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In Agency contracts, there exists a legal relationship between two people whereby one person acts on behalf of the other. The person acting on behalf of the other person is called an agent and the person for whom the agent derives authority is called the principal. In Section 182 of the Indian Contract Act of 1872 and Agent’ is defined as a person hired to perform any act for another or to represent another in dealings with third parties. The person for whom such an act is performed, or who is so represented, is referred to as the "Principal" in Section 182. As a result, the Principal will be the one who has delegated his power.

            The law of ‘ Agency ’ is based on the principle, ‘ Qui Fact per Alium, Facit Per se ’ . The meaning of the principle is that the one who acts through another is deemed in law to do it himself. For instance, A appoints b to deal with his bank transactions. In this case, A is the principal, B is the agent and ‘The Bank’ is the third party. 

Who can appoint an agent ?

Any person who has attained the age of maturity and has a sound mind can appoint an agent. 

Creation of an Agency : - 

  • An agency can be created either by appointing in written or it may be orally.

  • An agency can be created by conduct of the party or situation or Estoppel. For instance, A sends his friend S everywhere for dealings and meetings. The third party believes that S is an agent but in reality it is not been written anywhere. However, the conduct of S shows him as an agent. 

  • An agent can be created by ratification. Ratification is a principal's approval of an act of its agent that lacked the authority to bind the principal legally. For instance, A sends B to go to a school and make dealings with it for book supply. B also does a dealing of college supplies. Thus, A will have to agree for the college even though the authority exceeded. 

  • An agent can be created by necessity. This means that when a person acts for another in an emergency situation without express authority to do so. 

Duty of an Agent

The duty of an Agent is to execute mandate, follow instructions or customs, reasonable care and skill, avoid conflict of interest, not to make secret profit, remit sums, maintain accounts, not to delegate. Delegatus Non Potest Delegare means that if I delegate you to do something, you cannot delegate it further.

Landmark Judgment 

Kuchwar Lime & Stone Co. v. Dehri Rohtas Light Railway Co. Ltd. & Anr. 

CITATION: 1969 AIR 193 

FACTS: The appellant Company's carriage to Banjari station had booked a quantity of coal on the respondent Railway's line, and the Appellant Company had to pay the freight on the consignment. Because of the poor quality of the coal, the Company refused to accept delivery of a portion of the consignment, which arrived in Banjari on November 12, 1954. After some discussion between the parties and with the Coal Controller, the Railway sold the coal at public auction on June 2, 1955, after providing the appellant with a notice. It then filed suit against the Company, alleging unpaid freight and demurrage charges for 202 days, during which six waggoons carrying coal were held, and ‘sought a judgment for Rs. 17,625/14/- after deducting the amount realized from the sale of the coal.

ISSUES: Is the consignee liable for payment if he refuses to accept the shipment? Is the railway entitled to full demurrage or must it unload and claim demurrage for a reasonable period?

 HELD: The consignee could only be held responsible for wharfage, according to the Supreme Court. The argument that the consignee can only be held liable for demurrage if he accepts delivery of goods was found to be without merit. Even if the consignee does not take delivery, the Railway is generally allowed to make him responsible for demurrage if the waggon is held for his benefit.


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