"An agent is someone who has the power to speak on your behalf."
— George Clooney
An agent is defined as a person who possesses either express or implied authority to represent another individual, known as the principal. The primary role of an agent is to bring the principal into legal relationships with third parties. In most cases, this relationship is created through a contract between the agent and the principal, although it is not an absolute requirement for all agency relationships.
Agency is the legal relationship that exists between a principal and an agent. Typically, this relationship is established through a contract, though it is not always mandatory. The principal grants the agent authority to act on their behalf, and the agent exercises that authority within the scope of the agreement. Any individual who has the legal capacity to enter into contracts on their own behalf may do so through an agent, even if the agent lacks the ability to contract on their own. However, it is important to note that a person who is legally unable to enter into a contract personally cannot overcome this disability by appointing an agent. This means an agent cannot be granted powers that the principal themselves does not have.
A general agent has authority to act on behalf of a principal in all matters related to a specific trade, business, or some other general activity. This type of agent is authorized to make decisions and manage tasks in a particular area or industry on behalf of the principal.
A universal agent is one with unrestricted authority to contract on behalf of a principal. These agents have comprehensive powers, enabling them to act in any legal matter for the principal. Universal agents are quite rare, as most principals prefer to limit the scope of authority granted to an agent.
A special agent, on the other hand, is given authority to perform a specific task or represent the principal in a particular transaction. The scope of a special agent’s authority is much more limited compared to a general agent, as they can only act for a defined purpose.
Under the Factors Act, a mercantile agent is defined as an individual who, as part of their customary business practices, has authority to sell goods, consign goods for sale, purchase goods, or raise money against goods as security. These agents are crucial in trade and commerce, as they facilitate transactions related to goods and commodities.
A del credere agent is a type of mercantile agent who takes on the additional responsibility of ensuring that the contracts they make on behalf of their principal are performed. In exchange for this additional risk, a del credere agent typically receives a higher rate of commission than a standard mercantile agent. This kind of agent assumes liability if the third party to the contract fails to perform.
A factor is a type of mercantile agent whose primary role is to sell or dispose of goods that have been entrusted to them by a principal. The factor holds possession or control over these goods and acts in the best interest of the principal when dealing with these items.
In banking, a banker acts as an agent for their customer. The customer can instruct the banker to pay cheques and perform other financial acts on their behalf. While the banking relationship generally functions as a debtor-creditor relationship, in certain instances, such as when the customer's account is overdrawn, the roles of banker and customer may be reversed.
A broker is an agent employed to facilitate agreements and contracts of a mercantile nature between different parties. Brokers typically receive a commission, known as brokerage, for their services. The key distinction between brokers and factors lies in their role and possession of goods. While brokers do not hold possession of the goods being traded, factors do. Additionally, brokers can only sell in the name of their principal, whereas factors have the authority to sell in their own name.
An insurance broker serves as an agent who arranges contracts of insurance with underwriters on behalf of their clients, the principals. In this role, the broker acts as an intermediary in securing the insurance agreement. While the broker is an agent in the arrangement of the insurance, they may become a principal when handling the payment of premiums from the insured to the underwriter.
In some cases, an act may be performed on behalf of a principal without their prior authorization, either by an agent exceeding their authority or by an individual acting without authority at all. The principal can choose to ratify the act, thus making it as valid and binding as if it had been authorized from the outset. Only the principal, whose name is involved, can ratify such actions, and they may do so after the fact.
An agency relationship can be created explicitly by the principal appointing the agent through a formal agreement. There are no specific formalities required for the express appointment of an agent, though it is important to note that if an agent is to have the authority to sign contracts under seal, the appointment must also be made under seal. In such cases, the principal grants the agent a power of attorney to act on their behalf.
An agency relationship may also arise by implication, where an individual assumes the role of an agent without a formal agreement. In such cases, the consent of the principal is not immediately obvious, but it may be inferred based on the circumstances. For example, in a sale by public auction, the auctioneer acts as the agent of the seller during the bidding process. Once the hammer falls, the auctioneer’s role changes, and they become the agent of the buyer by implication of law, binding both parties to the contract.
In certain emergency situations, an agency relationship may arise without any formal appointment, either express or implied. This is known as an agency of necessity. An example of this can be found in maritime law, where a ship's captain may pledge the cargo aboard the vessel as collateral to secure funding for completing a voyage. In this instance, the captain acts as an agent of necessity on behalf of the cargo owners. Ordinarily, the captain is responsible for the custody and care of the cargo but does not have the authority to sell or dispose of it.
An agent’s authority is typically defined by the express instructions given by the principal. However, the agent also possesses implied authority to take any actions necessary to fulfill their express duties. The authority granted to an agent cannot exceed the principal's own powers. Furthermore, the agent must act in accordance with the customs and practices of the trade or area in which they are employed, as long as such practices are legal and reasonable. If a custom or practice would change the nature of the agency, it cannot be used by the agent.
In conclusion, the agency relationship is a crucial element in legal and business transactions, providing individuals and businesses the ability to delegate responsibilities and manage complex affairs through trusted representatives. Whether through express or implied appointment, agency serves as an essential tool in facilitating interactions between principals and third parties. The different types of agents, such as universal, general, and special agents, play key roles in various industries, each with distinct powers and limitations. By understanding the various forms of agency and the authority of agents, both principals and agents can navigate their roles with clarity and efficiency.
An agent is bound to act in accordance with the terms of the agreement set forth between them and the principal, ensuring that the principal’s instructions are followed, provided these instructions are legal. In the event that the principal has not provided express instructions, the agent is expected to follow any applicable customs or, where no custom exists, use their discretion to make decisions that best serve the principal's interests. It is the agent’s duty to execute their tasks with the utmost care, skill, and diligence, avoiding any actions that would conflict with the agency’s established purpose.
Furthermore, an agent must ensure that any money received on behalf of the principal is promptly paid over to the principal. The agent is required to keep the principal’s funds and property separate from their own or from those belonging to any third parties. It is essential that agents are transparent with their financial dealings, providing accurate accounts of all transactions conducted in the course of their agency. Documents relating to the principal’s business should be preserved and made available upon request. An agent has no right to make a personal profit without the principal’s knowledge or consent. Any profits made without consent must be handed over to the principal.
Under normal circumstances, an agent does not bear personal liability to the principal for the contracts made on the principal’s behalf. However, if the agent breaches their duty, they may become liable for any damages resulting from such a breach. An agent is also prohibited from disclosing any confidential information that has been entrusted to them during the course of their duties. This obligation persists both during the term of the agency and after its termination.
An agent is entitled to receive remuneration for their services unless they have agreed to act without payment. If the contract specifies a particular amount of remuneration, the agent is entitled to that agreed-upon amount. If no explicit agreement exists, the agent is entitled to a reasonable remuneration for their work. In cases where the agent is compensated by commission, the agent must prove that their agency directly contributed to the transaction.
In certain situations, depending on the terms of the agent’s contract, the agent may still be entitled to commission even after the termination of their employment, provided the business continues due to their efforts. However, if it can be established that it is a customary trade practice for commission rights to cease once the agency is terminated, the agent will not be entitled to remuneration for transactions completed after the agency’s end.
Even if the principal does not benefit directly from the agent’s actions, the agent is still entitled to compensation if they have fulfilled their contractual obligations. Additionally, an agent has the right to be indemnified by the principal for any reasonable losses, liabilities, or expenses incurred while carrying out their duties. The agent may seek to offset any outstanding indemnities against amounts due to the principal.
Although an agent generally has no claim against the principal for any contracts made on the principal’s behalf, there are exceptions. Insurance brokers, for example, may sue the principal for premiums related to insurance contracts they entered into on the principal’s behalf. Furthermore, if an agent has legally obtained goods on behalf of the principal, they may assert a lien over those goods to recover any outstanding dues.
An agent is generally not permitted to delegate their authority to another person without the express or implied consent of the principal. There are exceptions where delegation is permissible, such as in cases where it is a customary practice within the business or where delegation is necessary for the efficient performance of the agent’s duties. Delegation may also be allowed in urgent situations where the agent cannot communicate with the principal in time.
If an agent does delegate authority to a sub-agent, they remain accountable to the principal for any money received by the sub-agent on the principal’s behalf. The agent is also responsible for any damage or loss resulting from the sub-agent’s negligence, lack of skill, or breach of duty. In most cases, no direct contract exists between the principal and the sub-agent, meaning the principal cannot directly sue the sub-agent for negligence. However, if the agent delegates their entire role to a substitute with the principal’s consent, the substitute may be directly responsible to the principal for the proper performance of their duties.
If a sub-agent is appointed without the principal’s approval, the principal is not bound by the actions of the sub-agent. This principle ensures that the agent retains the full responsibility of their actions and any delegation made without the principal's consent is not legally binding on the principal.
In the shipping industry, the master of a ship is typically considered the agent of the shipowner, especially when the master is appointed by the owner and acts under their instructions. In certain cases, however, a chartered ship may alter the agent-principal relationship. When a ship is chartered for a specific purpose, the master’s role may shift, making them the agent of the charterer instead of the owner. This occurs when the charter agreement involves the charterer assuming full control over the ship, often accompanied by the charterer appointing their own master.
In cases where the charter agreement is unclear, and it does not explicitly define the master’s role, courts tend to favor the idea that the shipowner remains the principal, and the master will continue to act as their agent. A clause in a charter-party (C/P) stating that the master will be the agent of the charterer is not binding on third parties unless they have been notified of this arrangement. Third parties are justified in assuming the master is acting on behalf of the shipowner unless they have received direct notice to the contrary.
A charter-party (C/P) may include a clause that directs the ship to employ the charterer's agents at the port of loading. In such cases, those agents automatically become the ship’s agents when the ship arrives at the port, and the shipowner remains responsible for their actions. These agents are expected to perform their duties with due care, skill, and diligence, ensuring they represent the shipowner appropriately.
However, the scope of their responsibilities is generally limited to customs formalities and dealing with port authorities. The agents typically do not have authority over matters concerning the ship’s husbandry, crew, or other related concerns unless explicitly instructed by the shipowner. The shipowner often has their own agents at the port to assist with various operational issues, such as collecting demurrage, arranging fuel supplies, or dealing with port-specific customs.
The relationship between an agent and a principal is a vital component of both commercial and legal transactions, with clearly defined duties, rights, and responsibilities. An agent must perform their tasks with the utmost care and skill, adhering to the instructions of the principal and ensuring that any actions taken are in the best interest of the principal. In return, the agent is entitled to remuneration, indemnity, and a degree of protection against losses incurred during the execution of their duties.
However, the agent’s authority is not without limits. They cannot delegate their responsibilities without the principal’s consent, and they must act within the scope of their appointed authority. Additionally, while agents are generally not personally liable to third parties for contracts made on the principal's behalf, they are responsible for any breaches of duty and may be liable for damages resulting from those breaches.
By understanding the intricacies of agency relationships, both principals and agents can ensure that their professional engagements are clear, legally binding, and mutually beneficial.
