Under the common law an agency relationship can be ended by action of the parties or by events
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Businesses enter into numerous contractual relationships. One type of contractual relationship that arises between two parties is an agency relationship. This relationship involves one person providing the other with authority to act on their behalf. This type of legal relationship is prevalent within certain industries and involves essential responsibilities for both parties. This article will discuss:
What Is the Meaning of an Agency Relationship?An agency relationship involves one party (the agent) who has the authority to act or represent another party (the principal). Here, the agent acts as an intermediary between the principal and third parties when undertaking specific tasks. Agency relationships are common in many transactions. They can be specified to last for a set period of time, or for after the agent has performed certain acts. Agency relationships can also be specified to be far broader and last for an undetermined period of time. Examples of agency relationships include when:
Other less obvious transactions also give rise to an agency relationship. A good example is if you sell an item on an online marketplace, like eBay, the online marketplace may act as your agent to collect money from the purchaser. Why Do I Need to Understand Agency Relationships?You need to be aware of agency relationships as they give rise to additional duties that attach to both the principal and the agent. This is because agents have a level of authority when dealing with third parties on behalf of the principal. For this reason, agency relationships are based on an element of trust. To ensure that the agency relationship remains secure, higher obligations are placed on the parties, even if those obligations are not specified in a contract between them. What Are an Agent’s Obligations?Some of the fundamental obligations that may arise in an agency relationship include:
What Are the Principal’s Obligations to the Agent?A principal has a duty to:
To secure payment of any amount that the principal owes to the agent, the agent will have a right to keep any property that the principal owns until they pay the debt. What If the Agent Acts Outside of Their Authority?If an agent acts outside of their legal authority, they will have breached their contract with the principal. If this happens, then the principal will be entitled to make a claim against the agent for any loss or damage which they have suffered in consequence of the agent’s unauthorised act. However, if the principal wishes to do so, they can approve the unauthorised act of the agent. If this happens, then the agent is no longer in breach of the agency contract, and the principal has no claim for loss or damage. Furthermore, depending on the action of the agent, the principal may be able to make a claim in torts. For example, if the agent defamed a third party whilst negotiating on behalf of the principal. How Can an Agency Be Terminated?An agency relationship that is set to last for a set period will automatically terminate at the end of the period. However, an ongoing agency relationship can be terminated if both parties agree to end the relationship. The agency relationship may also end if the principal gives notice to the agent that they revoke the agent’s authority to represent them. It can also come to an end if the agent notifies the principal that they renounce their authority and no longer agree to carry out the mandated duties. If this occurs, the other party will still have an opportunity to claim compensation from the renouncing party for breach of contract. Key TakeawaysIt is essential to understand how an agency relationship works so that you:
An agent may have different authorities. For example, an agent may be entitled to enter a contract with a third party on the principal’s behalf, or it may only be entitled to enter negotiations on the principal’s behalf. Ideally, the authority of an agent should be clearly set out in writing. If you have any questions about entering into an agency relationship, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page. Frequently Asked QuestionsWhat is an agency relationship? An agency relationship involves one party (the agent) who has the authority to act or represent another party (the principal). Here, the agent acts as an intermediary between the principal and third parties when undertaking specific tasks. Does an agency relationship last indefinitely? Not necessarily. An agency relationship can be specified to last for a set period of time or can finish once the agent has performed certain acts. However, agency relationships can also be specified to be far broader and last for an undetermined period of time. Webinars Ending Employment: Understanding your Obligations as an EmployerWednesday 21 September | 11:00 - 11:45amOnlineIf you are ending a team member’s employment, you must understand your legal obligations. Register today for our free webinar. Register Now Australia’s Global Talent Visa: How To Make Your EOI Stand OutWednesday 28 September | 12:00 - 12:45pmOnlineApplying for a Global Talent Visa? Learn how to make your application a winner. Register today for our free webinar. Register Now Commercial Leasing 101: Understanding Heads of AgreementThursday 29 September | 11:00 - 11:45amOnlineWant favourable terms on your commercial lease agreement? Register today for our free webinar to learn how. Register Now Work Health & Safety: What Are Your Business’ Legal Obligations?Thursday 6 October | 11:00 - 11:45amOnlineAs an employer, you have work, health & safety legal obligations. Join our free webinar to understand your responsibilities. Register today. Register Now Startup 101: Raising Capital for Later Stage CompaniesThursday 13 October | 11:00 - 11:45amOnlineIs your later-stage startup ready for its next capital raise? Our free webinar will explain the process. Register today. Register Now Unfair Contract Terms: The Fuji Xerox Decision and Your Business’ Legal ObligationsTuesday 18 October | 11:00 - 11:45amOnlineAvoid non-compliance with consumer law on Unfair Contract Terms. Register today for our free webinar. Register Now Startup 101: Understanding Term SheetsThursday 20 October | 11:00 - 11:45amOnlineTerm sheets are a valuable tool when your startup is negotiating with investors. Learn how they work in our free webinar. Register today. Register Now Franchising Your Business: What to Include in Your Franchise AgreementsWednesday 26 October | 11:00 - 11:45amOnlineFranchise agreements are a crucial tool for your franchise business. To learn how they work, join our free webinar. Register today. Register Now Was this article helpful?Thanks! We appreciate your feedback – your submission has been successfully received. About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership. By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee. Learn more about our membership How do you terminate an agency relationship?Below are common rules for terminating the agency relationship: Withdrawal by a Party, Termination by the Principal, Renunciation by Agent, Death or Incapacity of Agent, Death or Incapacity or Bankruptcy of the Principal.
Who can terminate an agency relationship quizlet?Termination by one party. As a general rule, either party can terminate the agency relationship (the act of termination is called revocation if done by the principal and renunciation if done by the agent). Although both parties have the power to terminate the agency, they may not possess the right.
What are some of the ways in which an agency relationship can be terminated quizlet?An agency relationship can be terminated by either party orally, in writing or impliedly.
What authority is ended with the termination of an agency relationship quizlet?The termination of an agency terminates the agent's express authority, but not his implied authority. The principal's death automatically terminates an agent's apparent authority.
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