(law) A relationship between one individual or legal entity (the agent) who represents, acts on behalf of, and binds another individual or legal entity (the principal) in accordance with the principal’s request or instruction. In some countries, agency is more narrowly defined as a relationship created only by a written agreement or a power of attorney, entered into by a principal and a person who is designated to act for the principal within the limits of the written document creating the agency. See agent; principal; power of attorney.
(a) An express agency is established by a written or oral agreement between the parties. An express agency is created, for example, when a seller orally contracts with a sales representative to sell products or when a company makes a written power of attorney to authorize a person to act on its behalf.
(b) An implied agency arises as a result of the conduct of the parties. If a seller’s assistant, for example, sometimes deals with customers, a court may determine from that conduct that an implied agency exists between the seller and the assistant.
(c) An agency by estoppel is imposed by law when an agent acts without authority, but the principal leads a third person to conclude reasonably that the agent had authority and to rely on that conclusion. If a seller, for example, informs a buyer that the seller’s representative is authorized to negotiate any contract terms for the seller, a court may decide that an agency by estoppel existed, that the contract should be enforced and that the seller cannot avoid performing the contract by claiming that the representative in fact had no authority.
(d) An agency del credere arises when a principal entrusts goods, documents, or securities to an agent who has broad authority to collect from a buyer and who may be liable for ensuring that the buyer is solvent. A sales representative, for example, who is given goods and who is authorized to receive payment from buyers is an agent del credere.
(e) An exclusive agency is an arrangement with an agent under which the principal agrees not to sell property to a purchaser found by another agent. If a seller of green and red shoes, for example, gives a sales representative an exclusive agency to sell the green shoes in a particular country, the seller is not permitted to sell those shoes through any other representative in the same country. The seller may, however, authorize other agents to sell red shoes in that country.
(f) A universal agency authorizes the agent to do every transaction that a principal can legally delegate. A principal who will be traveling for some time may, for example, give an agent authority to deal with all business and personal transactions for the principal during that absence.
(g) A general agency authorizes an agent to do all acts related to the principal’s business, which may include negotiating contracts, establishing credit, advertising, arranging for shipping and setting up overseas offices and outlets.
(h) A special agency gives an agent limited powers to conduct one transaction or a specific series of transactions. A contract with a representative to secure the sale of certain components to a particular factory creates a special agency. See agent; principal; power of attorney.