12.
Explanation
Agency is a legal relationship in which one party, known as the agent, acts on behalf of another party, known as the principal, to perform certain tasks, make decisions, or enter into contracts with third parties. The agent’s actions are legally binding on the principal, and the principal is responsible for the agent’s actions within the scope of the agency relationship.
Agency relationships are a fundamental aspect of commercial law and are used in various contexts, including sales, distribution, real estate, finance, and more. Understanding the principles of agency is essential for businesses and individuals involved in commercial transactions, as it impacts legal rights, responsibilities, and liabilities in business dealings.
The agent acts as a representative of the principal, carrying out tasks, making decisions, and entering into contracts with third parties on the principal’s behalf.
The extent of the agent's authority to act on behalf of the principal can vary and may be expressly defined in a written agency agreement or implied based on the circumstances of the relationship.
Here's how an agency can be created under the laws of agency:
1. Express Agency
- Express agency is created when the principal and the agent explicitly agree, either in writing or orally, to establish an agency relationship.
- This agreement typically outlines the agent’s authority, responsibilities, and the scope of their actions on behalf of the principal.
2. Implied Agency
- Implied agency, also known as agency by implication, arises from the conduct and actions of the parties, rather than from a formal written or oral agreement.
- It occurs when the circumstances suggest that the principal has authorized the agent to act on their behalf, even if there was no explicit agreement.
3. Agency by Estoppel:
- Agency by estoppel occurs when a third party reasonably believes, based on the actions or representations of the principal, that an agency relationship exists between the principal and the alleged agent.
- Even if no actual agency agreement exists, the principal may be bound by the agent’s actions to avoid injustice to the third party.
4. Apparent Agency:
- Apparent agency, also known as agency by estoppel, arises when the principal’s conduct leads a third party to believe that an agency relationship exists between the principal and the agent.
- The principal is bound by the agent’s actions if the third party relies on this belief to their detriment.
5. Agency by Ratification:
- Agency by ratification occurs when a person (the principal) retroactively approves and accepts the actions of another person (the alleged agent) who initially acted without proper authority.
- The principal can choose to ratify the agent’s actions, making them legally binding as if they had been authorized from the beginning.
6. Agency by Necessity:
- Agency by necessity is created in emergency situations when an agent takes action to protect the interests of the principal when the principal is unable to act themselves.
- The agent’s actions are typically reasonable and necessary to prevent harm to the principal’s interests.
Conclusion:
The creation of an agency relationship should be based on clear communication, mutual consent, and, in some cases, a written agreement specifying the agent’s authority and limitations. The specific rules and requirements for agency relationships can vary by jurisdiction and the nature of the agency. Parties entering into agency relationships should seek legal advice to ensure compliance with applicable laws and regulations.