Agency under Contracts - Academike
TERMINATING AN AGENCY RELATIONSHIP xii. To ratify the act, the principal must know of the material facts involved in the transaction and accept the entire. The law of agency is an area of commercial law dealing with a set of contractual, agents and principals (internal relationship), known as the principal-agent . all concerned of the agent's lack of authority is an implied ratification to those. Ratification by itself only creates an agency relationship between the principal and the agent in respect of the act ratified by the principal, but not in respect of any.
A business owner often relies on an employee or another person to conduct a business. In the case of a corporation, since a corporation can only act through Natural person agents. The principal is bound by the contract entered into by the agent, so long as the agent performs within the scope of the agency. A third party may rely in good faith on the representation by a person who identifies himself as an agent for another. It is not always cost effective to check whether someone who is represented as having the authority to act for another actually has such authority.
If it is subsequently found that the alleged agent was acting without necessary authority, the agent will generally be held liable. Brief statement of legal principles[ edit ] There are three broad classes of agent: General agents hold a more limited authority to conduct a series of transactions over a continuous period of time; and Special agents are authorized to conduct either only a single transaction or a specified series of transactions over a limited period of time.
Authority[ edit ] An agent who acts within the scope of authority conferred by his or her principal binds the principal in the obligations he or she creates against third parties. There are essentially three kinds of authority recognized in the law: Actual authority Actual authority can be of two kinds.
Either the principal may have expressly conferred authority on the agent, or authority may be implied. Authority arises by consensual agreement, and whether it exists is a question of fact.
Agency under Contracts
An agent, as a general rule, is only entitled to indemnity from the principal if he or she has acted within the scope of her actual authority, and may be in breach of contract, and liable to a third party for breach of the implied warranty of authority.
In tort, a claimant may not recover from the principal unless the agent is acting within the scope of employment. Express actual authority[ edit ] Express actual authority means an agent has been expressly told he or she may act on behalf of a principal.
Implied actual authority[ edit ] Implied actual authority, also called "usual authority", is authority an agent has by virtue of being reasonably necessary to carry out his express authority.
As such, it can be inferred by virtue of a position held by an agent. For example, partners have authority to bind the other partners in the firm, their liability being joint and several, and in a corporation, all executives and senior employees with decision-making authority by virtue of their position have authority to bind the corporation.
Other forms of implied actual authority include customary authority. This is where customs of a trade imply the agent to have certain powers.
In wool buying industries it is customary for traders to purchase in their own names. This must be no more than necessary  Main articles: Apparent authority and Estoppel Apparent authority also called "ostensible authority" exists where the principal's words or conduct would lead a reasonable person in the third party's position to believe that the agent was authorized to act, even if the principal and the purported agent had never discussed such a relationship.
For example, where one person appoints a person to a position which carries with it agency-like powers, those who know of the appointment are entitled to assume that there is apparent authority to do the things ordinarily entrusted to one occupying such a position. If a principal creates the impression that an agent is authorized but there is no actual authority, third parties are protected so long as they have acted reasonably. This is sometimes termed "agency by estoppel " or the "doctrine of holding out", where the principal will be estopped from denying the grant of authority if third parties have changed their positions to their detriment in reliance on the representations made.
Wills J held that "the principal is liable for all the acts of the agent which are within the authority usually confided to an agent of that character, notwithstanding limitations, as between the principal and the agent, put upon that authority.
It is sometimes referred to as "usual authority" though not in the sense used by Lord Denning MR in Hely-Hutchinson, where it is synonymous with "implied actual authority". It has been explained as a form of apparent authority, or "inherent agency power". Authority by virtue of a position held to deter fraud and other harms that may befall individuals dealing with agents, there is a concept of Inherent Agency power, which is power derived solely by virtue of the agency relation.
Even if the agent does act without authority, the principal may ratify the transaction and accept liability on the transactions as negotiated.
Law of Agency Relationship | Onyekachi Duru - shizutetsu.info
This may be express or implied from the principal's behavior, e. Liability[ edit ] Liability of agent to third party[ edit ] If the agent has actual or apparent authority, the agent will not be liable for acts performed within the scope of such authority, as long as the relationship of the agency and the identity of the principal have been disclosed. When the agency is undisclosed or partially disclosed, however, both the agent and the principal are liable. If nothing is mentioned in the contract about remuneration, then he is entitled to a reasonable remuneration.
But an agent is not entitled for any remuneration if he is guilty of misconduct in the business of agency. Right of lien— an agent has the right to hold back or retain goods or other property of the principal received by him, till the time his dues or other payments are made. Right to indemnity— an agent has the right to indemnity extending to all expenses and losses incurred while conducting his course of business as agency. Right to compensation— an agent has the right to be compensated for any injury suffered by him due to the negligence of the principal or lack of skill.
(3) Formation of agency
Difference between agency and dealership In the law of agency, the relationship that matters the most between an agent and the principal is the legal relationship.
A person cannot become an agent of another merely because he gives advice to the other. Any person acting on behalf of the other cannot be an agent for another until there is an implied or explicit agreement between them, which leads to a legal relationship between them. Also not all those who describe themselves as agents will, in law, be considered as agents. The dealer of a particular make of cars, e. Mercedes, may be called as an agent, but the dealer in law is not an agent for the manufacturer.
No privity of contract exists between the manufacturer and the buyer. This example highlights the difference between agency and dealership. But, a dealer buys the product of a company directly from its manufacturer on its own name. An agent acts as an intermediary and receives a commission for its services.
But, a dealer acts on behalf of the firm rather than acting as an intermediary. As mentioned in the above car example, no contract exists between the dealer and the manufacturer, thus, there is no legal relationship, which is the most important thing in the law of agency. The description of an agent looks quite similar to that of a servant or a bailee but their duties, role and liabilities are entirely different. Agent Servant An agent is authorized to act on behalf of his principal and create contractual obligations between the principal and a third party.
A servant does not have the authority to create contractual obligations between the principal and a third party. The principal has the authority to direct the agent as to what he has to do but he cannot direct how it is to be done. The master can direct a servant as to what has to be done and also how it should be done An agent is paid in terms of commission A servant gets his salary or wages.
An agent can work for different principals at the same time A servant usually works under one master at a given point of time. The agent offers and accepts new proposals from the third party on behalf of his principal and thus new legal relations are created in law of agency.
A servant cannot create any such legal relations Section of the Indian Contract Act, defines sub-agent. Thus there are two types of delegation— Proper delegation— This comes under section of the Indian Contract Act, This is when an agent having the authority to do so, appoints a sub-agent. Improper delegation— This comes under section of the Indian Contract Act, This is when an agent without any authority appoints a sub-agent.
The table shows a distinction between an agent and a sub-agent: Agent Sub-agent An agent is appointed by a principal and is under his control. A sub-agent is appointed by an agent and as such is under the control of the agent. An agent acts under the principal.
A sub-agent acts under an agent. A privity of contract exists between a principal and an agent. No privity of contract exists between a principal and a sub-agent. An agent can ask for remuneration from the principal.
A sub-agent cannot ask for remuneration from the principal. Sections and talk about substituted agents. When an agent having the authority to do so, names another person to act for the principal in the business of the agency, then such a person is called a substituted agent and not a sub-agent.