Agency - Free MCQ Practice Test with solutions, CLAT PG Law of Contracts

Only individuals who have reached the age of majority and possess a sound mind can legally appoint an agent. This ensures that the appointing party can understand the implications of the agency relationship, allowing for valid and enforceable agreements.

An agent can act on behalf of the principal in cases of emergency. This provision allows the agent to make decisions and take actions necessary to protect the principal's interests in unforeseen circumstances, ensuring that immediate needs are addressed.

The primary relationship in a contract of agency is between a principal and an agent, where the principal delegates authority to the agent to act on their behalf. This relationship is foundational to many business transactions, enabling agents to represent principals in dealings with third parties.

No consideration is necessary to establish an agency relationship. This means that the agreement can be valid even if there is no exchange of value, as the principal is bound by the agent's actions performed on their behalf.

The principal is liable for all lawful actions taken by the agent within the scope of their authority. This means that any contracts formed or actions taken by the agent that are authorized by the principal will be binding on the principal as if they had executed them directly.

Express authority is the type of authority that is explicitly granted by the principal to the agent, either through written or spoken words. This direct delegation is crucial for establishing clear boundaries of the agent's powers in carrying out tasks on behalf of the principal.

A person must have reached the age of majority and possess a sound mind to appoint an agent. This ensures that individuals making such decisions can fully understand the implications of their actions. Both minors and those who are mentally incapacitated are not allowed to appoint agents, ensuring that the principal-agent relationship is grounded in legal competence.

The principal is liable for all lawful actions taken by the agent within the scope of their authority. This means that any contracts or agreements made by the agent, provided they are legal and authorized, carry the same consequences as if the principal had entered into them directly. This principle emphasizes the trust and responsibility inherent in the agency relationship.

Section 185 of the Indian Contract Act, 1872 clearly states that no consideration is required to establish an agency relationship. This means that a person can act on behalf of another without needing a formal contract or payment, as long as the relationship is accepted by both parties. This flexibility is significant in facilitating various business transactions.

An agency relationship can be established through ratification when the agent acts without prior authority, and the principal subsequently accepts those actions. Ratification makes the agent's actions legally binding on the principal, effectively retroactively approving the agent's conduct. This principle allows for flexibility in business dealings, ensuring that agreements can still be honored even if the proper authority was not initially granted.