Cecily Zamora
An agency is a relationship between a principal and an agent, where the agent is authorized to act on behalf of the principal. Typically, an agency is created by appointment, conduct, ratification, or operation of law. When an agency is created by operation of law, it exists because it conforms to the prevalent law, rather than an agreement between the agent and the principal. The relationship between the agent and the principal may arise by estoppel, necessity, or operation of law. An agency created by operation of law can be terminated by the death, insanity, or bankruptcy of either party, or if it becomes impossible for the agent to perform their duties.
| Characteristics | Values |
|---|---|
| Definition | An agency that exists because it conforms to prevalent law, not because of an agreement between the agent and the principal |
| Creation | Expressly appointing one person to act for another; this appointment may be oral or in writing |
| Termination | Death, insanity, bankruptcy, or impossibility of performing duties |
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What You'll Learn
- An agency is created by operation of law, not by an agreement between the agent and principal
- The consent of the agent and principal is necessary
- The principal must intend for the agent to act on their behalf
- The agent must intend to accept the authority and act on it
- The relationship of an agent and principal may also arise by estoppel, necessity, or operation of law
An agency is created by operation of law, not by an agreement between the agent and principal
An agency relationship is created when an agent is given the authority to act on behalf of the principal. The principal-agent relationship can be established through appointment, conduct, ratification, or operation of law. While the typical approach involves expressly appointing an agent through a contract, employment agreement, or power of attorney, an agency can also be formed by operation of law.
The creation of an agency by operation of law means that the agency comes into existence due to prevailing law, rather than through a direct agreement between the agent and the principal. In other words, the agency relationship arises as a result of legal requirements or circumstances, regardless of the explicit consent of the parties involved.
There are several ways in which an agency can be created by operation of law. One example is through the conduct of the principal, where their actions lead third parties to reasonably assume that an agency relationship exists. In such cases, even if the principal did not intend to create an agency, the courts may impose one if equity requires it. This is often referred to as "apparent agency" or "apparent authority".
Additionally, an agency may be created by operation of law in certain circumstances, such as when the actions of the parties indicate their consent to the relationship. For instance, if the principal intends for the agent to act on their behalf and the agent accepts the authority and acts on it, an agency can be established even without a formal agreement. This is known as "implied agency".
It is important to note that the relationship between an agent and a principal can be terminated by the acts or agreement of the parties or by operation of law. Events such as the death, insanity, or bankruptcy of either the principal or the agent can lead to the automatic termination of the agency by operation of law.
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The consent of the agent and principal is necessary
The concept of "agency" is inherent in most legal transactions and business structures. An agency relationship is a fiduciary relationship, where one party (the "principal") authorises another (the "agent") to act on their behalf. The agent is subject to the principal's control and must consent to their instructions.
The consent of both the agent and the principal is necessary to establish an agency. The principal must intend for the agent to act for them, and the agent must intend to accept this authority and act on it. This intention can be express or implied in a contract, or it can be inferred from the conduct of the parties. The relationship is contractual, and the rights and duties of both parties are outlined in the agency contract. This contract can be written or oral, and it can take the form of a power of attorney, employment agreement, or assignment agreement.
The agency relationship can be terminated by the acts or agreement of the parties or by operation of law. The death, insanity, or bankruptcy of either party usually terminates the agency. Additionally, the authority of the agent may be revoked by the principal, but this revocation must be clearly expressed.
The agent owes the principal a general duty of loyalty, meaning they must subordinate their interests to those of the principal. They also have a duty to act in accordance with the express and implied terms of the contract. For example, if the contract states that the agent will call five companies, they must call those five companies and no others.
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The principal must intend for the agent to act on their behalf
The concept of "agency" is basic to legal transactions in the United States and most of the world. It is inherent in every employment relationship, most sales relationships, and most organizations and business structures. An agency is a fiduciary relationship between a principal and an agent. The principal confers their rights on the agent to act on their behalf. The agent acts for and represents the principal and acquires their authority from the principal.
The intention for the agent to act on the principal's behalf can also be inferred from the conduct of the parties. For instance, if a principal acts in a manner such that third parties can reasonably assume an agency exists, then the courts may impose an agency even if the principal did not mean to create one. This is called "apparent agency," a variation of implied agency. In such cases, the principal, by their words or conduct, leads a third person to reasonably believe that the agent has the authority that they appear to have, and the third person relies on this appearance of authority.
The relationship of principal and agent can be terminated by the acts or agreement of the parties or by operation of law. The death or bankruptcy of the principal, for example, operates as an immediate and absolute revocation of the agent's authority, unless the agency is coupled with an interest.
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The agent must intend to accept the authority and act on it
The creation of an agency relationship requires the consent of both the principal and the agent. The principal must intend for the agent to act on their behalf, and the agent must intend to accept this authority and act on it. This intention can be explicitly stated in the contract or inferred from the conduct of the parties. For example, if a store owner places another person in charge, customers may assume that this person is the owner's agent, even if no explicit agency relationship has been established. This is referred to as "apparent authority".
The agent's intention to accept authority and act on it can be demonstrated through their conduct and actions. For instance, if an agent enters into a contract with a third party on behalf of the principal, they are exercising their authority to act on the principal's behalf. The agent's intention can also be inferred from their conduct during contract negotiations, promotions, or other business dealings.
It is important to note that the agent's intention to accept authority does not imply that they have the freedom to exceed their authorised powers. For example, in the case of *Payne v. Jennings* (1926), the court ruled that a real estate agent has limited powers and is only authorised to secure a purchaser willing to accept the property at a price set by the owner. Unless expressly or impliedly authorised, the agent cannot execute a contract of sale on behalf of the principal.
Furthermore, the agent's intention to accept authority is not static and can change over time. An agency relationship may be terminated by the agent's withdrawal or renunciation of their authority. This can be done expressly or implicitly through their conduct. However, reasonable notice must be given to the principal to avoid liability for any resulting damages.
In summary, the creation of an agency relationship requires the agent's intention to accept authority and act on it. This intention can be explicitly stated in the contract or inferred from the agent's conduct and actions, such as entering into contracts on behalf of the principal or engaging in business dealings that imply an agency relationship.
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The relationship of an agent and principal may also arise by estoppel, necessity, or operation of law
The relationship between an agent and a principal may arise by estoppel, necessity, or operation of law. Estoppel is a rule of evidence that prevents a person from denying the truth of certain matters under their control, which others have relied on. In the context of agency law, estoppel can create an agency relationship where none formally exists. For example, if a principal gives their firm's business cards to an agent, an agency relationship may be presumed, and the principal may be bound by the agent's actions.
The principle of estoppel also applies to the duties of the agent and principal. The agent has a duty of notification, which means they must inform the principal of any information that may help achieve the purposes of their relationship. The principal owes the agent duties of cooperation, fair dealing, and good faith. They must also compensate the agent for their services and reimburse them for authorized expenses.
Necessity can also create an agency relationship. This often arises in emergency situations where a person must act to prevent irreparable loss to the property or interest of another. For example, in Mac Fisheries Ltd v. Harrison, the defendant was not considered an agent because their actions did not cause the plaintiff to act to their detriment.
Finally, an agency relationship may be created by operation of law. This can include appointments, conduct, ratification, or the power of attorney. The usual method of creating an agency is by expressly appointing an agent, which can be done orally or in writing. Written authorization is typically required when the agent will be authorized to buy or sell land. An agency may also be created by the conduct of the parties, similar to an implied-in-fact contract. The specific circumstances of the relationship determine the extent to which an agent can act on behalf of the principal.
An agency relationship can be terminated by operation of law due to events such as death, bankruptcy, or insanity of either the principal or agent. The relationship may also be terminated by the express or implied revocation or renunciation of the agency by either party.
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Frequently asked questions
An agency created by operation of law is one that exists because it conforms to prevalent law, not because of an agreement between the agent and the principal.
A standard agency is created by the express appointment of one person to act for another, either verbally or in writing. An agency created by operation of law does not require this appointment.
Yes, an agency can be terminated by operation of law. The death, insanity, or bankruptcy of either the principal or the agent will usually terminate the agency.
If a store owner places another person in charge, customers may assume that person is the owner's agent, even if the owner did not intend to create an agency. The courts may impose an agency in this situation if equity requires it.
Yes, an agency can be created by operation of law without the consent of the principal. This differs from a standard agency, which requires the consent of both the agent and the principal.
