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Agency and Authority

What is "agency"?

Agency is a fiduciary (based on trust and confidence) relationship between two persons in which one person (the agent) acts for or represents another (the principal) in dealings with third parties. A principal can confer authority on an agent only if the agent accepts it. A principal can also approve the unauthorized actions of an agent and thereby create an agency relationship. This process is called ratification. An agent has certain duties to his or her principal. These include a duty to act in the principal's best interest, a duty of good conduct, a duty to keep the principal informed, a duty to act only as authorized, and a duty of loyalty to the principal.

What is an independent contractor, and what is an agent?

An independent contractor contracts to do a piece of work according to his or her own methods and without being subject to the control of the other party to the contract; the independent contractor's only concern is to provide an acceptable product or service. An independent contractor does not represent the other party in business dealings.

The primary distinction between an agent and an independent contractor is the amount of control placed over each. An agent is generally subject to more control. For example, a chauffeur is an agent of his employer. A taxi cab driver is not an agent of his fare.


Taxi Driver

Under control of his employer.

Paid only to take fare to a particular destination.

Fills limousine with gas and charges his employer.

Fills taxi with gas and is responsible for the cost.

Gets a ticket and the employer pays it.

Gets a ticket and must pay for it himself.

Has an accident and his employer is liable.

Has an accident and the fare is not liable.

There are two types of agents. A general agent can transact all the business of the principal or all of the principal's business of a particular kind or in a particular place. A special agent can act only in a special transaction or for a particular purpose or class of work. CORs are special agents because they can only be given authority to perform certain actions.

What is actual authority?

Agents can only be given actual authority. There are two types of actual authority:

Express authority is conferred in direct terms, definitely and explicitly.

Implied authority is conferred by inference. For example, if a COR is given express authority to authorize payment of invoices, he or she is given implied authority to return improper invoices for correction.

What is apparent authority?

Apparent authority is authority perceived by a third party (e.g., a contractor) to exist, when authority was never actually conferred upon the government agent in question. For example, the contractor may perceive that the COR has authority to conduct a particular inspection, when in fact the COR does not have that authority because the authority has been delegated to a particular government inspector. Apparent authority does not apply to government contracts unless a CO ratifies the action of an unauthorized agent.

What is ratification?

Ratification is defined as the affirmation by a person of a prior act that did not bind him or her but was done on his or her account; the act is then treated as if he or she originally authorized it. Government employees can ratify actions of any unauthorized agent if the individual ratifying the action has the actual authority to enter into a contract and the government benefits from the action.

How can agency be terminated?

Agency can be terminated:

By mutual agreement of the principal and the agent

Upon expiration of the contract

By the principal's revocation of the authority

By the agent's own renunciation, in some cases (e.g., an act of conscience)

By operation of law (e.g., the death of either principal or agent).

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