TYPES OF AGENTS
Definition
"Agency is the relationship that exists between two persons when one, called the agent, is considered in law to represent the other called the principal, in such a way as to be able to affect the principal’s legal position in respect of strangers to the relationship by the making of the contracts or the disposition of property." Fridman, (1990) P.,9.
Creation of Agency
This can arise in any of the following ways, namely through contract, from ratification and by estoppel.
Contract
Here the agency comes into being as a result of the stipulations of the parties orally or in writing. It may also arise as a result of the conduct of the parties.
Ratification
This is the confirmation by the principal, of unauthorised (but legal) acts done by the agent. The principal later endorses the acts of the agent so as to confer authority on the agent to proceed with the action.
Estoppel istOpl
Where representations have been made by an agent inducing a third to enter into a contract, a supposed principal will be denied the liberty to walk out of such an agency if he/she knew of the representations but did not take steps to avoid the transaction.
Principal-Agent Relationship
The relationship of the principal to an agent can be defined in terms of the scope of authority that underlines the relationship. This authority may be actual or implied. Each strand of authority is governed by different legal consequences.
Actual authority
This is authority as defined by the express terms of the agency contract between the principal and the agent.
It is possible for an authority to be couched in a deed.
Implied Authority
This is authority not expressly provided for but, is deduced as being incidental to the execution of the actual authority.
Types of agents
(a) General agent. This is an agent who has the principal’s unlimited authority to carry out contracts on behalf of the principal without recourse to the principal on each and every point in a transaction.
(b) Agent of necessity. Here, the agency comes into being as a result of circumstances. There is no formal appointment, express or otherwise. The agent steps into the agency with a view to minimise damages or loss to the goods of principal.
(c) Del Credere agent. This agent undertakes to guarantee the goods or indemnify the principal for any losses arising from the agency transaction. In return for this assurance, the agent receives an extra remuneration from the principal.
(d) Factor. The basic feature of the agent is that the agent has possession of the goods before sale. In this case, such an agent can sell in his/her own name and may even pledge the goods as security to raise money in the name of the principal.
(e) Special Agent. This is an agent who has been appointed to carry out only a designated task. On completion of the task, the agency terminates. Example, a polling agent.
(f) Broker. This is an agent who does not have possession of the goods at the time of sale. The transaction concluded by such an agent on behalf of the principal, nevertheless binds the principal.
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SECTION 7. AGENCY
BLOCK 1. CORRESPONDENCE RELATING TO AGENCY
LEAD-IN
¨ What is an agency?
¨ When do companies appoint agents?
¨ In what way are agents paid for their services?
¨ Do all agents sell from stock?
FOCUS 1
LETTER 1
Japan Importers Ltd.
Osaka Way
Tokyo
Japan
Dear Sirs
You were recommended to us by The Japanese Trade Commission in Prague which informed us that you might be interested in acting as our agent in your country.
As you can see from the catalogue enclosed we are manufacturers of high quality glassware and pottery.
We already export to the whole of Europe, North America and the Middle East and wish to expand into the Far East where there is a growing demand for our products.
So we would like to entrust you with the sale of our goods and appoint you our sole agent for Japan. We offer a 9 per cent commission on net list prices, plus advertising support. There would be an additional 2 per cent commission if you accept the del credere. We believe you could expect an annual turnover of more than 500,000 dollars.
If this type of agency interests you, please write to us immediately.
Yours faithfully
J.Chapek
LETTER 2
Glassware Company Ltd.
17 Zemedelska ul.
Prague
Czech Republic
Thank you for your letter in which you offered us a sole agency for your products in Japan.
We have pleasure in informing you that we can handle the type of agency you mentioned in your letter. However, there are some points we would like to be clarified before taking a decision.
Delivery: Would we be expected to hold large stocks or will you supply from stock? If you supply the customers direct, how long will it take an order to be met and shipped?
Payment of accounts: Will customers pay you direct in the Czech Republic or will they pay us and we would settle with you deducting our commission? How would payment be accomplished: by a Letter of Credit or by Bill of Exchange?
Advertising: You mentioned advertising support and we would like you to specify the type of assistance we can expect. As for our contribution we have spacious show rooms where your products can be shown to advantage.
Disputes: If any differences or disagreements arise out of the contract where arbitration will be held.
Length of Contract: How long will the initial contract run? We think that one year should be enough to decide whether it is worth continuing with sales.
We should be obliged if you would send us this information as well as a draft contract.
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We are looking forward to hearing from you as soon as possible.
Faithfully yours
K.Masumo
K.Masumo
LETTER 3
Brown & Co. Ltd.
16 Nelson St.
London, UK
Dear Sirs
We are a large manufacturing company specializing in motorcycles production in the USA and would like to appoint an agent in Great Britain to act on our behalf selling our products throughout the country.
We generally do not deal on consignment basis but prefer our agents to buy our products for their own account. They usually prefer this method as it proves more profitable for them and allows them greater freedom in determining prices.
We can allow a 30 per cent trade discount off our net list prices and another 5 per cent quantity discount for sales above 200,000 dollars.
Our company offers a full after-sales service which is essential in establishing the reputation of our brands, and your customers needn’t worry about spare parts or maintenance.
We should be very obliged to you if you would provide us with references.
If our offer is of interest to you, please write to us immediately so that we could draw up a draft agency agreement.
Yours faithfully
J.Campbell
Marketing Department
LETTER 4
October 29, 20...
Dear Sirs
We are glad to receive your letter dated October 21, 20... containing your proposals on increasing our sales in your region. The matter is that we do not think that if we appoint any other agent for your market but for you it will help us much. You know our produce well enough, besides your company is long established. If you agree to act on our behalf and sell our equipment equal in value to the sales of your machines in this country, we will be happy to entrust you with sole agency.
Will you please discuss all the details and particulars of the deal with our representative who will call on you on November 1, 20... if you answer in the affirmative manner.
We hope anyway you will cooperate with us further. Looking forward to your early reply.
Sincerely yours
George McNeil
FOCUS 2. COMMENTARY AND VOCABULARY NOTES