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The principal-agent relationship is an arrangement where one entity lawfully selects another person to act on its behalf. In a principal-agent relationship, the agent works on behalf of the principal and should not have the conflict of the interest in carrying out the act. The relationship between the principal and the agent is called the law of agency. The rule of agency establishes guidelines for such a relationship.
In this article, we will explain to you the topics such as:
The Indian Contract Act, 1872 defines an “Agent” under section 182 as a person who is employed to do any act for another person or to represent another party in dealing with the third party whereas the person for whom such act is represented is called the principal. Therefore, the person who has delegated his or her authority will be the principal.
For example Joe appoints Mary to deal with his bank transactions. In this case, Joe is the Principal, Mary is the Agent and the bank is the third party.
An agency can create in two ways:
Here are the types you must know such as:
Agents are required to act up to the following duties and standards:
The principal also owes agents several duties:
An agent has the following five rights such as:
The agency will get terminate in the following situations such as:
However,the contract establishes a relationship of the agency which prevalent in business laws for the law of agency. These can be express or implied. An agency creates when a person delegates his or her authority to another person. It is when a person appoints them to do any specific job in the specified areas of work. This topic is defined under the Indian Contract Act, 1872. The establishment of principal-agent relationship confers rights and the duties on both parties. There are many examples of the connection such as insurance agency, advertising agency, travel agency, factors, etc.
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