Genesis and Development of the Law of Agency

The concept of agency representation in the sense it is understood now emerged around the twelfth century (A.D) along with the salve and slave owner’s relations. Since the early time, salves were considered as a mere chattel without any rights. It was logical to hold the owner legally liable for the acts of his slave, especially if the acts of the slave were done based on the direction of the slave owner. Hence this slave and slave owner relationship paved a way for the creation and the concept of representation. And during this time, the responsibility of a principal for the acts of his agent or servant was commenced.

The concept of agency developed independently in the civil and common law legal systems. However, the rudimentary rules of agency representation as it is understood today became visible in both legal systems around the end of the twelve-century and early thirteen centuries.

Although, the concept of agency representation appeared around the end of the 12th century, its rules came to be arranged and significant, in order to facilitate commercial centers in the 19th century. Where business activities widely spread in most parts of the world especially in Europe commercial transaction was highly developed in volumes. Owing to this reason the rules of agency started to be organized and collected from the various fields over which they were distributed. (Law of agency, Am. J: comp. law vol.6 (1957) pp.165)

In spite of its high development, the Roman law did not outgrow an overall theory of agency in their law of contract, and even ‘’it was utterly unknown in the early law of contracts and never in the entire history of the  Roman law did it reach the importance it has attained in the English law. During the time where the Romans were unaware about the theory of Agency, the English law of contract developed the theory in a complete manner and businessmen used to carry out their business activities through intermediaries or agents.

One among the main reasons why the Romans failed to develop a complete theory of agency representation in their contract law as that of the English law was that ‘’ the Romans never acknowledged a general rule of their private law which declared that a person acting as an intermediary should be capable of creating valid contractual or commercial relations between the principal and the third party.’’(W.Muler-Freinfels, Legal Relations in the Law of Agency: Power of Agency and Commercial certainty Am. J: V.13 1964 pp.195)

With respect to the importance of commercial activities in the Roman Empire and the distance between commercial centers and slow means of communication, the notion of agency representation was not well developed in their contracts law. Among the basic governing principles that was expressed in the roman contract law which has created the major obstacle for the rapid development of the modern concept of agency law was that “rights and liabilities were acquired or incurred only by the persons making the contract; third parties are not considered. To the old contracts like Manicipatio, cessio injure, and stipulatio, the doctrine of agency never applied. The formal ceremonious words employed to create such obligations bound only the persons who actually uttered them. It was the act of the individual, his solemn declaration that bound him, and according to the theory of the old Roman law one could not speak for another but only for oneself. (William L. Burdick, The principles of Roman Law and their relation to Modern Law, 1938, pp.424)

While the Roman law of agency representation was in its lower stage, the English law of agency contract was found in a higher stage and it was well developed. In relation to this, in the English law of contracts, the doctrine of principals and agent was based upon three elemental propositions. These were:

  1. The creation by contract, express or implied of the relation,
  2. The non liability of the agent for contracts made in the name of his principal, and
  3. The liability of the principal for contracts made by his duly authorized agent.

According to this, when it is compared with the English law of contracts, the Roman law of contracts never developed the theory of agency to such an extent as the English law of contracts had achieved.

In order to have a broader concept on the genesis and development of the law of agency, let’s discuss the genesis and development of the law of agency in the following legal systems.

Theories and Development of the Law of Agency under the Common Law Legal System

The up-to-date concept of agency in the common law legal system is the outcome of many influences in its history. It is believed that agency was not part of the common law until the 13th century. However, owing to the master and servant relationships which emerged around the end of the12th century and beginning of 13th century.

While we discuss the historical development of the theory of agency in the common law legal system, we can observe that, three main standards gave raise to the effective development. These factors are:

  1. The emergence of the class of attorneys in legal matters. Which were regulated by ordinance 1292
  2. The impact of cannon law: and
  3. Custom of merchants, which at that time was already engaged in lively trade in Europe, created the introduction of some concepts of agency.

Owing to the influence of mercantile law by which commercial activities were developed in volume, the common law developed the principle that a principal was in direct contractual relation with third parties in which such principle laid down the foundation for the theory of agency. The development of such principle makes the principal liable to third persons. This liability was with regards to the goods bought or acquired by the agent, on the basis of which the principal had thereby obtained the use and benefit of the goods.

The genesis of such principle, which makes the principal in direct contractual relationship with third parties in a contract made by his agent, emerged from the case of Costace V. Forteye, which was decided in 1389 by the major and elder men of the city of London. Under this particular case, an apprentice and attorney of a London merchant bought wine from a French merchant for his master (Fortenye); and when he failed to satisfy the full payment to the seller, the agent was committed to prison. However, the agent (apprentice) i.e. Costance, alleged that it was his master who sent him to buy the wine and then the master approved the bargain. The Mayor then ordered the master (defendant) to satisfy the full payment to the French seller and set the plaintiff free from prison. The decision of the Mayor was based on the ground that the apprentice bought for the use and benefit of the master. (Willam Holdsworth/sir/, A History of English Law vpl 8, 1966, pp223)

The point that we can understand from the above case is that, a direct claim by a third party was admitted against the principal for contracts made by his agent for the benefit of the principal.

The trend of being represented through an agent spread somehow readily in the course of the 12th and 13th centuries owing to the allied influence of mercantile necessity and cannon law. In addition to this the development of trading companies, which must necessarily act through agents, helped its further development.

In the medieval period, the idea that it is possible to make a contract through an agent, and that it is possible for a man to ratify for a contract made on his behalf through an agent was recognized by the common law. The common law also, accordingly, recognized that on such contracts by an agent on behalf of his principal, it was to be held that the principal and not the agent was liable ‘’ not only when the agent had express authority to do the particular acts, but also when he acted within the scope of an authority to do acts of a particular kind.’’(William Holds worth/sir/, A History of English Law vole 8, 1966, pp223)

During the 17th and 18th centuries two classes of agents emerged in Europe as a result of the influence of mercantile law, which was closely related with commercial law. These were brokers and factors.’’ Brokers were intermediaries, through whom two persons were brought into contractual relations, and in which they were also independent persons.’’ However, ‘’Factors were essentially employees of their master who deal more faithfully for their masters in buying and selling of all commodities or in moneys by exchange.’’

In line with the wide recognition of agency contracts in the common law, which grew in line with the rapid development of trade, a clear distinction between the relations of master and servant was made in order to distinguish from the relations of principal and agent. Accordingly, the agent does not work for the principal physically, nor is he subject to the control of the principal in his physical actions. (William Holdsworth/sir/, A History of English Law vole 8, 1966, pp223)

The servant, on the other hand, was recognized, as one who, by agreement, whether gratuitously or for reward, gives his service to another. He ‘’has no power to bind the master in contract and he works physically for another, subject to the control of the master.’’

Theories and Development of the Law of Agency under the Civil Law Legal System

(Law of Agency, Am. J: comp. law vol6 1957, pp135)

In comparison to the common law concept of agency, the institution of the modern concept of contractual agency emerged and developed slowly in the civil law legal system. While ‘’the Roman law of contract was, of course, found in its high scientific level, it never developed a complete theory of agency.

As it is mostly stated, among the major impediments that hampered the rapid development of the modern agency principles in the Roman law was ‘’ the nature of commercial contract which involves only two persons.’’ This principle which emphasized a strict personal tie between the contracting partiers was the governing rule of the old Roman contract law which did not admit the triangular relations of principal, agent and third party in business transactions.

In addition to the above factor, the reason that hindered the development of the evolution and the inadequacy of the outcome may have been due to the fact that, “business agents were often slaves and that within the family the law yielded family satisfaction results at quite an early stage of its history.’’(Barry Nichlsa, An introduction To the Roman Law, 1965, pp.201) Owing to this condition, any benefit or property accrued to the patter families (father or head of family)

The concept of agency started to develop in the Roman law, however, in the 15th and 16th centuries and slowly had to recognize the activities of the procurator in connection to theses two classes of persons.

What is a procurator? A procurator was a free man, often a freed slave who acted as agent for the interest of a noble family, while an instate was normally a slave who sold his master’s goods ‘’ (F.H.Lawson, The Roman Law Reader,(1969)p.103)

The pressure of mercantile needs in the middle ages, the influence of the cannon law contributed a considerable importance in the contractual agency development. And the remarkable feature resulting from the principal and agent liability in the early Roman law was that,’’ The freeman who acted as an agent, usually known as a procurator, became invariably liable to the third party and the agent with no connection between the principal and the third party.

In the earliest times, as stated above, owing to the personal nature of the roman law, a master or parent acquired the benefit of contracts entered into by slaves or sons, whether they contract in their own name or in his own name. But, even though he received the benefits derived from such contract, he was not held liable to the contacting third party. Nevertheless, at a certain point, in the historical development of the Roman’s the agency concept, holding masters liable for acts of their slaves or agents was observed.