Agency Law

Agency law in Nepal is primarily governed by the Contract Act, 2056 (1999 AD). The Contract Act, 2056, is a key piece of legislation that addresses various aspects of contractual relationships, including the principles of agency. Please note that legal information can change, and it's advisable to consult with legal professionals or refer to updated legal sources for the most current information.

Here are key aspects of agency law in Nepal based on the Contract Act, 2056:

1. Definition of Agency:The Contract Act, 2056, defines agency as a relationship where one person (the principal) authorizes another person (the agent) to act on their behalf in dealings with third parties. The principal can be bound by the actions of the agent within the scope of the authority granted.

2. Creation of Agency:Agency can be created by express agreement, implication, or by necessity. An express agreement involves a clear understanding between the principal and the agent. Implied agency may arise from the conduct of the parties or the circumstances. Agency by necessity may occur in emergency situations.

3. Principal's Authority:The authority of the agent is derived from the principal, and the scope of that authority is determined by the terms of the agency agreement. The principal may grant specific or general authority to the agent.

4. Duties of Agent:The agent owes various duties to the principal, including the duty to act within the scope of the authority granted, to exercise reasonable skill and diligence, and to account for any benefits received. The agent must also avoid conflicts of interest.

5. Duties of Principal:The principal is obligated to fulfill the terms of the agency agreement, provide necessary instructions, and compensate the agent for services rendered. The principal is bound by the agent's actions within the scope of the authority.

6. Liability of Principal for Agent's Acts:The principal is generally liable for the acts of the agent performed within the scope of the authority. However, the principal may not be liable if the agent exceeds the granted authority or acts negligently.

7. Termination of Agency:Agency can be terminated by mutual agreement, expiration of the agreed-upon period, completion of the agency purpose, or by the death or incapacity of either the principal or the agent. Revocation of authority by the principal or renunciation by the agent can also terminate agency.

8. Notice:The principal is generally bound by the agent's acts only if the third party has notice of the agency relationship. The Contract Act, 2056, provides rules regarding notice and the communication of the agent's authority.

9. Ratification:The principal may ratify acts performed by an agent without authority, making those acts binding on the principal. Ratification is generally retroactive and requires the principal's full knowledge of the agent's actions.

10. Specific Types of Agency:The Contract Act, 2056, recognizes specific types of agency relationships, such as mercantile agent and auctioneer, each with its own set of rules and principles.

It's important for individuals and businesses in Nepal engaging in agency relationships to be familiar with the provisions of the Contract Act, 2056. Consulting with legal professionals in Nepal can provide specific guidance on agency-related matters and ensure compliance with the applicable legal framework. Additionally, it's advisable to refer to the most recent legal sources for any updates or amendments to agency laws in Nepal.