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MFM-I GROUP NO.11 2
AGENCY LAW
Agency is an area ofcommercial law dealing with a contractual orquasi-contractual tripartite set of relationships when anAgent is authorized to acton behalf of another (called the Principal) to create a legal relationshipwith a Third Party.
The agent is, thus, required to negotiate on behalf of the principal or bring
him and third parties into contractual relationship. This branch of lawseparates and regulates the relationships between:
Agents and the Third Parties
Principals and the Third Parties
Agents and Principals;
http://en.wikipedia.org/wiki/Commercial_lawhttp://en.wikipedia.org/wiki/Contracthttp://en.wikipedia.org/wiki/Quasi-contracthttp://en.wikipedia.org/wiki/Quasi-contracthttp://en.wikipedia.org/wiki/Agent_%28law%29http://en.wikipedia.org/wiki/Principal_%28law%29http://en.wikipedia.org/wiki/Principal_%28law%29http://en.wikipedia.org/wiki/Agent_%28law%29http://en.wikipedia.org/wiki/Quasi-contracthttp://en.wikipedia.org/wiki/Quasi-contracthttp://en.wikipedia.org/wiki/Quasi-contracthttp://en.wikipedia.org/wiki/Contracthttp://en.wikipedia.org/wiki/Commercial_law -
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CONCEPT
The reciprocal rights and liabilities of Principal and Agentreflect commercial needs and legal realities. In anybusiness of size, it is not possible for one person totravel everywhere to negotiate all the transactionsnecessary to maintain or grow the business. Theseproblems are increased if the business is a corporation,because it is then a fictitious legal person and, as such, itcan only act through human agents. Hence, independentpeople are contracted by businesses to buy and sellgoods and services on behalf of those businesses.
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CONCEPT
If the issue is considered from the view of innocent Third Parties, they areapproached by a person who is clearly identified as acting for another.
They deal with that person in good faith, relying on the representation of
authority. Indeed, in a busy commercial world, it would not be cost-
effective to check that everyone who is represented as having the
authority to act for another actually has that authority. Deals are done at
face value in the majority of routine situations. If it should later appear that
the alleged agent was acting without the consent of the Principal, the
Agent will usually be held liable. Any other decision would be unduly
disruptive to the usual flow of trade. This commercial necessity has led to
the creation of a body of law that applies in any situation, commercial or
otherwise, where one person is seen to be acting for another.
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Brief statement of legal principles
Universal agents-: hold broad authority to act onbehalf of the Principal, e.g. they may hold a power ofattorney (also known as a mandate in civil law
jurisdictions) or have a professional relationship, say,as lawyerand client.
General agents:- hold a more limited authority toconduct a series of transactions over a continuousperiod of time; and
Special agents :-are authorized to conduct either only
a single transaction or a specified series oftransactions over a limited period of time.
http://en.wikipedia.org/wiki/Power_of_attorneyhttp://en.wikipedia.org/wiki/Power_of_attorneyhttp://en.wikipedia.org/wiki/Mandatehttp://en.wikipedia.org/wiki/Civil_law_%28legal_system%29http://en.wikipedia.org/wiki/Jurisdictionhttp://en.wikipedia.org/wiki/Lawyerhttp://en.wikipedia.org/wiki/Lawyerhttp://en.wikipedia.org/wiki/Jurisdictionhttp://en.wikipedia.org/wiki/Civil_law_%28legal_system%29http://en.wikipedia.org/wiki/Mandatehttp://en.wikipedia.org/wiki/Power_of_attorneyhttp://en.wikipedia.org/wiki/Power_of_attorney -
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Authority
The Principal must give, or be deemed to give, the Agent authority to
act.
Actual authority : This arises where the Principal's words or conduct
reasonably cause the Agent to believe that he or she has been
authorized to act. This may be express in the form of a contract or
implied because what is said or done make it reasonably necessary for
the person to assume the powers of an Agent.
Apparent orostensible authority : If the Principal's words or conduct
would lead a reasonable person in the Third Partys position to believe
that the Agent was authorized to act, say by appointing the Agent 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.
http://en.wikipedia.org/wiki/Contracthttp://en.wikipedia.org/wiki/Ostensible_authorityhttp://en.wikipedia.org/wiki/Ostensible_authorityhttp://en.wikipedia.org/wiki/Ostensible_authorityhttp://en.wikipedia.org/wiki/Contract -
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Authority
Authority by virtue of a position held:To deter fraudand other harms that may befall individuals dealingwith agents, there is a concept of Inherent Agencypower, which is power derived solely by virtue of theagency relation.
For example, partners have apparent authority tobind 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 positionhave apparent authority to bind the corporation.
http://en.wikipedia.org/wiki/Partnershiphttp://en.wikipedia.org/wiki/Joint_and_several_liabilityhttp://en.wikipedia.org/wiki/Corporationhttp://en.wikipedia.org/wiki/Corporationhttp://en.wikipedia.org/wiki/Joint_and_several_liabilityhttp://en.wikipedia.org/wiki/Partnership -
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LIABILITIES
Liability of agent to third party - If the Agent has actual orapparent authority, the Agent will not have liability on anytransactions agreed within the scope of that authority so long asthe Principal was disclosed.
Liability of agent to principal - If the Agent has acted withoutactual authority, but the Principal is nevertheless bound
because the Agent had apparent authority, the Agent is liable toindemnify the Principal for any resulting loss or damage.
Liability of principal to agent - If the Agent has acted withinthe scope of the actual authority given, the Principal mustindemnify the Agent for payments made during the course ofthe relationship whether the expenditure was expressly
authorized or merely necessary in promoting the Principalsbusiness
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Duties
fiduciary duty
Not to accept any new obligations that are inconsistentwith the duties owed to the Principal.
Not to make a private profit or unjustly enrich himself
from the agency relationship.
In return, the Principal must make a full disclosure of allinformation relevant to the transactions that the Agent isauthorized to negotiate and pay the Agent either a
prearranged commission, or a reasonable feeestablished after the fact.
http://en.wikipedia.org/wiki/Fiduciary_dutyhttp://en.wikipedia.org/wiki/Commission_%28remuneration%29http://en.wikipedia.org/wiki/Commission_%28remuneration%29http://en.wikipedia.org/wiki/Fiduciary_duty -
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TERMINATION
An Agent's authority can be terminated atany time. If the trust between the Agent and
Principal has broken down, it is not
reasonable to allow the Principal to remainat risk in any transactions that the Agent
might conclude during a period of notice.
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TERMINATION WAYS
As per Section 201 to 210 The Indian Contract Act, 1872, anagency may come to an end in a variety of ways:
(i) By the principal revoking the agency
(ii) By the agent renouncing the business of agency;
(iii) By the business of agency being completed;
(iv) By the principal being adjudicated insolvent(Section 201 of The Indian Contract Act. 1872)
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Agency and partnership
A partner is the agent of the other partners whereas, in Scots
law where there is a separate personality, a partner is theagent 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.
In 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.
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Agency relationships
Agency relationships are common in many professional areasEmployment procurement
Real estate transactions : In real estate brokerage, the buyers
or sellers are the Principals themselves and the broker or
his/her salesperson who represents each Principal is his/her
Agent.
financial advice : Insurance agency, Stock brokerage,
Accountancy
Promotion (business management) : such as for publishing,music, movies, theatre, show business and sports.
http://en.wikipedia.org/wiki/Professionhttp://en.wikipedia.org/wiki/Employmenthttp://en.wikipedia.org/wiki/Real_estatehttp://en.wikipedia.org/wiki/Financial_advisorhttp://en.wikipedia.org/wiki/PRhttp://en.wikipedia.org/wiki/Business_managementhttp://en.wikipedia.org/wiki/Business_managementhttp://en.wikipedia.org/wiki/PRhttp://en.wikipedia.org/wiki/Financial_advisorhttp://en.wikipedia.org/wiki/Real_estatehttp://en.wikipedia.org/wiki/Employmenthttp://en.wikipedia.org/wiki/Profession -
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References
Restatement of Agency (Second) 1. Agency; Principal; Agent. "(1)Agency
is the fiduciary relation which results from the manifestation of consent byone person to another that the other shall act on his behalf and subject to his
control, and consent by the other so to act. (2)The one for whom action is to
be taken is the principal. (3)The one who is to act is the agent."
Restatement of Agency (Second) 27: "Except for the execution of
instruments under seal or for the conduct of transactions required by statuteto be authorized in a particular way, apparent authority to do an act is
created as to a third person by written or spoken words or any other conduct
of the principal which, reasonably interpreted, causes the third person to
believe that the principal consents to have the act done on his behalf by the
person purporting to act for him."
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References
Restatement of Agency (Second) 8A. Inherent Agency Power. "Inherentagency power is a term used in the restatement of this subject to indicate
the power of an agent which is derived not from authority, apparent
authority or estoppel, but solely from the agency relation and exists for the
protection of persons harmed by or dealing with a servant or other agent."
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