Agency System in Anglo-American Law

The words are derived from the Latin verb, agens, agentis. The purpose of the rules of agency is to accomplish results by utilizing the services of others. The basic theory of the agency device is to enable a person, through the services of another, to broaden the scope of his activities. Agency is well established not only in German law but also in English-American law. However, these two legal systems have developed creation of an agency differently. The American Law Institute's Restatement(Third) of Agency describes the creation of an agency relationship. Agency law is therefore fundamentallly concerned with whether particular kinds of relationships qualify as agency relationships. The creation of an agency relationship necessarily involves two steps: manifestation by the principal and consent by the agent. For example, must both parties subjectively consent to the relationship? Must they intend to create the legal relationship? Must the agent be promised contract-like consideration by the principal? The law of agency must therefore determine under what circumstances an agency relationship exist. When an agency relationship involves the arrangement making function, it is essential that third parties be able to enforce against the principal commitments made by the agent. Perhaps the most important consequence of the agency is the agent's power to bind the principal to third parties and to bind third parties to the principal.