A principal and agent relationship requires

Principal-Agent Relationship

a principal and agent relationship requires

rules of English law ' governing the relation of principal and agent, to determine the essential .. of conduct required from him springs from the fiduciary relation-. Generally, in a business relationship, the principal and agent relationship requires being either an employee/employer relationship or an ind ependent. This relationship requires the agent to exercise a duty of loyalty to the principal and to use reasonable care to serve and protect the interests of the principal.

Tweet agent principal authority relationship A consensual relationship created by contract or by law where one party, the principal, grants authority for another party, the agent, to act on behalf of and under the control of the principal to deal with a third party.

An agency relationship is fiduciary in nature, and the actions and words of an agent exchanged with a third party bind the principal. An agreement creating an agency relationship may be express or implied, and both the agent and principal may be either an individual or an entity, such as a corporation or partnership.

Under the law of agency, if a person is injured in a traffic accident with a delivery truck, the truck driver's employer may be liable to the injured person even if the employer was not directly responsible for the accident. That is because the employer and the driver are in a relationship known as principal-agent, in which the driver, as the agent, is authorized to act on behalf of the employer, who is the principal.

The law of agency allows one person to employ another to do her or his work, sell her or his goods, and acquire property on her or his behalf as if the employer were present and acting in person.

The principal may authorize the agent to perform a variety of tasks or may restrict the agent to specific functions, but regardless of the amount, or scope, of authority given to the agent, the agent represents the principal and is subject to the principal's control.

More important, the principal is liable for the consequences of acts that the agent has been directed to perform. This relationship requires the agent to exercise a duty of loyalty to the principal and to use reasonable care to serve and protect the interests of the principal. An agent who acts in his or her own interest violates the fiduciary duty and will be financially liable to the principal for any losses the principal incurs because of that breach of the fiduciary duty.

For example, an agent who accepts a bribe to purchase only the goods from a particular seller breaches his fiduciary duty by taking the money, since it is the agent's duty to work only for the best interests of the principal. An agency relationship is created by the consent of both the agent and the principal; no one can unwittingly become an agent for another.

Although a principal-agent relationship can be created by a contract between the parties, a contract is not necessary if it is clear that the parties intend to act as principal and agent.

The intent of the parties can be expressed by their words or implied by their conduct.

a principal and agent relationship requires

Perhaps the most important element of a principal-agent relationship is the concept of control: An independent contractor is subject to the control of an employer only to the extent that she or he must produce the final work product that she or he has agreed to provide.

Independent contractors have the freedom to use whatever means they choose to achieve that final product.

Agency - Agent, Principal, Authority, and Relationship - JRank Articles

When the employer provides more specific directions, or exerts more control, as to the means and methods of doing the job—by providing specific instructions as to how goods are to be sold or marketed, for example—then an agency relationship may exist.

The agent's authority may be actual or apparent. If the principal intentionally confers express and implied powers to the agent to act for him or her, the agent possesses actual authority. When the agent exercises actual authority, it is as if the principal is acting, and the principal is bound by the agent's acts and is liable for them. For example, if an owner of an apartment building names a person as agent to lease apartments and collect rents, those functions are express powers, since they are specifically stated.

To perform these functions, the agent must also be able to issue receipts for rent collected and to show apartments to prospective tenants. These powers, since they are a necessary part of the express duties of the agent, are implied powers.

a principal and agent relationship requires

When the agent performs any or all of these duties, whether express or implied, it is as if the owner has done so. A more complicated situation arises when the agent possesses apparent authority.

It is sometimes referred to as "usual authority" though not in the sense used by Lord Denning MR in Hely-Hutchinson, where it is synonymous with "implied actual authority". It has been explained as a form of apparent authority, or "inherent agency power".

Law of agency

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. 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.

Principal Agent Relationship in Contract

Liability[ edit ] Liability of agent to third party[ edit ] If the agent has actual or apparent authority, the agent will not be liable for acts performed within the scope of such authority, as long as the relationship of the agency and the identity of the principal have been disclosed.

When the agency is undisclosed or partially disclosed, however, both the agent and the principal are liable. Where the principal is not bound because the agent has no actual or apparent authority, the purported agent is liable to the third party for breach of the implied warranty of.

Law of agency - Wikipedia

Liability of agent to principal[ edit ] 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[ edit ] 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.

An agent owes the principal a number of duties. An agent can represent the interests of more than one principal, conflicting or potentially conflicting, only after full disclosure and consent of the principal.

An agent must not usurp an opportunity from the principal by taking it for himself or passing it on to a third party. In return, the principal must make a full disclosure of all information relevant to the transactions that the agent is authorized to negotiate. Termination[ edit ] Mutual agreement also through the principal responding his authority.

Through renouncing when agent hm self stop being an agent. The internal agency relationship may be dissolved by agreement. Under sections to of the Indian Contract Actan agency may come to an end in a variety of ways: Withdrawal by the agent — however, the principal cannot revoke an agency coupled with interest to the prejudice of such interest. An agency is coupled with interest when the agent himself has an interest in the subject-matter of the agency, e.

Alternatively, agency may be terminated by operation of law: 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 s.

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 s. Some states opt for the partnership as no more than an aggregate of the natural persons who have joined the firm.

Others treat the partnership as a business entity and, like a corporationvest the partnership with a separate legal personality.

Principal-Agent Relationship

Hence, for example, in English lawa 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. 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. The English Partnership Act 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.

a principal and agent relationship requires

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: For these purposes, the knowledge of the partner acting will be imputed to the other partners or the firm if a separate personality.