Explain the concept of agency law and relationship

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explain the concept of agency law and relationship

This lesson explains agency Tort Liability in Agency Relationships: Definition & Law Apparent Authority: Definition, Cases & Example. Agency is a legal term of art that refers to the relationship between a principal and . Agency is a subset of these areas of law that is used to describe a special . The law of agency thus governs the legal relationship in which the agent deals Because concepts grow primarily out of specific situations that have occurred and On the Law of War and Peace), explained that on the basis of his mandate a.

Historical development Roman law Because concepts grow primarily out of specific situations that have occurred and social needs that have arisen, the doctrine of legal representation developed differently in different times and places, sometimes even within a single legal system.

At first it seemed unthinkable that an agent, by making a contract with a third party, could create obligatory rights and duties between a third party and a principal. Even the official law of the Roman Empire never fully recognized the principle of representation. The explanation for this rejection lies mainly in the early Roman conception of a contractual obligation as a personal relationship binding the parties in some quasi-mystical way.

This type of relationship allowed creditors in some instances to seize the possessions—and in very early times also the person—of the debtor.

explain the concept of agency law and relationship

Usually the formation of such a relationship between two parties took place in a solemn ceremony at which both parties had to be present, certain formal words spoken, and definite acts performed.

In such a situation it was impossible to confer right or duties on a third party. Because of the wide prevalence of slavery, there was no great need for a true agency relationship. As Roman law later developed, the formalities connected with creating legal relationships became less important, and the need for personal representation in commerce increased.

In the meantime, however, legal theory and practice had developed so many ways to evade the problem that there was no longer an urgent need for Roman law to overcome its stark conservatism and to develop a legal institution that it had earlier opposed. Medieval influence of canon law and Germanic law Labouring under the influence of Roman law, legal development in the Middle Ages strove to overcome disadvantages in daily commercial life caused by the Roman rejection of the principle of agency.

Through the efforts of legal scholars glossators and commentatorsRoman law was further developed by means of extensions, emphases, and exceptions—a process already sanctioned by the Romans themselves. Additional impetus for change came from Roman Catholic Church canon law. Although manifestly structured after Roman civil lawcanon law had its own special development, influenced by Hebraic theological concepts.

Certain writers succeeded as early as in constructing a type of agency relationship based on the position of procuratora relationship intended to solve the representation problem in all except legal matters. The issue nevertheless remained in dispute. About this time, the doctrine of principal and agent developed in England as an outgrowth or expansion of the doctrine of master and servant. Anglo-Norman law created the figures of ballivus and attornatus.

explain the concept of agency law and relationship

His position in the household of his master empowered the ballivus to transact commercial business for his master, reminiscent of the power of the slave to bind his master under Roman law. Later the ballivus was given more authority, especially in his frequent role as land administrator, gradually becoming competent to act independently for his master.

explain the concept of agency law and relationship

On the other hand, the attornatus, originally just a representative of one of the parties in litigation, soon assumed a position of broader importance. Certain contracts were effective only when made in a judicially prescribed manner. For this reason, the formation of this type of contract always had to be concluded in a court proceeding in which an attornatus represented each party. This was the beginning of the role of the attornatus as a general agent.

Modern developments Recognition of the principle of agency in the field of civil law was finally achieved in continental Europe during the ascendancy of natural law in the 17th century. By this time, however, new objections grounded in state law, feudal law, and the question of the general reasonableness of agency had to be overcome. Hugo Grotius in his best-known work, De Jure Belli ac Pacis ; On the Law of War and Peaceexplained that on the basis of his mandate a procurator could acquire rights directly for his principal.

He thereby overcame the Roman rule that allowed slaves and dependent sons, but not free persons, with two exceptions, to act directly for the head of the household. Grotius simply maintained that this rule did not contradict natural law. In another work, Defensio Fidei Catholicae, Grotius added, in a theological contextthat the principle of agency is based not on essential natural law but on nonessential natural law; that is, agency is not demanded by the nature of things but must only correspond to and be adapted to the nature of things.

The codifications of the subsequent age of rationalism recognized the principle of representation. The Prussian Civil Codethe French Napoleonic, or Civil, Codeand the Austrian General Civil Code nevertheless regarded agency as an aspect of mandate and the power to act as an agent to be derived solely from that concept. In contrast, 18th-century commercial lawwhich at the end of the Anglo-Saxon period had split off from the main body of common law and had been allowed to develop under less-stringent controls, modified numerous feudal common-law concepts.

In particular, it brought a legal flexibility allowing the law of agency, which had grown from three independent common-law roots—one relating to actions of debt and assumpsit informal contractanother connected with the action of account, and the third deriving from deeds—to adapt itself to the peculiar problems and requirements of an individual case.

Through this commercial influence, the concept of undisclosed agency, an especially important mode of representation in commercial transactions in which the agent appears to be the principal, developed alongside open agency representation in English law. Thus, even when a principal with the real economic interest in the transaction remained concealed, claims for and against him began to be recognized, whereas in continental law the necessity for the agent to act openly in the name of the principal retained a more fundamental importance in the general doctrine of contracts.

English law attempted to relate agency rules more closely to the everyday needs of the principal—agent relationship, in contrast to the conceptually systematic and more narrowly confining treatment of agency in continental European law. A particularly important distinction in the European law of agency was made in the second half of the 19th century by the legal scholars Rudolf von Jhering and Paul Laband.

Before them, agency was viewed solely in terms of the relationship binding the principal, the person being represented, and the agent, the person representing; that is, agency was equated with the relationship created by the mandate given to the agent. This distinction was largely adopted by the continental European legal systems and was codified in several countries.

Nineteenth-century legal theory also strengthened the so-called disclosure principle Offenheitsprinzipaccording to which the acts of an agent have direct legal implications for the principal only when the agent makes it known to the third party by acting in the name of his principal that he acts for him and not for himself.

Only in such a case can there be direct representation—where the principal alone is the party to the contract—in contrast to indirect representation. Thus, this distinction became, to varying degrees, a common element in the individual civil-law systems.

explain the concept of agency law and relationship

Anglo-American law, more realistic in this area and standing on different dogmatic grounds, was not influenced to the same degree by such principles, although it was also long plagued by refined doctrinal distinctions, such as the contrast between general agents, with whom an outsider could deal with moderate safety, and special agents, whose powers the courts viewed very narrowly.

At this stage of development the remaining feudal elements in the English law of agency, whose prototypes had remained the servant and the steward of a lord, were largely eliminated. Because of the increasing complexity of most modern commercial transactions, the significance of the various types of representatives grew to the point where agency had become one of the most important of modern legal relationships.

The agent had come to be seen as an instrument of the principal without personal responsibility, a view which developed still further the responsibility of the principal for the misconduct of his agent. Reflecting the generally more realistic attitude of contemporary private law, the modern treatment of agency has retreated from the somewhat artificial conceptualism of the 19th century and has emphasized the actual commercial and social context. Tendencies both to apply general solutions to broad types of cases and to provide specific solutions in the more unique individual cases have produced further refinements in the law of agency.

The continuing shift to more complex business units, accompanied by developments in marketing practices, has required solutions more appropriate to modern business necessities. In addition to a reassessment of the relationship between mandate and authority to act for the principal, new questions are being asked concerning the proper role of this kind of authority in relation to the legal and social functions of representation that it serves. In this view the authorization by the principal and the act of the agent are not two independently complete legal transactions carried out in isolation from each other.

Rather, they are two parts of an extended legal event, which would consist of a single act if no agency were involved. Thus, when the principal uses the help of an agent, the offer, which is usually made by a single act, becomes divisible into two parts the authorization and the action of the agent. The rules of different systems In order to compare agency in continental and Anglo-American law, the principal types of agency that have developed in practice should be noted.

He is independent of his principal, has a claim for his commission, and, except in France, has the right when dealing with certain goods to conduct the transaction as he sees fit. The forwarding agent German Spediteur, French commissionaire de transport, Italian spedizioniere ships goods in his own name for the account of his principal and therefore is a type of commission agent. Although the degree of his independence from the principal varies, he is never totally independent.

Apart from several protective rules, the French commercial agent is subject to the general rules governing the mandate. In the area of employment brokerage or placement services, most European countries have passed special regulatory legislation to protect the interests of those persons using such services to seek employment.

Sales representative The sales representative is a dependent employee of a merchant who concludes contracts for the merchant outside the business establishment.

Law of agency

Most European legal systems have no special provisions governing such an agent but rather treat the position under the general rules governing dependent commercial employees e. The variety of Anglo-American agents Various kinds of agency relationships are evident in Anglo-American commercial life. The factor and the broker are the most common mercantile agents dealing in transactions involving personal property.

The factor is entrusted with possession of the chattels to be sold, or the documents of title thereto, and is empowered to conclude the sale at the best price obtainable. The broker, on the other hand, has no possession of the object of sale but is empowered to make contracts for the purchase or sale of personal property on behalf of his principal.

More limited are the powers of the real estate agent, who may show the land and state the asking price to the potential buyer without ordinarily being empowered to make further representations. The store salesman is similarly restricted in his power to represent his principal and can usually do no more than make customary warranties and sell at the price fixed by his employer. In contrast, the traveling salesman not in possession of the goods normally has authority only to take orders, which are in effect mere offers to buy and are not binding on either party until the principal has accepted.

The auctioneer is usually empowered to do no more than sell at the highest price bid. The common function of a second large class of agents is managerial or administrative. The manager of a business has the widest authority of all business agents and normally has complete control of all normal operations of the business.

Apparent authority and related questions If the principle of private autonomy were uncompromisingly applied to the law of agency, only an actually authorized agent could create legal rights and obligations for his principal. 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. 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.

Law of agency - Wikipedia

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.

CA Inter - CS Executive - CMA Inter - Contract of Agency - Law Classes

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.

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