Agency
In the majority of agency situations, Agents must be allowed some degree of discretion in the conduct of routine transactions. Hence, there is no need to seek specific authorisation for every deal or detail within a deal. But, when the Agent acts with actual or apparent authority, all the Agent's knowledge will be imputed to the Principal. If Principals were allowed to hide behind their agents' ignorance, mistakes, or failures to communicate, they could achieve better results than if they acted personally. For example, if the particular deal turned out well, the Principal could adopt the transaction—if it turned out badly, the Principal could disavow it. If not for imputation, there would be a perverse incentive to conduct business through Agents rather than personally. Consequently, the Principal cannot exploit ignorance to advantage by instructing the Agent to withhold key information, or by appointing an Agent known to be secretive.
This rule in favour of imputation relates to the generality of the duties an Agent owes to a Principal, in particular the Agent's duty to communicate material facts to the Principal. Since the purpose of the law is to offer protection to Third Parties who act in good faith, it is reasonable to allow them to believe that, in most cases, the Agents have fulfilled this duty. After all, the Principal selects the Agents and has the power to control their actions both through express instructions and incentives intended to influence their behaviour which will include laying down routines for how Agents should handle information, and the extent to which Agents will be rewarded for transmitting information of commercial value. The result is a form of strict liability in which the legal consequences of an Agent's acts or omissions are attributed to a Principal even when the Principal was without fault in appointing or supervising the Agent.
Read more about this topic: Imputation (law)
Famous quotes containing the word agency:
“It is possible that the telephone has been responsible for more business inefficiency than any other agency except laudanum.... In the old days when you wanted to get in touch with a man you wrote a note, sprinkled it with sand, and gave it to a man on horseback. It probably was delivered within half an hour, depending on how big a lunch the horse had had. But in these busy days of rush-rush-rush, it is sometimes a week before you can catch your man on the telephone.”
—Robert Benchley (1889–1945)