Agency relationship

Many points were raised and many questions were asked by many concerned entities regarding the agency relationship between the agent and the principal, generally the concept of agency in general and the duties of the appointed agent in particular.

To begin with, in an attempt to explain the legal concept and the limits conferred on the agent, we say that an agency relationship is the fiduciary bond which results from the manifestation of a consent by one person (who is the principal) to another person (who is the agent) wherein the principal to appoint an agent who shall act on his behalf and subject to his control and consent to the acts taken by the agent.

In other words, to create an agency relationship there must be a principal and an agent who mutually consent that the agent will act on behalf of the principal and be subject to his control. By this mutual agreement they are giving their consent to create a fiduciary relationship. Based on the above, it is clear that consent, control and a fiduciary relationship are necessary for agency relationship.

To establish consent, the principal must ask the agent to do something and likewise the agent must agree to do what he has been asked to do.

Control of the principal is required and based on this the principal is liable for the acts of his agent because principals exercise control over their agents. This point of control is very crucial to determine the legal status of the agency and the liability of the principal who will be of no liability unless there is agency relationship conferring a certain degree of control from him regarding the acts of his agent.

In other words, an agent and principal must not only consent to an agency relationship, but the principal must also have control over the agent. As explained above an agency relationship between the two parties is a form of a fiduciary relationship which constitutes certain type of special relationship with high standards. The beneficiary places special confidence in the fiduciary who, in turn, is obligated to act in good faith and perform his duty in every aspect in good faith.

This high standard of duty and good faith requires that the agent works for the interest of the principal and the interest of the agency relationship and, in this respect, to put his own personal needs second in line. This is basically because the purpose of the fiduciary relationship is for one person to benefit another. Agents have, and are required to have, a fiduciary duty to their principals. They have already accepted to undertake this special duty by giving their consent to form the agency relationship with the principal.

All three elements i.e., the consent, the control and the fiduciary duty are necessary to form or create an agency relationship. However, we need to mention that in some relationships, for example, there might be a fiduciary duty but no control. A trustee of a trust must act for the benefit of the beneficiaries, but the beneficiaries have no right to control the trustee. Therefore, a trustee even though he is doing fiduciary duty but he is not an agent for the beneficiaries.

(The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Daily Tribune)