The role of agents in business and society
Wednesday, 18 August 2010
The agency is one of the important means of democracy. The people administer the country through their agents or representatives. One of the parties gets the mandate through election to assume political authority to run the country in accordance with the will of the people.
Very often one is asked by family members or friends to obtain information, make appointments, buy things and do many other things. In a sense, all are accustomed to being 'agents' for others. The person who asks some one else to act for him is the principal and who does the job is agent.
There is a category of agents/dalals, who are related to administration and law-enforcement agencies. They play a crucial role in society. Access to powerful persons is very difficult and ordinary people rely on agents of powerful persons. This may be one of the causes of corruption. A better environment may be created when the Right To Information Act will be implemented and the people may not need to buy the services of dalals.
The positive side of agency is that the agents can help reduce the cost of business when they are with business establishments to perform certain specialized jobs. But they may increase the cost if they are agents of a corrupt and unfair administrative system. In either case, agents are an unavoidable part of the system.
The complexities and demands of life mean that people rely on others a great deal to get things done. They rely on agents to perform some of their jobs. People now rely more and more on agents to perform certain works with economic development. They rely on experts to do some jobs efficiently and economically. Some agents have very important role in our financial and social life. Agents play remarkable role in economic activities in global commodity and foreign exchange trade. The financial and stock markets also are field of their activities. The efficiency of agents is indicator of economic development in a free market atmosphere.
The businesses are run by executives who are agents of shareholders. Corporates are artificial entities. The management of the corporate entities has contributed to the importance of the law of agency as these can act only through human agents. The multinational companies expand their business to overseas countries through agents like local agents or managing agents or employees.
In course of dealing all are following the laws of agency. In law, an agent is a person who has been authorized by his principal to perform an act that has the power to affect the principal's legal relations with a third party. An agent, being empowered by his principal, can enter into a binding contract with a third party. Through the intermediation of the agent, the principal's legal relations will be altered because the agent's acts will bring the principal into a contractual relationship with others. The agent has to have some authority through different methods of appointments such as express authority given in a written contract that defines positions, duties, and expectations of parties; implied authority where it is customary or the norm in a specific business context; ostensible agency when actions cause a third party to assume someone as an agent. There are some more agencies created by estoppel when an agent's unauthorized activity causes a third party to believe the agent has that authority. Agency by ratification occurs when the unauthorized action of the agent is accepted by the principal after post facto approval.
The agency may be of various types: universal agency provides broad authority for an agent to act on behalf of a principal; a general agency limits agent's authority to a particular type of transaction or business; a special agency or "limited agency" in which the agent is not able to bind the principal. The agency of management of a company registered under company's act, more precisely the public company, is statutory agent -- an individual or organization -- called managing agent whose address is used even to receive official business and due process legal papers for a specific business entity.
There are a few laws of agency in different countries but there is no such specific law in Bangladesh. The agency is mostly governed under the law of contract and common law. Under common law, agency is the fiduciary relationship which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act. The one for whom action is taken is the principal and one who is to act is the agent. Agency is created when the principal (the buyer or seller) delegates authority to the agent to perform acts on behalf of the principal and the agent consents to the delegation. An agency relationship does not require writing a contract. An agency can also be created by the conduct of the parties toward each other regardless of whatever is their identity to describe their relationship. Thus, agency relationships can result unintentionally, accidentally, or inadvertently. A seller's agent represents and owes client level services to sellers, works "for" sellers and works "with" buyers as customers, not clients. Similarly, a buyer's agent represents and owes client level services to buyers, works "for" buyers and works "with" sellers as customers, not clients.
According to Wikipedia, agency is an area of commercial law dealing with a contractual or quasi-contractual, or non-contractual set of relationships when an agent is authorized to act on behalf of another (called the Principal) to create a legal relationship with a third party. Succinctly, it may be referred to as the relationship between a principal and an agent whereby the principal, expressly or impliedly, authorizes the agent to work under his control and on his behalf. The agent is, thus, required to negotiate on behalf of the principal or bring him and third parties into contractual relationship. This branch of law separates and regulates the relationships between:
l Agents and Principals;
l Agents and the Third Parties with whom they deal on their Principals' behalf; and
l Principals and the Third Parties when the Agents purport to deal on their behalf.
A principal may be liable for the acts of a person who is not actually an authorized agent, where the person appears to be an agent. On the other hand, there are certain extra responsibilities of an agent. In some countries "Agents are liable for their acts, to their principals, and to third person"; "in the case of agents or factors, acting for merchants in a foreign country, they will be considered liable whether they disclose their principal or not, this being the usage of the trade"; "An agent is liable for misfeasance as to third persons, when, intentionally or ignorantly, he commits a wrong, although authorized by his principal, because no one can lawfully authorize another to commit a wrong upon the rights or property of another."
In Bangladesh, the Import and Export Control Act, 1950 is one of the commercial laws which have some provisions related to agency. The Chief Controller of Import and Export issued the Importers, Exporters and Indentors (Registration) Order, 1981. In sector 2 of definition in sub-section (g), "Indentor" means a firm, institution, body, organization, person or group of persons registered as an Indentor and holding sole agency, dealership or distribution right from a supplier abroad. The Indentors are agent of foreign suppliers abroad.
Bangladesh Bank (BB) has given a definition of agent for the purpose of Section 18 A of the Foreign Exchange Regulation Act, 1947 as follows:
In terms of section 18A of the Foreign exchange Act 1947, permission of Bangladesh Bank is required for any person (which includes individuals, firms, business organization or concerns incorporated or not) to accept an appointment to act as an agent in trading and commercial transactions or as a technical or management adviser of any person resident outside Bangladesh or of a person resident in Bangladesh but not citizen of Bangladesh. For the said purpose of the said section the definition and role of an agent will be the same as sections 182 and 186 respectively of Chapter X of the Contact Act, 1872.
The National Board of Revenue (NBR) issued SRO no: 200-Ain/2010/549-Mushak dt 10th June 2010. This has given another definition of Indenting agents: Indenting agents are in business of negotiation, coordination and contract of sale and purchase of between buyers and seller.
These three agencies of Government have given three definitions of Agents, particularly the Indenting agents who is actually agent of overseas companies or individuals. There are some obvious reasons of defining the profession for convenience of their administration and enforcement of their own law and regulations as per their own choice. Bangladesh Bank insists on written agreement between principal and agent as per their standard format. BB has imposed certain rule of prior approval by them to run the business of agency. Indentors have some more obligation of regularly reporting to BB regarding foreign exchange they earn. But NBR defined differently to ignore the foreign exchange earning activities of Indentors. Indentors are foreign exchange earners like wage-earners or exporters and are not required to pay VAT. NBR has given a different definition to justify VAT on earning of Indentors and other agents.
Conflicting definitions of a profession by different regulators are confusing. There should be a uniform definition of a business profession.
The writer is part-time teacher, Leading University. He can be reached at e-mail: shah@banglachemical.com
Very often one is asked by family members or friends to obtain information, make appointments, buy things and do many other things. In a sense, all are accustomed to being 'agents' for others. The person who asks some one else to act for him is the principal and who does the job is agent.
There is a category of agents/dalals, who are related to administration and law-enforcement agencies. They play a crucial role in society. Access to powerful persons is very difficult and ordinary people rely on agents of powerful persons. This may be one of the causes of corruption. A better environment may be created when the Right To Information Act will be implemented and the people may not need to buy the services of dalals.
The positive side of agency is that the agents can help reduce the cost of business when they are with business establishments to perform certain specialized jobs. But they may increase the cost if they are agents of a corrupt and unfair administrative system. In either case, agents are an unavoidable part of the system.
The complexities and demands of life mean that people rely on others a great deal to get things done. They rely on agents to perform some of their jobs. People now rely more and more on agents to perform certain works with economic development. They rely on experts to do some jobs efficiently and economically. Some agents have very important role in our financial and social life. Agents play remarkable role in economic activities in global commodity and foreign exchange trade. The financial and stock markets also are field of their activities. The efficiency of agents is indicator of economic development in a free market atmosphere.
The businesses are run by executives who are agents of shareholders. Corporates are artificial entities. The management of the corporate entities has contributed to the importance of the law of agency as these can act only through human agents. The multinational companies expand their business to overseas countries through agents like local agents or managing agents or employees.
In course of dealing all are following the laws of agency. In law, an agent is a person who has been authorized by his principal to perform an act that has the power to affect the principal's legal relations with a third party. An agent, being empowered by his principal, can enter into a binding contract with a third party. Through the intermediation of the agent, the principal's legal relations will be altered because the agent's acts will bring the principal into a contractual relationship with others. The agent has to have some authority through different methods of appointments such as express authority given in a written contract that defines positions, duties, and expectations of parties; implied authority where it is customary or the norm in a specific business context; ostensible agency when actions cause a third party to assume someone as an agent. There are some more agencies created by estoppel when an agent's unauthorized activity causes a third party to believe the agent has that authority. Agency by ratification occurs when the unauthorized action of the agent is accepted by the principal after post facto approval.
The agency may be of various types: universal agency provides broad authority for an agent to act on behalf of a principal; a general agency limits agent's authority to a particular type of transaction or business; a special agency or "limited agency" in which the agent is not able to bind the principal. The agency of management of a company registered under company's act, more precisely the public company, is statutory agent -- an individual or organization -- called managing agent whose address is used even to receive official business and due process legal papers for a specific business entity.
There are a few laws of agency in different countries but there is no such specific law in Bangladesh. The agency is mostly governed under the law of contract and common law. Under common law, agency is the fiduciary relationship which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act. The one for whom action is taken is the principal and one who is to act is the agent. Agency is created when the principal (the buyer or seller) delegates authority to the agent to perform acts on behalf of the principal and the agent consents to the delegation. An agency relationship does not require writing a contract. An agency can also be created by the conduct of the parties toward each other regardless of whatever is their identity to describe their relationship. Thus, agency relationships can result unintentionally, accidentally, or inadvertently. A seller's agent represents and owes client level services to sellers, works "for" sellers and works "with" buyers as customers, not clients. Similarly, a buyer's agent represents and owes client level services to buyers, works "for" buyers and works "with" sellers as customers, not clients.
According to Wikipedia, agency is an area of commercial law dealing with a contractual or quasi-contractual, or non-contractual set of relationships when an agent is authorized to act on behalf of another (called the Principal) to create a legal relationship with a third party. Succinctly, it may be referred to as the relationship between a principal and an agent whereby the principal, expressly or impliedly, authorizes the agent to work under his control and on his behalf. The agent is, thus, required to negotiate on behalf of the principal or bring him and third parties into contractual relationship. This branch of law separates and regulates the relationships between:
l Agents and Principals;
l Agents and the Third Parties with whom they deal on their Principals' behalf; and
l Principals and the Third Parties when the Agents purport to deal on their behalf.
A principal may be liable for the acts of a person who is not actually an authorized agent, where the person appears to be an agent. On the other hand, there are certain extra responsibilities of an agent. In some countries "Agents are liable for their acts, to their principals, and to third person"; "in the case of agents or factors, acting for merchants in a foreign country, they will be considered liable whether they disclose their principal or not, this being the usage of the trade"; "An agent is liable for misfeasance as to third persons, when, intentionally or ignorantly, he commits a wrong, although authorized by his principal, because no one can lawfully authorize another to commit a wrong upon the rights or property of another."
In Bangladesh, the Import and Export Control Act, 1950 is one of the commercial laws which have some provisions related to agency. The Chief Controller of Import and Export issued the Importers, Exporters and Indentors (Registration) Order, 1981. In sector 2 of definition in sub-section (g), "Indentor" means a firm, institution, body, organization, person or group of persons registered as an Indentor and holding sole agency, dealership or distribution right from a supplier abroad. The Indentors are agent of foreign suppliers abroad.
Bangladesh Bank (BB) has given a definition of agent for the purpose of Section 18 A of the Foreign Exchange Regulation Act, 1947 as follows:
In terms of section 18A of the Foreign exchange Act 1947, permission of Bangladesh Bank is required for any person (which includes individuals, firms, business organization or concerns incorporated or not) to accept an appointment to act as an agent in trading and commercial transactions or as a technical or management adviser of any person resident outside Bangladesh or of a person resident in Bangladesh but not citizen of Bangladesh. For the said purpose of the said section the definition and role of an agent will be the same as sections 182 and 186 respectively of Chapter X of the Contact Act, 1872.
The National Board of Revenue (NBR) issued SRO no: 200-Ain/2010/549-Mushak dt 10th June 2010. This has given another definition of Indenting agents: Indenting agents are in business of negotiation, coordination and contract of sale and purchase of between buyers and seller.
These three agencies of Government have given three definitions of Agents, particularly the Indenting agents who is actually agent of overseas companies or individuals. There are some obvious reasons of defining the profession for convenience of their administration and enforcement of their own law and regulations as per their own choice. Bangladesh Bank insists on written agreement between principal and agent as per their standard format. BB has imposed certain rule of prior approval by them to run the business of agency. Indentors have some more obligation of regularly reporting to BB regarding foreign exchange they earn. But NBR defined differently to ignore the foreign exchange earning activities of Indentors. Indentors are foreign exchange earners like wage-earners or exporters and are not required to pay VAT. NBR has given a different definition to justify VAT on earning of Indentors and other agents.
Conflicting definitions of a profession by different regulators are confusing. There should be a uniform definition of a business profession.
The writer is part-time teacher, Leading University. He can be reached at e-mail: shah@banglachemical.com