Introduction
When you think about buying or selling property, the maze of paperwork, legalities, and financial intricacies can be overwhelming. This is where title agencies come to the rescue. They are the gatekeepers of property transactions, ensuring everything runs smoothly and legally. Let’s dive into the multifaceted world of title agencies and understand their pivotal role, especially under the Indian Contract Act.
Parties to an Agency
Every agency relationship hinges on two key players: They are Agen and Principal
Agent: Section 182 of the Indian Contract Act, of 1872 defines an agent as someone who acts on behalf of another person (the principal) in business dealings with third parties.
Principal: The principal is the person who empowers the agent to act on their behalf, thereby binding themselves to the actions performed by the agent within the scope of their authority.
Who Can Be Appointed as an Agent?
According to Section 183 of the Indian Contract Act, of 1872, any individual who is of legal age and sound mind can be an agent. This ensures they are capable of making binding decisions and are accountable for their actions.
How is a Contract of Agency Created?
A contract of agency can materialize through several avenues:
Direct Appointment
An explicit agreement is where one party appoints another as their agent, often formalized through a written contract.
Implication
Agency can be implied by the behaviour or situation of the parties.
Necessity
Sometimes, circumstances necessitate the creation of an agency to prevent loss or harm, even without express appointment.
Estoppel
When a principal’s actions cause third parties to believe someone is their agent, it forms an agency by estoppel.
Ratification
When a principal approves the actions of someone who acted on their behalf without prior authorization, they ratify those actions, creating an agency.
Authority of an Agent
Express Authority: Under Section 187, this is clearly stated in words, either orally or in writing, outlining what the agent is empowered to do.
Implied Authority: This isn’t explicitly stated but is inferred from the nature of the agent’s duties and the circumstances, including:
- Incidental Authority: Necessary actions to execute the express authority.
- Usual Authority: Common actions associated with the agent’s role.
- Customary Authority: Actions based on trade customs or local practices.
- Circumstantial Authority: Actions justified by the surrounding circumstances.
Agency Between Husband and Wife
In certain situations, an agency relationship arises between spouses. For example, if a husband causes their separation, he might become responsible for the necessaries provided to his wife. This establishes an agency of necessity, ensuring the wife’s needs are met.
Distinction Between Agent and Servant
- Agent: An agent establishes legal relations between the principal and third parties, having the authority to bind the principal.
- Servant: A servant performs tasks under the direct control of an employer and does not typically have the authority to create legal relations with third parties on behalf of the employer.
Essential Elements of a Contract of Agency
- Principal: Must appoint an agent to act on their behalf.
- Competent Principal: Must be legally capable of entering into a contract.
- Agent: Appointed by the principal.
- Consideration: Not necessary for creating an agency, but agents often receive remuneration for their services.
Various Methods of Creating an Agency
Agency by Express Agreement
Clearly established through direct communication, either orally or in writing.
Agency by Operation of Law
Automatically established by law in certain relationships, such as partnerships.
Agency by Ratification
Occurs when a principal approves the actions of someone who acted on their behalf without prior authorization.
Agency by Implied Authority
Inferred from the relationship and circumstances, such as:
Agency by Necessity
Acting to prevent loss or damage in emergencies.
Agency by Estoppel
Created by the principal’s actions leading others to believe in the agency.
Agency by Holding Out
Established by previous conduct suggesting the existence of an agency relationship.
Delegation of Authority by Agent
Generally, agents cannot delegate their authority unless necessary or implied by the nature of the work.
Rights of an Agent
- Right of Retainer: Agents can retain payments due to them for their services or expenses.
- Right to Remuneration: Entitled to be paid for services upon completing the agency’s business.
- Right of Lien: Can hold onto the principal’s property until dues are cleared.
- Right to Be Indemnified: Entitled to indemnity for lawful actions taken within the scope of the agency.
- Right to Compensation: Can seek compensation for losses due to the principal’s incompetency.
Conclusion
Title agencies are the unsung heroes of real estate transactions, meticulously verifying property ownership, providing essential insurance, and ensuring the seamless transfer of titles. By grasping their roles, rights, and duties under the Indian Contract Act, all parties involved can navigate the complexities of property transactions with enhanced confidence and security. Their expertise not only facilitates smooth transactions but also safeguards against potential legal and financial pitfalls, making them indispensable in the world of real estate.
FAQs on Agency under the Indian Contract Act
Q1: What is an agency under the Indian Contract Act?
An agency is a relationship where one party (the principal) authorizes another party (the agent) to act on their behalf in business dealings with third parties. Parties can establish this relationship explicitly through a contract or implicitly through their conduct.
Q2: Who can be appointed as an agent?
Section 183 of the Indian Contract Act allows any person who has attained the age of majority and possesses a sound mind to be appointed as an agent. This means that minors and individuals of unsound minds cannot be agents.
Q3: How is a contract of agency created?
A contract of agency can be created in several ways:
- Express Agreement: Directly through written or spoken words.
- Implication: Inferred from the conduct or situation of the parties.
- Necessity: When an individual acts on behalf of another to prevent loss or damage.
- Estoppel: When the principal’s actions lead third parties to believe someone is their agent.
- Ratification: When the principal approves an act done by someone on their behalf without prior authorization.
Also Read: Rights and Duties of Pawnor and Pawnee
Reference: ipleaders