Legal Aspects of Business: Agency Relationships and Authorities

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Legal Aspects of Business
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Table of Contents
Introduction......................................................................................................................................3
Definition and key features of an agency relationship.................................................................3
Relationship between Partner, Agency, Third party....................................................................4
Features of an agency relationship...............................................................................................4
Types of agents’ authority............................................................................................................4
Conclusion.......................................................................................................................................8
Reference.........................................................................................................................................9
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Introduction
Before commencing any business it is essential to look forward towards the legal aspects of the
business. This report main aim is to provide better understanding and provide information related
to the business so as to acknowledge the authorities of the respective person in the relationship of
the agency. Further, it binds the respective principals to be accountable and answerable for the
action and assist in determining where the action is of binding nature or not as per the given law.
This assists the business functions in a fair and ethical manner as per the laws of the agency. It
abides in building the trust and confidence level between the employees of the business. In this
report, it consists of the discussion on the relationship of the agency and also contains the
features of the relationship of the agency. It includes agency definition, consent of the parties,
and authorities of the agent, nonconsent agency, and types of authorities of agent and also
depicts the necessity and ratification under the relationship of the agency. For detailed and better
understanding there is the relevant case also are also considered. It also provides brief
information regarding the types of authorities of the agent with relevant case laws.
Definition and key features of an agency relationship
Agency is the fiduciary relationship among one person known as a principal and another person
known as an agent where the agent is authorized to act on behalf of the principal. In the business
of the agency, agent is liable to perform the duties and responsibilities as per the agency
agreement. The agent is authorizing to deals with all the agency matters and enters into the
contractual relations with the third parties. Agency can also be defined as the contract may be
express or implied for the consideration for the management of the operations of the business
(Casas, 2016). Agent is accountable for the acts done on behalf of the principal and it abides the
principal of the agent actions.
GHL Fridman defines the law of agency that it is the agency which create affiliation which is
exist between the two individuals where the one is known as the agent for representing the other
person known as principal in such a way that impacts on the legal position of the principal in the
context of the strangers for maintaining the relationships in the contracts making or the property
disposition.
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An agency relationship is the relationships of the business where the principal is legally
authorized for the action of the agent on behalf of the principal while performing third party
dealings. This relationship is a fiduciary relationship. In this, the person who receives the
benefits is bound to prove the agency relationship (Percival, et. al., 2017). The scope of the
relationship of the agency is proved orally or in writing.
Relationship between Partner, Agency, Third party
In the relationship of the agency, the beneficial party has to prove this relationship and the third
person binds the principal on the belief of the agent and act accordingly. The agent authority
scope is determined in the written form by the principal or it may be in the implied form.
In the agency business, its relationships are divided into three categories which include:
Buyers Agency is the relationship where the buyer is the client who is accountable for
maintaining confidentiality and performs the responsibilities with reasonable care. This
relationship is termed as principal and agent (Fayezi, et. al., 2017).
Sellers Agency is the agency where the seller is responsible to represent the transaction of the
seller and where the seller is known as the client and responsible for performing the same duties
to the seller as the agent of the buyer. This relationship is termed as agent and third party.
Dual agency is the relationship where the agent denotes both buyer and seller so as to carry out
the fiduciary responsibilities. This agency is only permitted for getting the voluntary consent of
the consumer and the trader. This relationship is termed as principal and third party.
Features of an agency relationship
The agency is the relationship which entitles the agent to perform the obligations and represent
the principal before the client (Mayol, et. al., 2018). It is crucial that the agent and the principal
are bound to be competent for entering into the relationship. It states that the parties are
competent and of sound mind and not possess any disqualification. But it is significant that the
principal conveys the right to the agent for performing the obligations.
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Types of agents’ authority
Consent states that that there must be the assent of both the agent and the principal where there
is no undue force to any party. It is important that there must be mutual consent of both the
parties before entering into the agency agreement that is the principal and agent. To create the
relationship of the agency it is important that must be consent of both the agent and the principal.
Consent agency includes express agency and implied agency.
The actual authority is divided into categories named express and implied authority where
the express authority states that where the principal is given the express consent whether in a
verbal manner or in written form (Timms, 2018). On the other hand, implied authority is the
authority where the agent is responsible to perform the acts which are necessary for the
performance of the business obligations. The implied authority is depending on the case and its
facts which determine the trade and profession. The agent actual authority scope includes express
or written agreement among the agent and the principal or any trade or profession and assists in
dealing among the two parties. If an agent enters into the third party contract for the performance
of the actual authority this assist in in creating the rights and obligation as per the contact among
the principal and the party.
Nonconsent agency includes agencies like apparent authority agency, usual authority agency,
and necessity agency.
Apparent authority (Rasmusen article)- The apparent authority is the right where there is no
contract with the agent for authoring the action but on this the third party act on the conduct of
the principal by believing that the agent is authorized for the act (Pfau, 2015). For instance, the
office of the home tells a customer that the manager of the sales has the authority for selling the
flour and removes the actual authority without telling to this to the customer who states that the
sales manager has still had the apparent authority. This authority is depending upon the third
party belief not the relation that exits among the principal and the agent in actual.
In this, the principle of estoppels states from objecting the agreement prepared by the agent if the
principal could possibly interfere so as to prevent the authority related confusion for instance,
that if the principal heard about the agreement and not made any statement about the
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unauthorized of the agent. For proving out the agency by estoppels it is important that the
following elements are included:
For creating the appearance of the agent authority there are acts of negligence or omission is
conducted on the hand of the principal.
The good faith is important for the reliable on the authority of the agent (Tefera and Migiro,
2018).
There is a change in the position of the third party.
In this right, if the agent appears to the third party to have the power then the principal is
prevented from denying the authority of the agent. For instance, if the agent takes action as the
managing director for the business although he is not appointed in actual for this position but
posses the apparent authority to perform all obligations which is needed to be performed by the
managing director. As per the case of Freeman Lockyer vs Bruckhurst which states that where
the person has lacked in the authority or power to enters into the contract with the third party on
behalf of the company. In this, it is stated that the actual authority may be express or implied
manner. In this, the architects are the claimants and entered into the contracts with Mr. Kapoor
who is responsible for the development of the Park of the Bruckhurst and for the property
development. Along with Mr. Kapoor, some people formed the defendant corporation for which
the company articles permit the corporation to appoint one for the four managing directors for
entering into the agreements on company behalf. Mr. Kapoor never appointed for the position of
the managing director. In this, Mr Kapoor has not actually authorized to represent the company
and act under the apparent authority and it was stopped from that Mr. Kapoor has no power to
enter in the contracts on behalf of the company and is liable for the payment of the frees of the
claimants. In the case of Hely Hutchinson vs Brayhead, where court states that the as per the
Company Law of the UK where the agent is authorized to act on behalf of the company. For the
apparent authority there are three requirements that need to be fulfilled and where the principal
bound the agent are as follows:
The agent must represent about possession of the authority.
This representation authorizes by the principle (Kerwin and Furlong, 2018).
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This representation is depending upon the third party.
Operation of law is the law that indicates the creation of the rights and liabilities irrespective of
the party intention as per the existing legal principles (Allen and Kraakman, 2016). The agency
is terminated with the operation of the law in the case of death of the principal or the agent.
Ratification agency is the agency where the agent is acting on the principal’s behalf for
performing the unauthorized act or a person who is not an agent of another. It may be express
where the principal approves the contract and in case of implied nature where the principal
accepts the agreement and its benefits. For instance, the
Ratification is the intention question where there is always questioned that the principal permits
the agent that it is upon the principal to decide whether the principal is approved the action of the
unauthorized agent. The ratification of the intention may be expressed or having the intention for
the ratification. There are various conditions in the ratification which includes:
The principal has full knowledge of all the important facts.
It is important the agent must act on behalf of the principal and the principal must be identifies.
It is important that the principal must have the capability for acting both at the time of the
ratification and at the time of the act.
Necessity agency is the agency where the arisen of the agency through the operation of the law.
The origin of this agency is found in the law of mercantile and the law of shipping. This type of
agency is formed in case of emergency in which the other individual's property are in imminent
jeopardy and it is essential to preserve the property or the interest of the property and it becomes
crucial to act without the authority of the person (Kliewer, et. al., 2017). The agency necessity is
applied where there is some contractual relationship is existing linking the parties and allows the
person to binding with the act of the stranger. An agent is accountable to bid the principal on the
agency basis where the agent has no way of contacting the principal for the instructions. The
emergency for the agent arises for instance the food of perishable nature. It is crucial that the act
of the agent is in good faith in the principal’s interest and the agent action is practical and
cautious.
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Usual authority-It is the right or power that binds the agent for the usual act for the type of the
business and the agent until and unless it is known by the third party. With the concern of the
third party if there is any restriction on the usual authority of the agent where the third party is
unaware and in this the third party cannot claim about the apparent authority (Gill, 2018). As the
third party is aware of the restriction of their usual authority and the third party cannot claim the
apparent authority. In the case of Ukraine vs Law Debenture trust where the court states that it is
the decision of the court to pay more time for the payment of the debts to Russia.
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Conclusion
This report concludes that the role of the agency helps out to conduct the operations of the
business in an ethical manner and abide the parties with the rule and regulations. The above case
laws help in enhancing the knowledge level of the learners and their related provisions. The
relationship of the agency guides both the agent and the principal about the provision of the
agency agreement. It also clears out the responsibilities and duties that are performed by the
agents and principals within their authority. For achieving the level of profitability it is important
that the parties under the agency work in an effective and efficient manner. It assists in
governing the agency laws that help in protecting the rights of both the agent and principal as
well. The agency laws help in maintaining the internal and external relationships of the business
with others with due diligence and good faith. As per the case of Hely Hutchinson vs Brayhead
and Freeman Lockyer vs Bruckhurst which explains the different authorities of the agent. It is
important that the agency and its relationship are formed for the legal purpose. It is important to
build trust for dealing with the risk transaction. The relationship in the agency bound the legal
parties to perform their obligations and duties. To perform the obligation by the agent it is
important that the agent act as per the right and instructions of the principal. If agent act beyond
the authorities specifies that the agent is responsible for the payment and liable for the
compensation to the principal for all the loss caused due to the agency action. The agent is liable
to act on the principal’s behalf and within the authority for which the agent is appointed by the
principal. The agency helps out the businesses of small nature to improve the level of sales and
productivity of the business. If an agent performs any act by stating that the agent has the
authority in the performance of the obligations and on the basis of which innocent party act than
it is the agent responsible to make the good for the losses that cause with the act of the agent.
The agency laws support the agency businesses to conduct the business as per the stare laws.
This assignment enhances the knowledge and guides the innocent parties against the unfair
practices of the principals and penalizes the defaulting party.
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Reference
 Allen, W.T. and Kraakman, R., 2016. Commentaries and cases on the law of business
organization. Wolters Kluwer law & business.
 Casas, M., 2016. The need for a police information officer within a law enforcement
agency.
 Fayezi, S., Zutshi, A. and O’Loughlin, A., 2017. Positivist agency theory and sourcing
decisions: perceptions, pressures, and contexts. In The 24th European Operations
Management Association (EurOMA) Conference, Edinburgh.[Google Scholar].
 Gill, P., 2018. Rounding up the usual suspects?: developments in contemporary law
enforcement intelligence: developments in contemporary law enforcement intelligence.
Routledge.
 Kerwin, C.M. and Furlong, S.R., 2018. Rulemaking: How government agencies write law
and make policy. CQ Press.
 Kliewer, C., Phillips, G.A. and Massanelli, M., 2017. Information & anxiety: The
impossibility of'literacy'and the necessity of agency.
 Mayol, A., Michallet, B. and Prevet, A., 2018. Providing public utilities in a common
agency framework: making, buying and governance.
 Percival, R.V., Schroeder, C.H., Miller, A.S. and Leape, J.P., 2017. Environmental
regulation: Law, science, and policy. Wolters Kluwer Law & Business.
 Pfau, T., 2015. Minding the Modern: Human Agency, Intellectual Traditions, and
Responsible Knowledge. University of Notre Dame Pess.
 Tefera, O. and Migiro, S., 2018. Service Quality and Hotel Ratings: Comparing the
Ratings by the Hotel Owners, Government Authority, Online Travel Agents and
Customers.
 Timms, N., 2018. The receiving end. Routledge.
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