Agency is the relation existing between two or more persons, arising out of a contract giving authority to one to represent the other in business transactions. A person who so represents another is called an "agent the one whom he represents is known as the "principal."

How Created

The contract which creates the agency may be a formal writing under seal, as a power of attorney, or it may be a written agreement, or a letter of instructions, or a verbal agreement or appointment, or it may be implied from facts and circumstances.

Who May Act As Principal Or Agent

Any one who is competent to do business for himself may act as principal, and appoint an agent to transact it for him. Persons who cannot do business for themselves may, however, be appointed to act as agents. Therefore minors and married women may act as agents.

Extent Of Authority

The employing of an agent is the act which gives him his authority. An agent has authority to do whatever is necessary or generally done in connection with the purposes for which he is employed.

Kinds Of Agency

There are several kinds of agency, the first division of which is into special and general; second, limited andunlimited; third, factor and broker. A special agency is an agency to do a single act. A general agency is one in which the agent is delegated authority to do anything about a particular business Limited agency is one in which the agent is bound by particular instructions, and applies to a general agent, restricting his authority. Unlimited agency is the power of a special agent, giving him authority to use any means he may find necessary to accomplish the thing to be done. A factor is one who has the property of his principal in his own possession for sale, and is commonly termed a commission merchant. A broker is one employed to negotiate sales between the buyer and the seller. He does not have possession of the goods or property which he negotiates, nor has he any authority to sell in his own name.

Liability Of Principal

The principal is responsible for the acts of his agent committed in the execution of the agency and which are within the real or apparent scope of the principal's business. A distinction is here made between a special and a general agent. If a special agent exceeds or disobeys his instructions the principal is not liable; but if a general agent exceeds his authority the principal will be bound, if the act is within the apparent scope of an agent's authority, when it is such an act as is natural and usual in transacting business of that kind. By appointing him to do that business, the principal is considered as saying to the world that his agent has all the authority necessary to transact it in the usual way. For any criminal act, however, of the agent, the principal is not responsible unless he directly commands him to commit it.

Wrongful Acts Of Agents

In case of wrongs and injuries (orts), the general rule is that the principal is liable to third persons for the wrongful acts of the agent when acting within the scope of his agency. But this does not relieve the agent of personal liability himself.

The Agent's Liability- (1) To his Principal. An agent is bound in transacting the affairs of his principal to exercise all the care which a reasonable man Would exercise in his own, and to the utmost good faith. For any loss to the principal through neglect or unfaithfulness, the agent is liable to him. (2) To the Third Party. If an agent conceals his character as an agent, or transcends his authority, or otherwise so conducts himself as to make his principal responsible, or if he expressly binds himself in any way, he is himself liable to the third party.


The principal may call his agent to an account at any time, and may recover full indemnity for all injuries sustained by reason of the positive misconduct or negligence of the agent, or by his transcending his authority. An agent is not liable to his principal for not accounting until demand, which demand should be made at his residence, and sufficient opportunity given him for payment.


As against the principal, an agent is entitled to compensation for his services, and reimbursement for the expenses of his agency, and for personal loss or damage in properly transacting the business thereof.


An agent may himself appoint another agent and act through him. Such a person is called a sub-agent, and is responsible to him who has appointed him, as his principal. In most commercial transactions sub-agents may be employed.

Mixing Property

If an agent mixes his own property with that of his principal, so that it cannot be identified, it will all belong to the principal.

Responsibility To Third Party

Ordinarily a person can only be responsible for his own acts, but an agent's act is really considered as that of his principal. Therefore the rule is that the principal is responsible for the acts of his agent. The principal is bound even though he was unknown at the time the act was done, because he is supposed to derive the benefit of the same.

Notice To Agent

A notice to an agent is generally-considered notice to the principal, but to have that effect, it must have relation to the agency business, and come within its scope. It must also be at the time he is acting as agent in relation to the very thing about which the notice is given.

Dissolution Of Agency

There are three ways in which an agency may be dissolved: (1) By a revocation of the power of the agent by the principal; (2) by a renunciation of power by the agent; (3) by operation of law.


This may take place at any time the principal's authority has not been executed in any part; at such time as desired by the principal if there is an express agreement that it shall be revocable; or at such time as such revocation will not work a hardship upon the agent.


The agent can renounce the authority of the principal at any time, but not without making himself liable to the principal for all the damages and losses he sustains in consequence of the renunciation, except where it is a gratuitous and purely voluntary agency.

Operation Of Law

An agency may be terminated by operation of law: (1) By lapse of time, as where it was created for a year and the year expires; (2) by change in the condition of either party producing incapacity to act.