Section 185 of the Indian Contract Act 1872 says that, no consideration is necessary to create an agency. According to Section 184В any person may become an agent, but no person who is not of the age of majority and sound mind can become an agent. In a Contract of Agency, Agent is a person one who is appointed by Principal to work on his behalf. Section 183 says that any person who is of the age of majority according to the law to which he is subject, and who is of sound mind, may employ an agent. To constitute Agency there must be Principal, who appoints another person as agent to represent or work on his behalf.ДЄccording to Section 183 principal must be competent to contract. To constitute Agency the following ingredients are to be satisfied.

The person for whom such act is done, or who is so represented, is called the вЂњprincipalвЂќ.

Section 182 of the Indian Contract Act defines Principal and Agent as follows :ДЄn вЂњagentвЂќ is a person employed to do any act for another, or to represent another in dealing with third persons. In simple words a contract which creates the relationship of 'principal and Agent is called Contract of Agency.ДЄgency is the legal relationship between an agent and Principal to bring the principal into legal relationship with the third party Here in this example 'A' is Principal and B is the Agent and the contract between them is Agency. 'A' appoints 'B' to buy five bags of Sugar on his behalf. The person who appoints is called 'Principal' and who is appointed is called 'Agent'.

In a contract of Agency, one person appoints another to act on his behalf.

4 elements of a contract