The law of agency is an area of commercial law dealing with a set of contractual, quasi-contractual and non-contractual fiduciary relationships that involve a person, called the agent, who is authorized to act on behalf of another (called the principal) to create legal relations with a third party.
The agent is, thus, required to negotiate on behalf of the principal or bring them and third parties into contractual relationship.
This branch of law separates and regulates the relationships between: The reciprocal rights and liabilities between a principal and an agent reflect commercial and legal realities.
Express actual authority means an agent has been expressly told they may act on behalf of a principal.
This is sometimes termed "agency by estoppel" or the "doctrine of holding out", where the principal will be estopped from denying the grant of authority if third parties have changed their positions to their detriment in reliance on the representations made.
[5] In the case of Watteau v Fenwick,[6] Lord Coleridge CJ on the Queen's Bench concurred with an opinion by Wills J that a third party could hold personally liable a principal who he did not know about when he sold cigars to an agent that was acting outside of its authority.
In return, the principal must make a full disclosure of all information relevant to the transactions that the agent is authorized to negotiate.
Under sections 201 to 210 of the Indian Contract Act 1872, an agency may come to an end in a variety of ways: Alternatively, agency may be terminated by operation of law: The principal also cannot revoke the agent's authority after it has been partly exercised, so as to bind the principal (s. 204), though he can always do so, before such authority has been so exercised (s. 203).
Notice in this connection that want of skill, continuous disobedience of lawful orders, and rude or insulting behavior has been held to be sufficient cause for dismissal of an agent.
In most states, a distinction is drawn between knowledge of the firm's general business activities and the confidential affairs as they affect one client.
Whether the injured party wishes to sue the partnership or the individual partners is usually a matter for the plaintiff since, in most jurisdictions, their liability is joint and several.
An agent in commercial law (also referred to as a manager) is a person who is authorized to act on behalf of another (called the principal or client) to create a legal relationship with a third party.
Two "normative precepts" [13] assist in concretising this standard of conduct: "Firstly, expressing honesty and openness, commercial agents and principals must mutually co-operate in the performance of their agreement.
Conduct in good faith requires that each party proactively take action to assist the other in the realisation of their bargain, as opposed to mere abstention from obstructive behaviour.
However, whether a party has acted in good faith must not be determined by reference to a moral or metaphysical notion of co-operation; this assessment must be based on an objective appraisal of the actual commercial agency relationship.
Accordingly, the intensity of the required co-operation will vary, depending on the terms of the contract and the pertinent commercial practices.
Secondly, commercial agents and principals must not exploit asymmetries in their agency relationship in such a manner that frustrates the legitimate expectations of the other party.
In this respect, whether a conduct is in breach of the Obligation must be appraised holistically, considering all aspects of the relationship; material facts will include the contractual and commercial leverage of each party, their objective intentions as enshrined in the contract, and the business practices of the sector in question.
Nevertheless, the starting axiom of this investigation must be that these are commercial relationships in which professionals are expected to be self-reliant and must be free to pursue their self-interest.
Critically, this will not be an estimation aimed at achieving ontological fairness, a just bargain or equilibrium between the giving and receiving of commercial agents and principals".