14 Agency
Learning objectives
At the end of this Chapter, you should be able to:
- explain the elements of an agency relationship
- describe the different types and relationships of agency
- discuss the appointment and sources of authority of an agent
- identify the rights, duties and liabilities of agents and principals
- identify the various means for termination of an agency agreement
- explain the remedies of a principal for breach by an agent.
Key Terms
You will notice these key terms, which are mentioned throughout the chapter, to help you to better understand and remember the material:
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- Agent: a person employed to act on behalf of, or represent, another person (the principal).
- Broker: a person who buys and sells things for other people for a commission and are common in the financial world.
- Del credere agent: a person as a broker for the principal but who also guarantees payment by a third party to the principal after the transaction is completed and who may become liable for that amount.
- Estoppel: a legal principle that prevents a person from going back on an action or statement that they made in the past.
- Factor: a type of trader who takes possession of goods, or the documents of title to the goods, on consignment for a principal for commission and sell them in their own name.
- Mercantile agent: a person who buys, sells and consigns goods for their principal (usually in their name) for a commission but who does not have possession or ownership (documents of title). If the mercantile agent is given possession of the goods he is known as a factor.
- Principal: a person who gives authority or capacity to another person (the agent) to act on the principal’s behalf and create legal relations with a third party.
- Ratification: the legal confirmation of the adoption of a transaction by a principal of an act of their agent.
- Secret commission: a commission or profit which has not been accounted for by the principal and which is like a bribe and may result in both a criminal and a civil law action.
Introduction
The is the last chapter. You have learned about some of the key areas of commercial law that are very important in business, but also equally important in a lot of your day-to–day activities, starting today. In Chapter 12 we began by looking at the doctrine of privity of contract and learnt that only those persons who were immediate parties to a contract acquire rights and liabilities under it. However, what you are about to discover is that agency is an exception to the rule, and hence it is important a have a basic understanding of it. Because of the complexity of commercial dealings today, it is often necessary to deal through others including at the very least bankers, financiers, accountants, managers, partners, and solicitors. Just understand that the law of agency exists in specific situations where one person (the agent) acts on the authority of another (the principal) to enter into legal obligations such as contract