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Contract of Agency – Business Law | Management Notes

Contract of Agency | What do you mean by contract of agency?| What are the main principles of agency?

What do you mean by contract of agency?

Contract of Agency is a contract that takes place between agent and principal, where the agent is to perform his/her task according to the instruction of the principal.

What are the main principles of agency?

Contracts of the agency are based on two important principles, namely:

  1. Whatever a person can do personally shall also be allowed to be done through an agent except in case of contracts involving personal services such as painting, marriage, singing, etc.
  2. He who does not act through a duly authorized agent does it by himself, i.e., the act of the agent is considered the acts of the principal.

What are the characteristics of agency?

  1. Representation

    An agent always represents his/her principal in dealing with third parties. An agent is responsible to the principal of his work.The responsibility of the work is for agents only.

  2. Delegation of authority

    In this, the principal delegates his/her authority to the agent to do the things on his/her behalf. In fact, contract of agency starts after principal appoints the agent along with a delegation of authority.

  3. Contractual capacity

    Both principal and agent should be competent in the eye of law. They are incomplete when they have unsound mind, minor, or disqualified in the eye of law.

  4. Consideration is not compulsory

    In this,the valid consideration is not compulsory. For example, the wife may take the role of his husband without consideration.

  5. Purpose

    An agent may be appointed for any purposes the principal likes. For example buying and selling goods, deposit money in the bank, dealing with a customer. However to be valid purpose it should not be against the prevailing law.

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