Agency is the relationship between the principal and an agent gives rise to the agency and under such contract the principal appoints the agent in order to represent him in legal dealings with the third party. Let’s discuss in detail various modes of the creation of the agency.
Modes Of Creation of Agency
It may be created in any one of the following ways:
By Direct Appointment
Where the agent’s authority is expressed, it is said to be a creation of agency by direct appointment. The authority of the agent is said to be expressed when it is given by words spoken or written.
Illustration: X appoints Y as his agent to sell his goods at X’s shop by spoken words. It will be a creation of agency by direct appointment.
By Implication
When the agency is inferred from the course of dealings between two persons or from the conduct, the agency is said to be created by implication.
Here the genital authority is not given by words spoken or written but it is assumed by the conduct or by the dealing of the parties.
Illustration: A owns a shop in Multan and lives in Bahawalpur. The shop is managed by B. B is in the habit of ordering goods from C in the name of A and makes payment from A’s fund with A’s knowledge. It means B has implied authority from A to deal with C.
Agency By Necessity
When the agent has no authority from his principal in expressed or any other way, but under certain emergency circumstances he does any act for the principal, it is known the creation of agency by necessity.
Illustration: A horse is sent by a train but at arrival, there is no one to receive it the railway company is bound to take reasonable steps to keep the horse alive.
It will be a creation of agency by necessity. The railway company will have agental position in such case.
Agency By Estoppel
When an agent without authority done acts or incurred obligations to third persons on behalf of his principal, the principals are bound, by such acts or obligations if he has by his words or conduct induced such third persons to believe that such acts and obligations were within the scope of agent’s authority. It will be the case of creation of agency by estoppels. Sec. 237
Illustration: X consigns goods to Y for sale, and gives him instructions not to sell under a fixed price. Z, being ignorant of Y’s instructions enters ‘into a contract with Y in X’s presence to buy the goods at a price lower than the reserved price. X is bound by the contract.
Agency By Ratification
Where a person (Principal) ratifies an unauthorized act done by another person (agent) on his behalf. It is known as creation of agency by ratification
Illustration: A having no authority from B purchases goods on B’s behalf. But after that B sells the goods on his account, B’s conduct implies a ratification of the purchase made by A on his behalf
Agency By Operation of Law
Under some cases the agency is automatically created by the operation of law enforceable in Pakistan. For example, a partner is an agent of the firm for the purpose of the business of the firm.
See Also: Registration of a Partnership Firm
Modes of Termination of Agency
The following are the different modes of the termination of the agency:
By Mutual Consent
The principal and the agent can terminate the business of the agency at any time by mutual consent. When they do so, it is known as termination of an agency by mutual consent (agreement).
Revocation By Principal
When the principal revokes the authority of his agent, the agency is said to be terminated by revocation. A principal is at liberty to revoke the time.
Illustration: B who was working as an agent of A to sell his goods at A’s shop. A orders B not to work at his shop in future. It will be termination of an agency by the revocation of principal.
Renunciation By Agent
If the agent renounces the business of the agency, then the agency is terminated. But the condition is that he should give due notice of renunciation of the agency to his principal.
Illustration: X were working as an agent of Y to sold goods at Y’s shop. X gives notice to Y that he will not work as his agent from next month, so it will be the termination of an agency by renunciation of the agent.
Completion of the Business
When the agent is appointed to do some particular work, the agency is terminated at the completion of such work.
Illustration: A company undertakes to construct a road from Multan to Bahawalpur. A company appoints B as an agent to look after the work and to provide construction material.
When work (road) is completed, the agency will be terminated due to the completion of work.
Expiry of Time
When the agent is appointed for a fixed period of time, the agency is terminated at the expiry of such time period.
Illustration: X is appointed as an agent only for one year. When one year period is completed, the agency will be terminated by the expiry -of time.
By Death
When either the agent or the principal dies, the business of the agency comes to an end.
By Insanity
When either the agent or the principal becomes of unsound mind ‘the agency comes to an end.
Winding Up of Company
When either the principal or the agent is a Joint-stock company, the agency is terminated automatically, when the business of the company is wound up.
