A contract is a voluntary arrangement between two or more parties that is enforceable by law as a binding legal agreement. Contract is a branch of the law of obligations in jurisdictions of the civil law tradition. Contract law concerns the rights and duties that arise from agreements.A contract arises when the parties agree that there is an agreement.
Formation of a contract generally requires an offer, acceptance, consideration, and a mutual intent to be bound. Each party to a contract must have capacity to enter the agreement. Minors, intoxicated persons, and those under a mental affliction may have insufficient capacity to enter a contract. Some types of contracts may require formalities, such as a memorialization in writing. Agency is one of the type of contract.The concept of agency was thus explained by Ramaswami J of the Madras High Court in P.
Krishna Bhatta v Mundila Ganapathi Bhatta “Agent” is defined in section 182 of the act in the following wordsSection 182: “Agent” and “Principal” defined an agent is a person employed to do any act for another ,or to represent another in dealing with their persons . The person for whom such act is done, or who is so represented, is called the principal. Although one person cannot , by contract with another ,confer rights or impose liabilities on a third person , yet , he may represent another for the purpose of bringing him into legal relations with a third party .Employment for this purpose is called ‘agency’.
The law relating to agency is contained in Chapter X (Secs.182 to 238 of the Indian contract act 1872.The agent may be expressly or impliedly authorised to do an act on the behalf of the principal.Agency in law connotes an authority or capacity in one person to create legal relations between a person, occupying the position of principal , and third parties .
Thus, in an agency (‘contract of employment’), one person (principal) employs another person.The emphasis on the power of the agent to represent his principal in dealing with the third person .but, the above definition is enough to embrace a servant pure and simple , even a casual employee , a man who is engaged by me in the street to black my boots ;Thus what distinguishes an agent from a person appointed to do an act , is the agent’s representative capacity coupled with a power to affect the legal relations of the principal with the third persons . The essence is that the principal authorised who is authorised as the agent to represent or act for him in bringing the principal into contractual relations with a third person SOME FEATURES OF A CONTRACT OF AGENCY1.
THE PRINCIPAL SHOULD BE COMPETENT TO CONTRACT (Section 183) – since the agent creates a contractual relationship between his principal and the third person , it is necessary that the principal and the third person should be competent to contract.” Any person who is of the age of majority according to the law of which he is subject and who is of sound mind , may employ an agent “2.THE AGENT MAY NOT BE COMPETENT TO CONTRACT (SECTION 184)It provides that no person who is not of the age of majority and of sound mind can become an agent. Thus, if an agent is a minor ,through him a valid contractual relationship will be created between the principal and the third person, though such an agent will not himself be responsible for his acts to his principal.
3. NO CONSIDERATION IS NECESSARY TO CREATE AN AGENCY (SECTION 185) – this section provides that no consideration is necessary to create an agency. From the very nature of the contract of agency , the principal agrees to be bound by the acts done by the agent on his behalf that serves as a sufficient detriment to the principa