Contract of Agency: Meaning, Types & Case Laws

1. Introduction

In everyday life, we often act on behalf of others—whether it's a friend picking up a parcel or a manager signing a deal for a company. This legal relationship is called a Contract of Agency. It plays a vital role in both business and personal settings, allowing one person (agent) to act legally on behalf of another (principal).

Under the Indian Contract Act, 1872, the concept of agency is widely recognized and governed with clear rules.

2. Definition of Agency

According to Section 182 of the Indian Contract Act, 1872,

“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 is called the “Principal.”

So, in simple terms:

• Principal: The person who gives authority.

• Agent: The person who acts on that authority.

💡 Example: If a business owner authorizes a manager to negotiate with suppliers, the manager becomes an agent of the owner.

3. Creation of Agency

The Contract of Agency is not always born out of a written agreement. In many cases, the law recognizes agency relationships through conduct, necessity, or even silence. Understanding how an agency can be created is essential in both legal studies and real-world practice.

Under the Indian Contract Act, 1872, an agency relationship can be established in several ways:

✅ a) Express Agreement

This is the most straightforward and formal way of creating an agency. It occurs when the principal explicitly appoints another person as their agent through a written or oral agreement.

The express agreement lays out the duties, powers, and scope of authority of the agent. It may include terms such as:

• The nature of the task to be done

• The period of the agency

• The remuneration to be paid

• Any limitations or special instructions

While a written contract is preferred (especially for clarity and legal enforceability), oral agreements are also valid under law unless a specific statute requires written form (like for real estate).

🧾 Example:
A company signs a contract appointing a legal advisor to handle all its legal matters. Here, the lawyer becomes an agent of the company through express agreement.

🔍 b) Implied Agreement

Sometimes, an agency is not explicitly stated but is understood through the conduct or circumstances of the parties involved. This is called an implied agency.

In such cases, the principal may not formally appoint the agent, but allows them to act on their behalf repeatedly or behaves in a way that makes others believe the agency exists.

There are two types of implied agency:

• Implied from conduct: Repeated actions suggest an agency relationship.

• Implied from circumstances: Situations demand the agent act on behalf of the principal.

🧾 Example:
If a person continuously allows their friend to handle travel bookings, talk to travel agents, and make payments on their behalf, the friend may be considered an implied agent.

Legal Insight:
The court can infer an agency relationship even when there is no formal contract if the principal knowingly allows another to act as their representative.

📜 c) Agency by Ratification

Agency by ratification arises when someone acts without authority but later, the principal approves or accepts that act as if it were authorized from the beginning. This approval is called ratification.

For ratification to be valid, certain conditions must be fulfilled:

• The act must be done on behalf of the principal.

• The principal must be fully aware of the facts.

• The principal must ratify the whole act (not partially).

• Ratification must occur within a reasonable time.

Once ratified, the act becomes binding on both the principal and the third party.

🧾 Example:
A person negotiates a business deal on behalf of a company without their permission. Later, the company learns about it and approves the deal. In such a case, the person becomes an agent by ratification, and the company is bound by the contract.

🚨 d) Agency by Necessity

This form of agency arises in urgent or emergency situations, where it becomes necessary for one person to act on behalf of another, even without prior authority.

This typically applies when:

• It is impossible to communicate with the principal.

• There’s an immediate need to act to protect the principal’s interests.

• The actions taken are reasonable and in good faith.

🧾 Example:
A ship carrying perishable goods faces a delay due to a storm. The captain, unable to contact the cargo owner, decides to sell the goods at the nearest port to prevent spoilage. This is agency by necessity—the captain acts in the owner’s best interest without being specifically authorized.

Legal Insight:
This type of agency is rare but recognized when inaction would result in loss or harm to the principal’s property or interests.

🪞 e) Agency by Estoppel

Agency by estoppel arises when a principal, through words or conduct, leads a third party to believe that a person is their agent, and the third party relies on that belief.

In such cases, even if no agency truly exists, the law prevents the principal from denying the agency relationship—this is the doctrine of estoppel.

For estoppel to apply:

• The principal must have represented (or failed to deny) that the person was their agent.

• The third party must rely on that belief and suffer harm if the agency is denied.

🧾 Example:
A business owner allows someone to sit in her office, use her business cards, and negotiate with clients. If a client enters into a contract believing the person is her agent, the owner cannot later deny the agency—she is bound by the actions of that "agent."

Legal Insight:
This protects innocent third parties who act in good faith based on the apparent authority of the agent.

4. Types of Agents

In the law of agency, not all agents are created equal. The extent of authority, the nature of duties, and the relationship with the principal vary depending on the type of agent appointed.

Understanding the different types of agents is essential because it determines:

• How much power an agent has,

• What kind of tasks they are allowed to perform, and

• Whether or not the principal is bound by the agent's actions.

Here’s a breakdown of the major categories of agents recognized under the Indian Contract Act, 1872 and common law:

1️⃣ General Agent

A general agent is someone who is authorized to act on behalf of the principal in all matters relating to a specific area of business or function.

🔹 Key Features:

• Appointed for a broad and continuous role.

• Has authority to perform a series of acts connected to a specific business or job.

• The agency does not end after one transaction—it is ongoing.

• Third parties can assume that the agent has full authority within the business context.

🧾 Example:

A branch manager of a bank is a general agent. They are entrusted to handle day-to-day operations like approving loans, dealing with customers, and signing official documents.

✅ Legal Effect:

The principal is bound by all actions taken by the general agent within the scope of their authority, even if specific instructions weren’t given for each act.

2️⃣ Special Agent

A special agent is appointed to perform a specific task or transaction. Their authority is limited to that particular act, and they cannot go beyond it.

🔹 Key Features:

• One-time or occasional appointment.

• Once the task is completed, the agency ends.

• The agent cannot bind the principal beyond the scope of the assigned work.

🧾 Example:

An individual authorizes someone to sell a particular piece of land on their behalf. The agent has no authority beyond completing the sale.

⚠️ Legal Effect:

If a special agent acts outside their authority, the principal is not legally bound unless they later ratify the act.

3️⃣ Universal Agent

A universal agent has the widest possible authority to act on behalf of the principal in all matters, often with powers almost equivalent to those of the principal.

🔹 Key Features:

• Can act on behalf of the principal in all legal and financial matters.

• Requires power of attorney or full written authorization.

• Very rare in practice due to the vast power it gives.

🧾 Example:

A person gives their trusted attorney power of attorney to manage all personal, business, and financial affairs during their absence abroad. The attorney becomes a universal agent.

✅ Legal Effect:

Everything done by the universal agent within the scope of their authority is legally binding on the principal.

4️⃣ Sub-Agent

A sub-agent is a person appointed by the original agent, not by the principal, to assist in carrying out the agency work. This is done with the principal’s knowledge and consent.

🔹 Key Features:

• Works under the control of the main agent.

• The agent remains responsible to the principal for the acts of the sub-agent.

• The principal is not directly liable to the sub-agent unless ratified.

🧾 Example:

An estate agent hires a photographer to take photos of a house they are selling for a client. The photographer acts as a sub-agent.

⚠️ Legal Note:

If a sub-agent is appointed without authority, the principal is not bound by their actions and may even sue for breach of trust.

5️⃣ Co-Agent (or Joint Agent)

Co-agents are two or more agents appointed jointly to carry out a specific function or transaction. All of them must act together unless otherwise stated.

🔹 Key Features:

• Their authority is collective rather than individual.

• They must act together, and one cannot bind the principal alone unless agreed.

🧾 Example:

A firm appoints two lawyers to jointly negotiate a contract. Both must agree and act together for any decision to be valid.

✅ Legal Effect:

Unless the terms say otherwise, unilateral action by one co-agent does not bind the principal.

6️⃣ Mercantile Agent

A mercantile agent is one who, in the ordinary course of business, has the authority to buy, sell, consign, or raise money on goods on behalf of their principal.

They are common in commercial settings and include:

• Brokers

• Auctioneers

• Factors

• Commission agents

🔹 Key Features:

• Has apparent authority to deal with goods in a commercial context.

• Third parties can rely on the agent’s authority, even if actual limits exist privately.

🧾 Example:

A car dealer (agent) who sells vehicles on behalf of manufacturers is a mercantile agent.

⚖️ Legal Effect:

The principal is usually bound by the actions of a mercantile agent if the third party deals in good faith, even when limits exist.

5. Duties of an Agent

An agent plays a key fiduciary role in representing the principal. This role brings with it legal responsibilities and moral obligations. The agent must act in the best interest of the principal, and any violation of these duties can lead to legal consequences, including termination of the agency or compensation for losses.

The Indian Contract Act, 1872 clearly lays out the duties of an agent in Sections 211 to 221. These duties ensure trust, accountability, and fairness in the principal-agent relationship.

Let’s explore the key duties in detail:

🔹 1) Follow Instructions (Section 211)

An agent is legally bound to act strictly according to the instructions given by the principal. If no specific instructions are provided, the agent must act according to the customary practices of the trade or profession.

✅ What this means:

• The agent must not deviate from the scope of authority.

• They cannot take decisions on their own that contradict the principal’s directions.

🧾 Example:

If an agent is directed to sell goods at a minimum price of ₹10,000, they cannot sell below that price without prior approval. If they sell at ₹8,000, they may be held liable for the ₹2,000 loss.

⚖️ Legal Insight:

If the agent disobeys lawful instructions and a loss occurs, the agent is liable to compensate the principal.

🔹 2) Reasonable Skill and Care (Section 212)

An agent must carry out their duties with the level of skill and care that is reasonably expected in the circumstances. The law expects agents to act as a prudent person would in their own business.

✅ What this means:

• The agent must not be careless or negligent.

• They should use any professional expertise they possess.

• Lack of experience is not an excuse for gross negligence.

🧾 Example:

An insurance agent who fails to inform a client about a crucial clause that later leads to claim rejection may be guilty of negligence and can be sued for damages.

⚖️ Legal Insight:

The principal can recover damages from the agent if their carelessness causes a loss.

🔹 3) Render Proper Accounts (Section 213)

The agent must maintain clear and accurate financial records related to the agency. They are obligated to provide full details of:

• Transactions made,

• Amounts received or spent,

• Commission earned,

• Balance amounts due.

✅ What this means:

• The agent must not conceal information.

• They must be ready to submit account statements whenever demanded.

• Personal and agency accounts must be kept separate.

🧾 Example:

A real estate agent who collects ₹50,000 as an advance from a buyer must record it and report it to the principal (property owner), not keep it hidden or delay the disclosure.

⚖️ Legal Insight:

Failure to render accounts can result in termination of the agency, or a legal suit for misappropriation.

🔹 4) Avoid Conflict of Interest (Section 215–216)

The agent must not place themselves in a position where their personal interests conflict with those of the principal. They must not make secret profits, take bribes, or use their position for personal advantage.

✅ What this means:

• No secret dealing or double agency without disclosure.

• No buying or selling the principal’s goods to oneself.

• The agent must act with loyalty and integrity.

🧾 Example:

If an agent is asked to buy a specific property for the principal but instead buys it in their own name, that is a clear conflict of interest and a violation of trust.

⚖️ Legal Insight:

Any benefit obtained from a conflict of interest must be handed over to the principal. If the principal discovers the fraud, they may cancel the deal and sue the agent for damages.

6. Rights of an Agent

While an agent has several duties and responsibilities, the law also protects their interests and efforts by providing them with specific legal rights. These rights ensure that agents are treated fairly, especially when they act in good faith and perform their duties as per the agreement.

The Indian Contract Act, 1872 gives agents the following key rights:

✅ 1) Right to Remuneration

(Section 219 & 220)

The most basic right of an agent is the right to receive payment (commission or fee) for the services they provide.

🔹 What it means:

• If the agent completes the assigned task as per the contract, they have the right to demand remuneration.

• Even if there's no written contract, the right to payment may be implied by custom, usage, or past conduct.

🧾 Example:

If a real estate agent successfully arranges the sale of a property, they are entitled to the agreed-upon commission, even if the contract didn’t mention it explicitly.

⚠️ Note:

An agent cannot claim payment if the task was not completed or was done in violation of instructions, unless the principal benefits from the partial performance.

✅ 2) Right of Lien

(Section 221)

A lien is the right to retain possession of goods or property until payment is made. An agent has a particular lien, which means they can retain only those goods related to the unpaid commission or expenses.

🔹 What it means:

• The agent can hold goods, documents, or other property of the principal that they lawfully possess.

• This right exists until the agent is paid for services or reimbursed for lawful expenses.

🧾 Example:

If a shipping agent delivers goods for a company and hasn't been paid, they can refuse to release the shipping documents or items until payment is made.

⚠️ Limitations:

The agent must have lawful possession, and the lien only applies to the particular goods connected with the unpaid services.

✅ 3) Right to Indemnity

(Section 222 & 223)

An agent who acts lawfully and in good faith is entitled to be compensated for any loss, damage, or liability incurred while performing their duties.

🔹 What it means:

• If the agent suffers a loss while acting under instructions, the principal must indemnify (protect or repay) them.

• This includes legal costs, penalties, and third-party claims, provided the agent did not act illegally or negligently.

🧾 Example:

If a clearing agent pays a fine to release goods due to unclear customs instructions from the principal, the agent can claim the fine amount from the principal.

⚠️ Exception:

If the agent acts illegally or without authority, they cannot demand indemnity.

✅ 4) Right to Retain Money

An agent has the right to deduct their lawful expenses or remuneration from any money they receive on behalf of the principal before transferring the balance.

🔹 What it means:

• If the agent receives money during a transaction, they can first deduct what they are owed.

• This includes agreed remuneration, expenses, and other charges they legally incurred.

🧾 Example:

An agent sells goods and receives ₹1,00,000. If they spent ₹5,000 in transportation and are owed ₹10,000 in commission, they can keep ₹15,000 and transfer ₹85,000 to the principal.

⚖️ Legal Protection:

This right prevents the agent from being financially burdened while working in good faith.

7. Duties of the Principal

Just as the agent is bound to act honestly and diligently for the principal, the principal also has legal and ethical duties toward the agent. The relationship is mutual—based on trust, accountability, and fairness.

The Indian Contract Act, 1872, particularly Sections 217 to 221, outlines the obligations that a principal must fulfill toward the agent to maintain a healthy and lawful agency relationship.

Let’s understand these key duties in detail:

🧾 1) Pay Remuneration

(Section 217 & 219)

The most fundamental duty of the principal is to pay the agent the agreed remuneration (salary, fee, or commission) for services rendered.

✅ What this means:

• If a specific payment is agreed upon in the contract (written or oral), the principal must pay that amount.

• If no amount is specified, a reasonable remuneration should be given based on the custom or market standard.

• Remuneration becomes due only after the task is performed, unless otherwise agreed.

🧾 Example:

If a marketing agent is hired to promote a product and the agreed commission is 10%, then once the agent generates sales, they must be paid exactly 10% of the sales value.

⚖️ Legal Insight:

If the principal refuses to pay without valid reason, the agent can sue for breach of contract or retain goods under lien (as per Section 221).

🧾 2) Reimburse Lawful Expenses

(Section 222)

If an agent spends money while lawfully performing their duties, the principal is bound to reimburse such expenses.

✅ What this means:

• The expenses must be authorized, reasonable, and necessary for the task.

• Even if the agency is gratuitous (without pay), the agent has the right to be reimbursed for expenses incurred during authorized acts.

• This duty also covers emergency expenses and travel costs.

🧾 Example:

Suppose a purchasing agent travels to another city to procure goods on the principal’s behalf and incurs transport and accommodation charges. The principal must pay back these expenses—even if no profit is made.

⚖️ Legal Insight:

Refusal to reimburse can lead the agent to terminate the agency or seek legal remedy under indemnity provisions.

🧾 3) Avoid Hindrance or Obstruction

Though not always explicitly stated in statutes, it is a well-accepted legal principle that the principal must not obstruct or interfere with the agent while they perform their duties.

✅ What this means:

• The principal should provide clear instructions and necessary resources.

• They should not change terms midway, deny access to tools, or interrupt the workflow.

• Constant interference or withdrawal of authority without reason can be seen as bad faith.

🧾 Example:

If an export agent is hired to finalize an international shipment and is suddenly denied access to the pricing documents or inventory, the principal is hindering the performance of duties.

⚖️ Legal Insight:

If a principal’s actions make it impossible for the agent to do their job, the agent can treat the agency as terminated and may claim damages or compensation.

8. Rights of the Principal

In the contract of agency, while the agent is entrusted with authority, the principal retains key legal rights to protect their property, interests, and reputation. These rights act as checks and balances—ensuring that the agent performs their duties with honesty and care.

The Indian Contract Act, 1872 and basic principles of agency law recognize several important rights of the principal. Let’s examine them in detail:

⚖️ 1) Right to Demand Account

(Section 213 of the Indian Contract Act)

A principal has the right to ask the agent to submit complete and accurate accounts of all transactions done on their behalf. This ensures transparency and prevents misuse of authority.

✅ What this means:

• The agent must report every transaction, amount received or spent, and all related documentation.

• The principal can periodically audit or examine the financial and operational conduct of the agent.

• This includes both cash and non-cash dealings, contracts entered into, and benefits gained.

🧾 Example:

If an agent sells products for the principal, they must provide:

• How many units were sold,

• At what price,

• To whom,

• How much money was collected,

• Any expenses deducted.

The principal has the full right to demand this information at any time.

⚠️ Legal Insight:

If the agent fails to provide proper accounts, the principal can sue for misrepresentation, breach of duty, or even terminate the agency.

⚖️ 2) Right to Compensation

(Sections 211, 212, 215 & 216)

If the agent acts negligently, disobeys instructions, or acts dishonestly, the principal has the right to demand compensation for losses suffered as a result.

✅ What this means:

• The agent is liable to compensate the principal if they:

  • Breach instructions,

  • Act with carelessness,

  • Engage in self-dealing or fraud,

  • Fail to perform agreed tasks properly.

• This includes financial losses, damaged reputation, or loss of business opportunity.

🧾 Example:

If a shipping agent was instructed not to send goods during monsoon season but does so anyway and the goods get damaged, the principal can claim compensation for the value lost.

⚠️ Legal Insight:

This right ensures agents remain accountable. Even in the absence of malice, negligence alone can make the agent liable.

⚖️ 3) Right to Revoke Authority

(Section 203 & 210)

A principal has the right to terminate (revoke) the agency at any time—especially when:

• There is a breach of trust,

• The agent acts dishonestly or against instructions,

• Or if the agency is no longer needed.

✅ What this means:

• The principal can withdraw the agent’s authority fully or partially.

• The revocation can be with or without notice, depending on the nature of the agency agreement.

• However, irrevocable agency (e.g., where agent has an interest in the subject matter) cannot be revoked without mutual consent.

🧾 Example:

If an agent uses their authority to make unauthorized investments or take bribes, the principal can instantly revoke their powers and appoint a new agent.

⚠️ Legal Insight:

Revocation must be done before the agent acts, or else the principal may still be liable to third parties. Written notice is ideal for formal agency arrangements.

9. Termination of Agency

The relationship between a principal and an agent does not last forever. It can come to a natural conclusion or be ended due to various legal or personal reasons. When this happens, the authority of the agent ceases, and they can no longer legally represent the principal.

Under the Indian Contract Act, 1872 (Sections 201–210), an agency can be terminated in several ways—either voluntarily, automatically, or due to external events.

Let’s understand each of these modes in detail:

a) 🤝 Termination by Mutual Agreement

An agency is based on consent and trust between two parties. Hence, they can also mutually agree to terminate the arrangement at any time.

✅ What this means:

• If both the principal and the agent agree that the relationship should end, they can cancel it at any point, regardless of whether the work is completed.

• This is the most peaceful and legal way to end an agency.

🧾 Example:

A principal hires a designer as an agent to market a product. Halfway through the project, both parties agree that they no longer wish to continue. The agency is legally terminated by mutual consent.

b) ❌ Termination by Revocation (by Principal)

The principal has the right to revoke the authority of the agent at any time, especially if the agent is not following instructions or if trust has been broken.

✅ What this means:

• Revocation is valid only for future actions, not for those already performed.

• If the agency was created for a fixed term or with interest, compensation may be required for premature revocation.

• Notice must be given before revocation (except in urgent cases of misconduct).

🧾 Example:

If an agent is supposed to negotiate a contract over 6 months, but the principal decides to end the agency in 2 months without valid reason, the agent may claim damages for early termination.

c) ✅ Termination by Completion of Business

When the assigned task or project is completed, the agency automatically comes to an end.

✅ What this means:

• Once the purpose of the agency is fulfilled, there's no need for further representation.

• No formal termination is necessary, unless the contract specifies it.

🧾 Example:

A travel agent is appointed to book a round-the-world trip. Once all bookings and payments are completed, the agency ends automatically.

d) ⚰️ Termination by Death or Insanity

Agency is a personal relationship that depends on the will and capacity of the parties. Therefore, if either the agent or principal dies or becomes mentally unsound, the agency is automatically terminated.

✅ What this means:

• The heirs of the deceased party cannot continue the agency.

• Insanity is treated the same as death since it destroys legal capacity.

• Any acts done after such events are not legally binding on the principal or third parties.

🧾 Example:

If a company appoints an individual agent, and the agent passes away, the contract of agency ends—even if the business task was incomplete.

e) 💸 Termination by Insolvency

If the principal becomes insolvent (i.e., declared bankrupt), the agency usually comes to an end. In some cases, the agent’s insolvency may also affect the agency.

✅ What this means:

• Insolvency of the principal affects their ability to own property or enter into contracts, making it impossible to continue the agency.

• If an agent’s insolvency prevents them from performing their duties (especially financial ones), it may automatically terminate the agency.

🧾 Example:

If a business owner becomes insolvent during an import transaction handled by their agent, the agent’s authority may cease immediately as the principal loses control over the assets.

10. Agency vs Other Legal Relationships

In legal practice, the term “agency” is often confused with similar concepts like employment, bailment, and partnership. However, each of these relationships has distinct characteristics, purposes, and legal consequences.

Let’s understand how agency differs from these other legal relationships through clear comparisons.

🧑‍💼 A) Agency vs Employment

Though both agents and employees work for another person, there are fundamental differences between the two roles in terms of authority, control, and impact on third parties.

✅ Example:

A real estate agent can negotiate and sign agreements with buyers on behalf of a builder (principal). This binds the builder to the deal.

On the other hand, a receptionist in the builder’s office cannot enter into binding agreements—they only assist in operations and are under strict employer control.

⚖️ Legal Insight:

In agency, legal authority is key. In employment, hierarchy and supervision define the relationship.

📦 B) Agency vs Bailment

Bailment is a legal relationship where physical goods are handed over to another person (the bailee), without transferring ownership, for a specific purpose and return.

✅ Example:

• A transport company given a parcel for delivery is a bailee, not an agent. They have no power to contract on behalf of the owner.

• A customs agent, however, who handles imports can sign documents and act legally on the owner’s behalf.

⚖️ Legal Insight:

Agency involves legal authority to contract, while bailment involves custody with no decision-making powers.

🤝 C) Agency vs Partnership

A partnership is a relationship where two or more persons share ownership of a business. Each partner is both principal and agent of the firm.

✅ Example:

• A sales agent hired by a manufacturing company to find buyers has no ownership in the company.

• In a law firm partnership, each lawyer is a co-owner and may represent the firm as both principal and agent of the others.

⚖️ Legal Insight:

An agency is a representational role, while partnership is a joint ownership and managerial role governed by the Indian Partnership Act, 1932.

11. Case Laws and Examples in Contract of Agency

Legal principles become clearer when we look at how courts have interpreted and applied them in real-world disputes. The doctrine of agency has been shaped and affirmed by landmark judgments that highlight the duties, rights, and liabilities of both principals and agents.

Let’s explore some important Indian case laws and real-life examples that help bring the law of agency to life.

📌 1. Pannalal Jankidas v. Mohanlal (1951)

Citation: AIR 1951 SC 144
Key Principle: Agent must act with due care and inform the principal of known risks.

🧾 Facts of the Case:

• Pannalal, an agent, arranged for the dispatch of goods without adequately ensuring proper insurance coverage.

• The goods were later destroyed in a fire.

• The principal (Mohanlal) sued the agent for negligence and failure to act with diligence.

⚖️ Judgment:

The Supreme Court held that an agent is duty-bound to act with reasonable care, especially in commercial matters. Since Pannalal failed to warn the principal about the lack of insurance, he was held liable for the loss.

📚 Legal Takeaway:

An agent must exercise due diligence, avoid negligence, and fully inform the principal of all material facts and risks.

📌 2. Syed Abdul Khader v. Rami Reddy (1979)

Citation: AIR 1979 SC 553
Key Principle: A principal is liable for acts done by the agent within the scope of their authority.

🧾 Facts of the Case:

• Rami Reddy entered into an agreement with Khader through an agent.

• Later, Rami Reddy denied responsibility, claiming that the agent acted without full authority.

• However, the court found that the agent was acting within the scope of apparent authority.

⚖️ Judgment:

The Supreme Court ruled that a principal is legally bound by the actions of their agent if those actions appear to be within the scope of authority—even if there was no explicit written contract.

📚 Legal Takeaway:

Even implied or apparent authority is enough to hold a principal liable for their agent’s actions. This ensures trust and fairness in commercial transactions.

🏡 Real-Life Example: Real Estate Misrepresentation

Let’s understand a practical example based on agency law principles:

Scenario:

A real estate agent tells a buyer that a property includes certain features (like government approval or a larger plot size), which turns out to be false. The buyer later finds out the truth after purchasing the property.

⚖️ Legal Consequence:

The principal (property owner) can be held liable for misrepresentation, even though they personally did not make the false claims. Since the agent was acting within his authority, the principal bears the consequences of the agent’s actions.

📚 Legal Takeaway:

A principal cannot escape liability by blaming the agent if the agent was acting on their behalf in a professional or representative capacity.

12. Conclusion

The Contract of Agency is one of the most practical and widely used legal concepts in the fields of business, commerce, and everyday transactions. By empowering a person (the agent) to act on behalf of another (the principal), it enables decisions to be made, contracts to be signed, and services to be delivered—even when the principal is not physically present.

Whether it's a lawyer representing a client, a real estate broker negotiating a deal, or a shipping agent handling logistics, the contract of agency creates legal accountability and streamlines operations. It bridges gaps of time, distance, and expertise by allowing trusted representatives to handle affairs with legal validity.

However, with this power comes responsibility. Both the agent and the principal must understand their mutual rights and duties:

• Agents must act with honesty, care, and loyalty.

• Principals must support, compensate, and guide their agents appropriately.

• Legal frameworks ensure that both parties are protected and held accountable.

Furthermore, understanding the ways in which an agency relationship can arise—and how it can be terminated—helps avoid misunderstandings and legal disputes.

In short, the contract of agency is not just a legal formality. It’s a powerful tool that allows the legal system to support delegation, representation, and efficient decision-making. From small businesses to multinational corporations, and from civil matters to commercial contracts, agency law continues to play a crucial role in enabling trust-based interactions in a legally secure manner. 📚⚖️