If you are a fan of action movies, you must know James Bond, Agent 47, or Charlie’s Angels. They are agents, who work for different agencies. Who is an agent? What do they do? How does an agency work?
Who is an agent?
An agent is a person who can work and act on behalf of another person or an organization, who refers to a principal. The principal hires, controls, and grants an agent his or her power or permission to perform, represent, and bring benefits to him or her. Anyone can become an agent. The relationship between the agent and the principal is called an agency relationship.
Besides James Bond, Agent 47, or Charlie’s Angels, sales clerks can be another good example to describe what agents are. Why do you always see sales clerks instead of CEOs whenever you go to big stores or supermarkets? Because top managers are responsible for managing and making important decisions to develop their companies. It can be difficult for them to work in multiple positions, from low to high. Therefore, they need to hire sales clerks to assist customers on their behalf. In this case, sales clerks are the agents, CEOs or top managers are the principals, and the business connection between them is the agency relationship.
What are the different types of agency relationships?
Principal-Agent
The principal and agent relationship likely occurs when an employer hires and contracts with an employee. This type of agency relationship is the most common one. We can clearly see it around us. If you have a job, it means you have established the principal and agent relationship with your employer through the contract. You also represent the company and make decisions on its behalf whenever you negotiate with its partners or communicate with its customers.
Employer-Employee
If an employer hires an employee for physical services, the employer and employee relationship is established between them. In this type of agency relationship, the employer can control the performance of the employee. All employees are considered agents, even if they do not enter into the contracts with the employer legally. Therefore, the employer-employee relationship is controlled by tort law, wage law, tax law, discrimination law, and copyright law to ensure that both employers and employees are not involved in illegal activities.
Employer-Independent Contractor
Employers usually hire independent contractors to complete certain tasks. They are not employees, so the employers do not have the right to control their performance. Independent contractors cannot enter into contracts or act on the employers’ behalf if they do not have permission. Tort law, wage law, tax law, discrimination law, and copyright law control this type of agency relationship to make sure both employers and independent contractors follow the laws.
Are the principals liable for their agents’ actions?
The answer is YES and NO because it depends on what types of agency relationships between the principals and agents. If the principals authorize and direct their agents to commit torts, they will be responsible for the illegal actions of the agents, which refers to direct tort liability.
In addition, the principals are liable for their agents’ actions, although they are not involved in torts directly. If the agents cause damages to the third party intentionally and without the principals’ consent, the principals will have to take responsibility for their agents’ intentional torts. Hence, the principals will have to pay compensation fees instead of the agents. For example, if a company’s driver Tom causes an accident to Jerry another driver while delivering products to customers, the company will be responsible for taking care of Jerry.
However, it is different when it comes to the employer and independent contractor relationship. The principals are not liable for the independent contractors’ torts because they cannot control the actions of their agents, which are independent contractors in this case. Hence, if the principals and agents establish the employer and independent contractor relationship, the agents will be liable for their own actions. Nevertheless, if the principals put the independent contractors in dangerous work environments or require them to involve in illegal activities, they will be liable for torts caused by their agents.
As a result, the types of agency relationships likely decide whether or not the principals are liable for their agents’ torts.
Termination of the agency relationship
The principals and agents can give each other actual or constructive notice when they want to terminate their agency relationship. Actual notice can be in oral or written forms, and constructive notice can be an announcement in a newspaper. Moreover, the agency relationship can be terminated when the time is expired, the agents complete their tasks, one of the parties is dead, the principals stop granting their power to the agents, etc. Depending on certain situations, the principals and agents can work with each other to can their agency relationship. If they cannot do it, they may need the involvement of judges in courts.
Now, you can understand more about agents and the relationship between the principals and agents. If you have any questions, please feel free to ask MindPhoers at the PHORum. We will be glad to help đŸ™‚
Reference
Kubasek, N., Browne, M. N., Herron, D. J., Dhooge, L. J., & Barkacs, L. (2019). Dynamic business law: The essentials (4th ed.). McGraw-Hill Education.
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