Role of Agent (Directors and Partners) 1 / 4

An Agent acts on behalf of the Principal

A footballer gets an agent to talk to prospective football clubs for him

So here..


Footballer = Principal

Agent = Agent

Football Club = Third Party

Or, you rent your house out...

You = Principal

Estate Agent = Agent

Tenant = Third Party

Partners and Agency

Here...

Firm = Principal

Partners = Agents

Third Parties (customers, suppliers etc) = Third Party

Under the Partnership Act 1890 all partners are deemed to be agents of the firm and are hence able to bind all co-partners and make them jointly and severally liable for business transactions

Directors and Agency

Here, the board as a WHOLE are agents of the company but NOT individual shareholders so..

Company = Principal

Board of Directors (as a whole) = Agent

Third Parties (customers, suppliers etc) = Third Party

The board of directors are the agent of the company (not the shareholders) and can therefore bind the company without personal liability.

Individual directors do not have the power to bind the company unless they have derived any of the powers of agency