THE CONTRACT OF AGENCY UNDER

INDIAN CONTRACT ACT, 1872

NAME OF THE STUDENT PINNU SREE HARSHA

ENROLMENT NO 20211BAL0029

SECTION 01

NAME OF TOPIC AND NUMBER OF CONTRACT OF AGENCY (IN BRIEF),

SLIDES 14 SLIDES
DATE ALLOTTED FOR 28-11-2022
PRESENTATION
PRESENTING ON SAME ALLOTTED YES
DATE
USE OF PROOF OF UNIVERSITY YES
E-RESOURCES IS ATTACHED
(SCREENSHOT WITH LINK)
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 THE CONTRACT OF AGENCY UNDER
INDIAN CONTRACT ACT, 1872

Introduction
“Agency is a relationship which exists where one person (the principal) authorizes another (the agent)
to act on his behalf, and the agent agrees to do so.”

Definition of Agent and Principal

As per section 182 of the Indian Contract Act, an agent is such a person who is employed to do any act
or to represent any person in dealings with a third person. And, the principal is a person who is
represented. The principal can authorize an agent to act on his behalf either expressly or impliedly. An
agent is simply a connecting link between his principal and the third person.

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 CHARACTERISTICS OF CONTRACT OF
AGENCY

1. Section 183: The Capacity of the Principal.

For the contract of agency, the principal should be competent to form a contract. That is, he must be of the age of majority (18+) and
must be of sound mind.
2. Section 184: The Capacity of the Agent.
The capacity of an agent in the contract of agency is immaterial. Any person can become an agent between the principal and the third
person. However, an agent is not responsible to the principal if he is not competent to contract.
3. Section 185: Consideration Is Not Required.
The law does not require or mandate any consideration for the validity of a contract of agency.
An agent is generally compensated by giving commission for services provided by him. But no consideration is provided immediately at
the time of his appointment.
4. Legal Binding.
The principal is legally bound to the acts done by the agent in the same manner as he has done that act himself.

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COMPETENCY OF THE PRINCIPAL
T HE P R E R E Q U I S I T E F OR T H E A B I L I T Y O F T H E P R I NC I PA L H AS B E E N R E H A S HE D ( A S S E C .1 0 O F T H E " A C T "
A D D I T I ON A L LY N E E D S F O R " PA RT I E S S K I L L E D TO C ON T R A C T " ) A N D S E T D O W N I N T H E I ND I A N C O N T R A C T
A C T U N D E R S E C . 1 8 3 , W H E R E T H E P R E R E Q UI S I T E S F OR A S K I L L E D P R I N C I PAL HAV E B E E N R E C O R D E D D O W N
TO ;
G R E AT E R PA RT, F O R E X A M P L E T H E P R I N C I PA L M O R E L I K E LY T H A N N O T A C C OM P L I S H E D T H E T I M E O F
G R E AT E R PA RT, U N D E R T H E P E RT I N E N T L AW S .
S O U N D B R AI N , F O R E X A M P L E T H E P R I N C I PA L S HO U L D B E O F S O U ND B R A I N , E S S E N T I A L LY R I G H T NO W OF
D E L E G AT I N G T H E A G E N T.

COMPETENCY OF THE AGENT

T HE N E C E S S I T I E S I N R E G A R D TO T H E A B I L I T Y O F T H E A G E N T H AV E B E E N R E C O R D E D D OW N I N S E C . 1 8 4 OF
I C A , 1 8 7 2 , W H E R E I T H A S B E E N E X P R E S S LY R E F E R E N C E D T H AT A NY B O D Y B E T WE E N T H E P R I N C I PA L A ND
T HE O U T S I D E R M I G H T T U R N I N TO A N AG E N T, PAY I N G L I T T L E H E E D TO I T S AG E O R S U F F I C I E N C Y O F H I S
P S Y C H E . I T E N D O R S E S T H AT A NY I N D I V I D U A L , I NC L U D I N G A M I N O R A ND A S H A K Y I ND I V I DU A L , M AY T U R N
I N TO A N A G E N T. N O N E T H E L E S S , T H E Y ( T H E A G E N T ) M AY N O T B E O B L I GAT E D TO T HE P R I N C I PA L E X C E P T I F
T HE Y H AV E A C C O M P L I S H E D T H E P E R I OD O F G R E AT E R PA RT A N D A R E O F S O U N D M I N D .

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 CREATION OF AGENCY: AGENCY MAY BE
CREATED BY ANY OF THE FOLLOWING WAYS:

1. Expressly (Sec. 187)

When an agent is appointed by words spoken or written, his authority is said to be express.
2. Impliedly (Sec. 187)
When agency arises from the conduct of the parties or inferred from the circumstances of the case, it is called implied agency.
Wife as an implied agent to her husband :
(a) Where the husband and wife are living together in a domestic establishment of their own, the wife shall have an implied authority
to pledge the credit of her husband for necessaries.
(b) Where the wife lives apart from husband without any of her fault, she shall have an implied authority to bind the husband for
necessaries, if he does not provide for her maintenance.
3. Agency by necessity (Sections 188 and 189)
In certain circumstances, a person who has been entrusted with another’s property may have to incur unauthorized expenses to protect
or preserve it. This is called an agency of necessity.
For example, a sent a horse by railway. On its arrival at the destination, there was no one to receive it. The railway company, is bound to
take reasonable steps to keep the horse alive, was an agent of the necessity of A. 5
4. Agency by Ratification (Sections 169-200):
Where a person not having any authority act as agent, or act beyond its authority, then the principal is not bound by the contract with the
agent in respect of such authority. But the principal can ratify the agent’s transaction and accept liability. In this way, an agency by
ratification arises.
Requisites for Valid Ratification
a.The principal should be named
b.Confirmation should be finished by the individual to whom act is finished
c.Sanction should be finished by an individual with full information on material facts or with aim to face the challenge of any
inconsistency
d.Confirmation should be by an individual equipped to have approved the transactions
e.Void or unlawful contract can't be endorsed by the principal Freedoms of Agent

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 Duties of Principal: Duties of Agent

• It is the Principal’s duty to indemnify the Agent for
the consequences of all acts carried out by the
Agent while exercising the authority conferred
upon him by the principal.
• The Principal is under a duty to compensate the
Agent for any injury caused to him due to the
Principal’s neglect or want of skill.
These duties are non-negotiable and not subject to any
contract to the contrary. Hence, the same cannot be
avoided.
• Duty to adhere to guidelines/bearings
• To act under the particulars of the contract
• Duty to correspondence
• Not to assign his position
• Duty to follow customs
• Duty to keep and deliver independent and right
records
• Duty to act with great confidence
• Not unveil classified data
• Duty not to create secret gain from agency

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 TYPES OF AGENT
On the Basis of
Nature of
Act/Business
Intermediary:
A specialist is an agent who is utilized to purchase or sell
merchandise on sake of another. He is a go between for buy
or offer of products however he isn't depended on the
ownership of products and he doesn't sell or buy the
merchandise himself. He is designated to achieve a
contractual connection among principal and outsiders.
Del-Credence Agent:
An agent who in extra commission ensures his principal the
individual with whom he enters into contract for the benefit
of the principal will play out their commitments in any case
he (agent) will be obligated. He is guarantee (condition of
being certain) too.
On the Basis of Limit
of Authority
Specific Agent:
A particular agent is one who is designated to play out a
specific act or to address in some specific transactions. For
instance, an agent named available to be purchased of
specific house.
General Agent:
An individual recruited to carry on a progression of
transaction identifying with specific business, he is the
person who has position to do all acts associated with a
specific exchange, business or work. For instance, A chief of
a firm.
Universal Agent:
This agent is delegated to do all acts and whose authority is
limitless and can do everything which the principal
legitimately do. 8
 TERMINATION OF AGENCY (SEC.201 TO SEC.210)

S.201 which provides termination of agency is not exhaustive: Termination of Agency may be
(1) by the Act of Parties and
(2) by the operation of law

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 TERMINATION OF AGENCY :BY THE
ACT OF THE PARTIES:
The agency can be terminated by the act of the Principal or agent by any of the following mode:
(A) By agreement: - By mutual agreement between Principal and Agent the agency can be terminated at any time or any
stage.
(B) (B) Revocation by the Principal:- Agency can be terminated by the Principal revoking the Agent's authority. The
Principal can revoke only his agent's authority when it has not been exercised by the Agent Reasonable notice must be
given for such revocation. Revocation may be express or complied. For
example – A empowers B to let A's house. Afterwards A lets it himself. This is an implied revocation of B's authority
(i) Where Authority has been partly exercised Principal cannot revoke his Agent's authority (sec. 204)
(ii) Termination of agency where agent has an interest in subject- matter (Sec.202)
Compensation for revocation by principal, or renunciation by agent [S.205]- Where there is an express or implied
contract that the agency should be continued for any period of time, the principal must make compensation to the agent, or
the agent to the principal, as the case may be, for any previous revocation or renunciation of the agency without sufficient
cause.
Notice of revocation or renunciation[S.206]- Reasonable notice must be given of such revocation or renunciation otherwise
the damage thereby resulting to the principal or the agent, as the case may be, must be made good to the one by the other.

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 TERMINATION OF AGENCY :BY THE OPERATION OF
LAW

(A) Completion of Business or Expiry of time: - When the business ofagency is completed, the relationship between
Principal and agent also comes to an end automatically. Similarly, where the agency has been created for a fixed time the
Agency is automatically terminated on the expiry of that time.
(B) Death of the Principal or Agent:- When either the principal or the agent dies, the agency relationship is automatically
terminated.
(C) Insanity of Principal or agent- When either the principal or his agent becomes unsoundmind, the agency relationship is
automatically terminated.
(D) Insolvency of the Principal-When the Principal is declared as an insolvent, the agency relationship is terminated.
(E) Subsequent impossibility- Agency is also terminated when after the creation of the agency.
(i) the subject matter of the agency business is destroyed:
(ii) Business of the agency becomes lawful.
When termination of agent's authority takes effect as to agent, and as to third person [S.208]- The termination of the
authority of an agent does not, so far as regards the agent, take effect before it becomes known to him, or, so far as regards
third persons, before it becomes known to them.

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 CONCLUSION

The law surrounding Agent-Principal Relationship aims at providing security and

unambiguity in the delegation of work and authority to carry out business.
Although an Agent Agreement is similar to a standard employment contract, the
nuances regarding the nature of delegation and responsibility are the distinctive
factor that draws a fine line between the two. Agent-Principal Agreements lay down
a foundation and bind the parties to fulfill their respective duties and acknowledge
each other’s rights at the same time. These agreements provide clarity as to the
nature, duration, and extent of authority to be delegated and hence, give structure
to an otherwise extensive scope of such relationships.

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