Introduction

Agency is a special type of contract. The concept of agency was developed as one cannot possibly
do every transaction himself. Hence, he should have opportunity or facility to transact business
through others like an agent. Principles of contract of agency- (a) Expecting matters of a personal
nature, what a person can do himself, he can also do it through agent (e.g. a person cannot marry
through an agent, as it is a matter of personal nature). (b) A person acting through an agent is
acting himself, i.e. act of agent is act of principal. Since agency is a contract, all usual requirements
of a valid contract are applicable to agency contract also except to the extent excluded in the Act.
One important distinction is that as per Sec. 185, no consideration is necessary to create an
agency.
Who may employee an agent- Any person who is of the age of majority according to the law to
which he is subject, and who is of sound mind, may employee an agent (Sec. 183). Thus any
person competent to contract can appoint an agent.
Who may be an agent- As between the principal and third person any person can become an
agent, but no person who is not of the age of majority and of sound mind can become an agent,
so as to be responsible to his principal according to the provisions in that behalf herein contained
(Sec. 184). The significance is that a principal can appoint a minor or person of unsound mind as
agent. In such case, the principal is responsible to third parties.

Definition
According to Sec 182 defines an ‘Agent’ as “a person employed to do any act for another or to
represent another in dealings with third person”. The person for whom such act is done or who
is represented is called the principal. The relationship between the agent and the principal is
called “agency”.
Section 182 of the Indian contracts act 1872, defines Agent & Principal: an agent is a person
employed to do any act for another, or to represent another in dealings with the third parties.
The person for whom such act is done, or who is represented, is called the principal. Agency is
the relationship that subsists between the principal and the agent, who has been authorized to
act for him or represent him in dealing with others. Thus, in an agency, there is in effect two
contracts i.e.
a) Made between the principal and the agent from which the agent derives his authority to act
for and on behalf of the principal; and

b) Made between the principal and the third party through the work of the agent.

Any person, who is of the age of majority according to the law to which he is subject, and who is
of sound mind, can employ an Agent1. As between Principal and third person a person may
become an Agent, so as to be responsible to his Principal according to the provisions contained
in the Act. No consideration is necessary to create an agency[iii]. Several types of commercial
agents have been recognized under Indian law, which includes inter alia brokers, auctioneers, del
credere agents, persons entrusted with money for obtaining sales and insurance agents.

Principles of Agency
Contracts of agency are based on two important principles, namely:
a) 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.
b) He who does not act through a duly authorized agent does it by himself, i.e., the act of
the agent are considered the acts of the principal (Sec. 226).
Difference between an Agent and a Servant
1) Scope of authority: An agent can create a contractual relationship between the principal
and third parties. But a servant cannot create contractual relationship between its employer and
third parties.
2) Remuneration: An agent receives commission for his services. A servant is generally paid
wages or salary.
3) On whose behalf: An agent may work for several principals at the same time. A servant
can serve only one master at a time.
4) Control: An agent is not subject to direct control and supervision of the principal. He is
often discretion. But a servant acts under the direct control and supervision of his master and
must follow all his reasonable order.
5) Liability of principal: The principal is liable for all the wrongful acts of his agent which are
within the “scope of his authority.” But the master is bound by the wrongful acts of his servant if
done in the course of servant’s employment.