The Law of Agency; Actual and Apparent Authority to Bind the Principal

March 27, 2023by Jeffrey Davis

The law of agency refers to the legal principles and rules that govern the relationship between two parties: the principal (the person or entity who hires another to act on their behalf) and the agent (the person or entity who is authorized to act on behalf of the principal).

The law of agency covers various aspects of the relationship between the principal and the agent, including the authority of the agent, the duties and obligations of the agent to the principal, the liability of the principal for the actions of the agent, and the termination of the agency relationship.

Some key principles of the law of agency include:

  1. Actual authority: As mentioned earlier, the agent’s actual authority is the explicit or implicit authority granted to them by the principal.
  2. Apparent authority: The principal may be liable for the actions of the agent even if the agent does not have actual authority, but only apparent authority, based on the reasonable beliefs of a third party.
  3. Fiduciary duty: The agent has a fiduciary duty to act in the best interests of the principal, and to avoid any conflicts of interest.
  4. Termination: The agency relationship can be terminated by mutual agreement, expiration of the term of the agency, or revocation by the principal.

The law of agency is important in many areas of law, including business law, employment law, and real estate law, as it defines the rights and responsibilities of parties who act on behalf of others.