Contractual relationship of Agency is dependent on the principle that a
single individual cannot carry out all transactions and thus he can assign
someone else to perform to act on his behalf. The main terms of �agent� and
�principal� have defined clearly in Section 182 of the Indian Contract Act,
1872. Agent refers to an individual who assigned to perform any given act for
another or to represent another in dealing with the third persons and for whom
the said act is done or who is represented is called the principal.
Meaning of agency had been elaborated in P. Krishna Bhatta v. Mundila
 by Ramaswami J. of the Madras High Court. There are two
methods to create an agency and they are: �Express Agency� in which �one can
enter into the contract of agency through an express an agreement, i.e., oral or
written. The other is �Implied Agency� in which it is not clearly or directly
mentioned but is implied by �method of conduction, circumstances of the parties
and as the need may arise.�
Furthermore, a test is presently known as:
Test of determining the existence of
Which means that �agency relies on the kind of
relationship formed.� The mere usage of the terms such as �agency agreement� and
�agent� by the parties in a contract does not by default formulate a legal bond
of the agency. Thus, there exist certain essential terms which must be met in
order for an agency relationship to be formed. They are the �competency of the
agency principal to enter into said contract� and �agent need not necessarily be
competent� and �consideration for an appointment is not necessary.�
The agency contract bases itself on the legal principle qui facit per alium
facit per se,
which translates to "He who performs a task through other acts
himself." It is a basic legal principle of agency law. It is a well-known maxim
when addressing the vicarious responsibility of an employer for an employee's
Agency Principal Should Be Competent To Contract But Agent Need Not Be Competent
An agent which is a contract of employment develops a legal connection linking
the �Principal� and a �Third party� and for this, the first requirement is a
competent nature of the principal. As stated under Section 183 of the Indian
Contracts Act, the first requirement is that of Majority, that is, the principal
must have attained the age of majority, under the relevant laws. Secondly, there
must be a presence of sound mind, that is a principal must be of sound mind
which implies sanity and rationality of mind, at least at the moment of
appointing the agent.
As a result, no person of the age of minority can appoint or employ an agent
according to the law to which he is subject. The designation of an agent
requires the formation of a contract, and an agreement entered into by a person
who is a minor is void at the onset of it. Putting more emphasis on this said
principle, in �Shephard v. Cartwright� an infant cannot appoint an agent to
act on his behalf neither by �means of power of attorney,� nor even through
other possible methods.
However, in a case, if he does attempt to appoint an agent, in addition to this
said appointment being void, everything which was carried out by the appointed
agent on behalf of the infant is also �considered to be void and incapable of
ratification.� It is understood that a minor fails to have the required ability
to exercise discernment to appoint an agent to act on his behalf. The law
believes that the person who hasn�t attained majority will in all likelihood
choose wrongly and thus declares him to be incapable of making a choice for an
agent for himself at all.
However, there arise certain conditions in which a minor is considered capable
of entering into a binding contract, he may assign an agent to contract on his
behalf. �Anything an individual is capable of doing by himself can be via an
In addition, �There is no such thing in the Act that can prevent the caretaker
of a person of the minority from assigning an agent for him.� From the
case, �Madanlal Dhariwal v. Bherulal,� only the legal caretaker can ensure
the wellness of the property of the minor for the goodness and betterment of his
property, activities carried out through a de facto guardian in absence of
required permitted legal authorities are not acceptable.
In a situation wherein the principal-agent had carried out a �power of attorney�
grows aged, feeble, mentally incapable and no longer in a state to reason and
think on his own, it was decided that the said �power of attorney� has no
significance as the one who held it was not capable to give evidence on behalf
of the principal. As a result, �this concept of agent assignment does not apply
to actions of a personal nature or where it is annexed to a public office or to
an office involving some guardian duty.�
On the other hand, �Agent need not be competent� Section 184  of the Indian
Contracts Act, 1872, as in the middle of the Principal and third parties,
whoever holds relevance to take up the responsibility of an agent provided he
has attained the given age of Majority and is mentally sound. This strives to
ensure that this person will maintain a responsible and mature relationship with
the principal pertaining to the provisions agreed upon in the contract signed
between them. The agent is obligated to carry out his principal's business and
tasks in accordance with the directions provided to him, or in the absence of
such directions, in accordance with the norm that prevails in doing similar
business at the location where the agent conducts such said business.
An agent bears no individual liability all by himself contracting for his
principal and hence it is not important and also irrelevant whether he is
competent to contract or not. Hence, one can enter a contractual relationship
via a minor agent, but the minor won�t be accountable to the principal.
Consideration Is Not Necessary But Consent For Creation Of Agency Is
According to Section 185  of Indian Contracts Act, 1872, "To establish an
organization, no thought is required." The ideology that the principal has
decided to be represented by the agent is enough of a 'discrimination' against
the principal to justify the agency contract. Only after the principal has given
their personal consent to be represented by the said agent, and under no
circumstances before that. Hence, it is not required for there to be an
additional separate consideration.
When A hires B as his agent, for example, A takes a loss because his affairs are
entrusted to B's care. As a result, no additional consideration in the form of
remuneration is required. As a result, a gratuitous agency contract will exist,
and a gratuitous agent would be as bound by his contract as a paid agent.
There are three prominent ways of the creation of agency: 1. Agency by Express
Appointment 2. By the conduct or situation of the parties 3. By necessity of the
case and 4. By subsequent ratification of an unauthorized act. As expressed by
Desai J of the Supreme Court: �The relation of the agency is given birth
whenever one person called the agent holds the power to act on behalf of another
called the principal and consents so to act.� 
In case of �Express appointment�
a person of sound mind is capable of
appointing an agent and such said appointment may be expressed in writing or it
may be oral in nature.  No one may turn into the agent of someone else
without his will that is his given consent for the same. In every case, the
agency may be created only after getting the consent or will of the employer.
Implied agencies are given birth from the �conduct, situation or relationship of
parties.� In a case when an individual is put in such a circumstance in which
the other is understood to act on his behalf, he becomes an implied agent with
no statements against the same. And in the case of �Estoppel� a principal by
�task based on his own will� placed an agent in such a situation that a �person
or ordinary prudence and rationality is right in assuming that such agent holds
the power for carrying out certain task also thus handles the agent, the
principal is estopped as against such third person from refusing to perform the
When the necessity arises, which is considered to be an extraordinary
situation or emergency
herein an individual whoever is an the agent may from
said pressing emergencies of the case, be legally right in taking hold of
special abilities and in these circumstances tasks performed by him will be
binding on his �Principal.�
Contract of Agency is formed when an individual known as the Agent
power to act on behalf of another individual known as the Principal
appoints him based on his will and consent for the same. This relationship can
be established �by expressed appointment, by conduct, by necessity, or by
subsequent ratification of an unauthorized act.�
In order to form a relationship of agency in the legal sense, certain essentials
are to be ensured.
These are that the Agency Principal
must be competent to contract and
having attained the age of majority is able to ably choose an Agent
act on his behalf. In addition, it is not necessary for the Agent
to be competent but
must not be a minor.
Through whichever prescribed method the agency is created, it must be based on
will and consent as it is essential for its formation. Also, as per Section 185,
�Consideration is not necessary.� The fact that the principal has not denied
being acted for by the agent is an adequate 'detriment' against the principal to
justify the agency contract, and thus no additional consideration will be
Suggestions would be as follows so as to not assume or without knowledge of all
required essentials that a certain relationship between a �Principal� and
�Agent� is that of Agency or not. All the essentials must be met in the legal
sense in order to ensure that there is the establishment of a contract of agency
but even in the absence of a single essential, it will fail to be an agency.
- AIR 1955 Mad 648, 651. https://indiankanoon.org/doc/819155/
- Avtar Singh, Contract and Specific Relief, 12th edition, 740-746.
- 1953 Ch 728, 755: (1953) 1 WLR 460 (CA).
- Powell, THE LAW OF AGENCY (1952) 242, citing Beaven v. Webb, (1901) 2 Ch
- AIR 1965 Mys 272. https://indiankanoon.org/doc/1252966/
- Avtar Singh, Contract and Specific Relief, 12th edition, 740-746
- L.C. De Souza, re, AIR 1932 All 374.
- Syed Ram v. Tulsi Ram, (1927) 26 All L J 81, per SEN J at p. 82.
- Delhasse, ex p, (1878) LR 7 Ch D 511.
- On Agency (9th Edn) S. 141 as cited by McCARDIE J in Prager v. Blastpiel
Stamp & Heacock Ltd, (1924) 1 KB 566, 571.
Award Winning Article Is Written By: Ms.Vibhuti Rao
Authentication No: MA113441165019-14-0521