A Guide to the Concept of Agency: The Contract Act, 1872

A Guide to the Concept of Agency: The Contract Act, 1872

Agency

One of the principle ideas you need to grasp from the outset in your contract law studies is Agency. Agency is the legal relationship that exists between persons, one of whom, called the agent, is authorised to represent and act on behalf of the other, called the principal, in his business relations with third parties. This feature is very important in business as well as in law. If you're someone who wants to start or restart how you study for Agency under the Act for all law exams and you want a simple, easy step-by-step explanation, this is the guide for you.

What is Agency?

Agency is a fiduciary relation, a relationship in which one person has an obligation to act for another’s benefit, and it is explained in section 182 in the Contract Act, 1872 of Bangladesh. Put more simply, when you hire an agent you give that agent the right to act on your behalf, to make decisions for you, or to sign contracts for you. You see it everywhere from business transactions to real estate transactions, legal matters, and on and on.

Key Elements of Agency

A theory of the connection in agency. PORTIONS The relationship of agency has a number of important features:

Principal and Agent:

• Principal: One who gives or grants another the power to act on his behalf.
• Agent: The person whom the principal authorizes to transact business on the principal’s behalf.

Mutual Consent:

The Agency Relationship is a consensual relationship between the principal and the agent. The power-of-attorney can be written or oral and sets the scope of the agent's authority.

Third Party Involvement:

The agent has power to create or alter legal relations between the principal and third persons. For example, when an agent makes a contract for a third party, the principal becomes a party to the contract.

Capacity:

Parties having legal capacity – The person who intends to make the appointment and the person who is to act in accordance with that appointment will only become the principal and the agent if both are possessed of legal capacity. It means that the principal can't be a minor or insane.

Classes of Agency under the Contract Act, 1872 of Bangladesh

In all and every, every agent is to be taken with their peculiar properties and application: The Contract Act also recognises different kinds of agencies:

Express Agency:

This result obtains where the principal itself by special contract engages the agent. That could be put to paper or into an oral agreement. For example, the owner of a home engages us to sell it.

Implied Agency:

This agency exists where the actions of the principal, or the nature of the transaction, lead the other party to believe that the agent had authority to act. For example, an employee may, by implication, possess the power to sign legal documents on behalf of his employer.

Agency by Estoppel:

Estoppel (relationship): An agent by estoppel exists where a principal leads someone to believe someone is his or her agent when that person is not. Where a third party is misled, the principal will be liable for the agent's transactions.

Sub-Agent:

A sub-agent is an intermediary acting for an agent. This occurs only if and when the principal agrees to it, and the sub-agent's act of his sub-agent binds the principal.

Principal's Obligations to Agent

Under the Contract Act, the principal owes the agent the following duties:

ü  SUB-AGENT Sub-agent is a person employed by, and acting under the control of, the original agent in the business of the agency,

ü  STATUTORY AGENTS There are some agents who are created by statute.

Duty to Pay Remuneration:

The agent has a right to fees under their agreement. In default of agreement the agent is entitled to recover from the principal the whole necessary expenses of the agency.

Duty to Indemnify:

An agent doesn’t bear the risk of any loss they might suffer carrying out the principal’s business — as long as the loss happened within the scope of the agent’s authority, the principal must make it up to the agent.

Duty to Cooperate:

For the agent to perform its function efficiently and effectively, the principal has to be in on it.

Agent's Obligations to the Principal

On the other hand, the agent owes duties to his principal:

Duty of Care and Skill:

The agent is duty bound to use due care and skill in the execution of their agency powers. The agent, if a professional, must exhibit the degree of skill of one of his profession.

Duty to Follow Instructions:

The agent is subject to the control of the principal and is governed by the latter. The agent cannot do anything beyond what the principal does, unless such is afterwards ratified by the principal.

Duty of Loyalty:

The agent owes the principal the duty of good faith, to disclose any conflict of interest the agent may have, to account to the principal all profits the agent makes in connection with the agency, and to refrain from competing with the principal.

Termination of Agency

An agency can be terminated in two or more ways:

1. By Consensus: The agency may terminate by the consensus of the principal and agent.
2. Their Task Performed: This connection is cut when they have completed their agency or duty.
3. By Death or Insanity: Death or insanity of the principal or agent results in termination of agency by law.
4. Revocation: As long as the principal is able, the principal can revoke the agent’s authority at any time if the power of attorney is conventional — however, because an irrevocable power of attorney requires consideration (quoted above), revocation cannot be effective so long as the power of attorney is irrevocable, unless the principal does so during the designated time.

Agency in Bangladesh and Its Legal Ramifications

On both the commercial and legal side, agency is absolutely crucial. The following are several significant legal implications of the agency under the Contract Act, 1872:

Liability in Contracts:

When an agent exercises authority, expressly given and generally exercised within his authority, the act of the agent binds the principal to third persons. The principal is concluded, if the agent has exceeded the authority unless the principal adopts the act of the agent afterwards.

Agent's Liability to Third Parties:

Nevertheless, even if the latter is considered to be speaking for the former, and even if the alleged wrong or the contract may be imputed to the former as the act of the latter so as to render him liable therefor, it does not follow that the injured party may not sue the agent for his bad faith or his false representations of his principal to the injury of the third person and of the principal also.

Conclusion

Agency in the Contract Act, 1872 is an essential principle for the relations between a principal and an agent in Bangladesh. Understanding Agency, its duties, types, and legal implications is vital for law students preparing for exams and real-world applications. Whether you're heading into business, law school, or starting your own startup, a well-rounded grasp of agency is a must for all of your legal affairs.

Find out more by checking the links of this website! Get some practice during your study of this vital area of contract law by exercising your brain with a number of examples in your textbooks, online classes, and in the real world.