Chapter 17: Agency
Agent: a person acting for another person in contractual relations with third parties.
Principal: the person on whose behalf the agent acts.
Dependant Agents: an agent who acts exclusively or mostly, for a single principal.
Independent Agents: an agent who carries on an independent business and acts for a number of principals.
Commission Agent: one who sells on behalf of a principal to third parties and receives compensation through
- a relationship in which the agent is authorized by the principal to form contracts with third parties, usually
has a contractual agreement where the agent is paid by the principal
- someone can act gratuitously but is still bound by the duties imposed by agency law
- may be created from an employment contract, but an agent need not be an employee, as all employees
are not agents (important for income tax)
- “agency” is used informally, and does not necessarily give all “agents” the power to enter contracts (eg.
real estate contract)
Creation of an Agency Relationship
- any person who has the capacity to contract may appoint an agent, and the power is limited to the
authority that the principal has
- Agency Agreement: the agreement between a principal and agent whereby the agent undertakes to act on
behalf of the prinipal + third party agreement between the principal and the 3 party
- Agreement can be express, implied, oral, written, or in writing under seal, but if it is enforceable beyond
one year it must be in writing
- Should clearly define the agent’s authority, how far the agent can go without obtaining further instructions
before contacting the principal. It can be a very wide range or very specific
- Authorization should be in writing if the agent wants to issue promissory notes of draw cheques in the
agents name; should be signed in a way as to demonstrate that the agent is acting on behalf of the
principal otherwise they could be personally liable for the promise
- Power of Attorney: a type of agency agreement authorizing the agent to sign documents on behalf of the
principal. Must be issued under seal.
principal and 3 rd rd
party that was
created by the agent
- agency may be implied through the conduct of the parties; if the principal has allowed the agent to act like
his agent in dealings with third parties, agency is implied (estoppel principal)
- Retroactively – through ratification, in which the principal adopts the contract as their own