Contract of Agency

Contract of Agency is a two-party relationship in which one person acts

as representative to the other in business dealing in order to create
contractual relations between that other and third person.
An agency may be created to perform any act which the creator of
agency himself could lawfully do.
In a contract of agency, the principal employs agent on his own behalf to
represent him before a third person with or without the consideration to
the agent.
It is also important that the agent shall act as per the directions of the
principal. The act done by the agent against the directions and
instruction of the principal, the principal shall not be responsible for
such an act.

Essentials of contract of agency

These are the essentials of Contract of Agency which are given below:
1. Agreement:
There shall be an agreement between the principal and agent.
2. Consideration not necessary:
The contract shall be with or without consideration.
3. Intention to Act on behalf of the principal:
There shall be an intention of the agent to act on behalf of the principal.
When the agent enters into a contract for himself, then the principal will
not be liable.
4. Creation of Agency:
The Contract of Agency could be created in any of the subsequent ways;
 5. Express Agency:
The agency or agency agreement could also be created by words of
mouth or by an agreement in writing.
6. Implied agency:
An implied agency or agency agreement arises from conduct, situation
or relationship of parties.

The various ways under which an agency may be created

The relationship between principal and agent may be created in four
ways: through express or implied agreement between principal and
agent; under the doctrine of apparent authority; by operation of law; and
through ratification of an unauthorized agent's acts by the principal.
Agency arising out of agreement will always be consensual, but it need
not be contractual. An agency may be gratuitous. Even in the
commercial context, the agency may not be contractual (although this is
rare). After explaining how the agency relationship is created, the
chapter examines the authority of the agent such as actual authority,
apparent authority, and usual authority.