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Agency Relationship Essay

1406 words - 6 pages

Pavla Routová, ATP


Agency relationships

To start my essay, I chose a story that illustrates the topic. Imagine two designers, John and Peter, who work together under contract on a project for a client. It is a serious business. One day, John takes the complete project created by the two of them to the client and pretends it is all only his work. The client is satisfied and John obtains a big payment. Peter knows nothing about it and finds out only during the next encounter with the client. In this situation, John and Peter are in agency relationship and both have fiduciary duties to each other. They must put the best benefits of the client above their personal ...view middle of the document...

Models, actors, musicians or athletes have very often their agents to secure benefits and work opportunities for them. Today, in the busy world I think it is the best way. Agents take care of their contracts, and Principals, as all these models and actors could be called, don’t have to worry about it. The Agent represents the interests of the Principal. As far as the Agent has done what he or she was instructed to do, the outcome is the same as if the Principal had done it on his or her own. In business, it is impossible for one person to go everywhere and negotiate all the deals that are necessary to grow or maintain the business.

Looking at the Agency concepts we should distinguish different types of agents. There are three broad classes of Agents:

1. Universal Agents – they hold broad authority to act on behalf of the Principal, and they have a professional relationship with the Principal, e.g. as lawyer and client

2. General Agents - they hold a more limited authority, they represents the Principal in the ordinary course of his or her business over a continuous period of time.

3. Special Agents are authorized to conduct either only for a particular transaction or a specified series of transactions over a limited period of time.

But there is no clear division between who is a General and who is a Special agent. Solicitor, for example, could be a general agent if he is working for his client in a range of legal work, but he could be a Special agent if he only sells his client’s house. Other types of agents are for example Broker, Commission agent or Forwarding agent. A Broker negotiates agreements between the contractual parties, but he is not in possession of the goods or documents of title. They are most common in the commodity markets and exchanges. A Commission agent buys or sells the goods on behalf of the Principal, but there arises no contractual relationship between the Principal and the Third party. Commission agent acts as the Principal in the contract with the Third party.

Special type of relationship between Agent and Principal is a fiduciary relationship. The noun fiduciary comes from Latin fiducia, which means trust. In this case, the Principal puts special trust, confidence, good faith and reliance in the Agent, who has a special fiduciary duty to act for the best benefits of the Principal. The basic fiduciary relationship is Parent – Child relationship, typical fiduciary relationship exist also between attorneys and clients, confidential advisors and those advised, corporate directors and stockholders, etc. Characteristically, the fiduciary has greater knowledge or experience in the issues that are being handled. That is probably why this profession came into existence. For instance, some people are not confident in business or stock market or don’t have time to do the business, but they have money and want to spend it there. So, they find themselves an Agent, who knows how these things...

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