The Law of Agency

1. The Agency and Its1.  Subject Matter

(a) Agency is the delegation of power to an agent to perform any legal act in the name or on behalf of the principal.

(b) Any legal act may be the subject matter of agency, except for an act that by its nature or by law must be performed personally, or an act that is contrary to law.

Civil Law

(a) Agency is the authorization given to an agent to perform, in the name or on behalf of the principal, a legal act towards a third party.

(b) Any legal act may be the subject matter of agency, except for an act that by its nature or by law must be performed personally.

2. The Law of Agency

The act of an agent, including his knowledge, speech, and intention associated with the act, obligates and entitles the principal according to the circumstances.

Civil Law

The act of an agent, including his knowledge and intention, obligates and entitles the principal according to the circumstances.

3. Establishment and Form of Agency

(a) Agency is established by authorization, either orally or in writing, or in any other manner, from the principal to the agent.

(b) If a person is required to act upon the act of an agent, he may refuse to recognize the agency unless a written authorization is presented to him and a copy thereof is delivered to him.

Civil Law

(a) Agency is established by authorization, either in writing or orally, from the principal to the agent, or by notification thereof from the principal to the third party, or by the principal's conduct towards either of them.

(b) If a person is required to act upon the act of an agent, he may refuse to recognize the agency unless a written authorization is presented to him and a copy thereof is delivered to him.

4. Competence of the Agent

Every person with legal capacity, who is a member of the covenant, is competent to be an agent.

Civil Law

Every person is competent to be an agent for an act he himself is legally competent to perform; however, regarding his rights and obligations, the general rules of legal capacity shall apply.

5. Scope of the Agency

Agency applies, unless restricted by authorization, to any action reasonably necessary for the proper execution of the agency's subject matter, including proceedings before a court, tribunal, or arbitrator. However, it does not apply, without explicit authorization, to a compromise, waiver, or action without consideration.

Civil Law

(a) Agency applies, unless restricted by authorization, to any action reasonably necessary for the proper execution of the agency's subject matter. However, it does not apply, without explicit authorization, to proceedings before a court, tribunal, or arbitrator, nor to a compromise, waiver, or action without consideration.

(b) An agent is authorized to take any urgent and unforeseeable action reasonably necessary to protect the principal's interests related to the subject matter of the agency, even if the action exceeds the scope of the authorization.

6. Unauthorized Action

(a) If a person acts as an agent without authorization or in total deviation from their authorization, their action is void.

(b) In the case of a partial deviation, the action may be annulled by the principal or the third party.

Civil Law

(a) If a person acts as an agent without authorization or in deviation from their authorization, the principal, subject to the provisions of subsection (b), may ratify the action retrospectively. Such ratification shall be deemed as original authorization, provided that it does not prejudice the rights of another person who acquired them in good faith and for consideration before the ratification.

(b) If the third party did not know at the time of the action that the agent was acting without authorization or in deviation from their authorization, they have the option, as long as they are unaware of the ratification, to treat the agent as the principal or to withdraw from the action and claim damages from the agent. (c) A corporation may ratify an action taken on its behalf prior to its formation, and the provisions of this section shall apply.

7. Hidden Agency

(a)        (1) If the third party did not know at the time of the action of the existence of the agency, the action of the agent obligates and entitles both the principal and the agent, granting proprietary rights to the principal and contractual rights to the agent.

(2) If the third party knew of the existence of the agency but the identity of the principal was concealed, the agency is treated as an open agency.

(b) If the agent acted with the knowledge of the principal but did not inform the third party of the agency, the transaction is valid, and the matter is between the agent and the principal.

Civil Law

If the third party did not know at the time of the action of the existence of the agency or did not know the identity of the principal, the action of the agent obligates and entitles both the principal and the agent jointly and severally, but only entitles the agent. However, the principal may adopt the agent's rights towards the third party unless it contradicts the rights by their nature, conditions, or circumstances.

8. Loyalty and Duties of the Agent

If a person accepts being an agent, they must act according to the principal's instructions. In the absence of any other intention implied from the nature or terms of the agency, the following duties apply:

(1) Provide the principal with an account of their actions.

(2) Can be an agent for different principals for the same matter, provided that the rights of the principals are not prejudiced.

(3) Not perform any action of agency with themselves without the principal's consent.

(4) An agent may receive any benefit or promise of benefit from any person related to the subject matter of the agency, provided that the principal is not prejudiced.

(5) Not use any information or documents obtained due to the agency against the principal.

Civil Law

If a person accepts being an agent, they must act loyally towards the principal and according to the principal's instructions. In the absence of any other intention implied from the nature or terms of the agency, the following duties apply:

1. Disclose to the principal any information and deliver any document related to the subject matter of the agency and provide an account of their actions.
2. Not be an agent for different principals for the same matter without the consent of the principals.
3. Not perform any action of agency with themselves.
4. Not receive any benefit or promise of benefit from any person related to the subject matter of the agency without the principal's consent.
5. Not use any information or documents obtained due to the agency against the principal and generally avoid any conflict between the principal's interest and their own or another's interest.

9. Remedies

(a) If the agent breaches any duty imposed on them under section 8, the principal is entitled to claim damages from the agent only if the breach caused them harm.

(b) If the agent's action towards a third party due to the breach caused harm to the principal and the breach was with the third party's knowledge, the principal is entitled, in addition to the remedies mentioned in subsection (a), to cancel the action.

Civil Law

(a) If the agent breaches any duty imposed on them under section 8, the principal is entitled to remedies available for breach of contract.

(b) If the agent's action towards a third party due to the breach was with the third party's knowledge, the principal is entitled, in addition to the remedies mentioned in subsection (a), to cancel the action and to claim damages from both the agent and the third party.

10. Assets and Profits

(a) Any asset acquired by the agent due to the agency is fully owned by the principal and is held by the agent as a trustee for the principal, even if the agent did not disclose the existence of the agency or the identity of the principal to the third party.

(b) The principal is entitled to all profits or benefits obtained by the agent in connection with the agency matter, where the benefit can be considered as compensation for the principal's money. If it cannot be considered as such, the agent and the principal shall share the profit equally.

(c) The provisions of subsection (b) apply only if the third party did not explicitly state his intention; however, if the third party explicitly stated that the benefit is for the agent, the asset goes to the agent, and if he explicitly stated that it is for the principal, it goes to the principal.

(d) If the agent deviates from the principal's instructions, even if this results in a profit, the profit belongs to the principal.

Civil Law

(a) Any asset acquired by the agent due to the agency is held by the agent as a trustee for the principal, even if the agent did not disclose the existence of the agency or the identity of the principal to the third party.

(b) The principal is entitled to all profits or benefits obtained by the agent in connection with the agency matter.

11. Indemnification

(a) The principal must indemnify the agent for reasonable expenses incurred and for obligations reasonably assumed in connection with the agency.

(b) The principal must also indemnify the agent if the agency is canceled before it is executed, without the agent's knowledge.

(c) The principal is not required to indemnify the agent for damages to his property incurred due to the agency; however, for damages directly caused by the principal or for bodily harm, the principal must follow the principle of holding liable.

Civil Law

The principal must indemnify the agent for reasonable expenses incurred and for obligations reasonably assumed in connection with the agency.

12. Retention

The agent has the right to retain the principal's assets that came into his possession due to the agency for the payment of his fees and other amounts owed to him by the principal in connection with the agency.

Civil Law

Notwithstanding the provisions of section 8(1), the agent has the right to retain  principal's assets that came into his possession due to the agency, including assets held as a trustee, for the payment of his fees and other amounts owed to him by the principal in connection with the agency.

13. Set-off

Obligations owed by the principal and the agent to each other in connection with the agency are subject to set-off.

Civil Law

Obligations owed by the principal and the agent to each other in connection with the agency are subject to set-off.

14. Termination of Agency

(a) The agency is terminated by its cancellation by the principal or the agent, and also by the death of either of them, or, if a corporation, by its dissolution.

(b) The provisions of this section do not apply when proprietary rights in the subject of the agency have been transferred to a third party.

Civil Law

(a) The agency is terminated by its cancellation by the principal or the agent, and also by the death of either of them, by the loss of their legal capacity, or by their bankruptcy, or, if a corporation, by its dissolution.

(b) The provisions of this section do not apply if the authorization was granted to secure the right of another person or the agent himself and their right depends on the execution of the agency's subject matter.

15. Limitations on Termination

(a) The agency is terminated even if the agent is unaware of its termination.

(b) If the third party is unaware of the agency's cancellation, they are entitled to protection from damages caused as a result.

Civil Law

(a) As long as the agent is unaware of the termination of the agency, they are entitled to consider it as continuing against the principal.

(b) If the third party is unaware of the termination of the agency, they are entitled to consider it as continuing; and if the agent knew of the termination, the third party is also entitled to the options provided in section 6(b).

16. Sub-agency

(a) An agent is allowed to appoint another agent in matters where the principal does not insist on it; if the principal authorized the agent or if the agent faced coercion, there is no prohibition on such appointment even in agency matters where the principal usually insists or the agent did so for actions as mentioned in section 5(b).

(b) Despite subsection (a), in agency defined as personal matters, a sub-agent cannot be appointed.

(c) A sub-agent is directly the principal's agent concerning the termination of the agency, indemnification obligation, and duty of loyalty.

Civil Law

An agent cannot appoint another agent for the subject of their agency unless explicitly or implicitly authorized, or if they did so for actions as mentioned in section 5(b).

17. Multiple Agents and Principals

(a) If a single authorization is given to several agents, each agent can execute the agency individually, except where the intention or wording of the authorization indicates they must act together; if they need to act together, the consent of all is required.

(b) If a single authorization is given by several principals, the agent is also authorized to represent each of his principals separately.

Civil Law

(a) If a single authorization is given to several agents, it is assumed they must act together.

(b) If a single authorization is given by several principals, it is assumed the agent must act on behalf of all together.

18. Knowledge

For the purposes of this law, a person is deemed to know something if, as a reasonable person, they should have known it or if they received a notification in the usual manner.

Civil Law

For the purposes of this law, a person is deemed to know something if, as a reasonable person, they should have known it or if they received a notification in the usual manner.

19. Preservation of Laws

This law does not detract from any agreement regulating a special type of agency relationship.

Civil Law

This law does not detract from the provisions of any law regulating a special type of agency relationship.

Sections 20-21 Repealed