Legal Aspects of Business: An Analysis of Agency Laws Report

This report delves into the legal aspects of business, specifically focusing on agency laws. It explores the fundamental principles governing the principal-agent relationship, emphasizing the duties and responsibilities of agents. The report outlines key agent duties, including following instructions, performing work with care and skill, avoiding conflicts of interest, maintaining accurate accounts, refraining from delegating work without authorization, and avoiding bribery. Relevant case laws such as Donald v Rachel, Ben v Jack, and Rachel v Bradman are examined to illustrate the application of these duties. The report underscores the importance of these legal frameworks in ensuring the smooth and ethical operation of businesses, providing a systematic approach to achieving organizational goals and maintaining stability within the business environment. The analysis highlights how adherence to these laws contributes to stronger decision-making processes and fosters sustainable growth. The report also touches upon the legal consequences of failing to adhere to these duties and the importance of clear agreements between principals and agents.

Legal Aspects of
Business

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................2
CONCLUSION................................................................................................................................6
7

INTRODUCTION
Legal aspect of business is that kind of aspects which helps in providing stability within a
business environment. In other manner it means those kinds of aspects that makes positive
environment for the growth of an organization. They provide a systematic way in which all kinds of legal
activities are perform in order to achieve objectives and goals of a business organization. Such asp helps
in making stronger decision making mechanism that uplifts smoother and faster growth within an
organization. Laws of such kind are formed by following a concrete structure that is enacted in a
parliament. Rules and regulation which comes under these laws has to be followed by all kinds of
business organizations. Scope of these aspects is very wide and dynamic in nature. As they have a strong
tendency of identifying those ideas which can create a negative impact over an organization. Agency
laws are those laws which are formed to represent a fiduciary relationship that exists between two
parties. Such laws are based upon a principal and agent relationship. In this relationship an agent is
hired by principal to perform a particular task over his behalf. Main responsibility of principal is to keep
check upon the activities done by him and actions taken by him. This can be achieved through strong
communication. An agreement is formed between principal and agent that provide a legal base to their
relationship under the eyes of law. These can be in written and oral form means can be in complied and
expressed form. Validity of such agreement gives rise to a contract that comes under contract law. Basic
nature of such kind of laws is formed upon tripartite form of relationship, as such relationship is
between employer and employee. Activities are performed in an organized manner for better and
smoother formation of an organization. Under a tripartite kind of relationship a responsibility is given to
a employee through employer and becomes his duty to perform such responsibility. These activities are
to be performed according to the rules and regulations given under agreement signed between parties.
In the following file discussion over laws related to agency is going to be talked about. Also relationship
of principal and agent is going to be covered. “ As per general laws various duties has been given to
agent, which are to be performed by them. Certain legal incidences are to be followed. Agency is hired
as per contract, because of this only some duties come into force after signing it. Whereas other
duties are imposed before contract comes into existence”. These duties are discussed further in more
detail.
MAIN BODY
Agency laws are those laws that are very important rules and regulation for a business
environment. All rules decided by principal for performing a task have to be followed by an agent. These
duties are given to agent as per the contract formed between both parties. Such duties are to be
followed until a specific time period. It is done in order to save principal from any kind of liability
occurred out of a particular condition. It is very important to understand that under any circumstances
any fault has been done on part of principal while performing the activity, he is to be held liable for it.
Different duties are to be performed by agent and also according to the legal framework prescribed
under agreement (Weber. and Studer, 2016).
.

These duties are to be followed by agent for full filling the standards and regulations which are
prescribed under agency laws. These duties are explained further.
First duty that has to be followed by agent for accomplishing of task given to him by principal is
“Duty to follow instruction given by principal in lawful manner”. In this duty an agent is required to
follow guidelines or instruction which is instructed by principal to him. Liability has to be bare by
principal. Under lot of cases agent fails to follow instruction given by principal. Relevant case law related
to this duty is Donald v Rachel. In this a responsibility of taking care goods has been given by principal to
agent. These goods were kept in the shop owned by Rachel. As instructions were given to her to take
proper care of goods till the time dispatched. This task was not performed by agent as per instruction
given by principal to him. She carelessly stored the goods which lead to damage caused towards these
goods and the loss has to bear by principal. In this case court held that principal does not have to bear
the cost of damage done to goods. It is the agent who needs to compensate for it. As he has not
followed instructions given by principal to him. In a simpler manner this can be understood that it is
agent’s duty to do his work with full responsibility and not with casual attitude. These duties can only be
followed as per information given by a principal to an agent. Also it is duty of agent to conform all
instruction from principal. If principal is not able to give instruct then work has to be done as per
guidelines mentioned in agreement (Kemp, 2018).
. So, that duty can be performed without facing any kind of legal issues. A contributes positively for
growth of organization.
Second duty that has to be followed by agent towards principal is “Duty of performing a work
with care and skill”. It is an important duty that has to be followed by agent for accomplishing agent’s
task. If positive outcome has to be gained out of any situation then it is very necessary to follow this
duty with a sincere attitude and in appropriate manner. This is going to result into faster and better
accomplishment of task. Under any circumstances or situation an agent fails to follow his duty then
principal has to be held liable for it. If an principal becomes insolvent the under such case agent is not
going to be held liable. Relevant case related to this duty is Ben v Jack. Facts of the case is as follows an
agent was given a responsibility of telling all information regarding the product launched in the market
but instead of doing so the principal has acted very carelessly on his part and has leaked the information
in public before launching the product. After considering all the facts of the case, court held that default
has been performed on part of agent. Task has not been performed by him with due diligence. An agent
is bound to follow such duty with care and skill.
Duties are not limited only to the situation and circumstances mentioned above. There
are certain duties which are to be followed in order to solve conflict happened between principal and
agent. Next duty that has to be followed by agent towards principal is “duty to avoid any kind of
conflict between agent and principal”. Under this duty certain kind of circumstances occur in which
motive of earning interest is there. This can be understood as interest earn out of hidden profit and also
misuse his power that is delighted to him by principal. This can be understood better through this
example that, an agent has been given responsibility of selling the property and responsibility of selling
it is given by principal to him. He started earning secret profit by renting the property to other

people(Abeyratne, 2018)(Lindström. and Hanken, 2018). It is duty of agent to disclose profit earned
to principal.
A relevant case law related to this is duty is Rachel v Bradman in this case it was found by the court that
one product has been purchased by a customer. According to the instruction given by Rachel, all
information regarding selling and purchasing of materials must be disclosed to him. Agent did so but
does not disclosed extra commission gained over material. Later on Rachel discovered it and this
resulted into conflict of interest between agent and principal. It was held by court that Bradman has
done breach of duty to avoid conflict of interest. So, it is observed from the situation of case mentioned
above that conflict of interest has is going to effect relationship of agent and principal in negative
manner only. It has to be understood that whenever an agent is going to perform his duty, as told by
principal. This is always going to result into positive outcome. All necessary points regarding the
agreement have to be discussed by agent and principal. Due to this smooth and effective working of
organization is going to be there. This helps in raising of standards that are being set up by principal for
company or organization. This makes very important to follow duty mentioned above by the agent of
the company and should not earn any secret profit or commission without its discloser to principal
Another duty of agent that has to be followed by him towards principal for accomplishing his task is
“Duty of account”. As per this duty an agent has to follow rules that are set in an agreement regarding
maintaining account. Assurance is required to keep about any of the circumstance; so that a principal
can keep a check over accounts maintained by principal and should also be submitted to him when
asked for. No personal profit has to be made with that of organization, as this may lead towards
dissatisfaction among agent and principal. Due to these issues may arise. The duty is not limited only to
this it is also important that duty delegated must return to principal even after the problem occurred
under relation of principal and agent. Under various occasions number of roles and responsibility is
delegated to agent. This kind of delegation is going to increase burden upon agent (Gordon, 2016).
For this purpose only another duty has been given to agent that is to be followed by him towards
principal which is” duty not to delegate work”. These are those general rules and regulation which has
been explained by an agent who is not given authority to delegate work to some other agent neither to
a sub agent under any circumstances or situation. Full consent of principal is required and duty of agent
cannot be given to a sub agent and when consent is approved then only it is going to be legalized. This
can be understood through this example, an agent hires a sub agent to perform his duties upon his
behalf and while performing its duty problem is created by an agent. All loss is going to be bear by agent
because prior permission is not taken by him. Relevant case related to this duty is “shark Mara and co v
Jenifer”. In this case it was decided by court that no agent is allowed to hire any employee or a sub
agent to work upon his behalf without gaining any legal permission from principal to hire a sub agent.
Also, in another case that is between “Alvin v Tim, which is related with distribution of authority to an
agent. In this agent was hired to perform task on behalf of principal. It was observed in the case that
important decision regarding selling of property has been taken by the partner of agent. So, upon
analyzing situation and all the facts of case, it is decided by court any loss happened to principal has to
be paid by agent. Decision was taken without permission of principal. So, Tim was held liable.

Last and the most important duty has to be followed by agent towards principal is “Duty not to
accept bribe”. An agent has to perform work as told by principal to him. Also agent should not
forget that decision cannot be taken which creates problems for him. This can be understood in
simple way that a decision which has been taken by principal and agent is taken from the motive of
earning profit. In such case principal can take legal action against agent. Situations of such types
always results in to breach of agency law and agreement formed under it. This can be better
understood with this example surpassingly a principle has given the property to agent to use it. For
his own purpose but agent misused it and planned to earn rent from it. Under such situation
principal was allowed to file case against agent for not disclosing any information regarding use of
property for such purpose. But, if agent takes prior permission and principal gives his consent in
positive manner, then under those circumstances. Then agent cannot be personally held liable for it
(Gordon, 2016). Regarding this a relevant case is as follows Bulk finishing and Ice Ltd v Draco, in
this case the director has been performing its duty of directors in two different organizations. This
was creating direct or indirect impact upon business organization because reduction in profit is
there at significant level. Having an over view of case the judges it was decided that it is the duty of
agent to inform both the principal about profit he has earned. So, looking at the case, it is held by
court that loss faced by principal has to be paid by agent only. Certain responsibility and duties are
there that has to be followed by agent.

CONCLUSION
From the above file, it is clear that legal aspects of business are those types of aspects that is
necessary for dealing with any kind of business environment. For, smooth and better functioning of a
business. This also helps in achieving of goals and objectives set up by an organization. Relations formed
between principal and agent should be able to make understand that agent has liability of performing a
task that has been assigned by principal to him. Principal has responsibility of guiding an agent
regarding task and various situation related to it. Agent is responsible for performing all work in a
systematic manner and if he does not do so then he can be held liable by the principal for it. In simple
way, agent helps in reducing of workload form principal, which allows them to focus over other work
because of which desired results can be achieved in better manner.

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