Legal Aspects of Business

This article discusses the legal aspects of business, including the importance of agency relationships. It explores the features of agency relationships and the different types of agents authority. The article also examines a case law in the area of agency law. Overall, it provides insights into the legal framework that governs business operations.

Legal Aspects of
Business

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................2
Agency relationship and its features...........................................................................................2
Agents authority and its types.....................................................................................................2
Case law in the area of Agency Law...........................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................7

INTRODUCTION
Legal aspects are the termed as inseparable part of a successful business environment that
existed in each country. Through legal aspects the policy framework and the mind set of the
government structure of a country is designed and elaborated in complete manner. Legal aspects
of a country helps in determining that each business organisation is following the statutory
framework that is provided in the legal structure. These aspects helps to flashcard evidence,
testimony, physical and sound image to conclude fact at issue. Legal aspects of business in UK
are used in relation to deal with the areas of contractual, quasi-contractual and maintaining a
fiduciary relationship which involves relationship among agent and principal (Amadi-Echendu,
and Amadi-Echendu, 2015). When business organisations appoints agents on their behalf to act
in defined situations then it leads to generation of legal relationship and this relationship makes
them legally binding for the act of other. Apparent authority is simply a situation in which
principal do not provide authority to agent to act in certain way but third party interpreted this act
with actions of principal to be approved. In this case principal is held liable for the act or actions
taken by agent in relation to third party. At the time of apparent authority no expressed and
implied contract existed among agent and principal and even then also principal is held legal
responsible for all the acts performed by agent. In agency relationship agent is only a mediator
who acts on behalf of principal and act of agent is governed with the agency contract entered by
them. Agent acts simply as a representative of principal to third party and make all the efforts in
best interest of principal (Bank, 2015).
Agency relationship is established on good faith and a fiduciary relationship is
maintained among both the parties involved. When agent performs agency activities it must be
ensured that all the activities are done in good faith and no personal interest of agent is involved
in any business transaction. A legal principal of estoppel is used in agency relationship through
which one party can not the facts or a conduct. Through this third party in agency relationship is
protected against fraud and misrepresentation. In this project using all the rules and regulations
agency law will be elaborated.
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MAIN BODY
Agency relationship and its features
Agency is a legal term that defined relationship between an agent and principal. Agency
relationship is a fiduciary relationship which involves trust of the parties involved and through
this agents are allowed to act on behalf of principals. A agency relationship can be created
through an express agreement which means principal and agents both gets agreed to form
relationship (Glinkowska and Chebotarov, 2019). A agreement can be written, oral or implied to
create agency relationship. Features of agency relationship are as follows-
 Agency relationship must be entered by individuals who are competent to contract and
not specifically legally set aside to make any agreement.
 The agreement of agency needs to be written, oral or in certain situations it can be
implied also.
 Agent and principal must possess fiduciary relationship which means they both should
trust each other.
 Principal is held liable for all the acts of agent when they are done in good faith and no
misrepresentation is made.
Agents authority and its types
Agents authority is defined as the control that is provided to them by principals with an
agreement to act in reasonable incident for effective performance of duties. Authority of a agent
is defined in three categories that are; expressed, implied and apparent authority. Expressed and
implied authority are part of actual authority (Ha, 2017). These authorities are described as
follows-
Actual Authority: This is referred to specific power provided by principal to an agent to
act on behalf of principal as mentioned in the agreement between them. Actual authority can be
broad, general power or can be limited to some extent and sometimes provided with special
power. When actual authority is provided to agents the a agreement is entered and in that all the
terms and conditions are well defined to maintain agency relationship. When the agreement is
entered between agent and principal then in that case it leads to generation of expressed
authority. When agency relationship is based on expressed authority then principal expressly
gives authority to agent through oral and verbal agreement entered by them. Sometimes some
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incidental activities that are not mentioned in the agreement is also performed by agent for
principal then this act will also be termed as an expressed authority. When authority is expressly
provided by principal then in that case principal always needs to be informed regarding what
activities are conducted by agent (Kemp, 2018). No agent in expressed authority is allowed to
perform activities that are not mentioned in the agreement without permission of principal. In
case of any breach of the agreement on part of principal and agent then default will be identified
and any one of them will be liable for misconduct to third party. Implied authority is also termed
as actual authority. It is referred as authority provided to an agent with the jurisdiction to perform
acts which are necessary for the purpose to complete all the activities performed by agent. For
example- agents of a care dealer wile negotiating with a consumer offer them free service for 2
years rather then as per their policy for one year. Implied authority gives rights to buyer to make
legally binding contract on behalf of principal to perform all the necessary activities mentioned
in the agreement.
Apparent Authority: This refers to a power of an agent to act on behalf of a principal
event the act was not mentioned in the expressed or implied agreement. In this situation agent act
on behalf of principal in good faith event no authority is provided for the same. Third party
involved in the deal with action of principal and by certain statements interpreted that agent
possess all the responsibility to act (Apparent Authority, 2019). Despite of no actual authority
with agent principal is held liable for all the acts of agent. This apparent authority is established
to protect third party for misrepresentation of agency relationship. If principal do not possess
agency relationship with agent in future then it needs to be communicated to third party before
any dealing. Apparent authority gives rise to agency by estoppel. In which principal can not deny
liabilities that are created with act of agent. If a principal creates the impression that an agent is
authorised but there is no actual authority, third parties are protected against liabilities so long as
they have acted reasonably. To create apparent authority there are certain essential elements
which are described as follows-
No expressed and implied authority: To create an apparent authority it is necessary that
act which is performed by agent is not authorise by principal with written, oral or implied
agreement. When authority is provided in expressed and actual terms then it can be termed as
apparent authority (Laudon and Traver, 2016).
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Fiduciary relationship: To establish apparent authority it must be ensured that agent and
principal possess relationship of trust. All the acts performed by agent must be in good faith and
for benefits of principal involved.
Communication to third party: To establish apparent authority it must be ensured that
existence of agency relationship is communicated to third party. When agency relationship is
established and it is communicated to third party and until third party is not informed for breach
of relationship its existence will be valid for the third party. When the act of principal are such
that it conforms that existence of agency relationship then also apparent authority can be created.
Case law in the area of Agency Law
Rama Corp Ltd v Proved Tin and General Investments Ltd [1952] case was held in
the year 1963 and the whole case scenario was related to burnt cotton. A business transaction
was entered by two individuals named as T and A. In this deal T has to sell an amount of 144
bales of cotton to A. To complete the transaction promised amount of cotton was loaded in a ship
to deliver it to A. The boat in which cotton was loaded got burned in the mean while when the
transportation was taking place (Mohamad, 2018). This whole transactions was entered by A
who was P's agent and A was warned by P to close this deal with an average rate of 30 cents per
pound. P as a principal suffered loss as his agent did not listen his instructions. The whole case
was held to identify liability of P in relation to losses suffered or not. The case was based on
agency relationship and involved agent, principal and third party. The case was decided by US
supreme court and it was held that P will be held liable for the losses involved in the transaction.
Issue in resolving the case was whether principal is liable for the act of agent and how the aims
and objectives of the deal must be taken by agent. Here agent appointed by principal was a
general agent and do not involve any specific authority. Goods when not purchased and sold as
per market price instructed by principal then in that case all the losses will be of the agent and
not of the principal.
The three categories in estoppel is required in the case related to; of representation,
reliance and representation and alteration of position resulting from such reliance. The
representation must be made by the principal and not by the agent himself. The third party must
have relied upon the representation in reliance (O’Regan, 2018). It is found that the principal can
be bound by a contract even though the requirements of apparent authority are not satisfied, if
excluded form the contract form the conduct by disagreeing with the contract as made on his
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behalf. The plaintiff contracted with the defendant company and give a cheque under the
contract. The director could have been authorised but in fact was not. The plaintiffs had not read
the article. The director misappropriated the cheques and plaintiff sued.
Rama Corp Ltd v Proved Tin and General Investments Ltd case law is one of the well
known case in the agency law. The case was based on the different representations made in
agency relationship among principal and agent. This is a real case scenario that was based on
cost or patent authority. To establish law of estoppel their needs to be three common terms which
make it a case related to apparent authority (Racheva and Kuznetsova, 2016).
When apparent authority is created and agent and principal do not agree on a particular
situation then in that case third party left only with one option to file a suit against the business.
As apparent authority specifies that agency relationship was interpreted and case is taken to court
to resolve the issue. All the matter will take them to emphasis over the fact that all the matter will
be considered and matter will be generalised in the authority. Agent and third party involves in a
deal and misguidance among them may be created when terms of the agency is not clearly
defined among principal and agent. When issue among principal and agent is created it affects
third party as they suffered a lot with this. Resolving a case through court requires a lot of time
and that leads to loss in the finances for any individual involved in the case. In court all the
scenarios are assessed well and with agency relationship liability of the party in default is
created. When principal is not agree to take liability then law of estoppal is applied and cases are
resolved (Teshome, Agostini and Nosella, 2018). Judges will give clear judgement in reference
to the parties and give correct representation which have to be taken in consideration in the court.
To undue preference will be provided to others and fair and neutral judgement will be provided
by considering all the laws and regulation of agency relationship. Sometimes when situation is
assessed well then in that case agents are also held responsible for the losses incurred through
apparent authority.
CONCLUSION
From the above project report it has been concluded that legal aspects helps business
organisations to operate its activities in legal and well structured manner that defines all rules
and regulations required by law. When businesses and its activities are conducted as per formal
legal structure then chances of misrepresentation, dispute and illegal operations can be
minimised to a certain level. Agency relationship is one of the important term used at a large
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extent in the present market as businesses are expanded to national and international level and
more and more agents are appointed for businesses. Agency will be governed through defined
principals of agency and that also leads to establishment of formal system among business
enterprises. Agency relationship is based on some essential features and presence of these
features helps in validating the agency relationship. When a relationship among principal and
agent is created then in that case different forms of authority is created. Certain authorities are
well defined and they are termed as actual authority and when authority is created to protect third
party form any misrepresentation then it is called apparent authority. The term apparent authority
is one of the most important term which is quite essential in this competitive world. As number
of fraud cases is increasing and it is very important to protect interest of third party involved in
any contract. Apparent authority held principal liable for the act of agent when apparent
authority is justified to be created. This principal of apparent authority use of agency relationship
is enhanced all over the business environment. Generation of apparent authority leads to
formation of term agency by estoppel. Rama Corp Ltd v Proved Tin and General Investments
Ltd [1952] case is one of the remarkable case that leads to generation of certain principles on the
basis of which agency relationship is created. When other cases related to agency is resolved
then verdict of this case is considered and issue involved in the case is assessed well. This
agency relationship and various laws and regulations to guide them helps in establishment of
businesses that are totally based on agency.
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REFERENCES
Books and Journals
Amadi-Echendu, J. and Amadi-Echendu, A., 2015. Legal aspects of engineering asset
management. In Engineering Asset Management-Systems, Professional Practices and
Certification (pp. 1797-1805). Springer, Cham.
Bank, R., 2015. Modern security paradigm of business activity: administrative and legal
aspects. Administrative law and process. (1 (11)). pp.73-79.
Glinkowska, B. and Chebotarov, V., 2019. Establishing a Business in Ukraine–the Initial
Regulatory Organizational and Legal Aspects for Polish Entrepreneurs.
Ha, H. T. H., 2017. Legal aspects of pension product-review of the client's rights and tax
incentives related to voluntary pension insurance business.
Kemp, R., 2018. Legal aspects of cloud security. Computer Law & Security Review. 34(4).
pp.928-932.
Laudon, K. C. and Traver, C. G., 2016. E-commerce: business, technology, society.
Mohamad, A. M., 2018. Legal aspects of electronic communication involving the Malaysian
courts. The European Proceedings of Social & Behavioural Sciences, pp.247-253.
O’Regan, G., 2018. Legal Aspects of Computing. In World of Computing (pp. 267-280).
Springer, Cham.
Racheva, S. S. and Kuznetsova, E. V., 2016. The Outlook on the E-Commerce in Russia in
Terms of Digital Single Market Strategy Development in Europe: Economic and Legal
Aspects. InterEU law east: journal for the international and european law, economics
and market integrations. 3(2). pp.109-121.
Teshome, M., Agostini, L. and Nosella, A., 2018, September. A Framework for Patent
Management: Beyond the Legal Aspects. In European Conference on Knowledge
Management (pp. 1098-XXVII). Academic Conferences International Limited.
Online
Apparent Authority. 2019. [Online]. Available through:
<https://www.lexology.com/library/detail.aspx?g=9103152b-0df5-4779-8005-
61d9392ad37a>
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