Business Law 101

Creating An Agency Relationship

BY ALBERT L. KELLEY

The easiest way of creating an agency is by a written agreement. A simple power of attorney will work for doing this. An agent under a power of attorney is called “an attorney in fact.” The proper way for an agent to sign a contract under a power of attorney is to sign the agent’s name rather than the principal, and signify that you are signing as their agent: “Bob Smith, as attorney in fact for John Jones.”

An agency relationship also can be developed by the conduct of the parties, even if the principal doesn’t mean to create one. If an employee acts as an agent, and the principal doesn’t object, an agency may be created.

If a principal takes some action to make it appear that another person has the authority to act on his behalf, when the person does not actually have the authority, it is called “apparent authority.” While this does not actually create an agency relationship, the principal will not be allowed to challenge it and he will be bound to any agreements that resulted.

If someone enters into an agreement as an agent without proper authority, actual or apparent, the principal may either ratify the agreement or ignore it.   The ratification must be actual. That is, the principal must intend to ratify the action, must have been able to authorize the act when it occurred and when he ratified it, and he must have full knowledge, or should have full knowledge of all the facts before ratifying. The action must also be ratified before the other side withdraws the offer.

An agency may be terminated by either the principal or the agent. It also may be terminated by its own terms or in some cases by law. If the agency agreement specifies that it is only for a specific purpose, once that purpose is over the agency is over. If the agreement states that the agency is for a specific period of time, the agency ends at the end of the time period. If no time period is stated, it is terminable at the will of either party.

Time is a common feature in contracts for sports agents. The agent has time and money invested in the agency agreement and wants to recoup his investment. Often the contracts will have clauses stating they may be terminated if one side gives the other side certain notice, or pays out a certain amount of money. The principal may always revoke the agency agreement, even if the contract states that it is irrevocable, however there may be a penalty for the termination. The same is not true for the agent. They may quit acting as an agent if there has been wrongful action of the principal, or if the agency is at will, but other than that, the agent may incur liability if he fails to continue acting as an agent.

There is no specific action required for revocation. Any action that indicates an intent to revoke the agency is sufficient. A revocation may be filed with the courts, delivered to suppliers and customers, or just tell the agent of the revocation directly. Any of those actions will result in a revocation.

Al Kelley is a Florida business law attorney located in Key West and previously taught business law, personnel law and labor law at St. Leo University. He is also the author of “Basics of Business Law” (Absolutely Amazing e-Books). This article is being offered as a public service and is not intended to provide specific legal advice. If you have any questions about legal issues, you should confer with a licensed Florida attorney.

 

[livemarket market_name="KONK Life LiveMarket" limit=3 category=“” show_signup=0 show_more=0]