The Agency Relationship
One of the most important relationships in commercial reality is that of the agent. Often employed in purchasing internationally, or indeed in negotiating the conclusion of a contract, the agent is seen in law as an extension of the principal for whom he acts, with the uncharacteristic authority to make decisions and enter contracts on behalf of another. However, what is the extent of the agent’s authority? How far can he really go in acting for his client before he ends up creating problems? Furthermore, what happens when the agent goes beyond his allotted authority to make unauthorised decisions on behalf of his agent? In this article we will look at some of the founding principles of the agency relationship, its importance, and some of the key considerations for modern debate.
Agency can normally arises in a number of situations, although these can broadly be categorised as follows. An agency relationship can be created by express notification, that is by way of a contract outlining his authority. It can be created impliedly, that is by implication of law or by permitting someone to act as agent on your behalf, and it can also be created by ratification, an unusual and counter-logical provision that allows principals to ‘ratify’ the unauthorised actions of an agent at a later date. This means in effect the agent can bind a third party with retrospective effect, as the ratification gives the agents authority force from when the contract was entered into. Of course, this means the third party could sustain loss, although this can be countered by allowing an action against the agent, or indeed the principal for the time delay and any damage sustained in material terms. Read more…