1.Meaning -
        In a contract of Agency, one person appoints another to act on his behalf. The person who appoints is called 'Principal' and who is appointed is called 'Agent'.

       'A' appoints 'B' to buy five bags of Sugar on his behalf. Here in this example 'A' is Principal and B is the Agent and the contract between them is Agency.
        In simple words a contract which creates the relationship of 'principal and Agent is called Contract of Agency.

2. Definition of Agency -

      Agency is the legal relationship between an agent and Principal; to bring the principal into legal relationship with the third party

Section 182 of the Indian Contract Act defines Principal and Agent as follows :

 An “agent” is a person employed to do any act for another, or to represent another in dealing with third persons. The person for whom such act is done, or who is so represented, is called the “principal”.

3. Essential Elements of Agency -

To constitute Agency the following ingredients are to be satisfied.

1. Principal : 

      To constitute Agency there must be Principal, who appoints another person as agent to represent or work on his behalf.

2 Principal must be competent :

       According to Section 183 principal must be competent to contract. Section 183 says that any person who is of the age of majority according to the law to which he is subject, and who is of sound mind, may employ an agent.

3 There must be an Agent : 

    In a Contract of Agency, Agent is a person one who is appointed by Principal to work on his behalf. According to Section 184 any person may become an agent, but no person who is not of the age of majority and sound mind can become an agent.

See >>>>> Kinds of Agents 

4.Consideration not Necessary 

Section 185 of the Indian Contract Act 1872 says that, no consideration is necessary to create an agency.  It is exception to the general rule - a contract without consideration is void. but as per this exception, it can be say that a contract without consideration is valid.

See also

1) The Capacity of Person Who may employ an Agent

2) Rights and Duties of Agent (Agency: Indian Contract Act,1872)

3) Distinction / Difference between Sub Agent and Co-Agent/ Substituted agent

4) Distinction/ Difference between Bailment and Agency

5) Who is Minor ? Effects of Minor's Agreement.


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