In the law of contract, Agency is a legal relationship where one person is authorized to act on behalf of another to create a legal relationship with a third party.
1. Definition (Section 182)
According to the Indian Contract Act, 1872, an Agent is a person employed to do any act for another, or to represent another in dealings with third persons. The person for whom such an act is done, or who is so represented, is called the Principal.
The Core Principle: Qui facit per alium facit per se (He who acts through another, acts for himself).
Capacity: Any person who is of the age of majority and of sound mind may employ an agent. However, no consideration is necessary to create an agency (Section 185).
2. Circumstances Under Which Agency is Constituted
An agency can be created through several different modes, depending on the circumstances of the agreement:
A. Agency by Express Appointment (Section 186)
This is the most common mode. The authority is given by spoken or written words.
Example: A formal Power of Attorney given to a lawyer to manage property.
B. Agency by Implied Appointment (Section 187)
This arises from the conduct, situation, or relationship of the parties. It is inferred from the circumstances of the case.
Agency by Estoppel: If a principal leads a third party to believe that a person is their agent, the principal is "estopped" (prevented) from later denying that agency if the third party acted on that belief.
Agency by Holding Out: A branch of estoppel where a person allows another to carry out a certain "course of dealings" on their behalf consistently.
C. Agency by Necessity (Section 189)
In an emergency, a person may be authorized to act as an agent to protect the property or interests of another, even without formal appointment.
Conditions for Necessity:
There must be a real, imminent necessity.
It must be impossible to communicate with the principal.
The agent must act in good faith for the benefit of the principal.
Example: A carrier of perishable goods selling them immediately if they are rotting and the owner cannot be reached.
D. Agency by Ratification (Sections 196–200)
This occurs when a person acts without authority (or exceeds their authority), but the principal later accepts and approves the act.
Effect: Ratification relates back to the time the act was performed, as if the person had original authority.
Example: You buy a rare book for a friend without asking. If your friend says "I'll take it and pay you," they have ratified your act, creating an agency after the fact.
E. Agency by Husband and Wife
Generally, a wife is presumed to have the authority to pledge her husband's credit for "necessaries" of life suitable to their style of living, provided they are living together and he has not provided her with a sufficient allowance.
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