Implications of Agency

Implications of Agency



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Implications of Agency

Yes I am definitely liable to pay for the wrong order although I did not personally order the goods from the vendor. This is because I gave my friend complete authority to make an order the moment I hired him to act as an agent for my business. I am the principal owner of the business who sort the services of unskilled friends to conduct activities affecting the business on my behalf. Therefore, the burden of paying for the wrong order is still mine.

Implied agency association is established based on parties’ actions which indicate that the parties have mutually agreed to have an agency relationship (Heath, 2009). An agency relationship exists whenever the principal party depends on the agent party to embark on some action on behalf of the principal. Implied authority agency that apply in this situation are agency by necessity, and holding out.

In the agency by necessity, it might become necessary for one party to act as agent for another party. For example, I hired my friend to become my agent because i am faced with rising expenses and cannot afford to hire “actual” employees. This can be viewed as an agency of necessity. Agency by holding out is where my friend (agent) has been accustomed to placing orders from vendors and he improperly places several orders. I am therefore liable to pay the vendor since he (agent) was acting on my behalf

One of the ways the company can cancel the improper order is through a valid defense to the contract of ordering and receiving goods: Unconscionability contract. This defense applies to different types of conduct, thus a court of law will examine the factors that make the contract unconscionable. The factors are whether one party consulted an attorney or asked questions, and whether the party is unqualified/uneducated/illiterate. My friend whom I hired to be my agent did not have the necessary qualifications. He placed improper orders due to his naivety. Therefore, he is the unqualified party in the contract and also the vendor did not ask questions regarding the improper order.


Heath, J. 2009, ‘The Uses & Abuses of Agency Theory’, Business Ethics Quarterly, 19, 4, pp.