RIFT VALLEY UNIVERSITY DIRE DAWA CAMPUS

DEPARTMENT OF BUSINESS MANAGEMENT

SECOND YEAR EXTENSION STUDENTS

(BUSINESS LAW)

GROUP ASSIGNMENT

GROUP – 04

Prepared by:

S.NO. NAME ID.NO

1 ABAYNEH FIREW 0696/18
2 ZERIHUN YILEMA 0692/18
3 FASIKA MESFIN 0823/18
4 TIONE SOLOMON 1039/18
5 TINSAE BISRAT 1030/18
6 TIGEST GIZAW 1025/18
7 TIGEST SHEWANGEZAW 1027/18
8 TESHOME TEKETEL 1021/18

SUB. DATE. 21/10/14

SUB.TO: INST EYOBAL

1. DISCUSS BRIEFLY WHAT DOES MEAN AGENCY AND NATURE OF
AGENCY

An agency, in broad terms, is any relationship between two parties in which one, the agent,
represents the other, the principal, in day-to-day transactions. The principal or principals have
hired the agent to perform a service on their behalf. ... By definition, an agent is using the
resources of a principal

Agency is a contract whereby a person, the agent, agrees with another person, the principal to
represent him and to perform on his behalf one or several legally binding acts.’

Nature of agency
Agency is a relationship under which a principal appoints an agent to act under their direction
and on their behalf for specified purposes. In business, such purposes are commonly the
introduction or conclusion of contracts between the principal and customers or other third
parties. The term ‘agent’ is sometimes used loosely in business and may refer to those, eg
distributors, whose activities are similar to those of agents but who are not agents in law.
In commercial matters, the parties will normally have a written agreement that sets out: the scope
of the agent's authority the parties' rights and duties under what circumstances and with what
consequences the agency can be terminated general commercial provisions,

2. LIST AND DISCUSS THE SOURCE OF AGENCY UNDER ETHIOPIA?

The representative capacity (power of attorney) to act on behalf of another person (artificial or
natural) may emanate from the following basic sources:
2.1 The Law
It is obvious from the reading of Art. 2179 of the civil code of Ethiopia that, the authority to act
on behalf of another person may derive from the law. This is the case where the law appoints an
agent to act on behalf of another person for reasons like the protection of the principal that may
otherwise be at stake if s/he acts by himself or herself. This become crucial in case the principal
is declared incapable by law.
The other situation where the law appoints an agent is the case of agency of necessity or
unauthorized agency.
In this regard the very nature of artificial persons that necessarily dictate their representation by
natural persons to perform their day to day activities is typical.
2.2 Contract
The basic source of agency is a contract. As different from the first, this is a relationship created
between the agent and the principal based on their genuine contractual engagement. The contract
should, among other things, define the scope of the representative capacity of the agent and its
duration.
Art. 192 of the civil code states that, every physical person is capable of performing all acts of
civil
life unless he is declared incapable by the law. Read also Arts. 193 and 194 of the civil code
Read Arts. 2257 to 2265 of the civil code. It is an agency established by law where an individual
standing from the middle of nowhere and without any express appointment by the principal takes
care of the affairs of another person being dictated by necessity or otherwise.
Read Art. 216 (2) of the com. Code, which dictate that a business organization shall act in legal
proceedings by its agents.
Art. 2199 of the civil code states that, agency is a contract where by a person, the agent, agrees
with another person, the principal, to represent him and to perform on his behalf one or several
legally binding acts.
2.3 Decision of the Court
This is a situation where the authority to do an act or acts of a certain kind on behalf of another
emanates from the decision of a court. Such types of agents are known as curators.
3. MENTION AND DISCUSS THE DUTIES OF PARTIES TO THE CONTRACT OF

AGENCY?
It is obvious that agency is a contract in which at least two parties bilaterally counter oblige
themselves to perform certain obligation towards each other. Hence, both the agent and the
principal in a certain agency relationship have their own respective duties in need to be
discharged according to their agreement in particular and the law in general. i.e., failure to
discharge by either party, if any, entails liability
Contract of the agency is a legal relationship, where one person appoints another to perform on
the transactions on his behalf. The person who appoints the other to take care of his transactions
is the principal. Whereas, the person who looks after the transaction of the principal is the agent.
The Contract of the agency is a special contract under the Agency can be defined as the
relationship between two persons, wherein a person has the authority to act on behalf of another,
bind him/her into a legal relationship with the third party. There are two parties in a contract of
agency – principal and agent. Contract of Agency is based on the fact that one person cannot
perform all the transactions and so he can appoint another to perform or act on his behalf. In a
contract of agency, the agent is not just the bridge between the principal and the third party, but
he can also make the principal answerable for the acts performed by him. Here it must be noted
that while the agent is acting for the principal, he works in the capacity of principal

A contract of agency may be express or implied. Consideration is not an essential element in the
agency contract. Agency contract may also arise by estoppel, necessity or ratification.

Types of an Agency Contract

 Express Agency
A contract of agency can be made orally or in writing. Example of a written contract of
agency is the Power of Attorney that gives a right to an agency to act on behalf of his
principal in accordance with the terms and conditions therein.

A power of attorney can be general or giving many powers to the agent or some special powers,
giving authority to the agent for transacting a single act.

 2. Implied Agency

Implied agency arises when there is any conduct, the situation of parties or is necessary for the case
3. DISCUSS THE SCOPE AND TYPES OF AUTHORITY OF AGENCY?
In general, there are two ways to determine the scope of an agent's authority: Express: An
agent's authority can be expressly determined. If an agreement specifies an agent's duties, an
agent does not have authority to represent the principal beyond those duties. Implied: An
agent's authority can be implied by custom

Types of authority of agency

 There are also two types of authorities in agency. These are express authority and implied authority.

An express authority is one in which the principal expressly grants the power of agency to an agent. There
is an express confirmation of the agency relationship between the parties. On the other hand, an implied
authority is one in which the principal sanctions the agency relationship not by words or writing but by

conduct.

Scope of Authority
Once a contract of agency is formed, the parties to the contract of agency assume the
obligations
that arise out of “the terms of the contract and by such incidental effects as are attached to the

obligations concerned by custom, equity and good faith, having regard to the nature of the
contract of agency “ (emphasis added). This is provided by Art 1713(1) of the civil code as
rearranged in conformity with the agency provisions.
The scope of the power assumed by the agent is determined by the contract-giving rise to
agency. Yet, the scope of the agency assumed by the agent might not be expressly
determined by
the contract. In the latter case it is determined by the nature of the transaction to which the
agency relates [Art. 2202].

5. WHAT DOES MEAN UNAUTHORIZED AGENCY?

An unauthorized agency occurs where a person who has no authority to do so undertakes
with full knowledge of the facts to manage another person’s affairs without having been
appointed an agent. Where the agent has acted beyond his power or without authority, the
principal may be held liable in accordance with the principles governing unauthorized
agency. Article 2257: Unauthorized Agency.
Unauthorized agency occurs where a person who has no authority to do so undertakes with
full knowledge of the fact to manage another person’s affairs without having been appointed
an agent.
SUMMERY
Agency generally is a relationship in which a person acts on behalf and for the benefit of
another. This relationship may result from the law or a contract. As to the first source, the
relationship is created by law without the proper consent of the parties. The relationship
between a minor and a tutor is a typical illustration of agency formed by law. In the
second source, it is the consent of the parties that creates the relationship. In this agency,
the agent and the principal have agreed to the relationship, the agent to act on behalf of
the principal for the performance of juridical acts of the principal. For this agency to
exist, the requirements for formation of a valid contract must be fulfilled. As to the
formal requirement, an agency can be created in whatever form they wish. But where the
act stated in the agency must be carried out in writing, the agency must as well be in
writing.