Agency Laws in a Business Environment

AgencyLaws in a Business Environment


AgencyLaws in a Business Environment

Lawof the agency is an area of the commercial law that deals with issuesof contractual, non-contractual and quasi-contractual relationshipsthat involve an agent and a third party (Lan &amp Heracleous, 2010).Agency law mostly concerns with the principal-agent relationship, butit can also address transactions or relationships that occur betweenemployees and other third parties that are intentional or accidental.The law expects us as an organization or the principal to compensateour employees for injuries that they sustain while in the line ofduty (Lan &amp Heracleous, 2010). Our staffs are our agents and anytransaction that they carry out is on behalf of our organization astheir employer.

Whenone employee of Hotspur Paper Mill ran down a pedestrian who wasaware of him/her being one of our staff, the pedestrian will seekcompensation from our company. For the purposes of protecting ourorganizational image, we will have to compensate the pedestrian forthe damages that resulted from the accident that transpired. In caseI would be aware of the deals of the employee who stole a shipment ofwood pulp, I will not have to sanction him/her. However, I will haveto warn my employee to be careful about how they handle themselves asthey could interfere with our company’s image. It is criminal toengage in any business that involves stealing of other people’sproperties.

Bydeclining to compensate the pedestrian on any ground, he could decideto take a legal action against our company that could invite athorough investigation that could reveal our dirty businesses. Therevelations could tarnish the image of our company, and ourcompetitors could use it against our company. In case we were notaware of the actions of our employee, legal actions would be takenagainst them that could even involve sacking.


Lan,L. L., &amp Heracleous, L. (2010). Rethinking agency theory: Theview from law. Academy of Management Review, 35(2), 294-314.