Contract of agency

Modes of creating agency

• Agency by express agreement:
  • When the principle and agent communicate their agreement, agency is established. The agreement made between the principals may be expressed verbally or in writing. An agency may only be established in writing in Nepal. The rights, obligations, and responsibilities of each party, which must be upheld by the principal and the agency, are spelled out in the contract itself when the agency is established by express agreement between the expressed principal and the agency.
• Agency by Implied authority:
  • Agency by Implied Authority is the term used to describe the agency established by the actions of the parties or by their relationship. For instance, a wife is a husband's implied agent. This can be caused by a variety of situations.
• Agency by Holding out:
  • A contract for an agency is impliedly made when someone leads others to assume that they are a certain person's agent through their actions or statements. For instance, Kritagya permits Ramu, one of his servants, to frequently purchase items from a specific store on credit. One day Ramu purchases some items not on Kritagya's order but for his own use. Here, an implied power of attorney creates an agency contract. By holding out, Kritagya is now seen as his agent.
• Agency by Necessity:
  • It is referred to as agency by necessity when a person is required to act on behalf of another without any formal authorisation. For the creation of an agency out of need, four requirements must be met:
  • Getting the principal's guidance must be impossible, or at the very least extremely challenging.
  • The agent's prompt action must actually be required.
  • The agent had to have made the decision that was most practical and reasonable in the given situation.
  • The agent has to behave honestly and in the principal's best interests.

• Agency by Ratification:
  • Ratification is the later adoption and acceptance of an action that was initially taken by a person without the knowledge, consent, or instruction of another. Thus, when someone adopts or recognizes another's authority. Therefore, the agency contract is said to be constituted by ratification when a person adopts or accepts the actions of another who operated as his or her agent without that person's knowledge or permission. Agency by ratification, then, is a type of agency where the principle approves the agreement entered into on his behalf by the agent but without his consent. For instance, Akriti pays Shristi to purchase the television on her behalf. However, neither Bidhya nor her instructions had named Akriti as their agent. But when Bidhya heard Akriti bought the television on her behalf, she accepts it. Here Bidhya ratified the act; Akriti becomes an agent of Bidhya by the agency by ratification.
• Agency by estoppels:
  • A person who has given another person reason to think that a certain state of circumstances exists is not afterwards allowed to reject that state of affairs if the other person has acted injuriously in reliance on that state of affairs, according to the legal concept of estoppels. When one person acts in a way that leads the other to believe that a third party is authorized to act on his behalf and the latter enters into a transaction with the third party, the person whose act caused the latter to do so is liable for that agreement as though the third party had acted on his behalf. This situation is known as agency by estoppels. It is founded on the ideas of equity and natural justice.
  • In all instances where the principal has persuaded a third party that the acts were within the scope of the agent's authority, any agent acting outside the bounds of his employment will be held accountable by the principal for his actions if those actions were perceived by others to be within the agent's illusive authority. Additionally, the third party's response to the principal's representation must have been required. However, this is the legal position of India, which holds that in order for agency to be established through estoppels, there must first be a prior relationship between the parties. The common law interpretation of the agency via estoppels holds that the existence of an agency is not a requirement. The only inducement of a belief of its existence is required.
• Agency by Operation of law:
  • Not because of a contract between the agent and the principal, but rather because it will comply with the law at the time it is created. A contract of agency may occasionally become effective due to a legal requirement. As an illustration, every partner is the firm's and other parties' agent under the Partnership Act. It has a subsumed agency. Only a partner can obligate the company and the other partners to his actions due to such implied agency. Promoters are also recognized as the company's agents in accordance with the businesses statute.

Rules of valid ratification

• An act did on behalf of another person:
  • An agreement should exist between the agent and the third party whose work is being performed. They shouldn't act without another person's approval. On behalf of the third party, it should act.
• Existence of principal:
  • If the principal is only created as a result of the actions taken by the so-called agent, then rectification will still be legal. For instance, if someone signed documents on behalf of a company that had not yet been constituted officially but did so later, the works would not be valid.
• Express or implied ratification:
  • When the principle and agent communicate their agreement, agency is established. The agreement made between the principals may be expressed verbally or in writing. The agency may only be established in writing in Nepal. The rights, obligations, and responsibilities of each party, which must be upheld by the principal and the agency, are spelled out in the contract itself when the agency is established by express agreement between the expressed principal and the agency. The agency established by the actions of the parties or by their relationship is referred to as agency by implied authority. For instance, a wife is a husband's implied agent.
• Knowledge of subject matter to the principal is essential:
  • The principal should be knowledgeable about the item that is discussed with third parties. The principal must be aware of all relevant information pertaining to the parties' actions. Without having access to the relevant information, ratifications cannot be considered valid.
• No partial ratification:
  • There can be no partial ratification since when one element is acknowledged, the total is also acknowledged. Partial ratification and partial rejection are incompatible.
• Ratification within a reasonable time:
  • If a specific period has been allotted for the act, then the correction must be made within that window of time; if not, then the correction must be made within a reasonable window of time.
• Only lawful acts may be ratified:
  • For instance, if the principle agrees to ratify it, the person who performed for the smuggling business is not ratified.
• No damage to the third party:
  • If a correction has an adverse effect on a third party, it cannot be effective. If the result is to harm a third party or to end any rights or interests they may have. For instance, suppose Kshitiz is the tenant of Sandesh on a property with a three-month notice period. Kshitiz receives notice of termination from Sushan, an unauthorized party. Sandesh can't approve the notice.
• Communication of ratification:
  • It must be confirmed, and the rectifier must receive full disclosure; otherwise, it cannot be genuine.

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