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Agency And Other Professional Relationships Essay

  1. Define and discuss the agency relationship and distinguish it from other professional relationships. Agency is defined as “an agreement, express, or implied, by which one of the parties, called the principal, confides to the other, denominated the agent, the management of some business; to be transacted in his name, or on his account, and by which the agent assumes to do the business and to render an account of it” (Lectric Law Library Legal Lexicon, n.d.). In simple terms, two parties agree that one of them represent the other, i.e. principal and the agent. Both of them agree that the agent will represent the principal in a business transaction.

The difference between agency and other professional relationships such as those in corporations and partnerships is that an agency is consensual and may be orally commenced. On the other hand, partnerships and corporations are organized in accordance with the provisions of law and therefore formalistic and must follow statutory procedures (wisconsinba.org, n.d.).

  1. Discuss in detail the several ways in which an agency relationship is created?

Agency is created either expressly or impliedly. There is an express creation of an agency either in writing or orally. Most often, an agreement of agency is reduced into a contract and is accepted also formally by the agent. On the other hand, an implied agency is created by virtue of acts or deeds “inferred from the relation of the parties and the nature of the employment without any proof of any express appointment” (Lectric Law Library Legal Lexicon, n.d.). The agency may be given before the performance of the act by the agent or it may be ratified and adopted thereafter.

  1. Discuss in detail the duties and liabilities of principals and agents.

The agent’s duties towards the principal are: to comply strictly with the terms of the agreement and perform the task for which he was commissioned. He should not accept other duties with other principals which duties may be considered inconsistent, conflicting, or contradictory to one of the principals. The agent also has the duty not to profit personally from the transactions he enters into in behalf of the principal. The agent is also duty bound to render an accounting. Clearly and generally, the agent has a fiduciary duty of loyalty to his principal. The principal on the other hand, must disclose all pertinent information relative to the transactions for which the agent is authorized to enter into and must also pay the agent his fee or commission (Answers.com, n.d.).

The principal is liable to third parties if the agent entered into a transaction with actual or apparent authority and acted within the scope of that authority.  The agent is not liable unless he fails to disclose the fact of agency and the identity of the principal (Answers.com, n.d.). Should the agency be undisclosed or partially undisclosed both agent and principal are bound. The principal is not liable if the agent had no actual or apparent authority in which case the agent is bound to third parties. The agent is liable for damages to the principal if the agent although without actual authority but with an apparent authority entered into a transaction in which the principal became liable.

The principal on the other hand, is liable to pay the agent the necessary expenses whether or not such expenses were expressly allowed by him provided that these payments were made in the course of agency relationship (Answers.com, n.d.).

4. What is the liability of the principal for the torts and crimes of the agent?

It is a rule that agent is liable to third persons for his own tortuous acts. The principal can also be liable if he authorized the tort, or if unauthorized but committed by the agent within his scope of authority or by the principal’s own tortuous act (South Dakota State University web site, n.d.)

With respect to crimes, as a general rule the agent is liable unless the principal allowed or authorized it or when the principal has also participated in the crime (South Dakota State University web site, n.d.)
5. Discuss the ways in which an agency relationship may be terminated. Can you think of other scenarios or behavior that should terminate an agency relationship?

The agency relationship may be terminated in two ways, i.e. by act of parties or by operation of law. As a rule, the principal may revoke the agency and notify the agent unless the agency agreement stipulates that it cannot be revoked or unless there is consideration given for the agency agreement (Lectric Law Library Legal Lexicon, n.d.). The agent may also renounce the agency, however if the agency is partially executed then he becomes liable for the damages which may be sustained by the principal (Lectric Law Library Legal Lexicon, n.d.).

Termination of the agency by operation of law occurs when the agreement is for a fixed period and the expiration of the period has happened (Lectric Law Library Legal Lexicon, n.d.).

Another situation whereby the agency can be terminated is when either of the parties, i.e. die. The contract being personal and consensual in nature may be terminated by death of the parties.


Wisconsin Student Bar Association. Outlines. Retrieved on September 25, 2007, from


Lectric Law Library. Agency (law). Retrieved on September 25, 2007, from


Answers.com.  Agency (law). Retrieved on September 25, 2007, from


South Dakota State University Department of Economics. Business Law1.

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Retrieved on  September 25, 2007, from


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