Agency Law

Agency Law

What is AGENCY ?

A relation, created either by express or implied contract or by law, whereby one party (called the principal) delegates the transaction of some lawful business or the authority to do certain acts for him or in relation to his rights or property, with more or less discretionary power, to another person (called the agent) who undertakes to manage the affair and render him an account there of.

Who is an AGENT ?

An individual or firm authorized to act on behalf of another (called the principal), such as by executing a transaction or selling and servicing an insurance policy. The agent does not assume any financial risk in the transaction, as a dealer would. 

Parties to Agency

The creation of agency involves 3 parties :

• The principal who passes the authority to act to the agent.

• The agent who in turn with this authority affects the legal relations of the principal with a third party.

• Third party is someone who may be indirectly involved but is not a principal in a deal.

Who can become an AGENT ?

Any person can become agent :

• Including minors and unsound mind persons.

• However, they are not responsible for their act.

• The principal must be responsible and take the risks of their acts.

Creation of AGENCY

• Agency is created or formed by agreement and consent of both parties.

• No specific formality in order to form the contract of agency.

• Consideration is not necessary in order to form a contract of agency.

• S 138 OF CA : “ No consideration is necessary to create an agency”.

Effect of Agency By Necessity 

1. The agent will be protected from any claims by the Principal .

2. The agent will be entitled to the additional payment for his effort to protect & to preserve the safety         and interest of the Principal.

3. A contract exists between the Principal and & 3rd party.

Termination of Agency

Section 154 – 163 of Contract Act 1950 deal with the manner which an agent may be terminated. 

 

i. By the act of the parties

• Mutual consent

• Unilateral revocation by the principal

• Unilateral renunciation by the agent

ii. By operation of law

• Completion of the task undertaken to be performed by the agent-section 154.

• Expiration of the period fixed.

• by the death of either the principal or agent- section 154.

• by the subsequent insanity of either the principal or agent- section 154