Agency relationship in contract

An agent is someone who acts for and on behalf of a person called the principal in such a way that he alters his principal legal position with third parties. He creates legal benefits and rights for his principal as well as legal burdens and obligations for principal.

Before a person can act as an agent of the principal, there must be an authority conferred by principal to the agent , otherwise such act of the agent shall not affect or alter the principal ' s legal position with regard to third parties.

Agency authority may be conferred by express words or the conduct of both parties (Actual authority). It can also arise from an independent act of the principal to the third parties asserting that a particular person has authority to act for and on his behalf(ostensible or apparent authority).

It must be borne in mind that agency relationship subsists only in commercial transactions and matters. Where a person acts for and represents another in a purely domestic and social engagements, such will not amount to an agency relationship. For instance, where A gives authority to B to represent him in a friend's party. In the eyes of law no agency relationship subsists.