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Principal & Agent - 1

Lecture # 15

Principal & Agent

Contract

Principal

Agent

Introduction to Agency

An Agent is a person who acts in the name of, and on behalf of another, having been given and assumed some degree of authority to do so. Most organized human activity—and virtually all commercial activity—is carried on through agency. No corporation would be possible, even in theory, without such a concept.

Recurring Issues in Agency•How extensive is Agency

•Commitment of a Crime

• Injured to Agent, Responsibility?

•Taking the “Profits” of the Principal

Creation of Agency

• Express Agency– Express agency is an actual agency created

by the written or spoken words of the principal authorizing the agent to act on behalf of the principal.  In express agency, authority is directly granted to or conferred upon the agent or employee in express terms, and it extends only to such powers as the principal gives the agent in direct terms, with the express provisions controlling.

Creation of Agency

• Implied Agency– Implied agency involves permission to act,

even though permission is not explicitly established orally or in writing.  An implied agency is frequently established by the conduct and communication of the parties and the circumstances of the particular case.

Creation of Agency

• Agency by Estoppel– Legally binding agency relationship that may

arise where, in fact, No formal agency agreement is in effect. A principal may give an appearance of agency relationship by, for example, furnishing his or her firm's call cards or other stationery to the agent. In such cases, the existence of an agency may be presumed, and the principal may be bound by the acts of the agent performed on the principal's behalf.

Creation of Agency

• Agency by Holding Out - Access Estoppel– The principal is bound by the acts of the agent if, on

earlier occasion, he made other persons to believe that the person doing the same acts on his behalf is doing with authority.

Example B is a servant of A, B buys goods on credit from C and A pay for them regularly. B buys the goods from C on credit for personal use. A is liable to C for payments.

Difference between Agency by Holding Out & Estoppel

Holding Out can only take place after an act by the purported agent, when the principal ratifies the agent's act

Agency by estoppel implies that there was some act indicating agency and the principal did not take action to deny the agency. This would be in advance of an action by the purported agent. 

Creation of Agency

• Agency by Necessity– Agency by necessity is an agency created by

an emergency arising from a situation making it necessary or proper for the agent to act without receiving the sanction or authorization of the principal, in order to prevent harm to the principal. It arises when a duty is imposed on a person to act on behalf of another apart from contract and to prevent irreparable injury. Such an agency relationship is recognized by the courts.

Creation of Agency• Agency by Ratification

– Subsequent adoption of an activity is called ratification. Soon after ratification, the person who has done the activity becomes agent and that person who has given ratification becomes principal.

For example: Without A`s direction, B has purchased goods for the sake of A from C. Thereafter, A has given his Support to B`s activity, it is called ratification and now A is principal and b is agent

Difference between Agency by Holding out & Rectification

• Holding out means that if a person having ANY authority, claims to act as an agent and the purported principal later adopts the acts of that agent, an agency relationship has retroactively been created.

• Ratification means that if a person having NO authority whatsoever, purports to act as an agent and the purported principal later adopts the acts of that agent, an agency relationship has retroactively been created.

Creation of Agency

• Agency by Statue– Government owned Agency

• Pakistan Environmental Protection Agency• Punjab Bank• Bank of Sindh• Khyber Bank

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Principal & Agent - 2