Agency is an area of commercial law dealing with a contractual or quasi-contractual tripartite set of relationships when an Agent is authorized to act on behalf of another (called the Principal) to create a legal relationship with a Third Party. Commercial law (sometimes known as business law) is the body of Law which governs Business and commercial transactions A contract is an exchange of promises between two or more parties to do or refrain from doing an act which is enforceable in a court of law A quasi-contract, also called an implied-in-law contract, is a legal substitute for a Contract. For other uses of the word Agent see Agent (disambiguation This is correct An Agent in Commercial Law is a person who is authorised In Commercial law, a principal is a person&ndash legal or natural &ndashwho authorizes an agent to act to create one or more legal relationships ^[1] Succinctly, it may be referred to as the relationship between a principal and an agent whereby the principal, expressly or impliedly, authorizes the agent to work under his control and on his behalf. The agent is, thus, required to negotiate on behalf of the principal or bring him and third parties into contractual relationship. This branch of law separates and regulates the relationships between:

• Agents and Principals;
• Agents and the Third Parties with whom they deal on their Principals' behalf; and
• Principals and the Third Parties when the Agents purport to deal on their behalf.

The common law principle in operation is usually represented in the Latin phrase, qui facit per alium, facit per se, i. Common law refers to law and the corresponding legal system developed through decisions of courts and similar tribunals rather than through legislative statutes or executive Latin ( lingua Latīna, laˈtiːna is an Italic language, historically spoken in Latium and Ancient Rome. e. the one who acts through another, acts in his or her own interests and it is a parallel concept to vicarious liability and strict liability in which one person is held liable in Criminal law or Tort for the acts or omissions of another. This article is about vicarious liability in private litigation for vicarious liability in criminal law see Vicarious liability (criminal. Strict liability is a Legal doctrine that makes a person responsible for the damage and loss caused by his/her acts and omissions regardless of Culpability (or fault The term criminal law, sometimes called penal law, refers to any of various bodies of rules in different Jurisdictions whose common characteristic is the potential Tort law is the name given to a body of law that creates and provides remedies for civil wrongs that do not arise out of Contractual duties

Contents 1 The concepts 2 Brief statement of legal principles 2.1 Authority 2.2 Liability of agent to third party 2.3 Liability of agent to principal 2.4 Liability of principal to agent 2.5 Duties 2.6 Termination 3 Agency and partnership 4 Agency relationships 5 References 6 See also

The concepts

The reciprocal rights and liabilities of Principal and Agent reflect commercial needs and legal realities. In any business of size, it is not possible for one person to travel everywhere to negotiate all the transactions necessary to maintain or grow the business. These problems are increased if the business is a corporation, because it is then a fictitious legal person and, as such, it can only act through human agents. A corporation is a separate legal entity usually used to conduct business Hence, independent people are contracted by businesses to buy and sell goods and services on behalf of those businesses. When agreements are made, the Principal is liable under the contract(s) made by the Agent. So long as the Agent has done what he or she was instructed to do, the result is the same as if the Principal had done it directly.

If the issue is considered from the view of innocent Third Parties, they are approached by a person who is clearly identified as acting for another. They deal with that person in good faith, relying on the representation of authority. Indeed, in a busy commercial world, it would not be cost-effective to check that everyone who is represented as having the authority to act for another actually has that authority. Deals are done at face value in the majority of routine situations. If it should later appear that the alleged agent was acting without the consent of the Principal, the Agent will usually be held liable. Any other decision would be unduly disruptive to the usual flow of trade. This commercial necessity has led to the creation of a body of law that applies in any situation, commercial or otherwise, where one person is seen to be acting for another.

Brief statement of legal principles

There are three broad classes of Agent:

1. Universal agents hold broad authority to act on behalf of the Principal, e. g. they may hold a power of attorney (also known as a mandate in civil law jurisdictions) or have a professional relationship, say, as lawyer and client. A power of attorney (POA or letter of attorney in Common law systems or Mandate in civil law systems is an authorization to Civil law or Romano-Germanic law or Continental law is the predominant system of law in the world. In Law, jurisdiction (from the Latin ius iuris meaning "law" and dicere meaning "to speak" is the practical Authority A lawyer, according to Black's Law Dictionary, is "a person learned in the law as an attorney, Counsel or Solicitor; a person
2. General agents hold a more limited authority to conduct a series of transactions over a continuous period of time; and
3. Special agents are authorized to conduct either only a single transaction or a specified series of transactions over a limited period of time.

Authority

For these purposes, the Principal must give, or be deemed to give, the Agent authority to act.

• Actual authority:

This arises where the Principal's words or conduct reasonably cause the Agent to believe that he or she has been authorized to act. This may be express in the form of a contract or implied because what is said or done make it reasonably necessary for the person to assume the powers of an Agent. A contract is an exchange of promises between two or more parties to do or refrain from doing an act which is enforceable in a court of law If it is clear that the Principal gave actual authority to Agent, all the Agent's actions falling within the scope of the authority given will bind the Principal. This will be the result even if, having actual authority; the Agent in fact acts fraudulently for his own benefit unless the Third Party was aware of the Agent's personal agenda. In the broadest sense a fraud is a Deception made for personal gain or to damage another individual If there is no contract but the Principal's words or conduct reasonably led the Third Party to believe that the Agent was authorized to act, or if what the Agent proposes to do is incidental and reasonably necessary to accomplish an actually authorized transaction or a transaction that usually accompanies it, then the Principal will be bound.

• Apparent or ostensible authority:

If 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, say by appointing the Agent 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. In law ostensible authority refers to the apparent authority of an agent (usually a Company director) of a company as it appears to others and it can operate both 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. Estoppel is a legal doctrine recognized both at Common law and in equity in various forms ^[2]

• Implied authority:

This type of authority is considered held by the agent 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, e. g. 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.

• 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. ^[3]

For example, partners have apparent authority to bind the other partners in the firm, their liability being joint and several (see below), and in a corporation, all executives and senior employees with decision-making authority by virtue of their declared position have apparent authority to bind the corporation. For partnership in cricket terminology see List of cricket terms A partnership is a type of Business entity in which partners Where two or more persons are liable in respect of the same liability in most Common law legal systems they may either be jointly liable or A corporation is a separate legal entity usually used to conduct business

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. g. if the Agent has purported to act in a number of situations and the Principal has knowingly acquiesced, the failure to notify all concerned of the Agent's lack of authority is an implied ratification to those transactions and an implied grant of authority for future transactions of a similar nature.

Liability of agent to third party

If the Agent has actual or apparent authority, the Agent will not have liability on any transactions agreed within the scope of that authority so long as the Principal was disclosed, i. e. the fact of the agency was revealed and the identity of the Principal revealed. But where the agency is undisclosed or partially disclosed, both the Agent and the Principal are bound. Where the Principal is not bound because the Agent had no actual or apparent authority, the purported Agent is liable to the Third Party for breach of the implied warranty of authority.

Liability of agent to principal

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

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.

Duties

The Agent's primary fiduciary duty is to be loyal to the Principal. fiduciary duty is a legal relationship of confidence or trust between two or more parties most commonly a fiduciary or Trustee and a principal This involves duties:

• Not to accept any new obligations that are inconsistent with the duties owed to the Principal. Agents can represent the interests of more than one Principal, conflicting or potentially conflicting, only on the basis of full and timely disclosure or where the different agencies are based on a limited form of authority to prevent a situation where the Agent's loyalty to any one of the Principals is compromised. For this purpose, express clauses in the agreement signed by each Principal with the Agent may identify specific types or categories of activities that will not breach the duty of loyalty and so long as these exceptions are not unreasonable, they will bind the Principals.
• Not to make a private profit or unjustly enrich himself from the agency relationship.

In return, the Principal must make a full disclosure of all information relevant to the transactions that the Agent is authorized to negotiate and pay the Agent either a prearranged commission, or a reasonable fee established after the fact. The payment of commission as Remuneration for services rendered or products sold is a common way to reward sales people.

Termination

An Agent's authority can be terminated at any time. If the trust between the Agent and Principal has broken down, it is not reasonable to allow the Principal to remain at risk in any transactions that the Agent might conclude during a period of notice.

As per Section 201 to 210 The Indian Contract Act, 1872, an agency may come to an end in a variety of ways:

(i) By the principal revoking the agency – However, principal cannot revoke an agency coupled with interest to the prejudice of such interest. Such Agency is coupled with interest. An agency is coupled with interest when the agent himself has an interest in the subject-matter of the agency, e. g. , where the goods are consigned by an upcountry constituent to a commission agent for sale, with poor to recoup himself from the sale proceeds, the advances made by him to the principal against the security of the goods; in such a case, the principal cannot revoke the agent’s authority till the goods are actually sold, nor is the agency terminated by death or insanity. (Illustrations to section 201) (ii) By the agent renouncing the business of agency; (iii) By the business of agency being completed; (iv) By the principal being adjudicated insolvent (Section 201 of The Indian Contract Act. 1872)

The principal also cannot revoke the agent’s authority after it has been partly exercised, so as to bind the principal (Section 204), though he can always do so, before such authority has been so exercised (Sec 203).

Further, as per section 205, if the agency is for a fixed period, the principal cannot terminate the agency before the time expired, except for sufficient cause. 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 (Section 206). As per section 207, the revocation or renunciation of an agency may be made expressly or impliedly by conduct. The termination does not take effect as regards the agent, till it becomes known to him and as regards third party, till the termination is known to them (Section 208).

When an agent’s authority is terminated, it operates as a termination of subagent also. (Section 210). ^[4]

Agency and partnership

This has become a more difficult area as states are not consistent on the nature of a partnership. Some states opt for the partnership as no more than an aggregate of the natural persons who have joined the firm. In Jurisprudence, a natural person is a human being perceptible through the senses and subject to physical laws as opposed to an artificial legal or juristic person Others treat the partnership as a business entity and, like a corporation, vest the partnership with a separate legal personality. A business (also called firm or an enterprise) is a legally recognized organizational entity designed to provide goods and/or services to A corporation is a separate legal entity usually used to conduct business Hence, for example, in English law, a partner is the agent of the other partners whereas, in Scots law where there is a separate personality, a partner is the agent of the partnership. English law is the legal system of England and Wales, and is the basis of Common law legal systems used in most Commonwealth countriesand the Scots law is a unique legal system with an ancient basis in Roman law. This form of agency is inherent in the status of a partner and does not arise out of a contract of agency with a Principal. In the English Partnership Act 1890 provides that a partner who acts within the scope of his actual authority (express or implied) will bind the partnership when he does anything in the ordinary course of carrying on partnership business. Even if that implied authority has been revoked or limited, the partner will have apparent authority unless the Third Party knows that the authority has been compromised. Hence, if the partnership wishes to limit any partner's authority, it must give express notice of the limitation to the world. However, there would be little substantive difference if English law was amended (see Law Commission Report 283 [1]): partners will bind the partnership rather than their fellow partners individually. A Law Commission, or Law Reform Commission, is an independent body set up by a government to consider the state of laws in a jurisdiction and make recommendations on those For these purposes, the knowledge of the partner acting will be imputed to the other partners or the firm if a separate personality. The principle of imputation or attribution reflects the general public policy underpinning the operation of the Law which is that Ignorantia juris The other partners or the firm are the Principal and Third Parties are entitled to assume that the Principal has been informed of all relevant information. This causes problems when one partner acts fraudulently or negligently and causes loss to clients of the firm. Negligence (Lat negligentia from negligere to neglect literally "not to pick up" is a legal concept in the Common law legal systems usually used to In most states, a distinction is drawn between knowledge of the firm's general business activities and the confidential affairs as they affect one client. Thus, there is no imputation if the partner is acting against the interests of the firm as a fraud. There is more likely to be liability in tort if the partnership benefited by receiving fee income for the work negligently performed, even if only as an aspect of the standard provisions of vicarious liability. Tort law is the name given to a body of law that creates and provides remedies for civil wrongs that do not arise out of Contractual duties Whether the injured party wishes to sue the partnership or the individual partners is usually a matter for the Plaintiff since, in most jurisdictions, their liability is joint and several. Where two or more persons are liable in respect of the same liability in most Common law legal systems they may either be jointly liable or .

Agency relationships

Agency relationships are common in many professional areas. The term profession is applied to those persons who have specialized and technical skill or knowledge which they apply for a fee to certain tasks that ordinary and unqualified people cannot

• employment procurement
• real estate transactions (real estate brokerage, mortgage brokerage). Employment is a Contract between two parties, one being the employer and the other being the employee. Real estate is a legal term (in some jurisdictions notably in the USA, United Kingdom This article focuses on US practice for other definitions and practices in other countries see the more general Real Estate or Real property articles A mortgage broker acts as an intermediary who sells Mortgage loans on behalf of individuals or businesses In real estate brokerage, the buyers or sellers are the Principals themselves and the broker or his/her salesperson who represents each Principal is his/her Agent.
• financial advice (insurance agency, stock brokerage, accountancy)
• contract negotiation and promotion (business management) such as for publishing, music, movies, theatre, show business and sport. A financial adviser is a professional who renders investment advice and Financial planning services to individuals and businesses A stock broker or stockbroker is a qualified and regulated professional who buys and sells shares and other securities through Market makers or Accountancy or accounting is the measurement statement or provision of assurance about financial information primarily used by Lenders managers, Management (covering theory practice and scope of management and Manager' (covering the people who manage might help clarify and systematise Publishing is the process of production and dissemination of Literature or Information &ndash the activity of making information available for public view Music is an Art form in which the medium is Sound organized in Time. Theatre (or theater, see spelling differences) is the branch of the Performing arts defined by Bernard Beckerman as what "occurs when one Showbiz redirects here For other uses see Showbiz (disambiguation. Sport is an Activity that is governed by a set of rules or Customs and often engaged in competitively

References

See also

• Corporate officer
• Employee
• Independent contractor
• Literary agent
• Ostensible authority
• Principal-agent problem
• Hawala
• Cestui que

Corporate titles are titles conferred on individuals as a means of identifying their function in the Organization. Employment is a Contract between two parties, one being the employer and the other being the employee. An independent contractor is a Natural person, Business or Corporation which provides goods or services to another entity under terms A literary agent is an agent who represents Writers and their written works to Publishers Theatrical producers and Film producers and In law ostensible authority refers to the apparent authority of an agent (usually a Company director) of a company as it appears to others and it can operate both In political science and Economics, the principal-agent problem or agency dilemma treats the difficulties that arise under conditions of incomplete and asymmetric Hawala (also known as hundi) is an Informal value transfer system based on performance and honor of a huge network of money brokers which are primarily located in Cestui que, Cestuy que, is an Anglo-French phrase of medieval English invention which appears in the legal phrases cestui que trust, cestui que use

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