Agency

COMMERCIAL ORGANISATIONS

TOPIC 1: AGENCY

1. DEFINITION OF AGENCY

"Agency is the relationship that exists between two persons, when one, called the agent, is considered in law to represent the other, called the principal, in such a way as to be able to affect the principal's legal position in respect of strangers to the relationship by the making of contracts or the [sale or purchase] of property."

So, an agent is someone who represents another, called the principal, in dealings with third persons.

Agency is therefore an exception to the general rule of contract law that only the parties to a contract are bound by it.

Examples: a director for his company, a solicitor for his client

Distinguish from other situations where one party acts on behalf of another:

(i) Employment: Employment does not always create an agency role. It depends on their job description and the authority they have been given.

(ii) Mandate: Mandate is like agency but it is gratuitous, the agent acts voluntarily and is unpaid but he must still be careful and take reasonable care as he could still be held liable. The terms mandate and mandatory are used instead of principal and agent. Otherwise mandate creates the same legal relationships as proper agency.

A mandatory still has a duty to exercise reasonable care:

Copland v Brogan: Brogan