Define the term agency. What are the essentials and legal rules for a valid agency?
The two terms ‘agent’ and ‘principal’ have been defined in Section 182 of the Indian Contract Act. An agent is a person employed to do an 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.
The contract which creates the relationship of ‘principal’ and ‘agent’ is called an ‘agency’. Thus where X appoints Y to buy fifty bags of sugar on his behalf, X is ,the ‘principal’, Y is the ‘agent’ and the contract between the two is ‘agency’. The essence of agency relationship is that the agent acquires a representative character and all his actions as agent make the principal liable as if they have been done by the principal only.
General Rules of agency. The law of agency is based on the following two general rules:
- The principal is bound by the acts of his agent and can get the benefit of such acts as if he had done them himself. The acts of the agent shall, for all legal purposes, be considered to be the acts of the principal.
- Whatever a person can lawfully do himself, he may also do the same through an-agent except in case of contracts involving personal services such as painting, marriage, etc.
Essentials of a Contract of Agency :
An agreement : The agreement between the principal and agent is the first requirement of a contract of agency. The agreement may be express or implied.
Competency of principal : It is another important essential element of a valid agency. Section 183 provides that 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. Thus, a minor or a person of unsound mind cannot appoint an agent. But any person can be an agent (even a minor or person of unsound mind).
In such cases the incompetent person shall not be liable for his acts to the principal.
No Consideration is necessary : Section 185 provides that no consideration is required to create an agency. So although consideration is necessary in every contract, law specially provides that consideration is not necessary to create agency.