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Law of agency
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The law of agency is an area of commercial law dealing with a contractual or quasi-contractual, or non-contractual set of relationships when a person, called the agent, is authorized to act on behalf of another (called the principal) to create a legal relationship with a third party.[1] Succinctly, it may be referred to as the relationship between a principal and an agent whereby the principal, expressly or impliedly, authorizes the agent to work under his control and on his behalf. The agent is, thus, required to negotiate on behalf of the principal or bring him and third parties into contractual relationship. This branch of law separates and regulates the relationships between: • Agents and principals; • Agents and the third parties with whom they deal on their principals' behalf; and • Principals and the third parties when the agents purport to deal on their behalf.
The common law principle in operation is usually represented in the Latin phrase, qui facit per alium, facit per se, i.e. the one who acts through another, acts in his or her own interests and it is a parallel concept to vicarious liability and strict liability in which one person is held liable in criminal law or tort for the acts or omissions of another.
In India, section 182 of the Contract Act 1872 defines Agent as “a person employed to do any act for another or to represent another in dealings with third persons”.[2]
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[edit] The concepts
The reciprocal rights and liabilities between a principal and an agent reflect commercial and legal realities. A business owner often relies on an employee or another person to conduct a business. In the case of a corporation, since a corporation is a fictitious legal person, it can only act through human agents. The principal is bound by the contract entered into by the agent, so long as the agent performs within the scope of the agency.
A third party may rely in good faith on the representation by a person who identifies himself as an agent for another. It is not always cost effective to check whether someone who is represented as having the authority to act for another actually has such authority. If it is subsequently found that the alleged agent was acting without necessary authority, the agent will generally be held liable.
[edit] Brief statement of legal principles
There are three broad classes of agent 1. Universal agents hold broad authority to act on behalf of the principal, e.g. they may hold a power of attorney (also known as a mandate in civil law jurisdictions) or have a professional relationship, say, as lawyer and client. 2. General agents hold a more limited authority to conduct a series of transactions over a continuous period of time; and 3. Special agents are authorized to conduct either only a single transaction or a specified series of transactions over a limited period of time.
[edit] Authority
An agent who acts within the scope of authority conferred by his or her principal binds the principal in the obligations he or she creates against third parties. There are essentially three kinds of authority recognized in the law: actual authority (whether express or implied), apparent authority, and ratified authority (explained here).
[edit] Actual authority
Main article: Actual authority
Actual authority can be of two kinds. Either the principal may have expressly conferred authority on the agent, or authority may be implied. Authority arises by consensual agreement, and whether it exists is a question of fact. An agent, as a general rule, is only entitled to indemnity from the principal if he or she has acted within the scope of her actual authority, and may be in breach of contract, and liable to a third party for breach of the implied warranty of authority. In tort, a claimant may not recover from the principal unless the agent is acting within the scope of employment.
Express actual authority
Express actual authority means an agent has been expressly told he or she may act on behalf of a principal. • Ireland v Livingstone (1872) LR 5 HL 395
Implied actual authority
Implied actual authority, also called "usual authority", is authority an agent has by virtue of being reasonably necessary to carry out his express authority. As such, it can be inferred by virtue of a position held by an agent. For example, partners have authority to bind the other partners in the firm, their liability being joint and several, and in a corporation, all executives and senior employees with decision-making authority by virtue of their position have authority to bind the corporation. • Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549
[edit] Apparent authority
Main articles: Apparent authority and Estoppel
Apparent authority (also called "ostensible authority") exists where the principal's words or conduct would lead a reasonable person in the third party's position to believe that the agent was authorized to act, even if the principal and the purported agent had never discussed such a relationship. For example, where one person appoints a person to a position which carries with it agency-like powers, those who know of the appointment are entitled to assume that there is apparent authority to do the things ordinarily entrusted to one occupying such a position. If a principal creates the impression that an agent is authorized but there is no actual authority, third parties are protected so long as they have acted reasonably. This is sometimes termed "agency by estoppel" or the "doctrine of holding out", where the principal will be estopped from denying the grant of authority if third parties have changed their positions to their detriment in reliance on the representations made.[3] • Rama Corporation Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147, Slade J, "Ostensible or apparent authority... is merely a form of estoppel, indeed, it has been termed agency by estoppel and you cannot call in aid an estoppel unless you have three ingredients: (i) a representation, (ii) reliance on the representation, and (iii) an alteration of your position resulting from such reliance." • Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 • The Raffaella or Egyptian International Foreign Trade Co v Soplex Wholesale Supplies Ltd and PS Refson & Co Ltd [1985] 2 Lloyd's Rep 36
[edit] Watteau v Fenwick
In the case of Watteau v Fenwick,[4] Lord Coleridge CJ on the Queen's Bench concurred with an opinion by Wills J that a third party could hold personally liable a principal who he did know about when he sold cigars to an agent that was acting outside of its authority. Wills J held that "the principal is liable for all the acts of the agent which are within the authority usually confided to an agent of that character, notwithstanding limitations, as between the principal and the agent, put upon that authority." This decision is heavily criticised and doubted,[5] though not entirely overruled in the UK. It is sometimes referred to as "usual authority" (though not in the sense used by Lord Denning MR in Hely-Hutchinson, where it is synonymous with "implied actual authority"). It has been explained as a form of apparent authority, or "inherent agency power. • Authority by virtue of a position held to deter: fraud and other harms that may befall individuals dealing with agents, there is a concept of Inherent Agency power, which is power derived solely by virtue of the agency relation.[6] For example, partners have apparent authority to bind the other partners in the firm, their liability being joint and several (see below), and in a corporation, all executives and senior employees with decision-making authority by virtue of their declared position have apparent authority to bind the corporation.
Even if the agent does act without authority, the principal may ratify the transaction and accept liability on the transactions as negotiated. This may be express or implied from the principal's behavior, e.g. if the agent has purported to act in a number of situations and the principal has knowingly acquiesced, the failure to notify all concerned of the agent's lack of authority is an implied ratification to those transactions and an implied grant of authority for future transactions of a similar nature.
[edit] Liability of agent to third party
If the agent has actual or apparent authority, the agent will not be liable for acts performed within the scope of such authority, so long as the relationship of the agency and the identity of the principal have been disclosed. When the agency is undisclosed or partially disclosed, however, both the agent and the principal are liable. Where the principal is not bound because the agent has no actual or apparent authority, the purported agent is liable to the third party for breach of the implied warranty of authority.
[edit] Liability of agent to principal
If the agent has acted without actual authority, but the principal is nevertheless bound because the agent had apparent authority, the agent is liable to indemnify the principal for any resulting loss or damage.
[edit] Liability of principal to agent
If the agent has acted within the scope of the actual authority given, the principal must indemnify the agent for payments made during the course of the relationship whether the expenditure was expressly authorized or merely necessary in promoting the principal's business.
[edit] Duties
An agent owes the principal a number of duties. These include: • a duty to undertake the task or tasks specified by the terms of the agency (that is, the agent must not do things that he has not been authorised by the principal to do); • a duty to discharge his duties with care and due diligence; and • a duty to avoid conflict of interest between the interests of the principal and his own (that is, the agent cannot engage in conduct where stands to gain a benefit for himself to the detriment of the principal).
An agent must not accept any new obligations that are inconsistent with the duties owed to the principal. An agent can represent the interests of more than one principal, conflicting or potentially conflicting, only after full disclosure and consent of the principal.
An agent also must not engage in self-dealing, or otherwise unduly enrich himself from the agency. An agent must not usurp an opportunity from the principal by taking it for himself or passing it on to a third party.
In return, the principal must make a full disclosure of all information relevant to the transactions that the agent is authorized to negotiate and pay the agent either a prearranged commission, or a reasonable fee established after the fact.
[edit] Termination
An agent's authority can be terminated at any time. If the trust between the agent and principal has broken down, it is not reasonable to allow the principal to remain at risk in any transactions that the agent might conclude during a period of notice.
As per sections 201 to 210 of the Indian Contract Act 1872, an agency may come to an end in a variety of ways: 1. Withdrawal by the agent – however, the principal cannot revoke an agency coupled with interest to the prejudice of such interest. An agency is coupled with interest when the agent himself has an interest in the subject-matter of the agency, e.g., where the goods are consigned by an upcountry constituent to a commission agent for sale, with poor to recoup himself from the sale proceeds, the advances made by him to the principal against the security of the goods; in such a case, the principal cannot revoke the agent’s authority till the goods are actually sold, nor is the agency terminated by death or insanity (illustrations to section 201); 2. By the agent renouncing the business of agency; 3. By the business of agency being completed; 4. By the principal being adjudicated insolvent (section 201).
The principal also cannot revoke the agent’s authority after it has been partly exercised, so as to bind the principal (section 204), though he can always do so, before such authority has been so exercised (section 203).
Further, as per section 205, if the agency is for a fixed period, the principal cannot terminate the agency before the time expired, except for sufficient cause. If he does, he is liable to compensate the agent for the loss caused to him thereby. The same rules apply where the agent, renounces an agency for a fixed period. Notice in this connection that want of skill, continuous disobedience of lawful orders, and rude or insulting behavior has been held to be sufficient cause for dismissal of an agent. Further, reasonable notice has to be given by one party to the other; otherwise, damage resulting from want of such notice, will have to be paid (section 206). As per section 207, the revocation or renunciation of an agency may be made expressly or impliedly by conduct. The termination does not take effect as regards the agent, till it becomes known to him and as regards third party, till the termination is known to them (section 208).
When an agent’s authority is terminated, it operates as a termination of subagent also (section 210).[7]
This has become a more difficult area as states are not consistent on the nature of a partnership. Some states opt for the partnership as no more than an aggregate of the natural persons who have joined the firm. Others treat the partnership as a business entity and, like a corporation, vest the partnership with a separate legal personality. Hence, for example, in English law, a partner is the agent of the other partners whereas, in Scots law where there is a separate personality, a partner is the agent of the partnership. This form of agency is inherent in the status of a partner and does not arise out of a contract of agency with a principal. The English Partnership Act 1890 provides that a partner who acts within the scope of his actual authority (express or implied) will bind the partnership when he does anything in the ordinary course of carrying on partnership business. Even if that implied authority has been revoked or limited, the partner will have apparent authority unless the third party knows that the authority has been compromised. Hence, if the partnership wishes to limit any partner's authority, it must give express notice of the limitation to the world. However, there would be little substantive difference if English law was amended:[8] partners will bind the partnership rather than their fellow partners individually. For these purposes, the knowledge of the partner acting will be imputed to the other partners or the firm if a separate personality. The other partners or the firm are the principal and third parties are entitled to assume that the principal has been informed of all relevant information. This causes problems when one partner acts fraudulently or negligently and causes loss to clients of the firm. In most states, a distinction is drawn between knowledge of the firm's general business activities and the confidential affairs as they affect one client. Thus, there is no imputation if the partner is acting against the interests of the firm as a fraud. There is more likely to be liability in tort if the partnership benefited by receiving fee income for the work negligently performed, even if only as an aspect of the standard provisions of vicarious liability. Whether the injured party wishes to sue the partnership or the individual partners is usually a matter for the plaintiff since, in most jurisdictions, their liability is joint and several.
[edit] Agency relationships
Agency relationships are common in many professional areas. • employment. • real estate transactions (real estate brokerage, mortgage brokerage). In real estate brokerage, the buyers or sellers are the principals themselves and the broker or his salesperson who represents each principal is his agent. • financial advice (insurance agency, stock brokerage, accountancy) • contract negotiation and promotion (business management) such as for publishing, fashion model, music, movies, theatre, show business, and sport.
An agent in commercial law (also referred to as a manager) is a person who is authorised to act on behalf of another (called the principal or client) to create a legal relationship with a third party.

Classification of Agents by V S Rama Rao on August 6, 2009
Specific or particular agent: Specific or particular agent is an agent who is appointed to do a single act for the principal. He is appointed mostly by a special power of attorney. He is also called a Special Agent. His authority ends no sooner the particular act is performed.
General agent: General agent is an agent who is appointed to do all or general acts concerning a particular trade or business of the principal. He is appointed mostly by general power of attorney. His authority continues until it is terminated.
Mercantile agents:
Broker: He brings two parties together into a contract. He is employed to find a buyer or seller. He is intermediary. He has no possession of the goods and the contract is entered into by parties directly. He buys and sells goods on behalf of another. His contract is essentially wit a person who employs him. He is an agent of both the seller and the buyer. He negotiates and contracts for the principal. He cannot act or sue in his own name. He has no implied power to delegate his authority.
Commission agent: he buys or sells the goods for the buyer or the seller and receives commission. He may or may not have possession of the goods.
Factor: He is entrusted with the possession of the goods with discretionary authority to sell, pledge or create any right on the goods with the third person. He sells the goods in his own name at such price as he thinks fit. He has the authority to receive the price of the goods. He has a general lien on the goods for the monies due to him.
Auctioneer: He has an authority to sell the goods of his principal in public auction. He has no implied authority to sell by private contract. He has the possession of the goods. He cannot sell the goods on credit. He cannot accept any payment other than each. He performs a dual role. He is the agent of the seller till the time of sale and when the goods are sold, he becomes the agent of the purchaser. He has aright of a particular lien on the goods. He has authority to receive the price of the goods. He can sue the buyer in his own name or the whole of the purchase price. He has an implied authority to sell without any restrictions.
Auctioneer is under an obligation to use reasonable care and skill in and about his work. He must for example, obtain the best price and ensure that contracts made are binding. Also, he must act in accordance with the terms of the contract. However, auctioneer is under no duty to get purchase money from the buyer, not withstanding that he has authority to receive it and account for it to the vendor.
Del-credere agent: he is an agent who for an extra commission or remuneration guarantees the performance of the contract by the third person with whom he enters into the contract on behalf of his principal. His extra commission is known as del-credere commission. He becomes responsible if the other party does not perform the contract. His liability is therefore secondary. His legal position is partly that of an insurer and partly that of a surety. However, if the default is on the part of the principal and the buyer refuses to buy, del credere agent is not liable. A del-credere agency may be inferred from the course of dealings.
Sub agent: An agent appointed by the original agent is called a sub agent. He is under the control of the original agent to the business of the agency (Sec 191).
Co-agent: When two or more persons are appointed as agents by the principal to act as such jointly or severally, they are called Co-Agents. Co-Agents should concur together in exception of their authority to bind the principal. Unless contrary is proved, they are jointly responsible. An agent who is appointed as co-agent must exercise some amount of discretion as a man of ordinary prudence would exercise in his own case. If he does this, he is not responsible to the principal for acts of negligence of the co-agent.
Substitute agents: (Secs 194 & 195) Where an agent holding an express or implied authority to name another person to act for the principal in the business of the agency, has named another person accordingly, such person is not a sub agent, but an agent of the principal for such part of the business of the agency as is entrusted to him. Such as agent is called substitute agent. A substitute agent is the agent of the principal and as much he is responsible to the principal.

more at http://www.citeman.com/6566-classification-of-agents.html#ixzz1ffVursok

Classification of Agents:
Agents are classified in various ways according to the point of view adopted. From the viewpoint of the authority they have, they can be classified as special agents, general agents and universal agents. They are classified as mercantile or commercial agents and non-mercantile or non- commercial agents. There are different various types of kind agents are as follows.
(a.) Sub-Agent: Sub-agency denotes delegation of power by an agent to a person appointed by him as sub-agent. Incidentally the agent himself is delegate of his principal. The principal is that ‘a delegate cannot delegate’. According to this, a person to whom powers have been delegate cannot delegate them to another. Section 190 of the Act. Contains this principle. Generally, an agent cannot lawfully employ another to perform acts, which he has expressly. But, if by the ordinary custom of trade, a sub-agent may be employed, the agent may to do so. A sub-agent, according to section 191, is a person whom the original agent employs in the business of the agency and who under the control of the original agent. Thus the relation of the sub-agent to the original agent is, as between themselves, that of the agent and the principal. We shall now discuss the Impact of the appointment of a sub-agent from the following two angles:-
(i.)
In case of proper appointment: The agent is responsible to the principal for the acts of the sub-agent. Thus, a commission agent for the sale of goods who makes a proper employment of a sub-agent for selling his principal’s goods is liable to the principal for the fraudulent disposition of the goods by sub-agent within the course of his employment.
(ii.)
In the case of appointment without authority: In term of Section 193, the principal is not bound by the acts of the sub-agent, nor is the sub-agent liable to the principal. The agent is the principal of the sub-agent both to the principal and the third party.
(b.) Substituted Agent:Substituted agents are different from sub-agents. Section 194 provides that substituted agents are not sub-agents but are in fact agents of the principal. Suppose an agent has an implied authority to name another person to act for the principal in the business of the agency, and he has named another person accordingly. In the circumstances, such a named person is not a sub-agent he is an agent of the principal for such part of the business of the agency as has been entrusted to him.
For Example: A directs B who is a solicitor to sell his estate by auction and to employ an auctioneer for the purpose. B names C, an auctioneer, to conduct the sale. In such a situation, C is not sub-agent, but is A’s agent for the sale.
(c.) Special Agents:
A special agent is also known as a specific or particular agent. Such agent appointed to perform a particular work or to represents his principal in particular transaction only

As soon as the said period lapses, the agency stands terminated. Specific agents have a limited authority and as soon as the entrusted to him is performed, his authority also comes to an end. A special agent cannot bind his principal in any act other than for which he is specially appointed. If he dose anything outside his authority, his principal cannot be bound by it. The third parties that deal with a special agent must ascertain the extent of the authority he has.
(d.) General agents: This type of agents has a general authority to do everything in the course of his agency and he has to perform all the acts in the interest of his principal. Thus, a general agent is one that ahs authority to do all acts connected with the business of his principal. A manager of a branch shop of a firm or a commission agent is instances of general agents. General agents have an implied authority to bind his principal by doing various acts necessary for carrying on the business of his principal. Sufficiently wide powers are vested in him to affect the business deals, enter into trade bargains, to make purchases and also payments of the purchases, to receive money on behalf of his principal.
(e.) Universal Agent:
A universal agent has a universal or an unlimited power to act on behalf of his principal. A universal agent is one whose authority is unlimited and who can do anyact on behalf of his principal provide such act is legal and is agreeable to the law of land. A universal agent is practically substituted for his principal for all those transactions wherein his principal cannot participate.
For Example: When a person leaves his country for a long time, he may appoint his son, wife or friend as his universal agent to act on his behalf in his absence.
(f.) Co-Agents:
When a principal appoints two or more persons a agents jointly or severally, such agents are known as co-agents. Their authority is joint when nothing is mentioned about the exercise of their authority. It implies that all co-agents concur in the exercise of their authority unless their authority is fixed. But when their authority is several, any one of the co-agents can act without the concurrence of other.
(f.) Auctioneers: An auctioneers is a mercantile agent who is appointed to sell goods on behalf of the principal i.e., seller and for this function, an auctioneer get a reward in the form of a commission. An auctioneer conducts auction on behalf of a seller, as he is primarily the agent of the seller. However, after the sale, he also becomes of the purchaser who gives the highest bid. An auctioneer has no authority to self-the goods of his principal by private contract or contracts.
Besides the above mentioned agents, there are other types of agents also such as brokers, bankers, clearing agents, forwarding agents, underwriter, estate agents, etc. They also play an important role and perform various functions for and on behalf of their principals.

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