AGENCY

in law, the relationship that exists when one person or party (the principal) engages another (the agent) to act for hime.g., to do his work, to sell his goods, to manage his business. Early precedents for agency date back to Roman law, when slaves (though not true agents) were considered to be extensions of their masters and could make commitments and agreements for them. This was an outgrowth of the preference in Roman law to have relations between principals as direct as possible. Through the European Middle Ages, legal writers in continental European civil-law countries attempted to change the concept with little success. It was in Anglo-Norman England in about 1200, under the system of common law, that two special figures were created, greatly advancing the notion of agency. The ballivus and attornatus began as close relatives of the masterservant relationship. The ballivus handled commercial transactions and became in time a nearly independent land administrator for the principal. The attornatus represented parties in litigation and became the principal's sole representative before the court. The servantmaster aspect of agency relationships predominated for many centuries and still has a place. Technically speaking, an employee of an individual or of a business stands in a servant relationship to the employer and is considered an agent. The matter becomes a legal problem when the agent injures or wrongs a third party. A doctrine called respondeat superior, devised in 17th-century England, provides for the injured third party to hold the master or employer liable for the agent's actions, the rationale being that the employer controls the employee's behaviour and must thus assume some responsibility for the employee's actions. This liability is usually limited to acts occurring while the agent is acting within the scope of his employment. The great increase in shipping, banking, insurance, and mercantile transactions generally, which occurred in the later 18th and early 19th centuries, brought another kind of agency relationship to the fore. Ship's captains, insurance brokers, bank managers, factors, and salesmen were agents whose relationships to principals could not aptly be defined as servant to master. Legal scholarship of the 19th century, primarily in Europe, came to deem that the authority to effect legal transactions resides in certain agents independent of the specific contracts made with individual principals. This is a primary feature of modern agency laws in many countries. The relationship is seen in two parts. Its internal aspect is the bilateral agreement, the contract of agency, existing between agent and principal, which protects the rights of the principal to (1) receive the benefits of the agent's services and (2) be assured that only certain actions will be carried out. The external aspect is a unilateral act of authorization bestowed on agents according to their specified positions within a given legal system. There is some variety among systems relating to this external relationship. In some countries, like France, Spain, Portugal, and Brazil, the agent's authorization is seen to be direct and not independent of the mandate given by the principal. This mandate, more closely akin to the servantmaster relationship, often requires a certain degree of formality, such as written authorization, for its verification. The Scandinavian countries, Germany, Japan, Poland, Italy, and others take the more modern view that an agent's authority exists independent of a specific written mandate from the principal. Under such circumstances, an agent, given a general charge, has more flexibility to act for the principal's benefit; and, in systems in which complicated laws make access difficult to laymen, such flexibility is useful. For example, minors can exercise many rights through agency that are not available to them in person. Anglo-American law is of this latter school of legal thought. The range of agency roles is broad in both continental European and Anglo-American systems. The commercial agent in continental countries may possess varying authority. A commission agent sells goods upon which a principal has basic claim, minus the agent's commission, but the agent may handle transactions any way he likes. A commercial agent handles the negotiation of contracts and can conclude them for the principal. A broker provides services of employment or placement on an entirely independent basis from the principal, and the salesman has a dependent relationship to the principal, who stands as a direct employer. In the Anglo-American system, agents known as factors and brokers manage transactions involving personal property. Brokers differ in never having physical possession of the property, only contract to it. Real-estate agents can represent the principal in property-sale negotiations but cannot transact deals affecting ownership. A large group of agents are those who manage businessesadministrators and managers. Their powers can be extensive. On an executive level, corporate directors determine entire policies for stockholder principals. Legal representatives, lawyers, use their extensive training to do whatever they can for the benefit of a client, the principal. in law, the relationship that exists when one person or party (the principal) engages another (the agent) to act for hime.g., to do his work, to sell his goods, to manage his business. The law of agency thus governs the legal relationship in which the agent deals with a third party on behalf of the principal. The competent agent is legally capable of acting for this principal vis--vis the third party. Hence, the process of concluding a contract through an agent involves a twofold relationship. On the one hand, the law of agency is concerned with the external business relations of an economic unit and with the powers of the various representatives to affect the legal position of the principal. On the other hand, it rules the internal relationship between principal and agent as well, thereby imposing certain duties on the representative (diligence, accounting, good faith, etc.). The two relationships need not be in full conformity. Thus, an agent's effective powers in dealing with outsiders may extend to transactions that he is under a duty to his principal not to undertake, leading to a situation characterized as apparent authority. Agency is recognized in all modern legal systems as an indispensable part of the existing social order. It fulfills the most diverse functions in both public and private law; in particular, it assists in organizing the division of labour in the national and international economy by making it possible for a principal greatly to extend his individual sphere of activity by having one or more persons act for him. In addition to the individual principal, a principal may be composed of a group of persons carrying on a trade or business by way of a partnership, a registered company, or another kind of corporate entity. The need for legal representation in some form has therefore increased as business units have come to involve transactions conducted at a distance (through the use of factors, or commercial agents) or have grown in size (as in the case of the firm, the house, and the corporation). Continental law additionally allows the use of legal representatives, such as the father, mother, guardian, or curator (curateur, tuteur), to enable minors, insane persons, and other legally incapacitated persons to act. Although a similar category of authority by law is not unknown in common law, powers based on family relationships are scarce and appear in only a few cases. Additional reading Oliver Wendell Holmes, Agency, in Collected Legal Papers (1920, reprinted 1985), pp. 49116, is an Anglo-American treatment written from a historical point of view. Harold Gill Reuschlein and William A. Gregory, Handbook on the Law of Agency and Partnership (1979); W. Edward Sell, Agency (1975); Warren A. Seavey, Studies in Agency (1949), and Handbook of the Law of Agency (1964); G.H.L. Fridman, The Law of Agency, 5th ed. (1983); and S.J. Stoljar, The Law of Agency: Its History and Present Principles (1961), are Anglo-American works on the basic principles of the law of agency. Comparisons between Anglo-American and civil law rules are offered by Wolfram Mller-Freienfels, Die Vertretung beim Rechtsgeschft (1955), and Law of Agency, The American Journal of Comparative Law, 6:165188 (1957); and Konrad Zweigert and Hein Ktz, An Introduction to Comparative Law, vol. 2, The Institutions of Private Law (1977; originally published in German, 1971), pp. 98108. Wolfram Mller-Freienfels