Quiz 21: Agency Relationships


In this case Ms V is not at all liable as this is a case of unauthorized acts under which if an agent has not been granted any type of authority but still he or she make a contract as in this case Ms X made without having any sought of authority signed the promissory note with the third party, this does not indicate that the principal can be held liable it will be the agent who is being held liable. The agent will be held liable only till the third party was relying on the status of the agency.

Difference between an employee and an independent contractor: The distinction is that an employee is a person who works on the behalf of his owner (principal). It can be said that the employee is an agent for his employer; laws of the agency and overlapping of the employment laws are significant as he (employee) deals with the third party. When an employee sells a good then it is to be obligatory on the employer (principal). Whereas on the other hand an independent contractor is a person who will work and receive payment for the work done by an employer but the employer is not in control of the conditions for the work that is done by the contractor. An independent contractor can be said to be an agent not an employee.

According to the agency relationships, it is considered that an agent will deal and negotiate the business transactions on behalf of the principal. These relationships exist between employee-employer and in certain cases between independent contractor-employer. Under employer-employee relationship, employees deal with the third party as an agent of the employer. Any purchase-sale of goods made by the employees binds the employer as they are assumed to be the representatives of the employer. An independent contractor can be referred as an individual who deals with others on his own. He is not managed by someone else; therefore a relationship between an enterprise and an individual contract may or may not be covered under agency relationships. For example, person A is a cab driver and he owns the car so when he deals with someone he will not act as an agent as he is an independent contractor, however, if A works under L Inc. to deliver goods from one place to another in his car then he can be considered as an agent of L while dealing with third party.

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