How is an agency established by an employee so that an employer will be bound to...

How is an agency established by an employee so that an employer will be bound to the terms of a contract entered into by an employee of that employer?

Expert Solution

An agency relationship is evident in almost all the employer relationship and even some sales relationship and organizational structures. The concept of an ‘Agency’ relates to dealing with legal transactions where one is appointed to act on behalf of the other for some specified purposes. It thus represents a fiduciary relationship. The party for whom another acts is called as ‘Principal’ and the and one who acquires his/her authority from the principal is called as the ‘Agent’. The relationship between a principal and an agent is always contractual, wherein the rights and the duties of the agent and the principal are always in accordance with the contract.

The establishment of an agency requires either a real written or an implied consent of both the agent and the principal. After the creation, the authority to perform further represents a power of attorney for the other which can be any contract or an employment in itself. In this case, an employee is the agent of an employer and acts on the behalf of the employer. Relating to the type of employment, a fiduciary duty of a higher grade is assigned to a employee or an employer accordingly. In the creation of an agency, the first requirement is the consent of both the principal and the agent. The principal must intend that the agent acts for him/her and the agent must accept this authority of action. Two types of agency exists ie; either expresses/implied and apparent. Depending upon the agency relation it is seemingly implied when the principal gives the implication that the agent may take any course of action when the business is running. Thus an implied agency requires a permission to act. Now, if a third party is involved in the contract, then it will lead to the creation of an apparent agency.

Thus from the above basic tenets, we can see that in an employer relationship, the employer is bound to any actions or flaws that the employee makes , since the employer forms the ‘principal’. Thus when an employer-employee agency is created, the employer is bound to all the activities of the employee in general.

Rahul Sunny answered 8 months ago

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