There are several modes for creating agency. It can be created in any one of the following modes:

Agency by express agreement

 Normally agency is created by an express agreement. The term express comprises both the oral and an agreement in written form. In Nepal, registration must be necessary in the prescribed governmental department to create an agency. When a power of attorney is given to another person an agency is created and the agent enables to perform the work on behalf of the principal. The authority of power of attorney may different in accordance with the terms and conditions of that document. They are as follows:

1. General power of attorney: Under this attorney the agent is authorized to do all dealings to act generally in the business agency.

2. Special power of attorney: Under this attorney, the agent is authorized to do a special transaction. e.g. selling a house.

3. Particular power of attorney: Under this attorney, the agent is authorized to do a particular single act. e.g. submission of document in the particular office or court.

Agency by implied agreement

 An agency may be created by an implied form. Implied agency arises when there is no express agreement appointing a person as agent. It arises from the conduct, situation or relationship of parties. The authority to act as an agent is inferred from the nature of business. Parties are usually regarded as agent by implications of their relationship. It may be the followings types:-

1. Agency by Estopple: Estopple is legal doctrine which prevents a person from denying a fact. If person, by his words or conduct has willfully led another to believe that certain circumstances of facts exist, the another person, who has acted on that belief may create an agent once accepted acts of facts cannot be rejected again. This agency is based on the doctrine of estopple.

2. Agency by holding out: It is a branch of estopple. But an agency by holding out requires some positive act of conduct by the principal to establish agency subsequently. For example, 'A' who is domestic servant of 'B'. Generally A purchases goods on credit from 'C' and B pays them regularly. 'C' can assume that 'A' is 'B's implied agent. Later on, 'A' uses 'B's authority to purchase goods for his own use. C files a suit against 'B' to recover the cost of the goods which were actually consumed by 'A'. In this prior conduct in holding out that 'A' was B's agent. Here 'C' can recover the price from 'B'.

3. Agency by necessity: It is also mode of creating agency by implied agreement or authority. In some cases the agency can be created because of the necessity. Where one may need to work being an agent of another person even in the absence of expressed agreement.

In certain circumstances the law confers (accepts) an authority in one person to act as agent for another without requiring the consent of principal. Following conditions must be fulfilled for the agency of necessity:

• It must be impossible to get the principals' instructions,

• The agent of necessity must act honesty in the interest of all parties.

• There must be real emergency and necessary of an act on behalf of principal 

Agency by Ratification

 Ratification means subsequent acceptance by the principal in respect of an act done by the agent without the consent of principal. It is the subsequent adoption and acceptance of an act originally done without authority or instructions. It is an approval of the previous act and conduct by principal. It has got retrospective effect. That agency comes in to existence from the moment when the agent acted and not from the time when the principal ratified. Ratification depends upon the will of principal. If he approves the previous conduct, he is said to have conform that act and becomes liable for that act. For example; 'A' buys certain goods on behalf of 'B', 'B' did not appoint 'A' as agent. Latter on "B" accepts it and the act is ratified. Here, 'A' becomes agent of 'B' with retrospective effect.