Agency Essay

1910 WordsApr 28, 20158 Pages
CHAPTER NO 5 AGENCY INTRODUCTION  An agent is a person who is authorized to represent another person, who is called the principal.  The agent creates a legal relationship between the principal and a third party. LETS SEE HOW THIS ALL IS DONE When people do business, they often deal with each other directly Buyer   Seller However, sometimes they deal with each other using a “middleman” (or representative or intermediary) Buyer  Middleman  Seller The legal relationship between the middleman and the businessperson is governed by the law of agency The legal term for a middleman or representative is an agent The person who is represented by the agent is called the principal Therefore, in our example Buyer  Middleman  Seller If the middleman represents the buyer Principal  Agent  Seller Definition:  An agent is a person who is authorised to represent another person, who is called the principal.  The agent creates a legal relationship between the principal and a third party. Therefore, any contract entered into is between the principal and the third party, even though it is arranged by the agent.The agent does not usually get any rights or responsibilities under the contract. Therefore, it is the principal who must have the capacity to contract and not the agent CREATION OF AGENCY The principal/agent relationship can be created in several ways 1. Express Appointment 2. Ratification 3. Implication 4. Necessity 5. Estoppels 1. EXPRESS APPOPINTMENT o This is the most common way of creating an agency o The agent is specifically appointed by the principal for a particular task or a general function o It can be done by contract, but this is not necessary o What matters is authority. 2. RATIFICATION o In this case, a person who does not have the authority of the principal enters into a contract with a third party on

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