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These include: the negotiation objective, the role of the negotiating parties, the nature of the relationship between the negotiating parties, the negotiating power of each party and the negotiation type. Where there are information asymmetries between the principal and agent, this can affect the outcome of the negotiation.
The law of agency is an area of commercial law dealing with a set of contractual, quasi-contractual and non-contractual fiduciary relationships that involve a person, called the agent, who is authorized to act on behalf of another (called the principal) to create legal relations with a third party. [1]
In commercial law, a principal is a person, legal or natural, who authorizes an agent to act to create one or more legal relationships with a third party.This branch of law is called agency and relies on the common law proposition qui facit per alium, facit per se (from Latin: "he who acts through another, acts personally").
The relationship between a company's shareholder and the board of directors is generally considered to be a classic example of a principal–agent problem.The problem arises because there is a division between the ownership and control of the company, [10] as a result of the residual loss.
The simple principal-agent model involves only one agent, one principal, and one task, and is a simplification of reality. In organizations, relationships typically involve multiple actors, and in particular, multiple principals. The director of a firm acts on behalf of all shareholders, typically not on behalf of one.
[61] [62] Sometimes it is used to denote the representation where the emphasis falls on the juristic relationship established by the agent between the principal and third party. At other times, it is used to refer to the contractual relationship between the principal and agent: the so-called "contract of agency" that in reality is a species of ...
Wills J held that "the principal is liable for all the acts of the agent which are within the authority usually confided to an agent of that character, notwithstanding limitations, as between the principal and the agent, put upon that authority." This decision is heavily criticised and doubted, [4] though not entirely overruled in the UK.
An agency relationship is between three parties: a principal authorises an agent to make a contract on his behalf with a third party. [23] In agency situations an agent can make a contract with a third party that is binding on the principal, even though he was not privy to the original contract. [23]