Legal Definitions - agency

Agency law is a set of rules that governs the relationship between agents and principals. An agent is someone who acts on behalf of another person, called the principal. The principal-agent relationship is created when the agent is given the authority to act for the principal.

There are two types of authority that an agent can have: express authority and implied authority.

• Express authority: An agent has express authority to take any actions requested by the principal as well as authority to take any actions inherently necessary to accomplish those requests.
• Implied authority: An agent has implied authority to take any action the principal’s conduct indicates the agent should do. Furthermore, failure by the principal to object to an agent’s prior actions may create implied authority to repeat those actions in the future. An agent does not have implied authority to do anything expressly prohibited by the principal.

For example, if a principal hires an agent to sell their car, the agent has express authority to negotiate the price and complete the sale. The agent also has implied authority to take actions necessary to complete the sale, such as showing the car to potential buyers and advertising the car.

In addition to actual authority, a principal may be bound by the actions of an agent if apparent authority existed.

• Apparent authority: An agent has apparent authority when, despite no existing authority, a third party reasonably infers that someone is authorized to act on the principal’s behalf due to the conduct of the principal.

For example, if a principal allows an employee to wear a uniform with the company logo and interact with customers, a third party may reasonably infer that the employee has the authority to act on behalf of the company. In this case, the employee has apparent authority to make decisions on behalf of the company.

Additionally, principals can be held liable for the torts of their agents under the doctrine of vicarious liability.

• Vicarious liability: A principal is always liable for torts committed while the agent completes their official responsibilities.

For example, if a delivery driver causes an accident while making a delivery for their employer, the employer is vicariously liable for any damages caused by the accident.

However, if the agent commits a tort outside of their official responsibilities, the liability of the principal depends on whether the agent’s tort occurred during a frolic or a detour.

• Detour: A principal is liable for the detours of their agent.
• Frolic: A principal is not liable for the frolics of their agent.

For example, if a delivery driver causes an accident while running a personal errand during their delivery route, the employer may be liable for the damages caused by the accident because it was a detour from their official responsibilities. However, if the driver causes an accident while joyriding in the delivery truck, the employer may not be liable because it was a frolic outside of their official responsibilities.