• Legis Scriptor

Creation of agency : Judicial Interpretation

Authored By : Amrutha Valli


Agency is a fiduciary arrangement between an employee, who decides to conduct duties and jobs, and a supervisor, who manages the jobs and compensates the employee for it in most cases. The partnership focuses primarily on the interests of third parties, with whom the agent must work on the principal's behalf. The agent-principal arrangement is contractual, with the two parties agreeing on the general outlines of how the agent will behave, subject to the principal's consent and control. During this partnership the agent has a responsibility to remain faithful to the principal and to function only in the best interests of the principal.

· There is an agency so that one person can act lawfully on another's behalf. The law of the agency determines who is responsible in different cases for the harms resulting from the agency. The participants in a relationship with an entity are a source, an employee and third parties who communicate with the client.

· The agent's characteristics will influence whether the principal is responsible for the actions that the agent is taking. Agents act with the actual authority or apparent authority and either type of authority may bind a principal in contract and for certain torts.

· There need not be a formal document to create a relationship with the agency. Then, the agent has only to act on behalf of the principal, with the assent of the principal, and for the good of the principal. No compensation is required to establish a partnership with an organization.

· An agency relationship occurs when an agent decides to act on behalf of a principal, performs the action, acts for the good of the principal, and has the principal's assent.


Agency, Actual Authority or Apparent Authority, Create an agency Relationship, Agency Relationship, Fiduciary duties, Duties to the Agent, The legal right.

What is agency?

If one party transfers any power to another party through which the latter carries out its acts in a more or less autonomous manner, the arrangement between them is considered an entity on behalf of the first party. It can be express or inferred to the Department. Section X of the Indian Contract Act, 1872, discusses Commission rules. Both companies, whether large or small, carry out their work by organization. Consequently, regulation relating to the agency is an important area of company law. Principal and employee linked partnerships include three primary parties: the principal, the Agent and a third party.

Who is agent?

One which is an agent is:

Ø Employed by another (maintainer);

Ø For the principal to do some act; or

Ø To represent him in third-party dealings.

An agent is a person hired to conduct certain actions for another person or to represent another person in relations with other persons. The person by which these actions are done or who is so represented is called the 'maintain.'

The Agent has other responsibilities under the Indian Act. An officer is obligated to Conduct the business of its principal in the manner stated by the Principal, or, in the absence of any such instructions, whichever custom Prevails. It is the responsibility of each agent to satisfy his principal's mandate. An agent is bound to make proper accounts to his principal on demand. It is the responsibility of the agent, in the event of difficulty, to use all due caution in dealing with his principal and in trying to obtain these accounts. A special agent has no clear power outside the limits of his appointment and the principal is not bound by his actions outside those boundaries, whether or not the other contracting party is aware of them.

Agents Authority:

This was seen with Palestar Electronics Private Limited v. Additional Commissioner binding on the principal is the agent's actions within the framework of his authority. Contracts signed by an agent and duties arising from actions performed by the agent can be applied in the same manner which would have the same legal implications as if the contracts were signed and the acts performed by the agent in person. It is important for this intention to be fulfilled that the agent must have committed the act within the scope of his jurisdiction.

The uncertainty is due in large part to the fact that an agent 's authority is not according to one source. In the case of Ramlesh v. Jasbir Singh it was rightly held that the agency was established to facilitate and not to impede trade.

An agent's authority stands for his ability to bind the principal. It alludes to "The sum of the actions agreed between the principal and the agent that the agent will conduct on behalf of the principal." If the agent does any such actions, it is claimed that he has acted within his authority, as was seen in the case of Nand Lal Thanvi v. LR of Brij Bhushan Goswami.


An agency contract is a type of general contract. As such, an agency may terminate except where the agency is irrevocable in the same way that a contract is discharged. The principal and agent partnership may only be terminated by the act or agreement of the parties to the agency or by the rule of law. An agency, if proved to have existed, would be believed to have ended, in the absence of anything to indicate its termination, until such a period of time has passed as removes the presumption agency may be put to an end either by the act of the parties, or through the rule of law. Subsequent events can terminate the Organization. This may be physical, such as when the subject matter is lost, or the principal or agent dies, or becomes insane, for example. Alternatively, they may be legitimate, even if the principal or agent is bankrupt or the relationship is illegal (e.g. if the principal is an foreign enemy).


Footnote : [1] Section 182 of the Indian contract act, 1872. [2] (1978) 1 SCC 636