Definitions
- 1. An agency
agreement is formed when one person, called the agent, is authorized by another
person, called the principal, to act on the principal's behalf. A principal who
assigns agency to an agent is creating a legal relationship with the agent.
- 2.
An agency
agreement is a legally binding contract between a person or an organization
(called the principal) and another person or organization (called the agent)
where the former allows the latter to act on their behalf.
- 3. A Freight
Forwarding Agency Agreement is a legal guarantee behind many long-term
partnerships between freight forwarders and their customers. It’s important to
know what to include and expect from such agreements.
Benefits of Agency Agreements
Agency agreements can have many benefits for the principal,
especially when that principal happens to be a small-business owner. Few people
have all of the specialized skills needed to run a business, so asking a
professional to act on your behalf as an agent saves you time and helps you
conduct business in a more efficient way. Using an advertising agency is one
example, or outsourcing human resources functions.
Besides the convenience of having someone act on your behalf, an
agency agreement can also arise out of necessity. If you're facing a legal
matter, for instance, you will likely need to have a qualified attorney
represent you. Hiring that attorney constitutes an agency agreement between you
and the attorney, and it authorizes the attorney to act on your behalf.
1. Actual authority
Actual authority includes express authority and implied authority
(not to be confused with implied appointment, that is, appointment by estoppel).
I.
Express
authority is the authority which the
principal has expressly given to the agent whether orally or in writing.
II.
Implied
authority (sometimes described as usual
authority) is the authority of an agent to do acts which are reasonably incidental
to and necessary for the effective performance of his duties. The content of
implied authority depends on the facts of each case and is sometimes determined
by the usages and customs of a trade, business or profession.
a.
The scope of
the actual authority of the agent is therefore to be ascertained from the oral
or written agreement between principal and agent, usage and customs of the
relevant trade, profession or business and the course of dealing between the
two parties.
c. If
the agent enters into a contract with a third party pursuant to his actual
authority, the contract entered into will create contractual rights and
liabilities between the principal and the third party.
2. Apparent or ostensible authority
An agent is said to have apparent or ostensible (not actual) authority
if:
i. The principal has made a
representation (whether by words or conduct) to the third party to the effect
that the agent has the authority to act for him although the agent does not in
fact have such authority;
ii. The third party has in fact relied
on such representation to deal with the agent; and
iii. The third party has altered his
position resulting from such reliance, for example, assuming obligations under
a contract with the agent.
1. In essence, apparent or ostensible authority is authority which the principal induces a third party to believe the agent has when the agent in fact has not. The agent has only the appearance of authority, but no actual authority to act on behalf of the principal. Nevertheless, if the third party enters into a contract with the agent in reliance on the principal's representation, that contract will still be legally binding on the principal.
2. Apparent or ostensible authority will give rise to agency by estoppel (discussed in section 3(2) above). The principal's representation to the third party as to the authority of the agent to act on his behalf, when acted upon by that third party by entering into a contract with the agent, operates as an estoppel which prevents the principal from denying that such contract is binding upon him.
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