An agency relationship exists where one person (or company) has authority to bind another person (or company) legally, either generally or in relation to certain matters. The agent is the person with authority to undertake legally binding acts on behalf of another. The person who is legally bound by the agent, and on whose behalf the agent acts is called the principal.
Agency is of key importance in relation to companies. Companies must act through agents. They have no separate physical existence. When considering whether an individual within the company has authority to enter transactions on its behalf, the law of agency is applied.
Agency law is important in the context of partnerships. Partners are a collective. Individual partners may bind the partners collectively.
Employees will often be agents of their employer for matters within the scope of their employment. They may be expressly appointed to certain positions, They may have authority which arises by implication from their role.
A power of attorney is the grant of power by one person (the donor) to another (the donee) to undertake legally significant acts on behalf of the donor. A power of attorney must be in writing, signed by the donor and witnessed.
Agents by Estoppel
Agency may arise under principles of estoppel. Where a person is held out as having a particular authority and a third party acts in reliance on the ostensible or apparent authority, the “principal” who has held him out is prevented or “estopped” from denying that he has authorised the ostensible agent.
Agent of Necessity
An agency of necessity may arise where a duty is imposed on a person to act on behalf of another in the absence of a contract or appointment. A stranger will rarely become an agent due to circumstances alone. There will commonly be a pre-existing contractual relationship between the principal and agent, the scope of which is expanded by the agency of necessity.
An agent may be a general agent, with authority in the ordinary course of its business or profession to act or do acts of a particular class on behalf of its principal. A general agent is a person who has authority on behalf of another in relation to a wide range of matters, such as the authority to conduct a particular business.
In many situations, the word, “agent,” is used in relation to persons who are not in fact agents. Distributors, franchisors, et cetera, are commonly called agents or sole agents when they distribute goods. However, they are not in fact agents and are in business on their own account.
Mercantile Agent and Factors
A mercantile agent is one who in the customary course of his business, has authority to sell goods, to consign goods for sale, to buy good or to raise money on the security of goods. Mercantile agents have special privileges under the Factors Act 1889. They may transfer the title to goods which they hold in the course of their business, notwithstanding the absence of title.
Del Credere Agents
A del credere agent negotiates and enters contracts for the sale of the principal’s goods to third parties on credit. He guarantees due performance and payment by the third party, to his principal. An additional commission or fee is usually charged.