Initial Agency Disclosure - Evans, Elder, Brown & Seubert
Generally, the agreement need not be in writing,4 and consideration is not required. An agency relationship can be created through a written contract or by an oral only Boris Koontz to park cars, but Boris has no employment contract there. The law of agency thus governs the legal relationship in which the agent deals with Written By: Wolfram Müller-Freienfels. Agency. Law. Hugo Grotius, detail of a law, powers based on family relationships are scarce and appear in only a few cases. For this reason, the formation of this type of contract always had to be. The law of agency is an area of commercial law dealing with a set of contractual, An agent, as a general rule, is only entitled to indemnity from the principal if he or she changed their positions to their detriment in reliance on the representations made. The internal agency relationship may be dissolved by agreement.
Nevertheless, the results obtained in concrete situations by the courts of both systems often seem rather similar. 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. 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. 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. 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.
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. 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.
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.
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. 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. This doctrine of respondeat superior arose from the belief that, since the head of the household or of the economic enterprise exercises control, he should pay for the harm caused by its members.
Generally, this includes conduct that is not a serious departure from that authorized, both in manner and space, by the master and that is actuated at least in part by a motive to serve the master. For example, a principal is not liable for the harm caused by the negligent physical conduct of his nonservant agent. The chief example of such conduct is tortious misrepresentation by the agent.
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Concepts[ edit ] The reciprocal rights and liabilities between a principal and an agent reflect commercial and legal realities. 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. 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.
- Chapter 9: Multiple choice questions
- Law of agency
- Agency agreement
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.
If the agent possesses the property, then she has the implied authority to collect payment. Under this concept, a principal is liable for the wrongdoing committed by his or her employees if the acts were within the scope of the employee's duties.
For example, if a salesman is instructed by his employer not to warrant the fitness of any of the vacuums being offered for sale and the salesperson warrants a vacuum, the employer will be held to the warranty.
In this context, scope of employment means that the employee is engaged in the furtherance of his or her employer's business. An exception is the doctrine of "apparent authority" sometimes used by the courts to prevent injustice to third persons.
The mere statement by a person that he or she is an agent of a certain person is insufficient to establish the agency. The third person has a duty to ascertain whether or not an agent has the authority to act in a particular situation.Agency (Part 1)
If the principal has led others to believe that the agency relationship exists, he will be bound by the acts that an agent in that situation would customarily have the authority to do. The agency relationship would be used by the courts when the principal has a duty to deny the relationship but fails to do so. For example, if May in Cathy's presence tells others that she is Cathy's agent, Cathy has a duty to deny the relationship.
If she fails to, then any third persons present might consider that May is, in fact, an agent of Cathy's. An agency relationship may also be found when the principal negligently allows another person to act as his agent. For example, a stranger comes into a store when no one is present, waits on a customer, sells a product, and pockets the money. Because it was reasonable for the customer to assume that the stranger was a clerk, the owner cannot force the customer to pay for the merchandise a second time.
If the owner does this, he or she is bound by the act of the unauthorized agent. To ratify the act, the principal must know of the material facts involved in the transaction and accept the entire transaction. He cannot approve the part favourable to him and deny the unfavourable portion. A principle can ratify only legal acts. The ratification of an agent's unauthorized acts may be by express approval, by acceptance of the benefits of the act, or by silence when the principal had a duty to speak.
The third person can withdraw from the transaction if he notifies the principal before the principal ratified the transaction. Exceptions to this rule may occur when the agent, for example, fails to disclose that he or she is acting on behalf of a principal, or when there is a clear intent by the agent to be bound to the terms of the contract.
Initial Agency Disclosure
If the third person knows the principal, and the agent acted within his or her authority, the principal is bound by the contract. If the principal's identity was unknown when the contract was entered into, then both the agent and the principal will be bound on the contract and the third person can sue either or both. If the agency relationship is for a specific period of time, it will terminate at the end of that period.
If no time period is agreed upon between the agent and his principal, then the courts will imply termination within a reasonable time. In many cases the agency will terminate when a certain event occurs. For example, if an agent is hired to sell property for you, the agency terminates when the property is sold.