Company Law - Agency Theory

Topics: Contract, Contract law, Breach of contract Pages: 4 (696 words) Published: October 12, 2013
1. Agency Relationship
Principal authorizes Agent to enter into legal transactions (contract) with Third Party on Principal’s behalf  Agency relationship between P and A

A’s obligations to P:
1. Act according to terms of appointment and within scope of authority 2. Not liable to P or TP
3. Carries out duties with care and skill, keep true and proper accounts 4. Cannot conflict P’s interest / act for personal gains
5. Cannot delegate whole duty to others

P’s obligations to A:
1. Remuneration
2. Reasonable Expenses in carrying out P’s duties

P can be disclosed or undisclosed (as if A acting on own behalf). Disclosed P can be named or unnamed.
Actual authority can be
1. Express: Written / Oral (contract/consent)
2. Implied by conduct
- acts necessary or reasonably incidental to effective execution of duties e.g. put up ads - do everything a person in a business/profession normally authorized to do - estoppel authority: silence is a representation that you agree/approve

A & T relationship

General rule: A has no obligations/rights under contract towards T

1. P is undisclosed *refer to P&T Point 2*
2. Parties intended (express/implied) A to be contracting party 3. A acted without authority
T can sue A for breach of warranty of authority 
Claim damages (Incurred expenses / loss)

P & T relationship


1. A has actual authority, P is disclosed and named.
Both P and T can sue or be sued. A cannot be sued.

2. A has actual authority, P is disclosed but unnamed.
T can only sue P, UNLESS contract is made with A as well. T is bound.

2. A has actual authority, P is undisclosed.
T can either sue A OR P.
P and sue T unless it is unfair to P.
NOTE: If P and T had conflict, T unaware that transaction with A was done on behalf if P  contract does not hold cuz unfair to T.

3. A has no...
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