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Commercial Law Among The Principal And Agent

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Question:

Discuss about the Commercial Law Among the Principal and Agent.
 
 

Answer:

The relationship[1] between the two parties that are the principal and the agent are called as an Agent. The agent has to create an agreement among the “principal” and the “third parties”. “Agency” is thus the relation that exists among the principle and the agent that is a person who has been appointed or authorised to act on behalf of him while dealing with others. Therefore, in an agency effects are made in two ways in a contract they are:

  1. Contracts that are made among the agent and the principle. In this the agent is authorised to principal,
  2. Contracts that are made among the “principle and the third party” through an agent.

Agency is thus, a fiduciary relation that is created through expressed or implied contracts or with the help of law where the agent may act on behalf of the principal. In the case of The Queen v Kane, it was said that an agent is a person who acts on behalf of another, who is the principal who authorises the agent to act on his behalf. The general rule that applies is that agents are the contact makers for their principal. The contract[2] is established among the principal and the third party considering prima facie at common law. The agent has no right in a contract nor does he have any obligations. After performing his work the agent moves out of the scene. In the case, Stickrose (PTY) Ltd v The Permanent Secretary Ministry of Finance, it was said that the agents cannot be personally liable for any failure by the state to perform the contractual obligations.

According to the law, agents have the power to affect the legal right, liabilities and the relationship of the principal. In Cavmont Merchant Bank V Amaka Agriculture Holdings, the Supreme Court observed that, when an agent is making a contract they have to disclose the interest and the names of both the principal on whose behalf the contract is made and the agent as per the general rule is not considered liable to the other contracting parties. The agent has the right to dispose the property of his principal[3] so that he can transfer the ownership to a third party on behalf of his principal. The actions done by the agent for his principal can sometimes lead him to be criminally liable; we can see this in the outcome of the case, Gardener v Ackeroyd.

The principals are bound to carry out certain duties to their agent, these duties are as follows:

  • The agent has to be given a commission
  • No prevention should be made by the agent from willingly earning his commission
  • The agent has to be indemnified for his acts.

The rights and liabilities of the principle and agents against the third parties may be different according to it if the agency is disclosed or undisclosed. This difference of being disclosed or undisclosed agency is important as affects the ability of the principal to ratify the action of the agents. The agency can be terminated under the following circumstances:

  1. Mutual consent
  2. By the act of either party
  3. The agent was appointed for a fixed period of time
  4. By the act of law.

As the relationship between the principle and the agent[4] is based on the consent of both, the important part is the actual authority. An agent can be paid only if he acts in accordance to the authority if he acts outside the authority the agent will be liable to his principle. It is the agent’s power that binds the relationship[5] between the principal and the third party.

 

References

Kiefer, Matthias, Edward AE Jones, and Andrew T. Adams. "Shareholders and managers as principal-agent hierarchies and cooperative teams." Qualitative Research in Financial Markets 9.1 (2017).

Kistruck, Geoffrey M., et al. "Mitigating principal-agent problems in base-of-the-pyramid markets: An identity spillover perspective." Academy of Management Journal 56.3 (2013): 659-682.

Lee, Hee “Andy, Basak Denizci Guillet, and Rob Law. "An examination of the relationship between online travel agents and hotels: A case study of Choice Hotels International and Expedia. com." Cornell Hospitality Quarterly 54.1 (2013): 95-107.

Orlu, Aondoana Daniel, Benjamin Jirbee, and Kaase Dominic Imeh. "Information Providers Behaviour: Communication as a Process in Information Behaviour of Pharmaceutical Companies: Part 2." (2016).

Tandberg, David A., and Nicholas W. Hillman. "State higher education performance funding: Data, outcomes, and policy implications." Journal of Education Finance 39.3 (2014): 222-243.

Tandberg, David A., and Nicholas W. Hillman. "State higher education performance funding: Data, outcomes, and policy implications." Journal of Education Finance 39.3 (2014): 222-243.

Kistruck, Geoffrey M., et al. "Mitigating principal-agent problems in base-of-the-pyramid markets: An identity spillover perspective." Academy of Management Journal 56.3 (2013): 659-682.

Kiefer, Matthias, Edward AE Jones, and Andrew T. Adams. "Shareholders and managers as principal-agent hierarchies and cooperative teams." Qualitative Research in Financial Markets 9.1 (2017).

Lee, Hee “Andy, Basak Denizci Guillet, and Rob Law. "An examination of the relationship between online travel agents and hotels: A case study of Choice Hotels International and Expedia. com." Cornell Hospitality Quarterly 54.1 (2013): 95-107.

Orlu, Aondoana Daniel, Benjamin Jirbee, and Kaase Dominic Imeh. "Information Providers Behaviour: Communication as a Process in Information Behaviour of Pharmaceutical Companies: Part 2." (2016).

OR

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