Sec-182.

‘Agent’ and ‘Principal’ defined:- An “agent” is a

person employed to do any act for another, or to
represent another in dealings with third persons. The
person for whom such act is done, or who is so
represented is called the “principal”.
➢ Agency is a relationship constituted between one person
and a third party, by another person, representing or
acting on behalf of the former. Thus, when ‘A’
represents or acts on behalf of ‘B’, with ‘B’s authority
for the purpose of bringing ‘B’ into legal relations with a
third party, ‘C’, the relationship so constituted is called
Agency.
Prepared by ....V.Shobha Rani., PLC
Sec-183. Who may employ agent:- Any person who is of the
age of majority according to the law to which he is
subject, and who is of sound mind, may employ an
agent.
Sec-184. Who may be an agent:- As between the principal
and third persons, any person may become an agent, but
no person who is not of the age of majority and of sound
mind can become an agent, so as to be responsible to his
principal according to the provisions in that behalf
herein contained.
Sec-185 Consideration not necessary:- No consideration is
necessary to create an agency.
Prepared by ....V.Shobha Rani., PLC
1. Principal should be competent to contract: Sec183
➢ Principal must be of the age of majority according to the
law to which is subject and
➢ He must be of sound mind
➢ Since in an agency, the agent creates a contractual
relationship between his principal and the third persons,
it is necessary that the principal and the third person
should be competent to contract.
➢ If a person is not competent to contract and , therefore,
is incapable of making a contract, he cannot make a
contract through an agent either. A person can do only
such thing through an agent which he is himself
Prepared by ....V.Shobha Rani., PLC
personally capable of doing.
2. Agent need not be competent to contract: Sec184
➢ It is the agent who brings the principal into legal
relations with a third party.
➢ He is only a connecting link between the two.
➢ An agent never acts on his own behalf but always on
behalf of another who employs him.
➢ The act of the agent are deemed, in law, to be not his
own but of the principal and bind the principal.
➢ His function is over after a contract is established
between the principal and the third party.
➢ For the above reasons, law does not require that the
agent must be competent to contract. Prepared by ....V.Shobha Rani., PLC
3. Consideration for appointment not necessary: Sec185
➢ No consideration is necessary to create an agency.
➢ The provision of Section 185 cannot deprive an agent of
his legal remuneration.
➢ Generally an agent is remunerated by way of
commission for services rendered, but no consideration
is immediately necessary at the time of appointment.

Prepared by ....V.Shobha Rani., PLC

An agent occupies a position which is in many respects similar to that
occupied by a servant, bailee or trustee.
The distinction between an agent and a servant has been underlined by
the Supreme court in

Lakshminarayan Ram Gopal &sons Ltd. V Govt of Hyderabad

AIR1954 SC364
1. An agent has the authority to act on behalf of his principal and to
create contractual relations between the principal and a third
party. This kind of power is not generally enjoyed by a servant.
2. A principal has the right to direct what the agent has to do, but a
master has not only that right, but also the right to say how it is to
be done.
Conti... Prepared by ....V.Shobha Rani., PLC
3.The mode of remuneration is generally different. A servant is paid
by way of salary or wages, an agent receives commission on the
basis of work done.
4. A master is liable for a wrongful act of his servant, if it is
committed in the course of the servant’s employment. A principal
is liable for his agent’s wrong done within the “scope of
authority”
5. A servant usually serves only one master, but an agent may work
for several principals at the same time.
➢ The managing director of a company is an employee of the
company, but in the matter of the company’s relation with third
parties he occupies the position of an agent.
K.R.Kothandaraman V CIT, AIR1967 Mad143

Prepared by ....V.Shobha Rani., PLC