The key feature of an agency relationship is that

the key feature of an agency relationship is that

AGENCY RELATIONSHIPS: AN OVERVIEW. Why do we care about agency relationships? Because it is the fundamental concept on which other business or . Agency relationships always involve an agent and a principal, though the agency relationship can arise in various ways. This lesson explains. In a principal-agent relationship, the parties have The key feature is the employer's right to control the .1 .in the performance of tasks involved in the.

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.

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. Where the principal is not bound because the agent has no actual or apparent authority, the purported agent is liable to the third party for breach of the implied warranty of. Liability of agent to principal[ edit ] If the agent has acted without actual authority, but the principal is nevertheless bound because the agent had apparent authority, the agent is liable to indemnify the principal for any resulting loss or damage.

Liability of principal to agent[ edit ] If the agent has acted within the scope of the actual authority given, the principal must indemnify the agent for payments made during the course of the relationship whether the expenditure was expressly authorized or merely necessary in promoting the principal's business. An agent owes the principal a number of duties. An agent can represent the interests of more than one principal, conflicting or potentially conflicting, only after full disclosure and consent of the principal.

An agent must not usurp an opportunity from the principal by taking it for himself or passing it on to a third party. In return, the principal must make a full disclosure of all information relevant to the transactions that the agent is authorized to negotiate.

Termination[ edit ] Mutual agreement also through the principal responding his authority. Through renouncing when agent hm self stop being an agent. The internal agency relationship may be dissolved by agreement.

Under sections to of the Indian Contract Actan agency may come to an end in a variety of ways: Withdrawal by the agent — however, the principal cannot revoke an agency coupled with interest to the prejudice of such interest.

An agency is coupled with interest when the agent himself has an interest in the subject-matter of the agency, e. Alternatively, agency may be terminated by operation of law: If he does, he is liable to compensate the agent for the loss caused to him thereby.

The same rules apply where the agent, renounces an agency for a fixed period. Notice in this connection that want of skill, continuous disobedience of lawful orders, and rude or insulting behavior has been held to be sufficient cause for dismissal of an agent.

Further, reasonable notice has to be given by one party to the other; otherwise, damage resulting from want of such notice, will have to be paid s.

the key feature of an agency relationship is that

The termination does not take effect as regards the agent, till it becomes known to him and as regards third party, till the termination is known to them s. Some states opt for the partnership as no more than an aggregate of the natural persons who have joined the firm.

Introduction to Agency Law

Others treat the partnership as a business entity and, like a corporationvest the partnership with a separate legal personality. Hence, for example, in English lawa partner is the agent of the other partners whereas, in Scots law where there is a separate personality, a partner is the agent of the partnership. This form of agency is inherent in the status of a partner and does not arise out of a contract of agency with a principal. The English Partnership Act provides that a partner who acts within the scope of his actual authority express or implied will bind the partnership when he does anything in the ordinary course of carrying on partnership business.

Even if that implied authority has been revoked or limited, the partner will have apparent authority unless the third party knows that the authority has been compromised. Hence, if the partnership wishes to limit any partner's authority, it must give express notice of the limitation to the world.

However, there would be little substantive difference if English law was amended: For these purposes, the knowledge of the partner acting will be imputed to the other partners or the firm if a separate personality.

The other partners or the firm are the principal and third parties are entitled to assume that the principal has been informed of all relevant information. One consequence of this is that, as already stated, when the agent enters into a contact on behalf of the principal, a direct contractual relationship or privity of contract exists between the principal and the other party to the contract.

the key feature of an agency relationship is that

The authority of the agent is another essential characteristic of agency relationship. It is to the effect that the agent is vested with legal authority or power to alter the legal relations of the principal with third parties. This seems to provide the nucleus of a true agency relationship. This underscores its representative character and the ability of the agent to subject the principal to personal responsibility and liability while creating rights in his favour as well as obligations against him.

Thus, in holding the principal bound by an act of the agent, it must be established that such an act was legally authorized.

Features and Characteristics of Agency Relationship | Onyekachi Duru -

However, an act which is ultra vires this authority, unless ratified by the principal, will not bind him. The notion of authority is still very important in agency 4 relationships in that it enables the judge or lawyer to state, even if provisionally what the agent can do and how he can affect his principal beneficially or adversely. In this regard, it becomes pertinent to determine both the source and the scope of the agents claimed or asserted authority.

The exercise of such authority binds the principal if the agent acted within his actual real authority or his apparent ostensible authority.

Law of agency

The actual or real authority refers to the authority of the agent to do that which the principal has agreed that the agent should do for or on his behalf. It includes the power to carry out whatever the principal has expressly mandated the agent to do or impliedly engaged him to accomplish.

Such authority may emanate from express instructions given by the principal to the agent, or implied from the words or conduct of the principal. Its scope, he states, is to be ascertained by applying ordinary principles of construction of contract including any proper implication from the express words used, the usage of the trade, or the course of dealing between the parties such an authority. He went further to state that such authority may be express when it is given by express words or implied when it is inferred from the conduct of the parties or from the surrounding circumstances of the case.

The apparent or ostensible authority refers to authority which in fact does not but merely appears to exist.

the key feature of an agency relationship is that

It is essential that the appearance of such an authority emanated from an independent act of the principal manifested to a third party. Thus, the basic difference between actual authority and apparent authority is that in the former, the expression of authority is made 5 directly to the agent, whereas in the later, the expression is made to a third party with whom the agent deals.

An agent who has apparent authority may or may not have actual authority, though it may coincide or sometimes exceed it. The apparent or extensible authority extends to doing all acts which a reasonable person or a person of ordinary prudence familiar with the customs and usage of the particular community, trade, business or profession where the agent is employed, would be justified in assuming that the agent has authority to perform.

Agency creates two types of relationships: These two aspects of the agency relationship are sometimes differentiated respectively as internal and external. Thus, the law of agency has no relevance to social or other non-legal obligations. In fact, agency relationship arises only in circumstances where it is considered in law to arise. It is not what the parties choose to call their relationship, or intend it to be, that matters, but the effect the law attaches to it.

Parties cannot make their relationship one of agency by calling it one. The test, therefore, is one of substance, not one of form. Lastly, agency creates fiduciary relationship, that is to say, a relationship of trust and confidence. Conclusion The law of agency is an essential part of commercial law because companies can only conduct business through agents. The function of the law of agency is to enable agents to bring commercial parties into contractual relations in such a way as to render the parties, not the agents, liable on, and able to enforce, the contract.