Commercial Law I (Scottish Law)- Assignment Example | Topics and Well Written Essays - 2000 words

Commercial Law I (Scottish Law)- - Assignment Example The principal can expressly or implicitly permits the agent to perform certain tasks on his behalf which will lead to a binding contractual accord between the principal and the third party but the contract is signed by the agent. In this case, the principal will be legally bound by the actions the agency relationship which exists between agents-principals, agents-third and Principals-third parties and all the parties in the cycle are bound to the agreement, the agency cycle comprises of: Agent: this is the person who enters and performs duties and activities on behalf of the other person (the principal) with the third party and has authority to create a binding relationship or agreement between the principal and the third party. The agent negotiates, performs and enters into binding engagements on behalf of another person with the third party. Principal: This is the person who hires an agent to act on his/her capacity with the third party and is bound by the actions of the said agent in engagements with the third party. ... An agent must therefore operate within the instructions and capacity given by the principal and this will bind the principal in the contractual agreements he or she creates with the third parties which means that the law of agency is based on both implied and express terms. An agent has several duties he/she owes to the principal and must not act outside the scope or mandate provided by the principal. These duties can be summarized as below; The agent must ensure that he/she operates within the specified terms of agency agreement. If the agent ignores the directives of the principal in entering into an agreement with the third party then he/she will be held liable. The agent must therefore follow instructions given by the principal. The agent must carry out his/her duties with due diligence, skill and high level of professionalism to protect both parties from unnecessary breach of contract and subsequent compensation for the same, and this must be followed whether the agency agreemen t is written or oral. The agent must not act out of his own benefit at the expense of the principal and all dealings must protect the interest of the principal. The agency relationships to occur, all the parties must understand the terms of engagement and the roles each of the is required to play within the framework of the agreement and the agent must have intension to work for the principal, though no consideration is necessary, there must be an agreement between the principal and the agent, oral or written. This relationship can be described as below: Therefore, before the contract of agency is constituted, several essentials are mandatory: The agency agreement must be based