Contract of agency

In a contract of agency, the agent and principal agree that the agent will carry out the principal's instructions in carrying out the task at hand. For a variety of tasks and objectives, an agent may be chosen. An agency is a legal connection that is founded on an express or implied contract, just like other types of legal relationships. According to Sec. 56 of Nepal Contract Act, 2056, ‘Any person may appoint any other person as his/her agent to do anything on his/her behalf, except something connected with his/her personal skills or to conduct business as his/her agent of the transaction with a third person on his behalf or to represent himself to such person, or to establish any kind of legal relation with the person appointing an agent and a third person, and in case an agent is so appointed, a contract relating to agency shall be deemed to have been concluded.

According to Sec. 182 of Indian Contract Act, 1872, ‘A contract by which a person employs another person to do any act for himself or to present him in dealing with the third person is a contract of agency.

Sec. 2(a) of Nepal Agency Act, 2014 states, ‘an agent is a person who works for any domestic of the foreign business firm all over Nepal or in any part of Nepal and the term agent may mean a distributor, stockist, nominee or a representative.

Features or Essential of Contract of Agency

Similar to a contract of indemnification and guarantee and a contract of bailment, a contract of agency is a particular contract. A person designates another in this agreement to perform in his or her place. Essential elements of an agency contract are:

• Representation: 
  • When interacting with third parties, an agent always speaks on behalf of his or her principal. An agent has a duty of care to the employer of his work.
• Delegation of authority: 
  • In an agency agreement, the principal grants the agent the power to act on the principle's behalf. The contract of agency actually begins when the principal selects the agent and delegated authority.
• Contractual capacity:
  • In the eyes of the law, the principal and the agent must both be competent. When someone is of unsound mind, a minor, or legally ineligible, they are lacking.
• Consideration is not compulsory:
  • Valid consideration is not required under the agency contract. For instance, the woman can unthinkingly assume the position of his husband.
• Purpose:
  • The principal may designate an agent for any purposes they choose. For instance, negotiating with a customer, purchasing and selling items, and depositing money in a bank. However, for a purpose to be legitimate, it must not violate the legislation now in effect.

Nature of agent:

• The principle appoints the agent.
• The power was delegated by the principal.
• Responsibility of the principal.
• The goal of the contract is to establish a legal connection between the primary and the third party.
• There is no need to give it any thought.
• Contracting power.
• Either an express or an inferred contract.

Who is principal?

The individual known as the "principal" may be the one who formally authorizes another person known as the "agent" to act on the principal's behalf. Some principals are merely regarded as important participants in a business deal. Principals might be people, businesses, or even governmental organizations. They are the ones who use an agent to communicate with the third party. In order to establish one or more legal connections with third parties, he or she gives an agent permission to act. Since this is a unique relationship between an agent and a principle, all requirements for a legal contract must be met. As a result, the principal needs to be qualified in legal terms.

Who is an agent?

A person who represents the principal as an agent. They are a person or object that actively participates in or causes a particular outcome. A person who is given the power to act on behalf of another by employment, a contract, or apparent authority is known as an agent. The key is that the agent can legally bind the principal or expose himself to liability if he injures someone while acting within the bounds of his employment. Agents come in two varieties: general and special. A general agent is someone who the principle confides his entire business to or functions of a certain class to in their role as a professional man of an art or trade.

Creation of Agency

A person who has the legal power to engage into a contract may do so directly or indirectly through another person. If he uses the first approach, the existence of an agency is not in doubt. He will have agency if he chooses the second approach. A person is referred to as an agent when they represent someone in a transaction with a third party, while the person being represented is referred to as the principle.

The agency can be created in the following various ways:

• Agency by Express agreement.
• Agency by Operation of law.
• Agency by Ratification.
• Agency by Implied authority.

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