19Agency

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Agency

Learning Objectives:• Understand the different types of agency arrangements and be

able to distinguish agency from other relationships;• Explain how an agency relationship is created and the nature

of the agent’s authority;• Understand the relationships that arise in the context of

agency, namely: principal and agent; agent and third party and principal and third party;

• Describe the rights, duties and obligations of agent and principal;

• Explain how an agency relationship is terminated.

Agency cont ...Who is an Agent?

Definition of an Agent

• Authorised to act on behalf of a principal.

• Creates legal relations between the principal and the third party.

• Authorisation can be express or implied.

• Contractual & Fiduciary relationship.

Agency cont ...

Agent’s Duties & Obligations

• Duty to follow instructions;

• Duty to act with due skill and diligence;

• Duty to avoid conflicts of interest;

• Duty to account for monies received on behalf of the principal.

Agency cont…

Principal’s Duties & Obligations

• Duty to remunerate;

• Duty to reimburse and indemnify.

Authority of agents

An agents authority to act on behalf of the principal can be either :

• Actual or ostensible ( apparent)

• Express or implied

Agency cont ...There are various types of agency

arrangements recognized by the law. These include :

• Universal Agents;

• General Agents;

• Special Agents;

• Factor or Mercantile Agents;

• Del credere agents.

Agency cont ...

Agency relationships should be contrasted with other forms of contractual relationships including:-

• Employer-employee;

• Independent contractors.

Agency cont ...

Third Party LiabilityAn agent may be liable to a third party in the following

ways:-• Third party believes that they are contracting directly

with the agent and the agent has failed to disclose the existence of the principal (undisclosed principal);

• The agent has exceeded the scope of his/her authority (breach of authority);

• The agent commits a tort (tortious liability).

Agency cont ...

Termination of Agency ( p 368)

• Operation of Law (time, death, bankruptcy);• Mutual agreement between the agent and the

principal;• Renunciation of the agent’s authority;• Dismissal of the agent by the principal.