Agency Law

A person who acts on behalf of others or who tries to make 2 parties enter into a legally binding contract
is an agent. The agent is authorized to create a contract between his principal and the third party and
after creating it he drops out and ceases to be a party leaving behind the principal and third party.

Agent: the person who makes a contract on behalf of the principal.

Principal: the person on whose behalf the agent works.

Third Party: the person with whom the principal makes a legally binding contract.

Essential rules for a valid agency

 There should be an agreement between the principal and the agent

 The agent acts in a representative capacity
 The principal must be competent to contract
 Agent need not be a competent person
 Consideration is not necessary

Duties of an Agent

Skill and care, render accounts, directions of the principal, can not deal on his own account, should not
keep secret profits, duty to pay any money received during the course of agency, can not delegate,
protect interest of principal, if a sub agent is appointed the agent is responsible for it.

CREATION OF AGENCY

1. Agency by express agreement

2. Agency by implied agreement (eg directors are agents of the co)
 Agency by estoppel/holding out
 Agency by necessity
3. Agency by operation of law (every partner is an agent of the firm)
4. Agency by ratification (full knowledge, whole transaction, No damage to the third party, act has
to be done on behalf of another person and not in the agents own name, principal must be
existing at the time of the contract, principal must have a contractual capacity, within
reasonable, lawful act, communication to third party)

TYPES OF AGENTS

1. Express/Implied agents
2. General, special, universal agents
3. Agent/sub Agent
 4. Mercantile agents (factor, auctioneer, broker, Del credere agent)

AUTHORITY OF AN AGENT

1. Actual or real authority

2. Ostensible or apparent authority=authority which appears to others, though it is not so.

TERMINATION OF AGENCY

1. Agreement
2. Revocation by the principal
3. Renunciation by the agent
4. Completion of agency business
5. Expiry of time
6. Death of either party
7. Insanity
8. Insolvency of principal
9. Destruction of the subject matter
10. Principal and agent become alien enemy
11. Dissolution of a co (when a co is either a principal or an agent)