When a person employs another person to do any act for himself or to represent him in dealing with third persons, it is called a ‘Contract of Agency’. The person who is so represented is called the ‘principal’ and the representative so employed is called the ‘agent (Sec. 182). The duty of the agent is to enter into legal relations on behalf of the principal with third parties. But, by doing so he himself does not become a party to the contract to the contract not does he incur any liability under that contract. Principal shall be responsible for all the acts of his agent provided they are not outside the scope of his authority.

Competence of the parties to enter into a contract of agency

The person employing the agent must himself have the legal capacity or be competent to do the act for which he employ the agent. A minor or a person with unsound mind cannot appoint an agent so as to be legally represented by him (Sec. 183). But an agent so appointed need not necessarily be competent to contact (Sec: 184) and hence minor or an insane can be appointed as an agent he can bring about legal relations between the principal and the third party but such an incompetent agent cannot personally be held liable to the principal.

Creation of Agency: Agency may be created by any of the following ways:

1. Expressly (Sec. 187)
   When an agent is appointed by words spoken or written, his authority is said to be express.
2. Impliedly (Sec. 187)
   When agency arises from the conduct of the parties or inferred from the circumstances of the case, it is called implied agency.
   Example: A of Calcutta has a shop in Delhi. B, the manager of the shop, has been ordering and purchasing goods from C for the purpose of the shop. The goods purchased were being regularly paid for but of the funds provided by A. B shall be considered to be an agent of A by his conduct.

CLASSIFICATION OF AGENTS

A general classification of agents from the point of view of the extent of their authority is as follows
1) Special agent. A special agent is one who is appointed to perform a particular act or to represent his principal in some particular transaction as, for example, an agent employed to sell a house or an agent employed to bid at an auction. Such an agent has a limited authority and as soon as the act is performed, his authority comes to an end. He cannot bind his principal in any matter other than that for which he is employed. The persons who deal with him are bound to ascertain the extent of his authority.
2) General agent. A general agent is one who has authority to do all acts connected with a particular trade, business or employment. For example, the manager (general agent) of a firm has an implied authority to bind his principal by doing anything necessary for carrying on the business of the firm or which falls within the ordinary scope of the business. Such authority of the agent is continuous until it is put to an end. If the principal, by secret instructions, limits the authority of the general agent, and the agent exceeds the authority, the principal is bound by the agent’s acts done within the scope of his authority, unless the third parties dealing with the agent have a notice of the curtailment of the authority of the agent.
3) Universal agent. A universal agent is one whose authority to act for the principal is unlimited. He has authority to bind his principal by any act which he does, provided that act (i) is legal, and (ii) is agreeable to the law of the land.,

4)Another classification of agents from the point of view of the nature of work performed by them is as follows :

1. Commercial or mercantile agent. A ‘mercantile agent’, according to Sec. 2 (9) of the Sale of Goods Act, 1930, means “a mercantile agent having in the customary course of business as such agent, authority either to sell goods, or to consign goods for the purposes of sale, or to buy goods, or to raise money on the security of goods.” This definition does not cover all kinds of mercantile agents which are as follows:
   (1) Factor. A factor is a mercantile agent entrusted with the possession of goods for the purpose of selling them. He has ostensible authority to do such things as are usual in the conduct of business [Pickering v. Busk, (1812) 15 East 38). He sells the goods in his own name as an apparent owner upon such terms as he thinks fit. He can sell them on credit as well. He has also the authority to receive the price and give a good discharge to the purchaser.
   

Example. P owned a motor car and delivered it to A, a mercantile agent, for sale at not less than £ 575. A sold the car for £ 340 to T, who bought it in good faith and without notice of any fraud. A misappropriated the £ 340 and F sued to recover the car from T. Held. as A was in possession of the car with P’s consent for the purposes of sale, T got a good title [Fakes v. King, (1923) 1 K.B. 2821.

(2)Auctioneer. An auctioneer is an agent appointed by a seller to sell his goods by auction for a reward generally in the form of a commission. He is primarily the agent of the seller but after the sale has taken place. he becomes the agent of the purchaser also. He resembles factor in all respects except that he has only a particular lien on the goods for his charges. He has authority
to receive the price of the goods sold. He can also sue for the price in his own name. The principal is liable to the third parties for the acts of the auctioneer if the auctioneer acts within the scope of his apparent authority even though he disobeys instructions privately given to him.
Example. P instructed A to sell a pony by auction, subject to a reserve price of £ 25, A. at the time of sale inadvertently stated that there was no reserve price and knocked the pony down to T at £ 16. Held, the sale was binding on P [Rainbow v. Hawkins, (1904) 2 K.B. 322)

(3)Broker. A broker is an agent who is employed to buy or sell goods on behalf of another. He is employed primarily to bring about a contractual relation between the principal and the third parties. He is not entrusted with the possession of the goods in which he deals. He, cannot act or sue in his own name. And as he has no possession, he has no right of lien.

(4) Commission agent. A commission agent belongs to a somewhat indefinite class of agents. He is employed to buy and sell goods, or transact business generally for other persons receiving for his labour and trouble a money payment, called commission.
(5) Del credere agent. A del credere agent is one who, in consideration of an extra commission, guarantees his principal that the person with whom he enters into contract on behalf of the principal, shall perform their obligations. He occupies the position of both a guarantor and an agent.
Banker. The relationship between a banker and his customer is really that of debtor and creditor. But there is a super-added obligation on the part of the banker to pay when called upon to do so by the draft or order (in the form of a cheque) of the customer. To this extent, a banker is the agent of his customer.
Non-mercantile agents. These include attorneys, solicitors, insurance agents, clearing and forwarding agents and wife, etc.