Someone who has been granted authority to enter into agreements on behalf of another person, known as the principal. In commercial terms, an agent sells on the supplier’s account the goods or services, i.e., the agent never takes title to the goods, and contracts of sale are between the supplier and the customer with the agent usually being paid a commission. Crucially, a principal is usually legally responsible for the agreements and acts of an agent within the scope of the agent’s apparent authority, i.e., acts and agreements that a third party might reasonably believe to be in furtherance of the principal’s objectives in appointing the agent.
An agent is regarded as different from a distributor, although in practice it can be difficult to distinguish one from the other. Moreover, even where a party is described as an agent in an agency agreement, courts may consider the facts of the relationship as opposed to the contractual description, applying in effect a “Duck Test.” It is also the case that relationships may overtime have evolved from an agency to a distributorship or vice-versa.
A second area of concern with respect to agency is that courts can imply an agency relationship, where a company or person allows another party to act with “apparent authority,” or “implied authority” as its agent, thus making the implied principal liable for the implied agent’s activities and promises vis-à-vis third parties. This risk can especially arise where, for example, a local distributor is allowed to trade under the principal’s name, an employee engages in unauthorized business, or the putative implied agent is allowed the use of the principal’s offices or negligently allowed access to headed paper or other facilities. See also Agency Directive.