Agency Agreement

As per section 182 of the Indian Contract act 1872 an agency agreement is a legal contract creating a fiduciary relationship, where the first party who is principal that the actions of the second party that is agent binds him for the later agreements/transactions, made by the agent as if the principal had himself personally made the later transaction.This power of the agent to bind the principal responsible for all its actions is referred to as 'Authority'.
Who are Agent and Principal?
In a principal-agent relationship, the principal is the person or entity that authorizes another party, the agent, to act on their behalf in business or legal matters. This relationship is based on trust and often involves a contract or agreement.
Key Differences:
Principal – The one who delegates authority and is ultimately responsible for the actions of the agent.
Agent – The one who acts on behalf of the principal, making decisions or performing tasks within the scope of their authority.
The termination of agency refers to the end of the principal-agent relationship, meaning the agent no longer has the authority to act on behalf of the principal. Agency can be terminated in several ways, which are broadly classified into by act of the parties and by operation of law.
1. Termination by Act of the Parties
The principal and agent can end their relationship voluntarily in the following ways:
2. Revocation by the Principal – The principal may revoke the agent’s authority, but if done wrongfully, they may have to compensate the agent.
3. Renunciation by the Agent – The agent can resign from their duties, but they may be liable for breach of contract if it is done improperly.
4. Completion of Purpose – If the agency was created for a specific task (e.g., selling a house), it automatically ends once the task is completed.
5. Expiry of Term – If the agency was for a fixed period, it ends when that period expires.
2. Termination by Operation of Law
Certain events automatically bring the agency to an end:
1. Death or Insanity – If either the principal or agent dies or becomes mentally incapacitated, the agency ends.
2. Bankruptcy – If the principal or agent is declared bankrupt, the agency may be terminated.
3. Destruction of Subject Matter – If the agency was related to a specific property or subject matter that is destroyed, the agency ends (e.g., if an agent was hired to sell a car that gets totaled).
4. Change in Law – If a law is passed making the agency's purpose illegal, the agency is terminated.
5. Dissolution of a Company – If either the principal or agent is a company that is dissolved, the agency ends.
Once an agency is terminated, the agent no longer has the authority to act on behalf of the principal. In some cases, notice must be given to third parties to prevent legal complications.
Documents Required for Agency Agreement Service
Memorandum and Articles of Association of the Company
Board Resolution authorizing the signing of the agency agreement
Power of Attorney (if required)
Identity proof of the authorized signatory
Proof of address of the authorized signatory
Financial statements of the Company
Business plan and marketing strategy (in some cases)