Agency: creation and kinds of agents

1. Agent and principal: section 182

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 the act is done, or who is so represented, is the principal. The test is representation: the agent can bring the principal into legal relations with third parties. The maxim is qui facit per alium facit per se, he who acts through another acts himself.

2. Who may employ and who may be an agent

• Section 183. Any person who is of the age of majority according to the law to which he is subject, and of sound mind, may employ an agent. A minor cannot appoint an agent, since he cannot do the act himself.
• Section 184. As between the principal and third persons, any person may become an agent, even a minor or a person of unsound mind. But no person who is not of age and of sound mind can become an agent so as to be responsible to the principal. So a contract made by a minor agent binds the principal and the third party, but the principal cannot sue the minor agent for negligence or misconduct.
• Section 185. No consideration is necessary to create an agency. The principal's consent to be bound by the agent's acts is a sufficient detriment.

3. Creation of agency

(a) Express agency. Section 186: the authority of an agent may be express or implied. It is express when given by words spoken or written (section 187), commonly by a power of attorney.

(b) Implied agency. Authority is implied when it is to be inferred from the circumstances of the case, and things spoken or written, or the ordinary course of dealing (section 187). Illustration: A owns a shop in Serampore, living himself in Calcutta and visiting the shop occasionally. The shop is managed by B, who is in the habit of ordering goods from C in A's name for 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 A's name. A wife living with her husband has implied authority to pledge his credit for necessaries suited to their style of living, unless he has forbidden it (Debenham v. Mellon, 1880).

(c) Agency by estoppel, section 237. When an agent has, without authority, done acts or incurred obligations to third persons on behalf of his principal, the principal is bound if he has by his words or conduct induced such third persons to believe that the acts and obligations were within the scope of the agent's authority. The principal is prevented from denying an authority he appeared to give. This overlaps with ostensible authority, discussed in the note on principal and third parties.

(d) Agency by necessity. Section 189: an agent has authority, in an emergency, to do all such acts for the purpose of protecting his principal from loss as would be done by a person of ordinary prudence in his own case, under similar circumstances. The illustration: an agent for sale may have goods repaired if necessary. Agency of necessity can also arise where none existed. In Great Northern Railway Co. v. Swaffield (1874), the railway, having carried a horse which no one came to collect, put it in a livery stable and was held entitled to recover the charges from the owner. The conditions: a real emergency, no practical possibility of communicating with the owner, and action in good faith for the owner's benefit.

(e) Agency by ratification, sections 196–200. Where acts are done by one person on behalf of another but without his knowledge or authority, the other may elect to ratify or disown them. If he ratifies, the same effects follow as if they had been done by his authority (section 196). Ratification relates back to the date of the act.

• Ratification may be express or implied by conduct (section 197).
• The act must have been done on behalf of the person ratifying. An undisclosed principal cannot ratify: Keighley, Maxsted & Co. v. Durant (1901).
• The principal must have been in existence and competent at the time of the act. A company cannot ratify a contract made by its promoters before incorporation: Kelner v. Baxter (1866). (Sections 15(h) and 19(e) of the Specific Relief Act, 1963 now let a company adopt such contracts if warranted by its terms of incorporation.)
• The principal must have full knowledge of the facts. Section 198: a ratification by a person whose knowledge of the facts is materially defective is invalid.
• The whole transaction must be ratified. Section 199: ratifying part of a transaction ratifies the whole.
• Ratification cannot injure a third person. Section 200: an act which, if done with authority, would have had the effect of subjecting a third person to damages, or terminating any right or interest of his, cannot by ratification be made to have that effect. Illustration: A, not authorised by B, demands on B's behalf delivery of B's goods from C. C refuses. B cannot ratify the demand so as to make C liable for damages for his refusal.
• The act must be one the principal could lawfully have done. A void or illegal act cannot be ratified.

4. Kinds of agents

• General and special agents. A general agent acts for the principal in all matters of a kind (a manager); a special agent is appointed for one particular act (to sell one house).
• Mercantile agent. Defined in section 2(9) of the Sale of Goods Act, 1930: an agent having in the customary course of business authority to sell goods, consign goods for sale, buy goods, or raise money on the security of goods. Factors, brokers, auctioneers and commission agents are its varieties.
• Factor. A mercantile agent entrusted with possession of goods, who sells in his own name. He has a general lien under section 171.
• Broker. Negotiates contracts between buyer and seller for commission, but has no possession of the goods and usually does not contract in his own name.
• Auctioneer. Sells goods by public auction; agent of the seller, and of the buyer for the limited purpose of recording the sale.
• Del credere agent. For an extra commission, guarantees to the principal that the third parties with whom he contracts will pay. He is both agent and surety, though he is not liable if the buyer refuses to pay on a valid ground such as defective goods.
• Commission agent, banker (for collecting cheques) and advocate are other common examples.

5. Sub-agent and substituted agent: sections 190–195

The general rule (section 190) is that an agent cannot lawfully employ another to perform acts he has expressly or impliedly undertaken to perform personally, unless by the ordinary custom of trade a sub-agent may be employed or the nature of the agency so requires.

• Sub-agent, section 191. A person employed by, and acting under the control of, the original agent in the business of the agency. If properly appointed, the principal is bound by his acts and the agent is responsible to the principal for them; the sub-agent is responsible to the agent, and to the principal only for fraud or wilful wrong (section 192). If improperly appointed, the agent alone is responsible for him (section 193).
• Substituted agent, section 194. Where an agent, holding express or implied authority to name another person to act for the principal, names such a person, he is not a sub-agent but an agent of the principal. Illustration: A directs B, his solicitor, to sell his estate by auction and to employ an auctioneer. B names C, an auctioneer. C is A's agent, not B's sub-agent. Section 195: in selecting him the agent must use the discretion a man of ordinary prudence would in his own case; if he does, he is not responsible for the substitute's acts.

6. Agent and servant

• Control. Agent: Principal directs what is to be done. Servant: Master directs what and how.
• Contracts. Agent: Can bring principal into contract with third parties. Servant: Ordinarily cannot.
• Remuneration. Agent: Usually commission. Servant: Usually salary or wages.
• Number of principals. Agent: May act for several. Servant: Usually serves one master.
• Liability for wrongs. Agent: Principal liable for acts within authority. Servant: Master liable for acts in course of employment.

In Lakshminarayan Ram Gopal & Son Ltd. v. Government of Hyderabad, 1954 INSC 37, AIR 1954 SC 364, the Supreme Court drew the distinction in these terms: a principal has the right to direct what work the agent has to do, but a master has the further right to direct the manner in which the work is to be done. A person can be both agent and servant of the same employer.

How this is examined

January 2026 asked both “explain the kinds of agents” and “explain the different modes of creation of agency”. For creation, the five modes with section numbers, and ratification in full with its conditions and cases (Keighley Maxsted, Kelner v. Baxter, section 200 illustration). For kinds, the list above plus sub-agent and substituted agent. Short notes: agency by necessity; del credere agent; agent and servant; ratification.