Delegating your legal authority is called “agency”. A principal gives her authority (rights) to an agent.
Qui facit per alium facit per se: he who acts through another acts himself.
The proposed agent must accept the principal's offer to act as an agent; that's the agency contract and it gets the ball rollling in terms of the agent being "out there" representing the principal, as if she or he were a clone thereof.
Rights given by the principal to the agent can be limited or unlimited (usually limited - why let a clone "out there" to potentially run amuck!).
The critical legal point: an agent’s actions with a third-party binds the principal ... until the third-party has rec’d notice that agency agreement terminated!
Here's the flow of the action:
Principal speaks to his agent who speaks to the third-party.
Agent contracts with the third-party = principal is bound to that contract with the third-party.... even though the principal and third-party have never met!
Contract results between the principal and the third-party (and not between the agent and the third party); the agent being merely the intermediary.
A great example is a lawyer:
- Lloyd Duhaime, lawyer hired by John Doe to sue Camosun College for “negligent hiring of business law professors”.
- Lawyer (Lloyd Duhaime) signs the legal paperwork and manages John Doe’s litigation.
- If the College offers to settle the case by reimbursing Doe’s tuition, and Duhaime accepts it, that acceptance is contractually binding on Doe even though he had no direct dealings with Camosun the whole time!
... or the real estate agent (aka "realtor") such as Vancouver realtor Mitchell Mingie (pictured, left).
You want to buy a house but know little of the in's and out's of houses or house buying. Mr. Mingie does - he trained for it, certified by a government agency and that's all he does - so you hire him to be your real estate agent and enter into an agency contract with him. Then, he does his thing; searching "for sale" houses for you within the general parameters you have given him.
Agency relationships like this play themselves out everwhere on a daily basis.
The "third party"
An outsider. The principal is the first party to an agency agreement and the agent, the 2nd party, making it, with the third-party a real party(!) or a ménage-a-trois.
The third point of the triangle!
Third-party must have notice of agent’s status.
In dealings with the third party, the agent does not have to reveal the identity of the principal but must reveal his or her agency status.
The third-party can insist on disclosure of the identity of principal but if not, non-disclosure of principal’s identity will not affect the principal • third-party's contract.
QNS Paper v Chartwell
C was never asked by QNS who their principal was but Chartwell always said it was acting as an agent.
When the services contract C had negotiated fell through, QNS looked to C for damages.
HELD: if the third-party does not require the identity of the principal and the agent is clear as to his status as an agent, the agent is just that and is not personally liable for breach of the principal+third party contract.
Some commonly known agents
- Lawyers and attorneys: represent persons in legal disputes or negotiations.
- Travel agent: represents principals to make travel contracts.
- Real estate agent: negotiates for their client in real estate deals.
- Sports agent: negotiates for their athlete/client with the sports club.
- Entertainment agents: try getting Britney Spears on the telephone!
Note: agents do not become employees of their principal!
LIABILITY
Nothing of the law of agency detracts from the basic law that agent is always personally liable for his/her torts; nothing in the cloak of agency shields the agent for his direct liability in regards to his errors or omissions. The agency agreement merely adds another level: that the principal may also be liable towards another for the same tort.
In any event, the Canadian law is presently unclear on the extent of a principal’s liability for an agent’s tortuous conduct. The most prevalent theory: the principal can be liable for agent’s torts as well if committed within scope of agent’s authority.
As with vicarious liability of employers for independent contractors, the tendency of the Courts now is to accommodate liability rather than exclude it, deferring to the principle of respondeat superior.
An agency relationship may be implied by law, but this is rare given the consequences in law as to the potential obligations of the principal.
Examples are a wife can be presumed to be agent for husband and vice-versa (rebuttable presumption) and in maritime law, a captain can bind ship owner re emergency repairs.
USEFULLNESS
Agent may have specialized knowledge to use for the principal’s benefit (having a carpenter job buy my storm windows for me or hiring Mr. Mitchell to buy a house in Vancouver).
An agent may be geographically advantaged re third-party (have a travel agent in Paris arrange for my car rental upon my next visit).
The agency agreement is contractual: the soul is the agency agreement which spells out the extent of an agent’s “borrowed” authority on behalf of the principal.
Mentally incompetent persons cannot contract agency. Minors can be agent (!) and his actions – although a minor – if within the scope of authority, will fully bind the principal. When a minor is a principal, Infant Act contract voiding rights may apply so it's not generally a good idea.
Power of Attorney (POA) - the ultimate agency agreement!
"I, Lloyd Duhaime appoint Jane Doe to be my attorney and negotiate and purchase a large coffee at the Moka House Coffee Shop. This power of attorney may be exercised during any legal incapacity on my part. Any previous power of attorney or any delegation of a previous power of attorney is hereby revoked."
A principal does not lose her/his authority to contract for themselves while the agency agreement continues.
The principal must pay the agent for expenses incurred and “reasonable fee” for agency services, unless otherwise agreed.
A principal can revoke the agreement. This is essential or you could have a two-headed monster with both the agent and principal making entering into contradictory agreements, causing all kinds of legal quagmires. Usually, the agency agreement will specify when it ends.
THE AGENT
- Loyalty is to her principal: not to the third-party.
- Honesty req’d - fiduciary duty.
- Cannot act for principal and third-party or represent any competing principal (subject to contractual or statutory exceptions)!
- Must keep accounts and report as required or if asked, on exercise of duty.
- Has authority set out in agency agreement or implied from the circumstances.
- Must follow instructions or will be liable for damages.
- If retained due to specialized knowledge, must perform to that standard.
Volkers v Midland Doherty
V gave instructions to an investment firm to deal with certain shares “first thing”. The investment firm hesitated and $ was lost to V as a result.
HELD: investment firm liable for loss as by hesitating, it had not followed instructions to act “first thing”.
Agency ends
- By death or bankruptcy of the either the agent or principal
- Notice to the agent and to the third-party, or
- By completion of whatever task the agency agreement was limited to.
References and further reading:
- mitchellmingie.com
- QNS Paper v Chartwell 1989 2 SCR 683
- Volkers v Midland Doherty 1985 17 DLR 4th 343 (BCCA)