Agency, governed by Sections 182-238, creates contractual relationship where one party (agent) acts on behalf of another (principal) to create legal relationships. Key elements: (1) Principal-agent relationship; (2) Agent acts with authority; (3) Creates/affects principal's legal position. Agent's scope: Agent represents principal in dealings with third parties; agent is not party to contract created. Types of authority: Express (clearly stated), Implied (reasonably necessary to express authority), Apparent (third party reasonably believes authority exists). Agent's duties: Act within authority; account for money/property; avoid conflicts of interest; use care and skill. Principal's duties: Reimburse agent for authorized expenses; indemnify for losses from authorized acts; pay agreed remuneration. Liability: Principal is liable for agent's authorized acts; agent liable for acting beyond authority. Termination: By mutual agreement, principal's death/insanity, agent's renunciation, or revocation. Case law: Sufi Ali v. Hari Har establishes third party must verify authority. For accountants, practicing through partners involves agency relationships; understanding authority limits is critical. Exam tip: Distinguish types of authority; identify if agent exceeded authority; determine party liable to third party.