Agency Under Indian Contract Act
Agency under the Indian Contract Act, 1872
1. Definition of Agency
Agency is a legal relationship where one person, called the principal, authorizes another person, called the agent, to act on his behalf and represent him in dealings with third parties.
The agent performs acts or enters into contracts in the name of the principal or on his behalf, which legally bind the principal.
2. Relevant Provisions in Indian Contract Act
The law of agency is primarily governed by Sections 182 to 238 of the Indian Contract Act, 1872.
Section 182 defines an agent and a principal.
3. Definition under Section 182
"An agent is a person employed to do any act for another, or to represent another in dealings with third persons."
Principal: The person who employs the agent.
Agent: The person employed to act for the principal.
4. Essential Elements of Agency
Principal and Agent: There must be at least two parties, principal and agent.
Consent: Both principal and agent must consent to the agency relationship.
Authority: The agent must have the authority (express or implied) to act on behalf of the principal.
Representation: The agent acts on behalf of the principal in dealing with third parties.
Legal relationship: The acts of the agent, within the scope of authority, bind the principal.
5. Creation of Agency
Agency can be created:
By express agreement (written or oral)
By implied conduct of parties
By necessity (emergency situations)
By ratification (principal approves agent's unauthorized acts)
By estoppel (principal leads third party to believe someone is his agent)
6. Types of Agents
General Agent: Authorized to conduct all business of a particular kind for the principal.
Special Agent: Authorized to conduct a specific act or transaction.
Sub-agent: Appointed by the agent to perform some acts on behalf of the principal.
Co-agent: Two or more agents appointed by the principal to act together.
7. Authority of Agent
Express authority: Clearly given by the principal.
Implied authority: Authority which is necessary to carry out the express authority.
Apparent authority: Authority which the principal represents to third parties the agent has.
Emergency authority: Given in situations of necessity.
8. Duties and Rights of Agent
Duties:
To act within the authority given.
To perform the task with reasonable care and skill.
To communicate with the principal.
To keep the principal’s property and money safe.
To account for the money or property received.
Rights:
Right to remuneration (payment) unless agreed otherwise.
Right to indemnity from the principal for expenses and losses.
Right of lien over goods of the principal.
9. Duties and Rights of Principal
Duties:
To compensate the agent for authorized acts.
To indemnify for lawful acts done by the agent.
To perform the contract made by the agent.
Rights:
To control the agent.
To receive information and accounts.
To revoke agency under certain circumstances.
10. Termination of Agency
Agency may be terminated:
By mutual agreement.
By completion of the purpose.
By expiry of time.
By revocation by the principal.
By renunciation by the agent.
By death or insanity of either party.
By insolvency of the principal.
By operation of law (e.g., destruction of subject matter).
11. Important Case Laws on Agency
1. Watteau v. Fenwick (1893) AC 229 (English Case)
An agent acted beyond authority but within the usual authority of a manager.
Held: The principal was liable for acts done by the agent in usual course of business.
2. Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly (1986) AIR 1571
Discussed the termination of agency and principles of contract termination.
It affirmed that revocation must be communicated to the agent.
3. Millar v. Taylor (1769)
Established that the principal is liable for the acts of the agent within authority.
4. Subramaniam v. Sukumar (AIR 1964 Mad 99)
Held that authority may be implied from conduct and circumstances.
12. Significance of Agency in Business
Enables principals to conduct business at multiple locations through agents.
Agents help in expanding commercial activities without the principal’s physical presence.
Facilitates specialization and delegation.
Provides legal certainty on who is responsible for contracts and actions.
13. Summary
| Aspect | Description |
|---|---|
| Definition | Agent acts on behalf of Principal |
| Governing Law | Sections 182–238, Indian Contract Act |
| Creation | Express, implied, necessity, ratification, estoppel |
| Types | General, special, sub-agent, co-agent |
| Authority | Express, implied, apparent, emergency |
| Duties of Agent | Obedience, care, communication, accounting |
| Rights of Agent | Remuneration, indemnity, lien |
| Termination | Mutual consent, revocation, completion, death, insolvency |
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