What is the legal relationship of agency

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what is the legal relationship of agency

The importance of establishing whether a legal relationship of agency exists, and if so, to what extent, can be critical when ascertaining whether. An agency relationship is defined [by Ohio's courts] as “a consensual fiduciary relationship between two persons where the agent has the power to bind the principal by his actions, and the principal has the right to control the actions of the agent.”. This article tries to comparatively analyse theoretical and practical problems of agency law in terms of business relationships. In order to reach this goal the.

what is the legal relationship of agency

It is obvious that the expression apparent authority is inappropriate since in none of the above cases is the competence of the agent illusory. With respect to the third party, at least, the authority of the agent is no less real than it would be if it were in conformity with the will of the principal. Although the expression apparent authority spread from continental Europe, where it was used by, among others, the influential French classicist Robert Pothier —into English law, where Lord Ellenborough applied it in Pickering v.

Buskits development in the two legal systems was independent and went systematically different ways. Nevertheless, the results obtained in concrete situations by the courts of both systems often seem rather similar.

Law of agency

A similar disparity marked the development of the doctrine within Europe itself, with the formulation of different rules in the French system, which largely identifies authority and mandate, and in the German system, which distinguishes the two ideas. Another general tendency that has arisen in both legal systems has been to objectify the more subjective aspects of the doctrine, thus making the legal consequences more certain and predictable.

Today both Anglo-American and continental courts permit the legal consequences of an agency relationship to result even when the principal is not willfully responsible for the appearance of authority. Similar situations can also lead to opposite approaches in some matters.

Here also it depends in the first instance upon whether the principal or the third party must bear the risk, since in general an agent acting without authority is not personally responsible. The question arises as to whether and to what degree the authority of the agent to bind his principal is affected by the death of the principal. According to the traditional English view Campanari v. In contrast, the continental legal systems have evolved less doctrinaire solutions to this question based more on considerations of protection of the concerned parties.

Article of the French Civil Code even goes so far as to treat all transactions of an agent who acts in ignorance of the death of his principal as valid.

what is the legal relationship of agency

The more balanced solution offered by the courts on the Continent, however, is to make the good faith of the third party the determinative factor, since in the usual case the real interest of the agent is simply to avoid any personal obligation.

The hidden principal is not concerned by the effects of the transaction at all. Such conditions include that the agent had power to make the contract and that the parties eventually learn their respective identities.

Agency Law

This wider concept of agency has no counterpart in continental legal tradition. The use of this basic doctrine in the common-law countries gives rise to questions regarding the identity of the undisclosed principal, the election of remedies that must be made by the third party, the extent of the respective liabilities, the right of the third party to setoff the amount of its own damages from any sum that might be awarded itetc.

A solution to these conflicts of interests must in final analysis rest upon an evaluation of the extent to which the relationship between the undisclosed principal and the agent should influence the contract made by the agent with a third party.

The external, unilateral act of authorization It is still a characteristic feature of the French Civil Code and of other codifications following its model for instance, those of Spain, Portugal, Romania, and Brazil and other Latin-American countries that agency is not recognized as an isolated institution.

These legal systems conceive of agency only as a subordinate instance or external effect of mandate.

  • Agency Relationship Law and Legal Definition
  • The legal relationship of agency

The result is that they consider the power to act as an agent as a mere part of mandate and do not have a general concept of authorization as a distinct legal institution. In contrast to this approach, the more modern codifications of Scandinavia and of such countries as Germany, Switzerland, Japan, Poland, Italy, and Greece draw a sharp distinction between the unilateral organizational act on the part of the principal authorizing the agent to act and the internal contractual relations between the principal and the agent.

This distinction, one of the major achievements of 19th-century European legal scholars, is also followed by modern English and American legal writers, even though the classical concept of mandate is unknown in the common law. The insight that authority can exist independent of the underlying contract, and even without it, opens several new practical possibilities. For example, it explains the rule that the authorization of a minor can be valid if he is in fact mentally and physically capable of transacting business, even though the minor is not competent himself to conclude the internal contract of employment for himself that establishes fiduciary duties.

Thus, the minor is not subject to the liabilities ex contractu from or out of a contract of an adult agent although he is authorized. A few countries still prescribe a special form for every authorization. According to the Russian and Brazilian codes, for example, an authorization must be given in written form. In spite of this express statutory language, German courts do require compliance with formalities in certain extreme situations under pressure of practical necessity, in order to avoid frustration of the aim of the formal requirement in the principal contract.

This attitude thereby approaches the English rule according to which, in most cases, no particular formalities are required, even if the agent is to make an agreement for the sale or lease of land, an agreement that must be in writing. More attention to the connection between the authorization and the act of the agent appears in provisions like that of the Greek Code ofwhich says that the authorization must take the form required for the legal transaction for which the authority is issued unless the particular circumstances lead to a different solution.

Law of agency - Wikipedia

The consent of the principal may be given expressly by a written power of attorney or implied by his conduct, such as an established course of dealing. Generally, the formation of the contract of agency requires no formal ritual. The basic principle of agency is that the agent, in fulfilling his obligation, concludes legal transactions on the part of his principal.

what is the legal relationship of agency

When these transactions result from the authorized legal acts of the agent, the result is that only the principal is bound by them. This general rule that the agent does not become involved may change in the exceptional case of an authorization conferred for the benefit of the agent.

Thus, such an agent has been held personally liable by German courts for mistakes made in the course of contract negotiations culpa in contrahendo.

what is the legal relationship of agency

Rights and duties between principal and agent Continental European codifications generally do not treat the contract of agency as a separate type of contract. The standards governing the principal—agent relationship must therefore be derived from the general legal rules governing the mandate, the contracts for performing work, employment contracts, and partnership contracts, together with the more specific rules e.

Differing from this general approach, the common law has recognized a number of more specific rights and duties between principal and agent.

what is the legal relationship of agency

The primary duties of the agent to the principal are those of care, obedience, and loyalty—similar to those of a trustee. If an agent has received money or other property from or for his principal, he must account for it. An agent also may not normally delegate his task to a subagent, since the principal is assumed to have placed his confidence in the person of the agent and not in a subagent.

Law of agency

Finally, the agent also has the abstract duty of conducting himself so as not to bring disrepute upon the principal. Liability of principal for acts of agents Continental European law classifies the undertaking of transactions in the place of another as agency only when the transactions are legal. It excludes other acts, including unlawful acts, so that, when dealing with the law of agency, the rules concerning the liability of a master for the torts of his servant do not come into consideration.

On the other hand, consequences flowing from an agency relationship rest on the idea that an authorized person performs legal acts within his competence not on his own behalf but for the principal. 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.

Agency Law | Legal Centre for Business & Technology | University of Calgary

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 [4] 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. 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. An Agent must act only within their authority. Where an Agent acts outside of the scope of their authority, for example, entering into an agreement with a third party on behalf of the Principal which is outside the scope of their authority, the agreement will not be enforceable against the Principal.

There are two 2 different types of authority than an Agent may holds, these are: Circumstances where an Agent may have the implied authority to act in a certain manner may include where there is: Ostensible authority Ostensible authority is based on the equitable principle of estoppel.

Rights and obligations of the Principal The Principal will be liable for the actions of the Agent that are carried out in accordance with their authority. The Principal is also subject to the obligations contained in the agency agreement.