In common law, an "agent" is a person who acts as the legal representative of another. A person represented by an agent is called a "principal." The relationship between the two is called an "agency."
In civil law countries (Scotland, France, Germany, Japan etc.), the word "mandate" (or an equivalent in the local language) is used instead.
Who is an agent
This is best illustrated by example:
Agencies are almost always created by consent, although the exact form of consent varies. Sometimes, agencies are formed by a contract, either oral or written; sometimes, an agency must be formed by written contract (for instance, when the agent is empowered to sell the principal's real estate).
Agencies can also be inferred from the conduct of the agent and the principal, even when there is no contract. A related concept is apparent authority, or "agency by estoppel"—if the principal permits the agent to act like an agent.
Another way to form an agency is by "ratification," which is basically consent after the fact—the agent enters an unauthorized transaction, and the principal later agrees to the entire transaction.
The tiny number of non-consensual agencies arise out of necessity. For example, if a child needs medical treatment and their parents are unavailable, the child becomes an agent of the parent for the purpose of obtaining the treatment. Since children cannot enter contracts, the child temporarily becomes an agent of the parents, and the contract for treatment binds the parents, not the child.
Agencies end when the consent (or necessity) ends. Either the agent or the principal can unilaterally terminate the agency at any time. (If there's a formal contract, they may be liable for breach of contract, but that's a different issue.) Agencies will also end when one of the parties dies or goes bankrupt, or when the purpose of the agency becomes impossible, impractical, or illegal (the last scenario often occurs when a license is needed, but denied or revoked).
Duties of an agent
The exact duties of an agent are often determined by the agency contract. If there is no contract, or if the contract doesn't specify duties, then some default duties apply, known as "fiduciary" duties. These can be condensed into duties of care and loyalty.
Care means that the agent must obey the principal's instructions, keep the principal reasonably informed as to what they're doing on the principal's behalf, protect the principal's confidential information, keep the principal's property (including money) separate from their own, and act with the ordinary degree of skill in their field.
Loyalty means that the agent must avoid any conflict of interest, and if they cannot do so, must inform the principal that the conflict of interest exists.
An agent is considered to be an extension of the principal within the scope of their agency. This means that (assuming the principal has consented) they can sign a contract on the principal's behalf, and the principal will be legally bound to enforce the contract. An agent for a corporation will usually sign a contract like this:
BLOCKSTACKERS INTERGALACTIC, INC.
Nate Oostendorp, CEO
An agent for a natural person would sign like this:
Michael Ovitz, agent for Michael Jackson
That's assuming Jackson is a "natural person," of course, but we'll save that discussion for elsewhere.
Besides contracts, a principal can also be held vicariously liable for the torts or crimes of their agent. Criminal liability usually requires the principal's direction, approval, or participation, but can also arise when an employer knows or should know that their employee is committing a crime on the job (for instance, if a low-level manager is violating discrimination laws, the company can be liable).
Tort liability is easier to pin on the principal. A principal can become liable for a tort if they give improper instructions to the agent ("don't bother fixing those brake pads"), if the principal is negligent in choosing the agent ("do you think your membership in al-Qaeda affects your ability to work at Delta?"), or if the principal has a duty to keep tabs on what the agent is doing and fails to do so ("go ahead and transport the safe deposit boxes in your station wagon... we trust you").
Such cases make sense because the agent's negligence is being furthered by the principal's negligence. However, a principal can be liable for their agent's torts even if the principal played no active role in the commission of the tort: this concept is known as respondeat superior, and is worth a node in itself. Suffice it here to say that respondeat superior usually applies in the context of employment: if a commercial truck driver runs somebody over while on the job, the truck driver's employer will have to pay the damages. Respondeat superior comes up in certain other contexts as well.
Note that in many of these cases, the agent and principal can both be held liable under the doctrine of "joint and several liability." This doesn't mean that the injured party gets paid twice: it means that either the agent or the principal may be held individually liable for all the damages, and will then have to dispute apportionment among themselves.
- Emerson, Business Law (4th ed., Barron's 2004)