Legal Aspects of Business

This document discusses the legal aspects of business and the relationship between agent and principal. It explores the duties and responsibilities of an agent in the agency relationship, including following lawful instructions, avoiding conflicts of interest, and more.

Legal Aspects of
Business

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY ..................................................................................................................................2
Critically discuss the statement...................................................................................................2
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Agency can termed as fiduciary relation which is creation between two person i.e.,
principal and Agent, where rights are given to agent for taking decision on behalf of principal
for the purpose of accomplishing the goals of an organisation (Agency Definition, 2019). This
types of relations are mainly developed by entering into the contract and it can be either in the
form of implied or expressed form. The main thing which is needed to consider with agency is
that any of the agent must perform only those work where they have been given permission. In
any of the situation, agent should not take those decision which can create issues for principal as
ultimate liability will be of principal .
The relation between agent and principal should be formed by legal procedure where
principal must give detail information about the rights and responsibility that agent has to
conduct. In present scenario, there are number of ways through agency can be formed such as it
can be commenced by taking the help of appointment. There is the option to form agency by
estoppel where implied appointment will be applicable. Also, there is the option to form it in the
manner of expressed contract. Here, both agent and principal have to decide about the authority
and action which they are allow to take for the welfare of particular organisation. Talking about
Tripartite relationship where relation is being creating among insurer, its insured and also
defence counsel which has been retained by the insurer for the purpose to defend the insured
against the third party claim (THE INSURANCE TRIPARTITE RELATIONSHIP WHO IS MY
CLIENT ANYWAY, 2017). It is the situation, where right is given to claim damages from third
party if insurer and insured party perform any of the unlawful activity.
Talking about the nature of agent/principal relationship, it can be simply expressed as the
situation where agent is given rights to take some of the decision which are crucial for the
business organisation. It is one of those decision which simply allow to reduce the overall burden
from principal . In addition, it has one of the most significant nature which allows agent to take
those decision through which chances of obtaining the business goal increases automatically. In
context of the file, various topics will be discussed which will have a directly link with topic that
are link with the relation between agent and principal . Some of the important aspects will
express about the duty of care and skill, the duty of avoid conflict of interest and many more.
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MAIN BODY
Critically discuss the statement.
“An agent is subject to a number of duties imposed by the general law as legal incidents
of
the agency relationship. Where the agency is contractual, some of the duties may take effect
as implied term in the contract, or be modified by its express terms. However, certain duties
are imposed on the agent automatically.”
In present scenario, agency law is one of the most important law which discusses about
the legal relationship between agent and principal . It is necessary that each and every agent and
principal must perform their work as per the legal laws and regulations. The law discusses that
agent only gets certain number of duties which are needed to perform such as duty to follow
lawful as well as reasonable instructions given by the principal . Secondly, it is necessary for
they them to perform any of the work with proper and using their skills so that they will get best
out of the decision which has been taken by them (Bogomolov and et. al., 2018). The agency law
also discuss that it is the responsibility of agent that they must be able to avoid conflicts for
personal benefit because that may raise the question. It is also the duty of agent they must not
accept any of the bribe for personal benefit because that will directly breach agreement which
has been signed between agent and principal as well as agency law which applicable in their
relation.
It is explained as the law which simply states that any of the agent must work according
to the lawful object where they are not allowed to take any of those decision which can raise
question against principal . The agency law discusses that any of the agent should not act on
those respective situation where rights are not given to them as it can create issues for principal .
Whenever any of the agent follow all of the rules and regulations, chances of obtaining the desire
outcome increases automatically. Gledhill v Bentley Designs [2010], It is one of the landmark
case which discusses that it is the obligation of agent that must comply with the instruction given
to them by principal (Gledhill v Bentley Designs, 2010).
In addition, there are number of instances where proper agreement is not prepared
between agent and principal and that can be the situation where problem be raised. It is
necessary that whenever any of the agent and principal form the agreement, it must be in written
form because it will allow them to settle all of the work and even duty will be also decided. Also,
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if in case, it is not found then in that respective situation burden of proof will be in the hands of
principal and that can create unnecessary issues.
Agent are one of those person who should be able to decide what is right and what is
wrong because any of the mistake can lead the organisation into a bigger mistake. By looking at
the requirement, it will be essential for principal to hire or enter into the contract with those
agent who is able to tackle the situation which are beneficial for both of them. Various qualities
are required within the agent but still they must have some of the knowledge regarding law and
legal rights so that effective decision can be taken by them according to the requirement of a
situation. The law explains that if agent fails to meet any of the standard then it is assumed as
prima facie negligent. The agency law simply tells that any of the agent has the responsibility to
review each and every activity in a systematic manner because it can allow them to meet out the
required standard. Vesta v Butcher 2007, is one of the important case law were judgement was
given by the the judges that it is the responsibility of agent that once they sign the agreement
with principal regarding any of the work, they must be able to review each and every work in a
systematic manner (Dharmapala, Garoupa and McAdams, 2016). It will simply allow them them
to reduces the chances of error.
In present scenario, any of the principal appoints agent just for the personal benefit as it
is the way which can allow them to reduce their workload and even it allows principal to focus
on other department as well. Agent has the crucial role for any of the business organisation and
looking at that respective situation it is necessary for any of the agent that they must be able to
perform work for only one of the principal . In any of the circumstances, they are not allowed to
take any of those decision where they involve themselves within any of the other principal . It is
one of the most important duty of any of the agent that they should not develop the
circumstances of conflict because whenever agent work for multiple people then there is high
chances that confidential information can be leaked due to which one might have to suffer.
Rossetti Marketing Ltd v Diamond Sofa Company Ltd and another [2011] EWHC
2482, is the case which simply determines that any of the agent has the right to work for multiple
organisation (Can an agent act for competing principals, 2012). But, if in case principal want
their agent to work for them only then in that respective situation they are required to mention
within the contract which makes terms and condition more clear. In addition, there is also the
provision that if agent doesn't want to create any of the problem for any of the principal for
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whom they work, then in that respective circumstances agent can disclose about the information
regarding the principal under whom he/she is working.
[Note: If any of the principal has to suffer from any of the losses just because their agent
work for multiple agent, then in that respective circumstances, principals gets the rights to sue
agent for the breach of a duty.]
The duty and responsibility of agent is not limited up to performing any of the task as per
the requirement but there number of other duties as well which they must perform according to
the requirement. According to the agency law, there are certain laws and regulations which is
needed to be followed by agent where are required to keep record of each and every which has
been assigned to them (McNay, 2016). Secondly, whenever any of the principal gives any of the
property to agent, then in that respective situation they are needed to understand that they are not
allowed to sell any of the property. Also, property is to be given back to principals if relationship
has been ceased. The third most important duty of account that agent has to take care is
completed related with keeping personal and principals profit separate and it is also essential to
treat principals property as a trustee.
There are number of other duties and responsibility which is the part of agent and they
are required to consider every single aspects of agreement in detail. It is necessary for agent to
understand that they are not allowed to delegate their duties and responsibility to any of the other
person. It is essential for agent to perform all of the task and work which has been delegated to
them (Agent's duties to principal under common law, 2019). If in case, agent gives his part of
role of work to any of the sub agent, still the responsibility will be of agent with whom
agreement has been made. It is because principal only knows the party or person with whom they
have entered into the contract.
But, the laws of agency has made some of the exception to this respective law. For
example: if permission has been obtained priorly then in that respective circumstance agent will
get the opportunity to perform the task as by taking the help of sub agent. Also, there are some of
the other rules and regulation where it has been discussed that whenever any of the principal
hires any of the agent, it is their duty of obligation to provide all of the expenses which are
incurred by agent (Brito, 2014). If in case, same has been done by sub-agent, then it will be
necessary for them to understand that agent will have to bear all of the expenses and charges. In
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short, it is also one of the duty which automatically joins agent whenever they enters into the
contract with their principal.
Finally, agent has been given number of roles and responsibility after entering into the
agreement with principals but one of the main duty which they are needed to consider is that they
must not try to perform any of those work which let them allow to earn the secret profit. If any of
the agent does the same work, then in that respective situation principal will get the right to take
legal action where principal will get the right to recover all of the damages money which has
been incurred due to agent. The secret profit is not related with monetary form only as it can be
other as well. For example: Agents gets the house property from principal for staying in that
particular property only but for the purpose of earning additional profit, agent further transfer on
lease which is not right and also it is against their duty mentioned under basis duty of any of the
agent. Tan Kiong Hwa v. Andrew S.H. Chong [1974] 2 MLJ 188, is the landmark case which
state that agent was in the position where lots of roles and responsibility where given to then and
using the duty in adverse manner, agent tried to earn the secret profit of $9000 (Dimitriu, 2017).
It was against the law as breach of agreement has been charged against the plaintiff.
In short, the above given statement clearly indicates that agent has multiple responsibility
which are needed to perform. There will be number of chances where agent have to act of own
and in that respective circumstance, they must be able to ensure that they are not going to
conduct any of those activity which can create issues for them as well as for principals.
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CONCLUSION
From the light of above definition, discussion and case laws, it can be easily concluded
that agency law is one of the necessary law where different laws and regulations are required to
be followed. This can be said that law is quite helpful for the business as it allows principal to
take those decision through which they can reduce percentage of burden from them as appointed
person gets the right to take some of the important decision through which goals can be
accomplished easily. There are number of benefits of agency law but still it has been found that
changes are required in it because there are number of circumstances where law create issues for
principal . As, it has been found that if any of the agent will take any of the decision then
ultimate liability will be of principal which should be changed. It is because there are number of
situation where agent shows their carelessness and which create trouble for principal so if
changes can be made in this respective section then agency law can be much effective. Also, it is
said that working in ethical manner is quite important for agent where implementation of useful
skill can allow agent to take corrective decision which can be result oriented for principal . In
short, it is also important because it will not allow any of the principal to deny from the actions
taken by its agent.
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REFERENCES
Books & Journals
Bogomolov, A. and et. al., 2018. Overview user interface of emergency call data of a law
enforcement agency. U.S. Patent 10,042,524.
Dharmapala, D., Garoupa, N. and McAdams, R. H., 2016. Punitive police? Agency costs, law
enforcement, and criminal procedure. The Journal of Legal Studies. 45(1). pp.105-141.
McNay, L., 2016. Agency. In The Oxford handbook of feminist theory.
Brito, J., 2014. Agency Threats and the Rule of the Law: An Offer You Can't Refuse. Harv. JL
& Pub. Pol'y. 37. p.553.
Dimitriu, C., 2017. Agency law and odious debts. Ethics & Global Politics. 10(1). pp.77-97.
Online
Agency Definition. 2019. [Online]. Available Through:
<http://www.duhaime.org/LegalDictionary/A/Agency.aspx>
THE INSURANCE TRIPARTITE RELATIONSHIP WHO IS MY CLIENT ANYWAY. 2017.
[Online]. Available Through: <https://lgwmlaw.com/news-media/THE-INSURANCE-
TRIPARTITE-RELATIONSHIP-WHO-IS-MY-CLIENT-ANYWAY/>
Gledhill v Bentley Designs. 2010. [Online]. Available Through:
<http://www.agentlaw.co.uk/site/case_summaries/gledhill_v_bentley_designs.html>
Can an agent act for competing principals. 2012. [Online]. Available Through:
<https://www.agentbase.co.uk/legalarticles/can-agent-act-competing-principals-2/>
Agent's duties to principal under common law. 2019. [Online]. Available Through:
<https://www.eaa.org.hk/en-us/Information-Centre/Publications/Agency-Law/-5-
Agents-duties-to-principal-under-common-law>
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