Quiz 37: Agency


Agency relationship Agency is a relationship between two persons, agent and principal. Agency is an express or implied contract, made between agent and principal, where agent is appointed to act as an authorized person on the behalf of principal. Agent can thus enter into contracts on the behalf of principal. However, such relationship can be terminated either by the operation of law or, by the act of any of the parties to agency agreement. Termination of Agency relationship Termination by operation of law: If any of the party to the agency contract, becomes incapable of performing as per the agency contract, it is considered under termination by operation of law. This may be due to any of the following reasons: • death of either agent or principal, • insanity of either agent or principal, • if either agent or principal, becomes bankrupt, • in case of emergency situations between the countries of agent and principal. Termination by act of parties: If any of the parties to the agency contract decides to terminate the agency, it will be considered under the heading " termination by act of parties". Both the parties possess the power of terminating the agency agreement. However, in case of unlawful termination, terminating party gets exposed to liability of damages caused due to such termination. Thus, among the given situations, where, an agency relationship is said to get terminated by operation of law, will include; principal's death, principal's incapacity, and agent's failure to acquire a necessary business license. Thus, options a, b, and d cannot be the right options. Correct option is c " Agent's renunciation of the agency" as in this case agent used his power to terminate the contract of agency which comes under the heading termination by act of parties.

Definitions Agent - is someone who is hired by a principle to act for the principle. The agent is seen to be controlled by the principle and any liability caused by the agent will make the principle liable. Independent Contractor - is someone who is hired to produce a certain product or service. However, they are not controlled by the hirer and are independent in making choices required to complete the job according to the hiring agreement. Discussion The most important difference between an agent and independent contractor is the liability on the principle/hirer. An agent's action will cause liability for the principle and will also bind the principle on contracts as they are seen to represent the principle. Contrarily, independent contractors are not controlled by the hirer and make not represent the hirer in contracts; they only do what is necessary to fulfill their duty.

a) The principle P may communicate the intention to ratify the contract with S , but it is not necessary as long as P is aware of A 's, their agent's, dealing with S. Incorrect. b) If A , the agent, doesn't have authority on a deal then it is not ratified even if it is reasonable and in the principle's interest. Incorrect. c) A 's agent status is irrelevant to the principle's ratification of the deal. The principle can ratify any deal. Incorrect. d) This is true, as long as the principle was aware of the agent's actions and all the material information and allowed the deal to proceed then they ratified the deal. Correct.

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