Agency Transactions (transactions made by an agent)
24 May, 2012

Judge  Lasha  Kalandadze  is answering our questions on the details of Agency Transactions in civil law, which at the first sight might seem simple to handle but is replete with complicated content deserving our undivided attention.

NBR – Could you please briefly provide us with information on the agency transactions?
L.K. – Legal transactions may be made by (trough) an agent as well. The power (authority) of an agent follows from a letter of authorization (authorization letter) or special provisions of norms. It should be emphasized that agency transactions cannot be applied if transaction must be performed merely by a particular person (principal) or if the law prohibits making of a transaction through an agent. Typical examples of the abovementioned are marriage, adoption, making or changing of a testament (last will) and so on.
NBR – Excuse my funny question, but what is an agent?
L.K. – No, this question is not funny at all. As a matter of question this is a very good question. An agent is someone who agrees to represent another person, called a principal. An agency relationship is usually formed by an agreement between two parties. An agent can only act on behalf of a principal for certain (issues) goals, depending on the type of an agreement. As for a principal, in an agency the relationship principal is the person who gives authority to another one, called an agent, to act on his or her behalf. The principal has the right to completely control the agent’s conduct if it relates to the duties given to the agent by the principal.
NBR – What is the Scope of an Agent’s Authority?
L.K. – This depends on the agreement made between the principal and the agent. In general, there are two ways to determine the scope of an agent’s authority: a) an agent’s authority can be expressly determined. If an agreement specifies (defines) an agent’s duties, an agent does not have authority to represent the principal beyond those duties; b) an agent’s authority can be implied by custom. Custom is determined by the expressly stated duties of other agents in the same position. For example, a realty company hires a real estate agent. It is implied that the agent has authority to help third parties buy and sell houses since it is the custom among real estate agents.
NBR – Are there other ways to determine an agent’s authority?
L.K. – There are situations where an agent’s authority is created even if the person is not an agent. Here are the examples of these different situations: a) Apparent Authority - a principal has a duty not to misrepresent another as his/her agent. When a principal (accidentally or purposefully) causes a third party to believe that someone is an agent, the principal is bound by the agent’s actions even if the person was not an agent. The third party must be reasonable in believing that the person was an agent; b) Emergency Powers – in an emergency situation, an agent may act beyond his/her authority even if the principal did not give the agent permission. For example, an agent might use company funds to provide medical attention to an injured employee. The agent may not have authority to do so, but the emergency situation would excuse the agent’s actions; c) Ratification: There are times when a principal will authorize the agent to act beyond his/her authority. As long as the principal ratifies the action ahead of time, the agent has authority to act.
NBR – What are the duties of an agent to the principal?
L.K. – An agent has several duties towards the principal. Failure to perform these duties can result in a breach of contract or tort liability. An agent’s duties include: a) loyalty; b) performance; c) notification; d) obedience.
(To be continued)