Many transactions are carried out under the category of agency. When one party acts on behalf of another person in a business transaction, such a relationship is called an agency relationship. One among the party to the contract – the principal, authorizes another person and gives legal authority to that person to perform on behalf of the principal. The agent is the individual or organization that has been given legal authority to undertake work on behalf of another person. Contracts with third parties will be entered into by the agency. The principal shall be held responsible and obligated for any actions performed by the agent. The Principal is obligated to carry out and fulfil the business contracts which have been entered into by the agent with the third parties. There can be instances of agency relationship termination. In such instances, all parties involved in the contract should be made aware of the termination. The agent will no longer have legal capacity to perform on behalf of the principal once the agency relationship is dissolved. The discontinuation of the agency connection should indeed be communicated to all parties involved.
Most of the current business employs agents to carry out work and business. In a commercial transaction involving a third party, an agent follows instructions. The agent works on behalf of the principal; it is considered that the principal is present and acting accordingly. Hence, the principal is legally responsible for the agent’s torts or improper conduct, giving rise to a civil claim. If the principal acts negligently with the agent, any torts performed by the agent will directly be assigned to the principal. These torts had occurred due to negligence of the principal’s supervision. Below mentioned are the duties of the agent.
The agent has to conduct the business and transactions as per instructions from the principal and should be loyal.
The agent should possess the ability to perform the business.
Agents should not involve themselves in any misconduct.
The agent should provide the accounts when demanded by the principal.
To obtain the directions, the agent should contact the principal.
The agent should not be making secret profits.
The agent should not disclose the business secrets to third parties.
Acts of Parties Under an Agency Relationship
Agency relationships are collective. It means that both the parties in the contract should accept to be part of the agency relationship. Suppose the contract term does not define the grounds on which the agency relationship should be terminated. In that case, either party involved in the contract can freely withdraw from their responsibilities in the contract. An oral communication or written communication is issued when the agency relationship is terminated. The communication shall include their consent to withdraw from the agency relationship. Both the parties in the contract â€“ the principal and agent can decide to terminate the agency relationship at any time by mutually accepting each other. Most of the agency relationship contracts are established for a defined period when the principal authorizes the agent to perform actions on their behalf only for the defined period. After the defined period, since the contract governs the agency relationship, the agent can terminate the agency relationship as per contract. The agency relationship is defined as the accomplishment of a particular action by the agent. Post accomplishment of a particular action by the agent, the agency relationship automatically gets terminated.
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