COURSE:

BUSSINESS LAW

SUMBMITTED BY:

MUHAMMAD ALI (L1F18BBAM0757)

SUBMITTED TO:

DR SAJJAD ASIF
 CONTRACT OF AGENCY AND ITS ESSENTIALS

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:

o Agreement:
There shall be an agreement between the principal and agent.

o Consideration not necessary:

The contract shall be with or without consideration.

o 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.

o Creation of Agency:

The Contract of Agency could be created in any of the

subsequent ways;

Express Agency:

The agency or agency agreement could also be created by words

of mouth or by an agreement in writing.

Implied agency:

An implied agency or agency agreement arises from conduct,

situation or relationship of parties.
 Termination/ Revocation of Agency or Agency Agreement:

An agency or agency agreement could also be terminated in any

of the subsequent ways:

1) Agreement:

An agency or agency agreement can be terminated at any time

by a mutual agreement between the principal and the agent.
Therefore, the authority of an agent terminates when the
principal and therefore the agent complies with to terminate it.

2) Revocation by the Principal:

The principal can revoke the authority of the agent at any time
before the agent has exercised his authority.

3) Revocation by Agent:

An agency or agency agreement can be terminated or revoked

by the agent himself because a person cannot be compelled to
work as an agent.

4) Completion of business of Agency:

An agency or agency agreement comes to an end automatically

when the business of the agency is completed.
 5) Expiry of time:

If the agent is appointed for a fixed period, the agency comes to

an end on the expiry of the fixed period, even though the
business may not have been completed.

6) Death of the Principal or Agent:

An agency or agency agreement terminates automatically on the

death of the principal or agent.

7) The insanity of the Principal or Agent:

An agency or agency agreement terminates automatically, where

the principal or the agent becomes of an unsound mind. When
the principal becomes insane, the agent cannot act for an
individual of unsound mind.

8) Insolvency of the Principal:

An agency or agency agreement is also terminated by the

insolvency of the principal.

9) Destruction of Subject matter:

An agency or agency agreement terminates on the destruction of
the subject matter of the Contract of Agency.

10) Principal or Agent becomes Alien enemy:

If the principal and agent are citizens of two different countries

and a war breaks out between the two countries, the contract of
agency(agency agreement) is terminated.

Conclusion:

To conclude that the Contract of Agency is merely a connecting

link between the principal and the third party and is based upon
consent. The agent is a connecting link between the principal
and the third party. The acts of the agent bind the principal to the
third person or give the principal rights against the third person.
The rights of an agent are the duties of the principal and the
duties of an agent are the rights of the principal. No
consideration is necessary to create an agency or agency
agreement.