Agency law regulates the legal association between two parties, where one party grants the power to act on behalf of the other. An agent is someone who acts on behalf of another party. The principal is the one that grants authority to the agent.
Agency law establishes the legal framework that governs the interactions between agents, principals, and third parties. The principal is legally obligated and responsible for the actions of the agent that are carried out within the agent’s authorized scope.
Agencies have the potential to exist in any form of connection and commercial organization. For instance, a married individual has the ability to serve as the representative of their spouse. A personal representative has the authority to act as a representative of the estate of a deceased individual. An employee has the ability to serve as the representative of their employer, establishing a professional connection. The examples cover many facets of employment law and commercial law.
Agency law plays a crucial role in establishing and governing corporate ties. This analysis provides a detailed examination of the law of agency and its impact on small enterprises and investors.
Examples of Agency
An agency is a dominant association in the land of business. Various categories of agents encompass:
- Sales agents are individuals who represent a business and are responsible for either selling or purchasing items. Examples of sales agents are pharmaceutical representatives and manufacturer’s representatives.
- Insurance agents are representatives of insurance companies who offer insurance policies to the public and assist with insurance claims.
- Real estate agents represent either the seller or buyer in the purchase or sale of a property.
- Talent agents represent artists, such as writers, actresses, and athletes, and negotiate contracts on their behalf.
- The enumeration of potential agency linkages inside the business domain persists.
There are two types of communication: express and implied.
An agency can be established through two methods, namely stated or implicit.
- Express agency
Express agency, it occurs when one party explicitly grants another party the ability to act on their behalf, typically through a power of attorney, either verbally or in writing.
Express agencies are often established by a verbal or written commercial agreement. The agent and principal affirm their mutual purpose to establish an agency relationship in the contract. This agreement can have a predetermined duration or be indefinite, depending on the specific requirements and goals of the parties involved.
The contract delineates the extent of power that the principal grants to the agent. As an illustration, the principle may grant the agent authority over the company’s investment portfolio. Alternatively, grant them the ability to oversee and control their real estate assets. Likewise, the principle may provide the agent the authority to enter specific contracts on their behalf.
Express agency refers to a situation when the agent possesses explicit power to act on behalf of the principal.
- Implied Agency
Implied agency, it occurs when one party, acting within the bounds of the law and fairness, holds another party responsible for their actions.
Implied agencies are created by the behavior of the parties involved. Implied agency refers to a situation where the activities of the principal grant the agent the authority to perform actions that are essential to achieve the principal’s objectives. The extent of the agent’s power to act is deduced from the surrounding conditions. The agent possesses evident power to act on behalf of the principal.
A prime example of implied agency can be observed in the association between business partners. Due to the presence of implied power, both partners have the ability to carry out a diverse range of tasks. They have the ability to create contracts. They have the ability to engage in negotiations. They have the authority to carry out company operations on behalf of the other partner. If one partner enters into a contract with a third party, the agreement is legally enforceable, even if the other partner did not participate in the negotiation or formation of the contract. Failure to meet the terms of the contract could lead to a violation of the agreement.
An further illustration can be seen in the correlation between a board of directors and their respective corporation. The decisions made by the board on behalf of the corporate entity have legal authority and are binding on the entire firm.
Implied agency provides assurance to third parties that any agreements they establish with a company’s representatives are legally safeguarded.
Individuals possessing implicit authority have the legal ability to enter into a business agreement on behalf of the company. Consequently, business owners must have confidence in the individual to whom they delegate such responsibility.
Agents and principals
Businesses frequently engage third parties to carry out activities on their behalf as an integral element of their everyday company operations. The agent’s role is to represent and carry out actions on behalf of the principal. An agency contract outlines the requirements of the principal-agent relationship when the agent is required to offer specified services.
For instance, the New York Times may use the services of a logistics firm to facilitate the delivery of its newspapers within New York City. The Times would assume the primary role, while the logistics business would take on the subordinate one as the agent.
The responsibilities of the logistics company would be specified in a formal agreement between the parties. If the logistics provider has promised to deliver the newspapers by a specified time each day in our example, the contract would explicitly state this requirement. The logistics company is serving as a representative of the New York Times by delivering the papers.
