Question

Which is true of contracts of agency?

• A. The relation between the agent and the principal is of a trust
• B. It is only when a person acts as a representative of the other in the creation, modification or termination of contractual obligations; between that other and third persons that he is an agent.
• C. The only essence of a contract of agency is the agent's representative capacity.
• D. None of the above

Hint:

The fundamental purpose of agency is to create a link between the principal and a third party. The agent is merely a conduit. The maxim is "\textit{Qui facit per alium facit per se}" (He who acts through another acts himself). A good definition of agency must reflect this triangular relationship.

Answer 1

The Correct Option is B

Step 1: Understanding the Concept:
The question asks for the most accurate and comprehensive definition of a contract of agency. Agency is a legal relationship where one person (the agent) is authorized to act on behalf of another (the principal) to create a legal relationship with a third party.
Step 2: Detailed Explanation:
- (A) While an agent has a fiduciary duty towards the principal (a duty of trust and confidence), the relationship is not a legal "trust" in the strict sense of the Indian Trusts Act. So, this statement is imprecise.
- (C) An agent's representative capacity is indeed the essence of agency. However, this statement is very brief.
- (B) This statement provides the most complete and legally accurate definition. It correctly identifies the core function of an agent: to act as a representative of the principal in dealings with third parties. The outcome of this representation is the creation, modification, or termination of legal (specifically contractual) obligations between the principal and the third party. This captures the full legal effect of the agency relationship. It is more descriptive and accurate than (C).
Step 3: Final Answer:
The truest statement about contracts of agency is (B).