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The Law & You: The Scope of the Law of Agency

 In modern life, it will be virtually impossible for a business to run efficiently without agents. For instance, corporations must hire agents to work for them since a corporation is an artificial person.

An agent has the potential to form contracts on behalf of the principal and in so doing, bind the principal. As a result, the agency relationship is one of the trust and confidence and agent must perform his or her activities in a capable and conscientious manner.  Its should be borne in minds because the terms agency is  often used loosely in business, the essential elements of the definition that are crucial  includes:-

(a) the agent must have authority to act;

(b) he or she must not only stand in stand in place of the principal  but must act for him or her; and

(c) the result of such acting must be to create legal relation between the principal and a third party.

Agency can be created in three major ways:

  • By express agreement
  • By implied agreement
  •  By operation of law

Creation of agency by expressed agreement: Here the appointment of agency is created in writing or verbally,  if an agent is to dispose of or create an interest in land he must be appointed in writing. An agent instructed to execute a deed must be appointed by (power of attorney) deed.

Implied agreement: There is no evidence that the agent has been appointed by any writing or verbally. But, there are facts and circumstances that can show that an agency has been created. In other words agency is implied from the circumstance of the cases.

 Operation of law

Agency by operation of law can be created under the following subheading;

By  Necessity: An agent of necessity can be described as a person  who in certain circumstances mostly in emergencies, is required by the operation of law to be vested with a presumed authority to act as  agent. Here, some unforeseen events can create an agency. The agency relationship can arise even as against the intention  and wishes of the parties concerned. The object of the law in this circumstance is to recognize the inability of the agent to communicate with the principal. The legal rules relating to agents of necessity seek to achieve common sense in day to day human life. However certain requirement must be met before agency by necessity will said to have occurred:

  1. There must be an emergency making the agent’s act commercially necessary.
  2. Its must be impossible to communicate with the principal in time.
  3. The act must be done bona fide(in good faith) in the interest of the principal and not merely for the benefit or convenience of the agent.

 By Estoppel: The term “estoppel” is a legal term and means that a person who has  let another person believe that a certain state of affairs exist, is not permitted later to deny that  state of affairs if another person has acted to his detriment in reliance of that state of affairs. He is stopped or prevented from taking a different position.

By Rectification: A principal can bind himself or herself to an agent’s unauthorized act(s) or to do the act of a person purporting to be his or her agent by ratification. The express statement or other behavior of the principal must exhibit an intention for the agent’s unauthorized actions to be treated as authorized. Implied ratifications occurs if the behavior of the principal gives evidence of an intent to ratify and may occur even if the principal undertakes partial performance of his or her contractual obligation or accepts the agent’s act by receiving benefits. In some situations, the principal’s silence, acquiescence, or failure to repudiate an agent’s actions may be sufficient to show intent and constitute ratification.  

In conclusion all corporate transactions, including those involving governmental organizations, are so conducted  because corporations themselves cannot actually act; they are legal fiction, which cannot carry out its activities by itself expect through its agent. However both must be legally capable.  For instance, a contract is void or voidable when one of the parties lacks capacity to make one. If both principal and agent lack capacity for example, a minor appoints another minor to negotiate or sign an agreement there can be no question of the contract’s voidability. Such contract is void ab initio(from inception).

Featured image source: Business Law

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Foluke Akinmoladun

Foluke Akinmoladun is the Managing Solicitor of Trizon Law Chambers. She has been a legal practitioner for 13 years and has experience in a wide range of commercial matters. She is a certified mediator, a member of the Chartered Institute of Arbitrators(UK), holds an Advanced Diploma in Accounting from the Association of Chartered Certified Accountants (UK) and is also a tax consultant. She is a dispute resolution expert, handling commercial disputes from negotiations all the way to litigation (if need be).

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