Agency relationship and liability

Liability of Agents in an Agency Relationship - The Jet Lawyer

agency relationship and liability

This post discusses agency relationships and who is liable when acting on behalf of the business with authority and who is liable for acting on behalf of the. In certain circumstances, a principal will be held liable for his or her agent's torts. This lesson explains the liability of a principal for an. An agency relationship is a fiduciary relationship, where one person (called the . The principal/landowner was required to indemnify the agents for this liability.

For example, if the principal tells the agent to sell its commercial real estate portfolio, then the agent generally has the implied authority to market the property, negotiate with other parties, and present an offer for the commercial real estate. Apparent Authority Apparent authority is where the principal has not given the agent actual authority, express or implied, to act on its behalf. For example, a Seattle business is in negotiations with a third party, T, and tells T to talk to agent A about finalizing the sale of a piece of business equipment.

However, the business has never told A explicitly to sell the business equipment and actually does not wish to sell the property. The business would be obligated to T even if A acted outside the scope of its authority. Ratification Ratification happens when the principal approves the deal after the fact, even though the agent did not have any actual or apparent authority to make the deal.

The extent to which the principal ratified the act and thus is bound is defined by what the principal approves of either expressly or impliedly after the agent acted outside the scope of its authority.

For example, the principal tells agent to sell property A, but the agent actually makes a sales contract for property B. When the principal finds out that the agent has actually made a contract to sell B instead of A, the principal agrees to continue with the sale.

Law of agency

The agent did not have the actual or apparent authority to make the sale, however the principal ratified the sale by continuing with it and thus is bound. Understanding agency relationships and limits on the authority of an agent is important when having an agent act on your behalf. Because employees and contractors are often agents of your business, you should ensure your agents act under proper authority and that you do not inadvertently ratify acts.

If you are an employee, you should ensure you act within the authority you have been granted or know the consequences, including your personal liability. Other forms of implied actual authority include customary authority.

This is where customs of a trade imply the agent to have certain powers.

Who is liable, me or the business? Agency liability issues your business should know:

In wool buying industries it is customary for traders to purchase in their own names. This must be no more than necessary [4] Main articles: Apparent authority and Estoppel Apparent authority also called "ostensible authority" exists where the principal's words or conduct would lead a reasonable person in the third party's position to believe that the agent was authorized to act, even if the principal and the purported agent had never discussed such a relationship.

For example, where one person appoints a person to a position which carries with it agency-like powers, those who know of the appointment are entitled to assume that there is apparent authority to do the things ordinarily entrusted to one occupying such a position.

If a principal creates the impression that an agent is authorized but there is no actual authority, third parties are protected so long as they have acted reasonably. This is sometimes termed "agency by estoppel " or the "doctrine of holding out", where the principal will be estopped from denying the grant of authority if third parties have changed their positions to their detriment in reliance on the representations made.

Wills J held that "the principal is liable for all the acts of the agent which are within the authority usually confided to an agent of that character, notwithstanding limitations, as between the principal and the agent, put upon that authority. It is sometimes referred to as "usual authority" though not in the sense used by Lord Denning MR in Hely-Hutchinson, where it is synonymous with "implied actual authority".

It has been explained as a form of apparent authority, or "inherent agency power". Authority by virtue of a position held to deter fraud and other harms that may befall individuals dealing with agents, there is a concept of Inherent Agency power, which is power derived solely by virtue of the agency relation. Even if the agent does act without authority, the principal may ratify the transaction and accept liability on the transactions as negotiated.

This may be express or implied from the principal's behavior, e.

agency relationship and liability

Liability[ edit ] Liability of agent to third party[ edit ] If the agent has actual or apparent authority, the agent will not be liable for acts performed within the scope of such authority, as long as the relationship of the agency and the identity of the principal have been disclosed.

When the agency is undisclosed or partially disclosed, however, both the agent and the principal are liable. Where the principal is not bound because the agent has no actual or apparent authority, the purported agent is liable to the third party for breach of the implied warranty of.

Liability of agent to principal[ edit ] If the agent has acted without actual authority, but the principal is nevertheless bound because the agent had apparent authority, the agent is liable to indemnify the principal for any resulting loss or damage. Liability of principal to agent[ edit ] If the agent has acted within the scope of the actual authority given, the principal must indemnify the agent for payments made during the course of the relationship whether the expenditure was expressly authorized or merely necessary in promoting the principal's business.

Who is liable, me or the business? Agency liability issues your business should know:

An agent owes the principal a number of duties. An agent can represent the interests of more than one principal, conflicting or potentially conflicting, only after full disclosure and consent of the principal.

An agent must not usurp an opportunity from the principal by taking it for himself or passing it on to a third party.

agency relationship and liability

In return, the principal must make a full disclosure of all information relevant to the transactions that the agent is authorized to negotiate. Termination[ edit ] Mutual agreement also through the principal responding his authority. Through renouncing when agent hm self stop being an agent.

agency relationship and liability

The internal agency relationship may be dissolved by agreement. Under sections to of the Indian Contract Actan agency may come to an end in a variety of ways: Withdrawal by the agent — however, the principal cannot revoke an agency coupled with interest to the prejudice of such interest. An agency is coupled with interest when the agent himself has an interest in the subject-matter of the agency, e. Alternatively, agency may be terminated by operation of law: If he does, he is liable to compensate the agent for the loss caused to him thereby.

The same rules apply where the agent, renounces an agency for a fixed period. Notice in this connection that want of skill, continuous disobedience of lawful orders, and rude or insulting behavior has been held to be sufficient cause for dismissal of an agent.

Further, reasonable notice has to be given by one party to the other; otherwise, damage resulting from want of such notice, will have to be paid s. The termination does not take effect as regards the agent, till it becomes known to him and as regards third party, till the termination is known to them s.