Agency | Practical Law
Business Law: The Principal-Agent Relationship. People, especially business owners, routinely hire or designate other people to perform tasks on their behalf. the principal must indemnify the agent for payments made during the course of the relationship whether. (5) Agent's duties to principal under common law. Owing to the fiduciary relationship between a principal and his agent, the agent shall not disclose any.
Express terms may be specifically stated out in a written contract between the principal and agent. Implied authority can also exist if the agent is performing conduct that is generally identified as authorized by the principal, either traditionally or through custom. Issues such as agency formation and the termination of an agency relationship can often be implied as well.
However, to avoid any confusion or legal issues, it is best if formation and termination of a principal agent relationship are spelled out clearly in a written contract.
One common question in a principal agent relationship is who should be liable if the agent commits a violation. This can happen if the agent has stepped outside the boundaries of the agency relationship. However, such determinations may be different for each case. Legal remedies for violations may include a damages award to reimburse the plaintiff for injuries caused by the agent.
In some cases, both principal and agent can be held jointly liable. In many cases, the agent may also owe damages to the principal if their misconduct has caused the principal any losses. 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.
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.