Agency: Contract and Agent

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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

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