When it comes to our personal finances, we regularly engage agents (or, at least, those who call themselves ‘agents’). When we want to sell a house, we use a real estate agent, we book our holidays with a travel agent and when we want a new job we use a recruitment agent. It is a term which also turns up constantly in the ordinary running of a business. Are employees, agents? Are your distributors your agents? This article is part one of a two-part introduction to the law of agency.
Please note, this is general information, for legal advice about your specific situation, consult a lawyer.
The basic idea of agency
There is no legislation in Australia which provides an all-encompassing definition of the agency relationship. Rather, agency is a legal relationship defined primarily by the courts over several centuries (albeit with contributions from legislation, from time to time).
The basic idea of agency is that an agent is someone who acts on behalf of, or represents, another person. This other person we can call the principal. Of course, there is a lot more nuance involved to the legal concept of agency than this basic idea. We flesh this idea out by looking at how the relationship of agency comes about, its potential scope, and in our next article, the duties of agents.
How does agency come about?
There are several different ways in which the legal relationship of agency can come about:
- Through express or implied agreement between two parties that one will act for the other
- A principal approving of all ‘ratifying’ an act done on his or her behalf, after the fact
- Operation of law, such as legislation
- This doctrine, crafted by the courts, holds that, where one person leads a second person to consider some third person an authorised agent, and the second person relies on this, the first person is ‘estopped’ from denying that that third person is their agent[1].
It must be emphasised that a relationship of agency is not created simply by two individuals claiming that an agency relationship exists (whether in writing or otherwise). It depends on the nature of the underlying relationship.
What is the scope of the relationship?
Through the agency relationship, the principal provides an agent with the authority to do certain things. This is never an unlimited authority. For example, no one can authorise their agent to do unlawful acts.[2] This authority can be actual (such as through a written agreement) or apparent (such as in the case of ‘estoppel’, explained above). In turn, actual authority could come from what is explicit (such as written into an agreement), or implicit (such as is customary in a particular industry[3]).
In our next article, we look further at the legal concept of agency by exploring the legal duties of agents.
If you have any questions on this article please contact us.
[1] Rama Corp Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147.
[2] Collins v Blantern (1767) 2 Wils 341; [1558-1774] All ER Rep 33; (1767) 95 ER 847.
[3] Lienard v Dresslar (1862) 3 F & F 212; 176 ER 95.
