Question

Which of the following statements are correct? (i) No consideration is necessary to create an agency. (ii) As between the principal and third persons, any person may become an agent. (iii) An "agent" is a person employed to do any act for another, or to represent another in dealings with third persons. (iv) The consideration for agency must be adequate depending on the nature of the agency.

• A. Only (i), (ii), and (iii)
• B. Only (ii), (iii), and (iv)
• C. Only (i), (ii), and (iv)
• D. Only (ii), and (iv)

Hint:

While any person can be an agent (Section 184), a minor or person of unsound mind cannot be personally responsible to their principal.
Therefore, principals usually avoid appointing incompetent agents.

Answer 1

The Correct Option is A

Step 1: Understanding the Question:
The question asks to evaluate several statements regarding the law of agency under the Indian Contract Act, 1872, and identify which statements are correct.

Step 2: Key Legal Principles and Approach:
The relevant rules on the definitions, capacity, and consideration of agency are located in Sections 182, 184, and 185 of the Indian Contract Act, 1872.

Step 3: Detailed Explanation:

• Evaluating Statement (i): "No consideration is necessary to create an agency."

• This is correct. Section 185 of the Act explicitly states: "No consideration is necessary to create an agency." Agency is an exception to the general rule of Section 25.

• Evaluating Statement (ii): "As between the principal and third persons, any person may become an agent."

• This is correct. Section 184 states: "As between the principal and third persons, any person may become an agent..."

• Even a minor or a person of unsound mind can act as an agent and bind the principal to third parties, though they cannot be held personally liable to the principal.

• Evaluating Statement (iii): "An 'agent' is a person employed to do any act for another, or to represent another in dealings with third persons."

• This is correct. It is the verbatim definition of an "agent" as provided in Section 182 of the Act.

• Evaluating Statement (iv): "The consideration for agency must be adequate depending on the nature of the agency."

• This is incorrect. Since Section 185 clarifies that no consideration is required at all to create an agency, there is no requirement of "adequate consideration". Gratuitous agencies are perfectly valid.

• Therefore, only statements (i), (ii), and (iii) are correct, which corresponds to Option (A).

Step 4: Final Answer:
Statements (i), (ii), and (iii) are statutory facts of agency law, whereas statement (iv) is incorrect, making Option (A) the correct answer.