Agency agreements are contractual relationships between two or more parties, when one party (the agent) is able to contractually bind the other party (the principal). Agency agreements are very common, but for good reasons solicitors are often involved.
How do agency agreements work?
The agreements are sometimes between two individuals, for example:
- An estate agent
- A home buyer
Or, the agreements may be between two companies, for example when one company is able to contract on behalf of another.
The main goal of these agreements is to allow the agent to act on behalf of the principal, legally binding the principal to agreements they enter.
Agent agreements may arise without the need for writing, and on occasion without intent. Whenever a party permits another party to act on its behalf there is the potential for an agency agreement to arise.
Who has the legal responsibility in an agency contract?
In a corporate setting however, the most commonly seen agency agreements are between directors of a company and the company itself.
For example a director of a company (i.e. the agent) must keep in mind that his actions could be judged in a court based on whether or not they were taken with the company’s best interests in mind.
This important legal responsibility is crucial because when an agent’s ability to act on behalf of an entire company is misused, it can have adverse effects on the entire company and other companies which trade with it.
This relationship places much power in the hands of the agent. The law therefore places the agents under fiduciary duties, ensuring that the agent’s behaviour will always be for the benefit of the principal.
Company directors are said to have agent agreements with the company, where they serve as agents and the company is the principal. With company law the fiduciary duties are also defined in statute (specifically the Companies Act). These are set to ensure that the agent’s actions reflect their company’s best interest.
If you have entered into an agency agreement and you are unsure of your rights or obligations, it is vital that you see a legal professional. A breach of fiduciary duties can have very serious consequences for either party. It can be a complex legal matter to litigate, and a professional’s opinion in the early stages can help you identify what your legal options are, and how best to proceed.
For more advice on how agreements can be illegally broken, see our page on breach of contract.
Are you party to an agency agreement and a dispute has arisen throughout the course of the contract? Are you a business that needs an agency agreement drafted? Caven can put you in touch with specialist commercial solicitors suited for your industry, who can advise on any legalities relating to agency agreements. Please call us on 08001 221 2299 or complete the web-form above.