The law of agency governs the legal relationship in which the agent deals with a third party on behalf of the principal

The law of agency governs the legal relationship in which the agent deals with a third party on behalf of the principal. -illustrate & explain


In each and every country there are rules and reguations which is been followed all over the country. People who will be be violating this kind of rules and regulation will be punished. However the punishment varies from country to country and it also depend of the intensity of violating the rule, which has been set by the government of that country. When Talking about rules this is where the term law comes into the play.

Lets focus a bit on the formal defination of law-

Law, as it is, is the command of the Sovereign. It means,

1) law has its source in sovereign authority,

2) law is accom­panied by sanctions, and

3) The command to be a law should compel a course of conduct. Being a command the law must flow from a determinate person or group of persons with the threat of displeasure if it is not obeyed.

Sovereignty is, however, only a part of the state. So, in ultimate sense, law emanates from the state. Thus the term Law is used to denote rules of conduct organized society have to follow certain common rules, otherwise peaceful living is impossible. It is the function of the State to enforce these rules


*What is Contract Law??-

Basically the heading says it all. The term contract law actually means that, the law which comes in the play if someone violate a contract or an agreement with someone. What is Contract???

A contract is a legal between two or more parties, and it plays as an ducumentation testimony which shows that both the party has agreed upon a specific negotiation.

However contract comes in different shape and sizes. Some involve large amount of money while other involves trivals sum. Some are long duration, while others are of short duration. The contents of contract varies enermously, and may include contract of sale, hire-purchase, employment and marriage etc.

Contract Act 1872

In law the relationship that exists when one person or party (the principal) engages another (the agent) to act for him, e.g. to do his work, to sell his goods, to manage his business. The law of agency thus governs the legal relationship in which the agent deals with a third party on behalf of the principal. The competent agent is legally capable of acting for this principal vis-à-vis the third party. Hence, the process of concluding a contract through an agent involves a twofold relationship. On the one hand, the law of agency is concerned with the external business relations of an economic unit and with the powers of the various representatives to affect the legal position of the principal. On the other hand, it rules the internal relationship between principal and agent as well, thereby imposing certain duties on the representative (diligence, accounting, good faith, etc.).

The foot nore below will make the act more clear about what does the act actually mean section wise.

Under section 201 to 210 an agency may come to an end in a variety of ways:

The principal also cannot revoke the agent’s authority after it has been partly exercised, so as to bind the principal (Section 204), though he can always do so, before such authority has been so exercised (Sec 203).Further, as per section 205, if the agency is for a fixed period, the principal cannot terminate the agency before the time expired, except for sufficient cause. If he does, he is liable to compensate the agent for the loss caused to him thereby. The same rules apply where the agent, renounces an agency for a fixed period. Notice in this connection that want of skill continuous disobedience of lawful orders, and rude or insulting behavior has been held to be sufficient cause for dismissal of an agent. Further, reasonable notice has to be given by one party to the other; otherwise, damage resulting from want of such notice, will have to be paid (Section 206). As per section 207, the revocation or renunciation of an agency may be made expressly or impliedly by conduct. The termination does not take effect as regards the agent, till it becomes known to him and as regards third party, till the termination is known to them (Section 208).When an agent’s authority is terminated, it operates as a termination of subagent also. (Section 210).

Contract Law in Employment-

A Contract if employment may contain a covenant which purports to restrict the freedom of employee to the work either during or after the termination of his employement. Such covenants are scrutinised with greate care by the court. In deciding weather the restraints clause is reasonable as between the parties, two factors are particularly relevant. The first is that the covenant must seek to protect some legitimate interest of employee Lord parker has stated in in Herbert Morris Ltd v. Saxelby (1961) 1 AC 688, that an employer must establish that he has some propriertary right, weathe in the nature of trade connection or in nature of trade secret, for the protection of which such a restraint is reasonably necessary. Thus an employer can legitimately restraint an employee who has come into contact with customer of the employer in such a way as the acquire influence over them (Fitch v. Dewes (1921) 2 AC 158) or who has acquired trade secret or confidential information belongings to the employer (Froster and Sons v. Suggest (1918) 35 TLR 87). But en employee is not entitled to protect himself against the use of the personal skill and knowledge, acquired by the employee inb the course of the employer’s business. Such skill belong to the employee and he is free to exploit them in the market place.

The second factor is that the restraint must be reasonable in terms of subject matters locality and time. An employer in not generally entitled to restraint an employee from carrying on a business which is different from that in which he was employed . Similarly the restraint must not be wider than is necessary to protect the emplyees interest, according(Mason v. Provident cloathing and supply Co 1913 AC 724), in which a clause of restraning an employee from working in a similar business with in 25miles of london was held to be unreasonable. The restraint must also be reasonable in terms of time, although it is possible for the restraint clause to be unlimited in time and still be reasonable (Fitch v.Dewes).

Once it is demonstrated that the restraint is reasonable as between the parties, it must also be demonstrated that it is reasonable in the interests of the public. However the court are extremely reluctant to conclude that an agreement, which is reasonable as between the parties is unforceable because it is contrary to the interest of the public especially in case of restraint clause in a contract of employment ( Wyatt v. Kreglinger and Fernau (1933) 1 KB 793)

However there is always a contract between an employee and employer. You may not have anything in writing, but a contract will still exist. This is because your agreement to work for your employer and your employer’s agreement to pay you for your work forms a contract. Your employer does have to give you a written statement within two months of you starting work. The statement must contain certain terms and conditions.

A contract gives both you and your employer certain rights and obligations. The most common example is that you have a right to be paid for the work you do. Your employer has a right to give reasonable instructions to you and for you to work at your job. These rights and obligations are called contractual terms.

The rights that you have under your contract of employment are in addition to the rights you have under law, such as, for example, the right to a national minimum wage and the right to paid holidays

Role of Agencyship in contract law-

It would cause a great commercial hardship if a businessman who appointed an agent to enter into a new contract on hi behalf was prevented by the doctrine of privity from suing upon that contract himself. So therefore the doctrine of agency exists to give the businessman such a right of action. An agency relationship arises where one party, agency is authorized by another, the principal to negotiate and to enter into a new contract on behalf of the principal. Once an agency relation is created, the agent is there by authorised to commit the principal to contractual relationship with the third parties. When an agent discloses to the third party that he/she is acting as an agent of principal and he conclude that the contract with in the scope of his authority, the general rule is that the contract is made between the principal and the third party and the third party and the agent cannot sur or be sued on the contract. Such a transaction is not generally an exception to the doctrine of private because the function of the agent is to negotiate the contract on his behalf of his principal as the true party of the contract. However there are certain aspect of law of agency which appears to flout the tradition doctrine party. One such aspect is the rule that a principal may, in certain limited circumstances, sue upon the contract even though the agent has not disclosed to the third party that he is acting as an agent for the principal. In this situation the thrid party could find him/herself in a contractual relationship with the person of whose existence he was blissfull unaware at that time that he entered into a contract. The ability of principal to ratify the unauthorised act of his agent is also said to be an exception to the doctrine of privity.

How does labor law get introduced-

Normally when a company form, all the paper works is been done in pen and papers. Now most of the designation, and assaignment is been done through contract and papers. According to the labor law, it has been said that before downsizing an employee atleast a notice should be sent to him/her atleast a month before such action takes place. However this is how most companies carry out there operation and this rule has been stricly followed which has been implemented by the british law. However now a days it varies from company to company. For example some companies tend to focus on 6month or an year contract, now the termination of employee before 6month or one year, will be allowing the agent even to sue the company. But however now a days these types of case are often taking place, so thats is how in such situation or cases the role of labor law comes into the play. In some next sentions we will be seeing some types of relevant cases in terms oif example.

*Types of Relevant cases those that are likely to take place:

The situation doesnt stay the same like all the time. It waries from environment, circumstances, and also from geographic location to location. For example, rules and regulation in our subcontinent, is highly differes with the rules and regulation in other continents. Let me just refresh your memory by repeating the topic again in my words. Basically the topic said that when a Boss fire/downsize/sac his employee with out notifying him/her is a violation of contractual law, provided a contract had been made innitially.

Suppose, As for example-

Mr. Rahim works for grameen phone in the Humen Resource Management and Under Mr.Quddus, who happens to be the head of Humen Resource Management. Now Mr.Quddus hired Mr.Rahim for in a contractual agreement, which says that Mr.Rahim as been hired in the Grameen Phone HR Deparment, and he will be working here for atleast one year, untill furthur notice. Which means before a year, Mr.Rahim wont be able to get sac/downsized/fired from the HR department of Grameen Phone.

However after the contract if Mr.Quddus thinks that Mr.Rahims service is no longer required, then Mr.Quddus have to notify Mr.Rahim one month before atleast.

What are the types of situation likely to take place, When…

>.Mr Quddus sent a notice at the end of 6month to Mr.Rahim for his resignation letter??

Well in this case, Mr.Quddus’s words will not be taken under the authorities consideration. Because, Mr.Rahim already is tied up in a contract, which says before one year Mr.Rahims cant get sacked or fired. As per the contract.

>.Mr Rahim switched to a different company before the year end

Well, in such case legal action is going to be taken upon Mr.Rahim, since he agreed that he will not be leaving the company before one year. So, if he does, then legal action can be taken upon Mr.Rahim for the violation of such contractual agreement.

>. What if Mr.Rahim has been sent the letter by Mr.Quddos after one year, but Mr.Rahim is dening the fact that he didnt get the notification??

Well first of all if, Mr.Quddus sent the letter to Mr.Rahim after one year then its is absolutely okey for the lagal department to consider such sue, but if Mr.Rahim is claming that he didnt get the notice then a month before, then to proof the both side the tranportation company by which Mr.Quddus had sent the letter to Mr.Rahim will come into the play to proof the fact. Now based upon what they have to say, the final decision will be taking place. However then the situation will fall under the section of classification of Invalid Contract.

Invalid contract-A Contract which does not satisfy the above tests may be either void, voidable or unenforceable. A void contract is not a contract at all. A voidable contract is a contract which one party may avoid, that is terminating at his option. A contract is usually unenforceable when the required of its terms, for example written evidence of a contract relating to land, is not available

*How Law varies from on place to another?

There are lots of advantages and disadvantages of having rules and regulation in a country, but inspite of everything without rules and regulation cuvilization wouldnt have taken place. We are social creatures and the most sophisticated one, highly backed up by the fact of rules and regulation. Hence the term law comes into the play. However it varies from different location and different country to different geographical areas, for example- Laws those are being followed in USA wouldnt be applicable over here in Bangladesh, Laws those that is been followed in Europe, would hardly relate with the system that is been followed in Africa, so which lead to the fact that in each abd every country there are rules and regulation and law, but those implementation is depend upon the tradition and culture of that particular country. If i say only tradition and culture, then it wouldnt completly be true. Because human behavior, and way of life also happen to be one of the important fact to be taken upon consideration. This is because people tend to behave very differently from one place to another. People in Africa wouldnt behave or wouldnt have the same mentality, like the people in England OR people in Middle East, is highly different, from the People in North-East part of Europe. So based upon those behaviral factor rules and refulation are being implemented.

Bottom Lines:


In this entire very world, starting from a simple pin and ending in rocket and spaceship each and every thing, doesnt matter tangible or intangible has cetain degree of advantages and disadvantages. Each and every product, service, and what so ever the object is, everything has a dark side and bright side. But the thing that matters the most is, what is the degree of having a possitive impact and what is the possibility of having a negative impact, based upon these two factor, each and everything are being analysed. Law is something very like that. Without law, there wouldnt have been any civilization taking place. However about what the topic has to offer

has been evaluated analysed and had been given proper measurement of factual and hypothetical statments. Different scenarios alos had been put upon to make it easier for the reader to delever, what has been reflected on my min regarding the topic, and what my perception has to offer and give in term of intellectual resources.


# Ewan Mckendrick, Contract Law (8th edition, Palgrave Macmillan, UK 2009).

# Jill Poole, Contract Law (10th edition, Oxford University Press, New York 2010).

# Terence Ingman, The English Legal Process (13th edition, Oxford University Press, New York 2010).

# James Holland and Julian Webb, Learning Legal Rules (7th edition, Oxford University Press, New York 2010).

# Michael Zander, The Law- Making Process (6th edition, Cambridge University Press, Cambridge 2004).

# Neil Parpworth, Constitutional and Administrative Law (4th edition, Oxford University Press, New York 2006).