Agency Agreement

Meaning of 'agency' The traditional view of the term 'agency' connotes an authority or capacity in one person (the 'agent') to create legal relations between a person occupying the position of principal and third parties. However, it is not essential for an agent to have the capacity to actually create legal relations on behalf of the principal; an agent may be appointed to represent the principal in a less extensive manner, depending on the terms of the agent's authority, including merely to make representations on behalf of the principal. In each case, though, the critical element of the common law concept of agency is the representative capacity in which the agent acts vis-a-vis the principal. Whether an element of 'control' is also a part of the common law concept of agency is unclear, although its role may be to substantiate the representative element rather than as a stand-alone element.

Although the legal concept of agency is potentially a broad one, it is narrower than colloquial usage in which the word 'agent' sometimes refers to one who has no principal but who on his or her own account offers for sale some particular article having a special name (such as a distributor for a manufacturer). Nor is a mere introducer of business, even if described as an agent, necessarily treated by law as an agent. It follows that facilitation does not of itself connote agency

Whether agency is constituted depends not on the terminology adopted by the parties, but on the true nature of the agreement or the exact circumstances of the relationship between the alleged principal and agent. This is because persons cannot by the mere device of labelling either confer a particular legal character on a relationship that it does not possess or deny it a character that it does possess. If the substance of the agreement contemplates the alleged agent acting on his or her own behalf and not on behalf of a principal, then although he or she may be described in the agreement as an agent, the relation of agency will not arise. An independent contractor as such is not an agent but may often be an agent in particular transactions. It follows that the fact that the parties adopt the terminology of agency is not decisive, and cannot be given effect if that would contradict the effect of the agreement as a whole. If the relationship of the parties is capable of being either one of service or agency, however, then the parties can remove that ambiguity by the terms of the agreement itself. A court will, for this purpose, give proper weight to the parties' choice of agency as a label, although it is not bound by that description. It is open to a court to find a relationship of agency even in the face of a specific clause purporting to deny it.

Any need for Australian courts to rely on the creation of an agency relationship in order to make the owner of a motor vehicle liable for the negligence of the driver is alleviated by legislation extending the car owner's insurance policy to cover the driver's liability in addition to his or her own.