CONTRACT OF AGENCY

Definition: Agency can be defined as the relationship between two

persons, wherein a person has the authority to act on behalf of
another, bind him/her into a legal relationship with the third party.
There are two parties in a contract of agency – principal and agent.
 CONTRACT OF AGENCY
• Agency can be defined as the relationship between two
persons, wherein a person has the authority to act on behalf
of another, bind him/her into a legal relationship with the
third party. There are two parties in a contract of agency –
principal and agent.
CONTRACT OF AGENCY
CONTRACT OF AGENCY
CONTRACT OF AGENCY
CONTRACT OF AGENCY
CONTRACT OF AGENCY
CONTRACT OF AGENCY
CONTRACT OF AGENCY
CONTRACT OF AGENCY
• Contracts entered into through an agent, and obligations
arising from acts done by an agent, may be enforced in the
same manner, and will have the same legal consequences, as if
the contracts had been entered into and the acts done by the
principal in person.”
CONTRACT OF AGENCY
• Introduction: What is Agency?
• When one party delegates some authority to another party whereby
the latter performs his actions in a more or less independent fashion,
on behalf of the first party, the relationship between them is called
an agency. Agency can be express or implied. Indian Contract Act,
1872 deals with the laws relating to Agency. It is important to know
the law relating to agency because nearly all business transactions
worldwide are carried out through agency. All corporations, big or
small, carry their work out through agency. Therefore, laws relating
to the agency are an important area of Business Law. Relationships
relating to principal and agent involve three main parties: The
Principal, the Agent, and a Third Party.
CONTRACT OF AGENCY
• Who is an Agent?
• The Indian Contract Act, 1872 defines an ‘Agent’ in
Section 182 as a person employed to do any act for
another or to represent another in dealing with third
persons.
• Who is a Principal?
• According to Section 182, The person for whom such
act is done, or who is so represented, is called the
“principal”. Therefore, the person who has delegated his
authority will be the principal.
CONTRACT OF AGENCY
• Illustrations
• A, a businessman, delegates B to buy some goods on his behalf.
Here, A is the principal and B is the agent, and the person from
whom the goods are bought is the ‘Third Person’.
• Joe appoints Mary to deal with his bank transactions. In this
case, Joe is the Principal, Mary is the Agent and the Bank is the
Third Party.
• Lavanya lives in Mumbai, but owns a shop in Delhi. She
appoints a person Susan to take care of the dealings of the
shop. In this case, Lavanya has delegated her authority to
Susan, and she becomes a Principal while Susan becomes an
agent.
CONTRACT OF AGENCY
• Who can appoint an Agent?
• According to Section 183, any person who has attained the age
of majority and has a sound mind can appoint an agent. In
other words, any person capable of contracting can legally
appoint an agent. Minors and persons of unsound mind cannot
appoint an agent.
• Who may be an Agent?
• In the same fashion, according to Section 184, the person who
has attained the age of majority and has a sound mind can
become an agent. A sound mind and a mature age is a
necessity because an agent has to be answerable to the
Principal.
CONTRACT OF AGENCY
• Types of Agents
1.Special Agent- Agent appointed to do a singular specific act.
2.General Agent- Agent appointed to do all acts relating to a specific job.
3.Sub-Agent-An agent appointed by an agent.
4.Co-Agent- Agents together appointed to do an act jointly.
5.Factor- An agent who is remunerated by a commission (one who looks like the
apparent owner of the things concerned)
6.Broker- An agent whose job is to create a contractual relationship between two
parties.
7.Auctioneer- An agent who acts a seller for the Principal in an auction.
8.Commission Agent- An appointed to buy and sell goods (make the best purchase)
for his Principal
9.Del Credere- An agent who acts as a salesperson, broker and guarantor for the
Principal. He guarantees the credit extended to the buyer.
CONTRACT OF AGENCY
• Illustration
• Ali owns a shop in Bihar but lives in Mumbai. His shop is
managed by a person named John. John takes care of
the deals regarding the shop and buys goods from a
person named Ram, with Ali’s knowledge. In this case,
John has implied authority from Ali to buy these goods.
• Soham employed Abhay, who is a shipbuilder to build
ships for him. In doing so, Abhay may legally buy all
the material necessary to build the ships.
CONTRACT OF AGENCY