Legal Aspects of Business

Legal Aspects of Business

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Agency relationship is been formed by manifested and the mutual agreement between
both the parties that is principal and an agent where one party acts on behalf of other. Some of
the agency relationships are been arise as the result of the other agreements like employment
contract and the partnership agreement. There are some agency relationships that are been
established by way of contract in which the duties of an agent or the obligations are largely been
defined by terms of contract but an additional duties are generally established by the law of
agency, until and unless contract specifies for modifying it. Such duties arises from confidence
and the trust which forms a foundation of agency relationship and is been termed as the fiduciary
duties.
Agency definition
In accordance to Bowstead and Reynolds, agency referred as the fiduciary relationship
that exists in between two parties, where one party expressively or impliedly show consent that
other party should act on behalf of him in order to affect his relations with that of the third
parties and the others who similarly consents to act.
On the other hand, as per GHL fridman, agency means a relationship that is present
between two persons where one is called as agent, is counted in law for representing other one
who is called as principal (Leow, 2019). It is indicated in such a manner so as to affect legal
position of the principal in context of the strangers to relationship by making of the contracts or
disposing of the property.
Relevance of an agency
Agency theory is the principle that is been used for explaining and resolving the issues
within the relationship between the business principals and their respective agents. Agency law is
essential because it allows an authority to individual for acting on behalf of corporation that is
legal entity in itself. This theory helps in understanding relations between the principal and the
agent where an agent represents principal in specific business transaction and is expecting for
representing best interest of principal without the regard of self interest. Agency theory is been
seen as the most important developments in the microeconomics in past 20 years. It contains
application to the accounting, labour economics and has become a basis of an economic
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compensation model (Shogren, Wehmeyer and Palmer, 2017). It studies for selection, incentive
and risk of the employees.
Principles of agency make the corporations accountable towards their actions whether the
actions are abided by law or not. In agency relationship, there present two parties that is an agent
and principal. Agency law allows the corporation to act in a particular manner as the firm can act
only by its board of directors, the board has the power to delegate the duties to the appropriate
officers or the committees. BODs and officers of the company are generally counted as agent and
the company is principal on behalf of which they perform their task. In this theory, the agent
represents a principal within business transaction and expects for representing into a best interest
of principal without the regard of the self interest.
Agency acts a the capacity for acting and relates to an autonomy but is seen in a different
way. In case the key contributors to the team lacks agency, it is the situation that has to be
addressed with urgency and ultimately, these contributors will get frustrated, unproductive and
marginalized (Hammond, 2017). Lack of an agency could result in destroying a team, preventing
a team from the ever forming in the first place with an individual that are acting autonomously.
Agency, as the fiduciary relationship
Fiduciary relationship represents where one party places for the special trust, reliance and
confidence that is been influenced by the other who is having a fiduciary duty acting for benefit
of party called as confidential relationship at duty. Such relationship might be created by
expressing an agreement of parties that is been imposed by law where established by conduct of
parties.
In context of fiduciary relationship, agent is been authorised by the principal for
undertaking several acts on behalf of the principal (Gu, 2018). Along with this authority, agent
has power for binding a principal. For example- buying or selling property on behalf of his
principal. This type of relationship gives rise to the rights and obligation of the agent against the
principal. Contracts are been treated as a contracts that is been made by the principal. Under this
the principal could be held liable for the breach and an agents statement might bind the principal.
Types of Agent Authority
Actual Authority
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