Agency
Lecture structure and objectives:
1. Introduction and overview.
2. Agents’ authority.
3. The concept of ratification.
4. Relations between principal and agent.
5. Position of third party (principal disclosed/undisclosed).
6. Termination of agency relationship.
1. Introduction and overview:
- Think about how it works in practice
Agency Defined:
Relationship where one party called the principal (P) appoints another called the agent (A) to create
or effect legal relations between P and one or more third parties (T).
Principal = instructs the agent,
who deals with the third party
Agent = working on behalf of the
third party
Three relationships: (1) P-A; (2) P-T; and (3) A-T.
Agent tends to be someone whose services are external to P (i.e. not merely employee of P entering
into contracts on behalf of employer).
Sometimes, P is disclosed so T knows A is acting on behalf of P:
- 3rd party is aware principal exists but, either:
, o Knows principal –
OR
o Knows there is a principle but doesn’t know the identity of that principal
Sometimes, P is undisclosed so A’s status as agent is also undisclosed, which means T assumes A is
acting alone and there is no other party:
- 3rd party has no idea that the principal exists, so thinks that the only relationship is T-A
We will return to the significance of this later:
- Can cause problems if the agent or 3 rd party defaults or the principal waits to enforce the
contract
Commercial importance of agency:
, In exam –
- Benefits? Why would the party want to use an agent?
- Risks? What are the practical problems?
X Ltd manufactures goods in the UK. X Ltd now wants to expand by selling into new markets
(different locations and/or different product types).
a) Why might X Ltd not be able to do this very well itself?
- Practical problems:
o P might not have knowledge of local laws or practices where they won’t know the
new market
o Don’t know about the new market in different jurisdictions
o Financial risks:
Doing business in new jurisdictions you don’t know anything about:
Don’t know:
o Who can/cannot be trusted
o If new market has any competition issues
o About local market practice
- Overall = too much CERTAINTY for the principal
b) How might agency help X Ltd do this? What benefits will it bring to X Ltd?
- Agent has knowledge about practices, market, laws etc
- Expertise knowledge can help remove risks and any practical problems discussed above
c) In what ways could an agent operate or provide services to X Ltd?
Problems with agent:
- Who is legally responsible if anything goes wrong?
- Principal loses control by putting self in the hands of the agent
Lecture structure and objectives:
1. Introduction and overview.
2. Agents’ authority.
3. The concept of ratification.
4. Relations between principal and agent.
5. Position of third party (principal disclosed/undisclosed).
6. Termination of agency relationship.
1. Introduction and overview:
- Think about how it works in practice
Agency Defined:
Relationship where one party called the principal (P) appoints another called the agent (A) to create
or effect legal relations between P and one or more third parties (T).
Principal = instructs the agent,
who deals with the third party
Agent = working on behalf of the
third party
Three relationships: (1) P-A; (2) P-T; and (3) A-T.
Agent tends to be someone whose services are external to P (i.e. not merely employee of P entering
into contracts on behalf of employer).
Sometimes, P is disclosed so T knows A is acting on behalf of P:
- 3rd party is aware principal exists but, either:
, o Knows principal –
OR
o Knows there is a principle but doesn’t know the identity of that principal
Sometimes, P is undisclosed so A’s status as agent is also undisclosed, which means T assumes A is
acting alone and there is no other party:
- 3rd party has no idea that the principal exists, so thinks that the only relationship is T-A
We will return to the significance of this later:
- Can cause problems if the agent or 3 rd party defaults or the principal waits to enforce the
contract
Commercial importance of agency:
, In exam –
- Benefits? Why would the party want to use an agent?
- Risks? What are the practical problems?
X Ltd manufactures goods in the UK. X Ltd now wants to expand by selling into new markets
(different locations and/or different product types).
a) Why might X Ltd not be able to do this very well itself?
- Practical problems:
o P might not have knowledge of local laws or practices where they won’t know the
new market
o Don’t know about the new market in different jurisdictions
o Financial risks:
Doing business in new jurisdictions you don’t know anything about:
Don’t know:
o Who can/cannot be trusted
o If new market has any competition issues
o About local market practice
- Overall = too much CERTAINTY for the principal
b) How might agency help X Ltd do this? What benefits will it bring to X Ltd?
- Agent has knowledge about practices, market, laws etc
- Expertise knowledge can help remove risks and any practical problems discussed above
c) In what ways could an agent operate or provide services to X Ltd?
Problems with agent:
- Who is legally responsible if anything goes wrong?
- Principal loses control by putting self in the hands of the agent
