A contract of agency is one that
creates a legal relationship between the principal and an agent. The person who
has been delegated the authority to act on behalf of another is called ' an
agent', and the person who authorizes another to carry out some responsibility
is called ' a principal'.
Nepal
Agency Act 2014 states, "An agent is one who works for any domestic or
foreign business firm all over Nepal or in any part of the kingdom of Nepal,
and the term "agent" may mean a distributor, stockiest, nominee or a representative."
Thus
agency is a relationship where one agrees to represent others to do some act on
behalf of others.
Procedures of Registration of agency business in Nepal
(frequently asked and important
from exam point of view)
In
Nepal, the law of agency is governed by two-act, namely, Agency act 2014 and
Rules 2019 and Contract Act 2056. Agency act 20145 and Rules 2019 are relating
to the procedures of registration, renewal, and punishment. The procedure for
registering an agency in Nepal is as follow:
a) Application:
Any person willing to take the agency is required to apply to the
director/ Controller of the dept. of commerce for the registration of agency.
The application should contain the name and address of the agent and he/ she should
commit to furnish a description of a transaction within every three months with
a registration fee.
b) Registration:
On receiving the application, the controller makes the necessary
investigation and register the agency.
Modes
of Creating Agency:
1) By express agreement:
Normally, the authority given by the principal to his agent is an express authority. It is the most usual and natural way to appoint an agent, by executing the formal power of attorney in a written stamped and signed document.
2) By Implied Agreement:
In implied
agreement agency arises under certain circumstances from the behavioral conduct
of the parties or relationship between them. The circumstances are as follows:
a)
Agency by estoppel: If a person
represents by words or conduct that another person is his agent and the third
party reasonably believes in such representation and enters into an agreement,
the person who represents. So, is bound by the act of others, this is known as an
agency by estoppel.
b)
Agency by holding Out: Likewise agency by estoppel the agency is created but in
holding out ' the principal himself holds out the words that somebody is his
agent and there is holding out.
c)
Agency by necessity: In certain urgent circumstances the law confers an authority
on a person to act as an agent for the benefit of another. Such an agency is
called an agency of necessity. In such a case, the agent must act in good faith
and to protect and preserve the interest of the principle.
'X'
a transporter, carries Meat product of 'Y' from Nuwakot to Kathmandu. Because
of the strike, 'X' sold all meat products in 'Kakani', otherwise, there was a
danger of damage to all the products. In such a case 'Y' can't sue against 'X'
because of want of authority. Here 'X' is treated as an agent of 'Y' by necessity.
3) By Ratification:
Where an agent does an act for his principal without consent
or knowledge, and the act is accepted by the principal afterward, it is called
agency by ratification. Thus, the act of performing and the act of ratifying by
the principal may create an agency. Such types of agency occur in two ways:
i)
The person acting on behalf other has no authority and enters an agreement on
behalf of the principal and if the transaction is adopted by the principal.
ii)
The agent when he exceeds his authority and enters an agreement on behalf of the
principal, and the principal accept the transaction.
For example: A is an insurance agent of B. 'B' is a businessman. 'A' insures the goods
of B without consent of 'B'. If 'B' ratifies the act of 'A', the policy of
insurance is valid with retrospective effect.
Note:
rules regarding valid ratification is also an important question.
4. By Operation of law:
In some certain circumstances, an agency is created by
operation of law.
-
when a company is formed as a legal person it cannot run itself. It's promoters
run its business. They are its agent or representative by operation of law. The
company is responsible for its acts.
- a
partner is an agent of a business firm for the purpose of running the business.
Thus the act of the partner performed to carry out the firm's business binds
the firm legally.
- a
carrier of goods acting as an agent, the carrier is created as an agency by
operation of law.
Write down the rights and duties of an Agent.
Duties:
i) Duty
to obey lawful directions of principal or customs: An agent must follow all the lawful
instructions given by the principal. In the absence of such instruction, the
agent has to act in accordance with the customs of the business.
ii)
Duty to render an account: an agent is bound to render a proper account of the
transaction done by him/herself on demand of principal.
iii)
To carry out the work with reasonable care, skill, and diligence.
iv)
Duty to act in good faith and the interest of the principal.
v)
Duty to communicate with the principal.
vi)
Not to make any secret profit beyond the commission.
vii)
Not to delegate work or authority given by the principal.
ix)
Duty to protect and pursue the interest of the principal in particular circumstances.
Rights:
i)
Right to receive remuneration.
ii)
Right to retain money.
iii)
Right of lien: Except otherwise agreed, an agent has a right to retain goods,
papers, or other property of the principal received by him/her until the
rightful agreed amount of commission payment is recovered.
iv)
Right to indemnification of the cost incurred in a lawful act.
v)
Right to receive compensation of loss.
Reviewed by Bijay Munikar
on
September 29, 2020
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