One of the most utilized tools in a partnership, company, or corporation is the agent. An agent, often with some expertise in a specific field, can help best utilize a company’s resources by acting on behalf of the corporation. However, an agent can cause just as much liability on behalf of the company, or its principal, as if it were the principal itself. That is why when hiring an agent, the principal must make some careful, meticulous decisions as to the agent’s authority. More importantly, the principal must ensure that an agent’s authority is terminated when his job is done, before any liability may emerge. Therefore, a principal must understand how an agent’s authority may be terminated before liability ensues.
One way for a principal to terminate an agent’s authority is through express termination. A principal or agent always has the power to terminate actual authority. This is the easiest way to avoid liability for the actions of an agent. However, sometimes the principal may not have expressly terminated the agency prior to liability attaching. In these situations, there are other options to claim that the agency has ended.
An agency may end through a lapse of time. If, for example, there was a stated period of time for which the agent was to work for the principal, his authority will have ended upon termination of the period of time. Along those lines, if the agent has accomplished the authorized acts, or a specific event has passed, the authority of the agent will automatically end. Time, therefore, can be a determining factor as to whether or not the agent’s authority has ended.
Apparent authority of an agent can also be terminated by the principal. This can be done by expressly communicating to a third party that an agent can no longer act on behalf of the company. Sometimes terminating an agent’s actual authority is not enough. As a principal, you should be sure to terminate an agent’s apparent authority by reaching out to third parties anyways. Often times, courts will try protect third parties that had previously been dealing at arm’s length with a company, leaving you in a situation where you may still be liable for your agent’s apparently authority even though your agent’s actual authority has been terminated.
In sum, as a principal in an agency relationship, it is important to end authority when possible to protect yourself from liability. This can be done in a number of ways, either with the help of the agent or the third party. Consulting with the right legal team can help ensure that you have covered your bases in ending your relationship with your agent and protecting yourself from further liability. Call the Trembly Law Firm at (305) 431-5678 today to schedule your consultation.