This Article is written by Mihuka Singh & this article disscuss the Principles & Essentials of Agency law.
Introduction
Agency law embodies delegation of responsibility, establishing fiduciary obligations that
bind agents to act in the best interests of principals. Consent is the foundation of this
connection, emphasizing the voluntary character of the parties involved. Control defines the
parameters within which agent’s function, ensuring that their activities are consistent with the
best interests of the principal. Agency law is a cornerstone in the intricate web of legal
relationships, describing the interplay between principals and agents. This blog post aims to
provide a complete introduction of agency law, essentials of contract of agency supported by
notable case laws that have affected its evolution.
Understanding Agency law
The legal connection between the principal and the agent is defined under agency law. An
“agent” is a person hired to perform any act or to represent another in transactions with third
parties and the “principal” is the person for whom such an act is performed or who is so
represented. 1 The principal gives the agent power to act on their behalf in a variety of
capacities, such as making contracts, engaging into agreements, or doing particular tasks.
This connection entails fiduciary duties, which require the agent to act in the best interests of
the principal.
Principles of Agency
Consent – The agency relationship is established by mutual consent between the
principal and the agent. This consent may be given directly or implicitly through
actions and situations.
Authority – The agent’s authority refers to their ability to act on the principal’s behalf.
It could be actual, implicit, or obvious. Actual authority is officially conferred;
implied authority is reasonably required to carry out the agent’s tasks; and apparent
authority occurs when a third party reasonably believes the agent has authority.
Fiduciary duty – Agents have a fiduciary duty to their principals, which requires
them to act in the best interests of the principle. This obligation includes loyalty,
obedience, and diligence.
1 The Indian Contract Act 1872, s. 182.
Essentials of contract of Agency
Competency of Principal – Any person who has reached the age of majority under the
applicable legislation and is of sound mind may hire an agent. 1 The age of majority
here means that the principal must have attained the age of majority under the relevant
laws. The sound mind means that principal must be of sound mind at the time of
appointing the agent. If a person who is of sound mind sometimes and rest of the time
is unsound mind so the person can appoint the agent when he is of sound mind.
Competency of agent – As between the principal and third parties, any individual may
become an agent, but no person under the age of majority and of sound mind may
become an agent in order to be responsible to his principle under the conditions set
forth herein. 2 According to the section’s general description, any person, including
those who may not be competent to contract (minors and persons of unsound mind
included), has the capacity to represent and bind their principals in direct and valid
contractual relationships.
Consideration – Creating an agency does not require consideration. 3 However, unless
demonstrated otherwise in the contract, these restrictions do not deprive the agent of
his legal and reasonable remunerations. 4 These provisions, however, do not deprive
the agent of his legal and reasonable remuneration until established otherwise in the
contract. These contract act principles are based on Common Law ideologies, which
state that no consideration is required to give an individual the authority of an agent,
and that neither party is barred from suing the other, whether for negligence on the
part of the agent or to recover due compensation from the principal. 5
Case laws
Watteau v Fenwick 6 –
This case is frequently cited as creating the concept of “apparent authority,” in which a
principal permitted an agent to purchase goods but prohibited him from doing so on
credit. The agent defied these orders and purchased items on credit, and the court held the
principal accountable because of the agent’s apparent authority.
Bolton partners v Lambert 7 –
A made an offer to B, the managing director of a company, and it was accepted without
authority on behalf of the company. A then withdrew his offer and notified the firm, after
which the company ratified B’s unlawful acceptance. The ratification dated back to the
point of acceptance, rendering the withdrawal useless.
Keighley Maxted and co. v Durant –
Unless there is an agreement or custom to the contrary, an agent’s authority expires
following the death of the principal. In this situation, the agent continued to act on behalf
of the deceased principal despite being unaware of the latter’s death. The court decided
that the agent’s authority expired with the principal’s death, underlining the significance of
providing timely notice of a principal’s death to avoid unforeseen repercussions in
ongoing transactions.
Agency law is a dynamic and complex area of law, developed by a diverse set of decisions
and legal ideas. Understanding the basic aspects of agency partnerships and the ramifications
of landmark judgments is critical for legal practitioners, corporations, and individuals
involved in such interactions. As the legal landscape evolves, staying up to date on current
developments is critical for successfully navigating the complexities of agency law.
Conclusion
Agency law is a vibrant and complex area of law, by a rich tapestry of cases and legal
concepts. Agency law is important to the legal system, shaping relationships, transactions,
and contractual agreements. Its principles form a solid foundation for trust, responsibility,
and legal clarity in a variety of situations. Understanding the fundamentals of agency law is
critical for individuals, corporations, and legal professionals alike, as it allows them to
manage the intricacies of relationships with confidence and in accordance with legal norms.
Whether doing business, real estate, or personal transactions, a thorough understanding of
agency law is a crucial advantage in today’s linked and legally complex world.
References
Nitish Thukral, ‘Essentials to the Contract of Agency under Indian Contract Act, 1872’ (IPleaders, 19
March 2020) < https://blog.ipleaders.in/essentials-to-the-contract-of-agency/> accessed 07 January
2024
[1893] 1 QB 346.
[1889] 41 CH D 295
[1901] AC 240.
Singh, A. (2009) Textbook on law of contract and specific relief. Lucknow: Eastern Book Co.
