Q-1: Explain the term “Agency”. How it can be organized? OR Define agency agent and principal.
Contract act defines the agency in the following words:
Agency is a relationship existing between principal and agent.
PARTIES TO AGENCIES
(1) Agent (2) Principal
Under Section 182 the agent can be defined, as
“The person employed to do any act for another in dealing with the third parties’
“The person for whom such act is done is called as principle”
DISTINGUISH BETWEEN AN AGENT AND SERVANT
Basis of Distinction
|1. Authority to create contractual relationship||He has the authority to create contractual relationship between the principal and a third party.||He ordinarily has no such authority.|
|2. Work of several persons||He may work for several principals at a time.||He ordinarily works only for one master.|
|3. Remuneration||He usually gets commission.||He usually gets salary or wages.|
CREATION OF AGENCY
Agency may be created in different ways.
1. GENERAL AGENCY
An agent who is liable to do all the acts, which are selected to the specific business, is called as general Agent.
Mr. Nawab a factory owner appoints Mr. Saad a general manger of his factory.
2. SPECIFIED AGENCY
When a principle appoints an agent only for a special and particular act, it is called special
Mr. Nawab employs Mr. Asif to sell his house.
3. AGENCY CREATED BY NECESSITY
If one person acts without authority for another due to emergency, it is said that agency is created by necessity.
4. AGENCY CREATED BY RATIFICATION
Where a person (Principle) ratifies an unauthorized act done by another (Agent) on his behalf without his knowledge. Afterward principal may accept or rectify the contract, it is said that agency is created by ratification.
X the managing director of a company, without prior authority from the company accepted an offer made by Y on behalf of the company- Y later on revoked the offer but the company ratified Xs acceptance. It was held that Y is bound by ratification because ratification related back to the time ofX’s acceptance.
5. AGENCY CREATED BY EXPRESS AGREEMENT
Under Section 186 An Express Agency is one when authority is given to agent by words or written is called expressed agreement.
X who owns a shop, appoints Y to manage his shop by executing a power of attorney in Ys favour. Here, the relationship of principal and agent has been created between X and Y by an express authority.
6. AGENCY CREATED BY IMPLICATION / IMPLIED AUTHORITY
Under Section 187, when the conduct of the principal him self toward the other shows that others person is his agent is called agency created by implication.
A owns a shop in Multan, living himself in Karachi, and visiting the shop occasionally. The shop is managed by B, and he is in the habit of ordering goods from C in the name of A for the purposes of the shop and of paying for them out of A’s funds with A’s knowledge. B has an implied authority from A to order goods from C in the name of A for the purposes of the shop,
7. AGENCY CREATED BY ESTOPPEL
Under Section 237, some times some principal induce another to believe that the un¬authorized acts done by his agent are authorized. If once the principal accepts the authority of his agent, then he cannot refuse.
X tells V in the presence and within the hearing of Z that he (X) is Z’s agent. Z does not contradict this statement. Later on Y enters into a contract with X believing that X is Zs agent. In such a case Z is bound by this contract and in a suit between Z and Y, Z cannot be permitted to say that X was not his agent, even though X was not actually his agent.
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AGENCY BY RATIFICATION