What do you mean by 'Agency by operation'? Can there be any agency relationship between husband and wife?

Question: What do you mean by 'Agency by operation'? Can there be any agency relationship between husband and wife? [JJS 2015]

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Answer

According to Black Law’s dictionary, ‘Agency by Operation’ refers to an agency that exists because it will conform to prevalent law that is not because of an agreement between the agent and the principal.

The term agency refers to a connection between a principal and an agent in which the principal delegated his or her authority to the agent to act on behalf of the principal while entering into any contract.

The relationship between principal and agent can be established in one of four ways:

1.  Agency by express agreement
2. Agency by operation of law
3. Agency by ratification
4. Agency by implied authority.

Agency by Operation of Law

Agency by operation of law occurs when an agency relationship is created automatically due to legal principles or specific circumstances, without the need for a formal agreement or the explicit consent of the principal and agent. This type of agency arises directly from the law, typically in contexts where it is necessary to protect the interests of one party or to facilitate legal and business operations.

Characteristics of Agency by Operation of Law:

(A) Automatic Creation: Unlike traditional agency relationships that require mutual consent and a formal agreement, agency by operation of law is established by the law itself based on the circumstances or the nature of the relationship.

(b) Legal Necessity: It often arises to address legal necessities or to ensure that certain duties and responsibilities are fulfilled automatically by the legal relationship or business structure involved.

One of the prime examples of an Agency by operation of law is the creation of a Partnership. Under the Partnership Act, when a partnership is formed, each partner automatically becomes an agent of the other partners and the firm. This agency relationship is established by operation of law and does not require a separate agreement. When a partnership is created, each partner has a fiduciary duty to manage the firm's business and account for its activities. This fiduciary duty is also created automatically between partners.

Can There Be Any Agency Relationship Between Husband and Wife?

Yes, an agency relationship can exist between husband and wife. Such relationships are typically established through implied authority, necessaries, or specific agreements and can arise in various contexts:

1. Implied Authority: Implied authority occurs when a spouse acts on behalf of the other in routine matters, especially household or personal matters, without express permission. It is based on the behaviour of the spouses or the nature of their relationship. For example, if a wife regularly buys household items on credit and the husband usually pays those bills, the wife may have implied that she has the right to accept such debts on behalf of her husband.

2. Agency by Necessity: Agency by necessity arises when one spouse acts in an emergency or under pressing circumstances to protect the interests or property of the other spouse, even without explicit consent. For instance, if immediate medical care is required for a child, and the wife arranges for it, she is acting in the best interests of the family as an agent by necessity.

3. Liability for Necessaries: Under the principle of providing for necessities, a spouse may be liable for debts incurred by the other spouse for essential goods and services required for living. For instance, if the wife purchases essential clothing or food on credit, the husband may be liable to pay for these items if they are considered necessary for the family.

4. Express Authority: This is applicable when a spouse explicitly authorizes the other to act on their behalf in specific matters. Such an arrangement between them may be formalized through agreements or understood through clear communication. For example, if a husband authorizes his wife to manage certain financial transactions or to purchase specific items on his behalf, this creates a direct agency relationship where the wife acts as an agent with express authority.