Agency Law

Agency

Definition of Agency

Agency, Agent and principal

An agent is a person employed to do any act for another or to represent another in dealings with third person. In other words an agent is a person who acts in place of another. The person for whom such act is done or who is so represented is called the Principal

Foe e.g., A appoints B a broker to sell his car on his behalf. A is the principal and B is his agent. The relationship between A and B is called Agency.

According to Section 56 of the Contract Act of Nepal 'agency' means 'any person, except for any matter related to his personal skill,

• to do any work on his behalf or
• to carry on his occupation as an agent or
• to do any business with any third person or
• to make his representation to that third person or
• to establish a legal relationship between the main person appointing the representative and the third person

may appoint a agent on his behalf and after the appointment of such agent, the contract of agency shall be considered to have been executed.

The function of an agent is to bring about contractual relations between the principal and third parties. Thus, an agent is merely a connecting link between the principal and the third party and is rightly called a “conduit pipe”.

After entering into a contract on behalf of the principal with a third party, the agent drops out and ceases to be a party to the contract and the contract binds the principal and the third party as if they have made it themselves. “Qui facit per alium facit per se” is the principal of agency which means “He who does through another does by himself”.

Section 56 of Contract Act of Nepal 2056 has defined 'agency'.

General features of agency

• The agent acts on behalf of the principal or represents the principal in dealings with the third person
• There is a delegation of authority from the principal to the agent for doing something or representing him in dealings with the third party. However the agent has to follow his directions of the principal in the performance of his duty.
• Principals and the third person should be competent to contract.

A person can do only such thing through an agent which he is himself personally capable of doing. 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. Thus a minor or lunatic cannot contract through an agent since they cannot contract themselves personally either. If an agent acts for a minor or lunatic, he will be personally liable to the third party. A person can do only such thing through an agent which he is himself personally capable of doing.