Law of Agency

Law of Agency

In English law, the law of agency is a fundamental principle that governs the legal relationship between two parties: the principal and the agent. An agent is a person who is authorised to act on behalf of another person, known as the principal. The law of agency defines the rights, obligations, and responsibilities of both the principal and the agent in this relationship.

One of the key principles of the law of agency is the concept of vicarious liability. This means that the principal is responsible for the actions of the agent when the agent is acting within the scope of their authority. For example, if an employee of a company commits a tort (i.e. a civil wrong) while carrying out their duties, the company may be held liable for the employee's actions.

Another important principle of the law of agency is the concept of actual authority. This refers to the authority that the principal has given to the agent to act on their behalf. Actual authority can be express or implied. Express actual authority is explicitly given to the agent through a contract or agreement. Implied actual authority arises from the conduct of the parties or the circumstances of the case.

In addition to actual authority, the law of agency recognises two other types of authority: apparent authority and ratification. Apparent authority arises when the principal leads a third party to believe that the agent has authority to act on their behalf, even if the agent does not have actual authority. Ratification occurs when the principal later approves or adopts the actions of the agent.

The law of agency also imposes certain duties on both the principal and the agent. These include a duty of loyalty, a duty of obedience, a duty of care, and a duty to account. The duty of loyalty requires the agent to act solely in the best interests of the principal. The duty of obedience requires the agent to follow the lawful instructions of the principal. The duty of care requires the agent to exercise reasonable care and skill in carrying out their duties. Finally, the duty to account requires the agent to keep accurate records and provide the principal with an account of all transactions.

The law of agency is a complex area of law that plays an important role in commercial transactions and relationships. It is essential for principals and agents to understand their respective rights and responsibilities in order to avoid disputes and ensure that their interests are protected.
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