Running head: AGENCY BUSINESS LAW 1

AGENCY BUSINESS LAW

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AGENCY BUSINESS LAW 2

Introduction

The law of agency is among the principal laws in business laws. According to the law of

agency, an agency is defined as an arrangement in which two persons, referred to as the principal

and the agent, have an agreement under which the agent is permitted to enter into specific legal

relationships with third parties on the principal's behalf. An alternative definition is a voluntary

relationship in which one (the agent) has in trust for and under the direction of another (the

principal) the authority to effect specific legal relations on their behalf. Even though the parties'

permission is required to determine if an agency connection exists or not, the relation can and

will exist even if they do not provide their consent. It is a control that serves as the foundation of

agency, and the agent can influence the principal's legality regarding third parties. There are

three main characteristics of an agency; It is the agent's responsibility to provide services to the

principal, act as a representative of the principal, and act in a manner that impacts the legal status

of the principal. Discussion

Explain the unique relationship between the principal and agent

The relationship between the principal and agent in an agency can only be described as

unique. This is due to the different aspects that guide the relationship. The relationship is, first of

all, fiduciary, meaning the principal gives the agent the power to operate and act on their behalf.

This means that the principal retains the final power, and therefore, the agent is subject to the

authority and control of the principal and, therefore, must follow the principal's instructions

(Story, 2020). However, the main understanding within the principal and agent relationship is

that the agent can act for and on behalf of the principal. Therefore, loyalty to the principal by the

agent is called for, and the agent will not at any given time negligently or intentionally act in an
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impropriate manner while performing their duties as indicated in the act (Zardkoohi, Harrison &

Josefy, 2017). This also insinuates that the agent is not obliged to take advantage of the agency

relationship's opportunities. On the side, the principle delivers confidence and trust to the agent,

making the relationship based on confidence and trust. However, for this relationship to be

effective and functional, both parties involved must undertake their roles and responsibilities

with the weight they deserve. The agent must ensure that he makes the most informed decisions,

an aspect that sounds simple but can be very challenging (Story, 2020). It is also important for

one to understand that the agent is only said to be working on behalf of the principal only when

they have been authorized. If they are not authorized, it is taken that they were conducting the

transaction for their benefit, which is contrary to the contract.

Discuss how the agency relationship is created and terminated

There are different ways of agency relationship creation, and they are a creation by

agreement, contract, or appointment; creation by ratification, creation by estoppel, creation by

necessity, and presumption or cohabitation.

Agency by Agreement-This agency is established when multiple parties consent to

establish it. Their thoughts must be at par, and both sides must possess the necessary ability. The

relationship's primary goal should be lawful (Story, 2020). Nevertheless, an agent hired with the

intention of filing paperwork in the principal's absences should be authorized by a contract

termed a Power of Attorney, which both the principal and agent must sign. An agency agreement

may be expressly stated or inferred from the actions of the involved parties.

Agency by Ratification-Agency ratification emerges after the "agent" has started acting.

Whereas if an individual about whose account the agent pretended to engage, but without whose
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permission the agent operated, accepts the arrangement as if there would have been previous

authorization, the action is said to have taken place (Zardkoohi, Harrison & Josefy, 2017). By

ratifying the transfer, the agent's power is restored to the date the deal took place.

Agency by Estoppel-The legal theory of estoppel was established to serve this purpose. It

happens when a person, by their words or actions, portrays a 3rd party as their agent, and the 3rd

party transacts business with the agent. The opposite side is barred from rejecting the evident

agency based on estoppel.

Agency of Necessity-It is a type of agency agreement formed out of a need in situations

when one person is regarded to have already behaved like an agent on behalf of someone else.

Agency by Presumption or Cohabitation-A certain kind of agency inferred law is found

in this area. When a man and a woman live together under conditions that represent both as

a married couple, it is thought that the woman is acting as the man's agent and may use the man's

income to pay for necessities (Story, 2020). It is not necessary for a marriage to have it to exist.

There are different ways in which an agency can be terminated. However, there are two

main ways if terminate the agency and they are termination by the act of the parties and

termination by Operation of Law. An agency may be dissolved either by the principal or the

agent act in their respective capacities. Ideally, there ought to be a common understanding and

voluntary cancellation by the principal and voluntary renouncement by the agent (Goshen &

Squire, 2017). In terms of results by the agent, if an agent is assigned to fulfill a particular job or

for a particular function, the agency will cease whenever the agent completes the function or the

specific goal or when the agent achieves the specified purpose. An agent can renounce their
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authority by declining to act or telling the principal that they will no longer act on the principal's

behalf.

Upon all the happening of certain circumstances, an agency's authority may be terminated

by the operation of law. First and foremost, the agent must do the duty assigned to him. It is

possible to find a contract agency for a certain goal or carry out a specific enterprise on occasion.

The agency agreement is terminated when the initiative is completed in such a circumstance. It is

also possible that this is linked to the expiry of the period set out for the agency connection

(Story, 2020). The demise of the principal or agent might also be a contributing factor. In

addition, either the principal or the agent may go insane due to the events that have occurred.

The agent's and principal's rights and responsibilities

The main responsibility, especially if he has been recruited according to a contract with

the principal, is to carry out the provisions of the agreement under which he has been constituted.

Whenever an agent is carrying out the conditions of his agency, he has a responsibility of

allegiance or devotion to following out any directives that may be issued to him by the principal

in connection with the execution of those conditions (Goshen & Squire, 2017). In carrying out

the requirements of his agency, an agent is obligated to use the attention, ability, and discernment

that are appropriate considering the circumstances of the specific circumstances in which they

are engaged. General Expectation of Individual Acting skills: The agent is normally expected to

carry out their responsibilities as an agent individually. The agent has the right to the lawsuit,

place a lien on the asset, and delay the transfer of ownership of the property. The principal's

responsibilities and duties include the following: The fundamental responsibility of a principal

toward his agent is to compensate him for the operations done. Refund and Indemnification
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Obligations (Goshen & Squire, 2017). The principal's rights include the right to termination and

the right to challenge or bring a judicial action.

Respondeat superior and its intersection between business torts and agency

When an individual or agent commits an unlawful act while acting within the extent of

their contract or agency, a legal notion known as vicarious liability applies; it is most typically

utilized in tort law and makes an owner or principal lawfully liable. Unless the principal knew or

should have known that the agent's actions would cause injury to anyone, the principal is

accountable for their representative (Zardkoohi, Harrison & Josefy, 2017). A practical

implementation of the broad common-law concept that someone cannot avoid culpability by

designating illegal conduct to another.

Conclusion

The agency contract is distinct from trust and bailments. The agency connection results in

the formation of two legal contracts. There are two types of contracts: first, an agreement of

agency between the principal and the agent, and second, an agreement of trade between the

principal and a third party. In an agreement of agency, gratitude is not taken into account. The

ability to execute as a Principal and Agent are the same as the ability to contract for those of

legal age and modicum of intelligence. The principal cannot recover any losses resulting from

the actions of his agent if he hires a juvenile to serve as his representative. The agreement

between them is invalid as a matter of law.

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References

Zardkoohi, A., Harrison, J. S., & Josefy, M. A. (2017). Conflict and confluence: The

multidimensionality of opportunism in principal–agent relationships. Journal of Business

Ethics, 146(2), 405-417.

Story, J. (2020). Commentaries on the Law of Agency. BoD–Books on Demand.

Goshen, Z., & Squire, R. (2017). Principal costs: A new theory for corporate law and

governance. Colum. L. Rev., 117, 767.