Unit 4: Contract of Agency
4.1 Meaning of Agent and Agency
Agency is the relationship in which one person (the agent) is employed to act on behalf of, and represent, another (the principal) in dealings with third parties, so that the agent’s authorized acts bind the principal as if done by him. The maxim runs: qui facit per alium facit per se — he who acts through another acts himself (name only). In Nepal, the Muluki Civil Code 2074, Part 5, Chapter 10 (Contracts of Agency) governs (chapter verified from the Code’s official table of contents), continuing the Contract Act 2056’s line.
Agency vs. independent contractor: the agent represents and binds (authority); the contractor works to a result without representing (no power to bind). The control test separates them — the agent is subject to the principal’s direction as to the act’s manner; the contractor is not.
4.2 Features of Contract of Agency
- Agreement between principal and agent (express or implied) — plus consent, express or implied, of the agent to act and of the principal to be bound.
- Fiduciary character — loyalty, no conflict, no secret profit (the heart of the relationship).
- Acting on the principal’s behalf — the agent brings the principal and third party into direct relations (distinct from the contractor’s own account).
- Capacity — anyone competent to contract can be a principal or agent; a minor’s agency fails with the general law (Law of Contract-I, Unit 3).
- No consideration necessary to create agency (the Indian Act’s express rule — name only) — the relationship rests on consent, not price.
- The authority’s limits define the principal’s bond — the principal is bound only within actual or apparent authority.
4.3 Modes of Creating Agency
- Express agency — oral or written; the written form is the power of attorney/authorisation deed (for immovable-property dealings, Nepali practice requires a properly executed — and, where the law demands, registered — power of attorney; the notarised instrument before offices and banks).
This is a preview. The complete Law of Contract-II notes — full unit, Exam Focus box and model questions — are in the PDF / full version. Get the complete notes →