The reality in a commercialised world is that we often do not have the time or expertise to personally attend to all our transactions.
Furthermore, legal entities cannot function without having natural persons to perform transactions on their behalf. The result of this is that representation takes place: A relationship between a principal and agent comes into existence.
- What is agency?
This is the situation whereby one person (the agent) performs a legal act on behalf of another (the principal), with some legal authority to do so. The agent is not a contracting party himself, but rather acquires rights and legal duties for his principal, to which the latter is bound.
The vast majority of juristic acts can be performed by way of agency.
- Typical examples of agency.
· A sales representative selling products on behalf of his company;
· An estate agent marketing a property on behalf of the owner;
· An attorney representing a party in court;
· A friend attending an auction to purchase furniture on your behalf.
- What are the requirements for agency?
The most important are the following:
· The agent and principal must reach consensus to act as such;
· The agent must have the legal authority to act on behalf of the principal;
· There must be at least three parties, i.e. the principal, an agent and the third party with whom a commercial transaction is concluded;
· It must be made known to the third party (or be clear from the circumstances) that the agent is acting on behalf of the principal (and not personally);
· Certain formalities might exist (such as a written proxy being required, or in the case of estate agents, where the law requires that they are appointed in writing).
- How does an agency relationship come into existence?
· Contract of mandate: When a (written or oral) agreement is entered into between a principal and agent, in terms whereof the latter may enter into certain agreements on behalf of the former;
· Employment contract: Employees are generally required to perform acts on behalf of their employer, such as a cashier selling products in a supermarket;
· Ratification: It might happen that an “agent” enters into an agreement on behalf of a “principal” without having had the authority to do so. If the “principal” then expressly or tacitly, after the fact, approves of what the “agent” has done on his behalf, the agency agreement comes into existence retrospectively and the agreement with the third party is enforceable;
· By operation of law: Although this is strictly-speaking not “agency” in the traditional sense, an executor can be appointed to perform legal acts on behalf of a deceased person or a curator bonis on behalf of a person who lacks mental capacity;
· Estoppel: If a “principal” creates the impression with a third party that he has appointed someone as his agent (while he, in fact, hasn’t), and the third party contracts with such agent to his prejudice, the third party can in certain circumstances enforce the agreement against the principal as if there was valid agency.
If an agent acts within the scope of his mandate received from his principal, the principal will be legally bound by what has been done by his agent.
When agents exceed their authority or act negligently or recklessly, their principals can suffer serious damage. It is therefore important to ensure that the relationship between yourself and your agent is properly regulated. A thorough, written agreement of mandate prepared by a suitably qualified professional will protect your interests.
Francois de Kock and Juan Kotze of Juan Kotze Attorneys may be contacted at 011 892 1019, francois@therescueshop.co.za or juan@therescueshop.co.za.
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