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Agency law

The meaning and importance of agency

Agency refers to a relationship which exists where one party acts as an
agent for another.

The most familiar situations where an agency relationship can arise are
where an estate agent or travel agent acts as an intermediary. The
party for whom the agent acts is known as the 'principal'. Therefore, the
holiday company which the travel agent represents will be the principal.
The customer booking the holiday will be the third party.

The resulting contracts are made between the principal and the third
party, and not directly with the agent.

The most important type of agency relationships in the law syllabus are
those seen in partnerships and companies.

 A partner within a partnership is an agent of the business. A
partner can enter into transactions on behalf of the business.
These transactions will be binding upon the business, and thus all
the other partners.

 A director is an agent of a company. They can enter into contracts
on behalf of the company which are binding on the company itself,
rather than the directors.

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