Agency, creation of

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Updated: Aug 20, 2021

An agency is a contractual arrangement, either express or implied. written or verbal, whereby one person may act on behalf of another and bind that other as if he or she had acted personally. The law relating to agency is generally related to the law of contract, as it is for the purpose of making legally binding contracts that an agent is normally appointed. The most extreme kind of agency, in the eyes of the law, is created by giving the agent a power of attorney to act for the donor. Other common forms are categorized as agent, special and agent. general. Appointment may be in writing and must be so in instances where the contracts themselves are bound to be in writing; it may also be by verbal request, by implition or may arise from circumstantial necessity. Examples of the latter are the implied authority of a wife to pledge her husband’s credit for necessaries (but necessaries), or the agency of necessity. Contracts improperly made by an agent (being outside his ostensible authority) may be ratified by the appointor, in which case the ratification dates back to the time that the contract was made. This is only possible where the principal himself could, had he so wished, have made the contract himself at that time and, in addition, the other party must have believed that he was dealing with an agent even if the name of the principal was not disclosed. Agency might also arise where circumstances prevent the principal from denying the agency, i.e. he is ‘estopped’ from disclaiming acts done in his name. This often happens in partnerships where notice of termination has not been properly given or, again, in any situation where failure to disclaim liability after the facts have become known is taken to imply ratifiation.

Reference: The Penguin Business Dictionary, 3rd edt.



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James Knight
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James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.