Agency

In the hustle and bustle of everyday life it sometimes becomes impossible to do everything ourselves and hence it becomes necessary to employ people to perform our acts. The person employed is the “agent” and the contract by which he is appointed is called “Agency”. In an agency, an agent acts on behalf of his principal and often uses his name and his acts in that capacity are attributable of the Principal. The law of agency is based on the maxim “qui facit per alium facit per se” i.e. he who does an act through another does it by himself.

“Agent” and “Principal” defined: Section 182

Section 182 of the Indian Contract Act, 1872 defines an “agent” and “principal” as follow: 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 act is done, or who is so represented, is called the ‘principal’.

The concept of “agency” has been thus explained by Ramaswami J. of the Madras High Court in Krishna v. Ganapathi, AIR 1955 Mad 648. In legal phraseology, every person who acts for another is not an agent. A domestic servant renders to his master a personal service; a person may till another’s field or tend his flocks or work in his shop or factory or mine or may be employed upon his roads and ways; one may act for another in aiding in the performance of his legal or contractual obligations to third persons…….In none of these capacities he is an “agent” within the above meaning as he is not acting for another in dealings with third persons. It is only when he acts as representative of the other in business negotiations, that is to say, in the creation, modification, or termination of contractual obligations between that other and the third persons, that he is an “agent.”…… Representative character and derivative authority may briefly be said to be the distinguishing features of an agent.

The essence of the matter is that the principal authorised the agent to represent or act for him in bringing the principal into contractual relationship with a third person. Representative capacity is the test of agency relationship, merely because the respondent had undertaken to supply machinery for certain period did not make him an agent to the petitioner.

Existence of Agency relationship

The test of determining the existence of agency relationship has been explained by Dhawan J. of the Allahabad High Court in the following words: “Agency depends on true nature of relationship. The use of the word “agency agreement” and “agent” by the parties in a contract does not necessarily establish the relationship of agency is not conclusive; if the incidence of this relationship as disclosed by evidence does not justify a finding of agency and that the Court must examine the true nature of the relationship and the functions and responsibilities of the alleged agent.

Co-agents and Co-principals

When the authority given to co-agents is joint, it would be necessary for them to act jointly and only then their principal would be bound. When the authority is joint and separate, any one of them would be competent to act for the principal. An agent who represents more than one principal in one and the same transactions, he should account to all of them jointly, for an account given to one may not absolve him from his liability.