What are the effects of the acts of an agent if he exceeded the authority given to him?
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Scope and authority of the agent Show
Published by a LexisNexis Commercial expertThe following Commercial practice note provides comprehensive and up to date legal information covering:
This Practice Note describes the nature and degree of an agent's authority which is conferred upon it by the principal, subject to some limitations. This Practice Note considers the different types of agent’s authority, including actual, apparent and customary authority. It also considers authority granted under a power of attorney. This Practice Note considers the impact of an agent acting outside of its authority, whether the actions of an agent acting outside of its authority are binding on the principal and what remedies are available to a principal when an agent acts outside of its authority. Authority of agentAn agent's authority is conferred by its principal. The scope of authority granted to agents by principals in business matters is usually a combination of all or some of the following: to introduce, conclude, or otherwise deal with contracts between the principal and customers. An agent does not necessarily have authority to bind a principal in contractual relations; this will depend on the nature of the agent’s appointment and the authority that the principal grants to the agent. Where such authority exists, the agent will have the power to bind the principal to contract. Where such authority is absent, or the relevant act is outside the scope of the relevant authority, the contract will not be binding upon the principal. Authority may be general, or limited
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An agent is an individual who agrees to represent another individual, who is referred to as a principal. Agency relationships are typically formed by an agreement between those two parties. The agent is only permitted to act on behalf of the principal for certain issues, depending upon the agreement between the parties. What is the Scope of an Agent’s Authority?The scope of an agent’s authority will depend upon the agreement that is made between the agent and principal. Generally, there are two ways to determine the scope of the agent’s authority, express or implied. An agent’s authority may be expressly determined. If the parties enter into an agreement that specifies the agent’s duties, the agent is not permitted to represent the principal beyond those duties. The authority of an agent may also be implied by custom. Customs are determined by the express duties of other agents in the same position. For example, suppose a realty company hires a real estate agent. It is implied that the real estate agent has the authority to assist third parties to purchase and sell homes because that is the custom for real estate agents. Are There Other Ways to Determine an Agent’s Authority?There are certain situations in which an agent’s authority is created even if the individual is not an agent, including:
The principal has a duty not to misrepresent another individual as their agent. If a principal, whether accidentally or purposefully, causes a third party to believe that an individual is an agent, the principal is bound by the actions of the agent even if that individual was not actually their agent. The third party must have been reasonable in believing that the individual was an agent. This is also referred to as agency by estoppel. In emergency situations, agents may act beyond their authority even if the principal did not give them permission. For example, an agent may use company funds in order to provide medical attention to an injured employee. The agent may not have the authority to use those funds in that manner. However, the emergency situation may excuse the actions of the agent. There are situations in which a principal authorizes an agent to act beyond their authority. So long as the principal is aware of the stretch of authority and ratifies that action ahead of time, the agent has the authority to act. Why is Agent Authority Important?Agent authority often determines whether or not a principal or an agent may be held liable in a lawsuit. If an agent acts under the authority of the principal, the then agent was most likely under the control of the principal and, therefore, the principal may be held liable. In most cases, the principal has more funds than the agent. Because of this, an injured party may want to go after a principal because they may be able to obtain more compensation, although suing the agent may be easier. What Happens if the Agent was Operating Outside the Scope of Authority?If an agent acted outside the scope of their authority, the principal will not be liable for any injuries or losses. The only exception to this rule is if a principal ratified an agreement. If an agent was acting outside of the scope of their authority, the agent can be liable for any breach of contract or injuries. What Are Some Common Principal-Agent Problems?A principal-agent relationship may be helpful for accomplishing a number of business or personal tasks. Having another individual, such as an agent, represent a party may free them up to complete more tasks on their own. Some principal-agent problems may sometimes arise in the course of this type of arrangement. Issues including agency formation as well as the termination of an agency relationship may also arise. In order to avoid confusion and/or legal issues, formation and termination of a principal agent relationships should be outlined clearly in a written contract. Common principal-agent issues may include:
Other principal-agent issues may arise, including:
This will depend upon the individual contract between the agent and the principal. Who Can be Held Liable in a Principal-Agent Relationship?If an agent causes injury to a third person or enters into a contract with a third person, the principal typically may be held liable for the actions of the agent if the agent acts within the scope of their express or implied authority and they have been specifically instructed to perform the task on behalf of the principal. An agent, however, may be held personally liable for conduct they performed during the principal-agent relationship when authorization was not provided by the principal and the agent acted in such a way that their actions constitute:
This may occur if the agent has stepped outside of the boundaries of their agency relationship. What Are Some Legal Remedies for Principal-Agent Problems?The legal remedy for a principal-agent issue will vary depending upon the nature of the conflict that arises. If a principal is suing an agent, the remedy may be that the agent will be required to pay a monetary damages award in order to reimburse the principal for their losses. The agent may be required to make a lost business reimbursement if their conduct resulted in the principal incurring any lost profit or lost business. In other situations, a principal may be liable to an agent if there was a breach of contract. One common example of this situation occurs when a principal fails to pay an agent for their services. A principal or an agent, or in some cases, both, may be liable to a third party if they harm or cause losses to an outside party. This type of conflict may be confusing because it is not always clear whether a principal or the agent should be held liable for the loss. In many instances, a principal may be held liable for conduct which they authorized an agent to do. This, of course, will vary with each unique case. Some cases may also require the assistance of an attorney. How Can an Attorney Help Me?Principal-agency relationships are similar to employer-employee relationships. A contract lawyer can assist you with any issues involving agency law. Your lawyer can assist you if an issue has already come up. Your attorney can also assist you before an issue ever arises by assisting with drafting an agency agreement or informing you if any of the parties to an agreement have violated their duties. What will happen when the agent exceeds his authority?( ACT NO. IX OF 1872 )
227. When an agent does more than he is authorized to do, and when the part of what he does, which is within his authority, can be separated from the part which is beyond his authority, so much only of what he does as is within his authority is binding as between him and his principal.
How far is the principal bound when the agent exceeds his authority?When an agent exceeds the agent's authority, the agent's principal is bound by the agent's authorized acts only so far as the authorized acts can be plainly separated from those that are unauthorized. History: En. Sec. 3113, Civ.
What is the effect when the agent has acted with in the scope and in the name of the principal?If the agent has acted within the scope of the actual authority given, the principal must indemnify the agent for payments made during the course of the relationship whether the expenditure was expressly authorized or merely necessary in promoting the principal's business.
Is the principal bound by the actions of an agent if the agent exceeds the stated scope of authority?The principal is not bound if an agent acts without or outside his authority ("falsus procurator") unless he ratifies, expressly or impliedly through his conduct, the acts of the agent. In the latter case, the act produces the same effects as if it had initially been carried out with authority.
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