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 …show more content…
It was held that since the principal did not exist at the time, there could not be a contract of agency, where there is no principal, there can be no agent. (2) Creation Consitution (legal formalities): There is no requirement for any formal written agreement, consent is enough, but a written agreement is advantageous in case of disputes. No special form of document is required and can even be created by oral agreement. If it is created by oral agreement, there are no restrictions on the evidence needed to prove there was an agency relationship. Pickin v Hawkes: In this case, oral agreement was used to agree a contract of agency. One party was allowed to use evidence from witnesses to prove that there was an agency relationship. In practice, agency is often by formal written document. The authority of an agent is either "actual" or "apparent" (3) Scope This is an important issue. An agent may only be given authority to do certain things. The general rule is that an agents authority is that specified in the agreement between the agent and the principal. If the agent affects a contract between the principal and the third party and it is within his authority, then it is valid, if it is outwith authority, it is not. The scope of the agents authority varies: Distinction between special and general agents: General Agent: Has wide authority and a wide discretion to enter into a wide
This is a case of a law suit filed against Quick Takes video by Non-linear pro claiming that it is owed money for editing equipment that was leased to the company. This is a case where there was poor contract creation and management. One of the executives claims that there was no contract between the two companies since as far as he is concerned there was no contract that was signed. However, this was not the case since there was actual signing of a contract by Jane an employee in Quick Takes video. Jane claimed that she was signing a delivery slip, but this was no the case as she was just trying to defend herself. The executive still claims that this contract is not valid since neither of the partners did not sign the lease then it is not in any way legal. He claims that the person who signed the lease was not an agent of the company, and had no authority to sign the lease. Therefore, he claims that the company can not be held responsible in any way since the lease was not legal according to him.
“Agency is the relationship arising where one person, the principal (P), appoints another, the agent (A) to bring about, modify or terminate legal relations between the principal and a third party (T)”
In short, the agency theory asserts the total cooperation between the managers (agents) and the shareholders/stockholders (principals) to ensure that their visions, goals, and interests in the organization are the same and well-aligned (Seven Pillars Institute, no date). However, reading the Nortel case, it is evident that this supposed alignment did not happen.
Another example can be found in the case, also Australian, of Spunwill Pty Ltd v. BAB Pty Ltd in which it was found that there is no real justification for excluding evidence of mutual intent simply because such evidence falls under ‘pre-contractual negotiations’. In his judgment, Santow J. said:
As a real estate agent you are an independent contractor working under a broker agency. This means that you get to be your own boss.
Thus each of the partners is bound by the other’s act assuming that a transaction falls within the express, implied or ostensible authority as stated in s6(1). In respect to s7 an agent should have special express authority to bind the other partners and the firms for the acts lying outside of the partnership business (Allen, 2002).
10. Although the existence of the principle was not doubted, the reasoning of Rowlatt J. seemed to be that no contract existed at all because of the doctrine. The reasoning suggested an absence of capacity to contract. If so, The Amphitrite was wrongly decided . The circumstances in which the doctrine applied and consequences of its application have not proceeded on the basis of an absence of capacity in the Crown and its instrumentalities to contract. Rather, issues of damages for breach or compensation were pursued.
In Stilk v Myrick [1809]1, it was held that on the evidence of the signed contract the plaintiff was bound to do a duty under an existing contract and that duty could not be considered valid consideration for a new contract.
In addition, in order to be covered by the Regulations, the agent’s primary activity must be dealing goods for the principal. Agents who provide services such as travel, insurance and advertising will not be under any protection. Therefore, Regulations will not apply to commercial agents whose activities are secondary. For instance, an officer of a company acting as an “agent” of the company is excluded from the Regulations as it is considered to be a secondary activity. It is important to remember that a commercial agent is someone who holds the authority to negotiate and conclude sales on behalf of the principal. Where the agency is outside the Regulations, for instance, the agent is a partner representative of a company or a
Contract comes in a distinctive way like shapes & sizes or bond needs to set up by an individual who is making the agreement and should be recognized by the person who is marking the agreement and he/she needs to verify that a person who signed the agreement fulfills the conditions. It can isolate into two sorts, which are lawful or unlawful & oral or reported. In like manner law legitimate frameworks, an agreement (or casually known as an assertion in a few words) is an understanding having a legal item gone into intentionally by two or more gatherings, each of whom expects to make one or more lawful commitments between them.
An agency relationship is a contract under which one or more persons (the principal(s)) engage another person (the agent) to perform some service on their behalf which involves delegating some decision making authority to the agent. If both parties to the relationship are utility maximizers and they may have divergent goals and objectives, and there is good reason to believe that the agent will not always act in the best interests of the principal (Jensen, Michael C., and William H. Meckling. "Theory of the Firm, Managerial Behavior, Agency Costs, and Ownership Structure." Journal of Financial Economics 3 (October 1976), 305-360)
Most organisations these days are no more owned by their managers. This separation of ownership and management gives rise to what is called agency relationship. Jensen and Meckling (1976) define the agency relationship as
Had there been any clarification by a principal of her exact authority, or lack thereof, then Quick Takes may be able to dispute the contract formation.
Agency Theory is the relationship between agents in a business and the business principals. Agency theory is also concerned with undertaking problems that can exist in the agency relationships due to irregular goals or different aversion levels of risk.
Agent – An agent is a person who is authorized by another person or party to take decision on their part. The agent has the authority or power to bind the party he/she is representing by contract with third parties.