In a contract of agency, a person (the agent) binds themselves to render some service or to do something in representation or on behalf of another (the principal), with the consent or authority of the latter. The agent's principal duties include: to act within the scope of their authority and in accordance with the principal's instructions; to carry out the agency and be liable for damages if they fail to do so; to act with the diligence of a good father of a family; to advance the interest of the principal and not to prefer their own; and to render an account of their transactions. The principal, in turn, must comply with the obligations the agent contracted within the scope of authority, advance funds if stipulated, reimburse the agent for advances and expenses, and pay the agreed compensation. A crucial point: the principal is bound by the agent's acts within the scope of authority; acts beyond the authority do not bind the principal unless ratified, but the principal is estopped from denying authority they allowed the agent to appear to have (apparent authority). Agency is extinguished by revocation, withdrawal of the agent, death, civil interdiction, insanity or insolvency of either party, dissolution of a firm, or accomplishment of the object. Some agencies coupled with an interest cannot be revoked at will. So an agent binds the principal only within authority, and both owe reciprocal duties.
What Agency Is
In agency, an agent acts in representation or on behalf of a principal, with the principal's authority.
The Agent's Duties
- Act within the scope of authority and follow instructions;
- Carry out the agency (liable for damages if they fail);
- Act with diligence, prefer the principal's interest, and render an account.
When the Principal Is Bound
The principal is bound by acts within authority; acts beyond it do not bind unless ratified — but the principal is estopped from denying apparent authority they allowed. The principal must reimburse expenses and pay compensation.
Practical Takeaways
- An agent binds the principal only within authority (or by ratification/apparent authority);
- The agent owes diligence, loyalty, and accounting; the principal owes reimbursement and pay;
- Agency ends by revocation, death, or accomplishment, among others.
Frequently Asked Questions
What is a contract of agency? One where a person (the agent) binds themselves to render service or do something in representation or on behalf of another (the principal), with the principal's consent or authority.
What are the agent's duties? To act within the scope of authority and follow instructions, carry out the agency, act with the diligence of a good father of a family, prefer the principal's interest over their own, and render an account.
Is the principal bound by everything the agent does? No. The principal is bound by acts within the scope of authority. Acts beyond it do not bind the principal unless ratified, though the principal is estopped from denying apparent authority they allowed the agent to appear to have.
How does agency end? By revocation, withdrawal of the agent, death, civil interdiction, insanity or insolvency of either party, dissolution of a firm, or accomplishment of the object. Some agencies coupled with an interest cannot be revoked at will.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
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