What is contract of agency?

A contract of agency is a legal agreement where one party (the principal) authorizes another (the agent) to act on their behalf and bind them legally. It is a consensual contract governed by the Agency Act, 2020 (2077) in Nepal.

Key Features:

• Principal: The person who delegates authority.
• Agent: The person who acts on behalf of the principal.
• Lawful Consideration: The agent must receive compensation or benefit.
• Fiduciary Relationship: The agent must act in the best interest of the principal.

Purpose:

The agent acts as a representative of the principal, entering into contracts or performing duties that legally bind the principal. This contract is widely used in business, trade, and legal transactions to facilitate transactions without direct involvement of the principal.

Legal Basis:

Under Section 188 of the Contract Act, 2074 (2017), an agency agreement must be supported by lawful consideration and must not be against public policy. The agent must have capacity to contract and must act within the scope of authority granted by the principal.