An agency may be created in any of the following ways

An agency may be created in any of the following ways:

1. Express agency:

An express agency may be created orally by words of mouth or in writing (Sec. 187). The most common form of written agency, you might have often heard of, is power of attorney, under seal, popularly called P.O. A. Under such authority, an agent is authorized to bind his principal by any contract under seal, i.e., a written and stamped document.

2. Implied agency:

An agency is said to be implied when it is to be inferred from the circum­stances of the case. An implied agency does not arise out of a contract, but is implied from the acts of the parties, or the ordinary course of dealing, usage or custom of the trade, etc. The agent is deemed to be acting on behalf of the principal.

Example:

A owns a shop in Meerut and he himself lives in Delhi. A visits his shop occasionally. The shop is managed by B who is in the habit of ordering goods from C in the name of A for the purpose of the shop, and of paying for them out of A’s funds and with A’s knowledge. B has an implied authority from A to order goods in the name of A for the purpose of the shop.

The implied agency includes agency by estoppel, agency by holding out and agency by necessity.

(i) Agency by estoppel:

Where a person, by his conduct or words spoken or written, willfully leads another to believe that a certain person is acting as his agenct, he is estopped later on from denying the truth of the fact that such a person is dealing as his agent.

Example:

A tells B in the presence and within the hearing of C that he (A) is C’s agent. C does not object to this statement and keeps quiet. Later on B enters into a transaction with A bona fide believing that A is C’s agent. C is bound by this transaction and will be estopped from denying that A was his agent, even though A was not in reality his agent.

It will be noticed from the above example that C by his conduct has willfully led B to believe that A is C’s agent. Now C will be estopped from denying the truth of the statement that A is C’s agent. Hence C is liable although in reality, A is not C’s agent.

(ii) Agency by holding out:

It is a corollary of the first rule. In the case of agency by estoppel, the role of the principal is passive while is the case of agency by holding out, the role of the principal is rather active and somewhat affirmative or positive.

Example:

A allows his servant habitually to buy goods on credit from local dealer and pays for them.

One day he terminated the services of his servant without any notice to the dealer. The servant purchased goods worth Rs. 100 on credit, as usual, after his termination. A is liable for the purchase made by his servant.

(iii) Agency by necessity:

Necessity in certain cases forces a person to act as an agent of the other, even without his consent (i.e., consent of the other person). In such a case, the law implies agency by necessity. The law confers authority upon a person to act as an agent of the other in times of necessity or emergency to save his property, etc. where it is impossible to get the formal consent of the principal. In that case, the law implies the consent of the principal.

Example:

A sent 10 tons of fish by a truck to Agra. On the Way, the truck met with an accident. The fish were in danger of perishing so the truck driver sold the fish. The truck driver has become A’s agent by necessity.

Ratification Relates back to date of Contract :

Ratification relates back to the date of the original transaction or ratification is tantamount to prior authority. In simple words, ratification would mean as if the agent had authority to enter into transaction at the time of making the contract (Sec. 196). In other words the transaction would be valid not from the date of ratification but from the date the transaction was made.

Example:

The managing director of a company, without its authority accepted an offer by L. L withdrew his offer later on. But the company ratified the acceptance. Held, L was bound by the ratification as it related back to the time of acceptance and, therefore revocation by L was not valid [Bottom Partners v. Lambert]