Agency under the Indian Contract Act, 1872

Agent

The word agent is defined under Section 182 of the Indian Contract Act, 1872. When a person is employed to do any act for another person or to represent another in dealings with third persons, they are known as Agent. The third party for whom the act is to be done or is represented is called as Principal.

Agency

Agency is a contract formed between an Agent and its Principal. The idea behind the creation of an agency is to reduce the workload of the Principal. Principal being too busy in doing various work, hires an agent in their place to do the job on their behalf. The relation between an Agent and the Principal is contractual is defined by the terms and conditions in the contract.

Creation of Agency

Generally there are five (5) different methods of creation of an agency. They are-

  • Agency by actual authority

A contract of agency can either be expressed or implied. Whether it can be express or implied, it can be by words written or spoken.

  • Agency by ratification

When an agent acts beyond their authority or when a person who is not authorised as an agent, acts as such, the Principal is not bound by the contract of the agent. The Principal can ratify the agent’s contract and accept the liability. Such agency is called agency by ratification.

  • Agency by ostensible authority

Agency through ostensible authority is created when the authority of the Principal is inferred by the conduct of the Principal. Agency by ostensible authority is of two (2) types-

  • Agency by estoppels
  • Agency by holding out
  • Agency by necessity

Sometimes circumstances would compel and a relationship of agency would fall in place. Agency by necessity is created when following conditions are fulfilled-

  • The agent should be in such a position where it is not possible to communicate with the Principal on time
  • The commercial necessity must have been an actual and definite
  • The agent must have acted for the benefit of the Principal and may have acted bonafidely
  • The agent may have adopted most reasonable and practicable course of action
  • Agency by actual and apparent authority

Agency by actual authority to act as an agent stem from a consent. The consent to act may be oral or in writing.

The authority of agent is apparent where the principal represents or is regarded by law as having represented that another has authority.

The agent’s authority is governed by two (2) principles namely-

  • In normal circumstances

An agent has the authority and power to do all the acts that are lawful and necessary in normal circumstances in discharge of his functions.

  • In emergency

In case of an emergency, an agent has the authority to do all such acts which a man of ordinary prudence would, for protecting his principal from loss which may arise under similar circumstances. Any notice given to an agent or any information obtained by the agent will be deemed to be given to the principal.

However, under certain circumstances like, where the agent exceeds his authority, or has no authority or the principal does not ratify the acts of the agent, the agent will be personally liable. This is also known as the Doctrine of Implied Warranty of Authority.

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

If you are interested in participating in the same, do let me know.

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