VOL 18 NO 112 REGD NO DA 1589 | Dhaka, Wednesday August 18 2010

The role of agents in business and society

Conflicting definitions of a profession by different regulators are confusing. There

should be a uniform definition of a business profession, writes M S Siddiqui

The agency is one of the important means of democracy. The people administer the
country through their agents or representatives. One of the parties gets the mandate
through election to assume political authority to run the country in accordance with the
will of the people.

Very often one is asked by family members or friends to obtain information, make
appointments, buy things and do many other things. In a sense, all are accustomed to
being 'agents' for others. The person who asks some one else to act for him is the
principal and who does the job is agent.

There is a category of agents/dalals, who are related to administration and law-

enforcement agencies. They play a crucial role in society. Access to powerful persons is
very difficult and ordinary people rely on agents of powerful persons. This may be one of
the causes of corruption. A better environment may be created when the Right To
Information Act will be implemented and the people may not need to buy the services of
dalals.

The positive side of agency is that the agents can help reduce the cost of business when
they are with business establishments to perform certain specialized jobs. But they may
increase the cost if they are agents of a corrupt and unfair administrative system. In either
case, agents are an unavoidable part of the system.

The complexities and demands of life mean that people rely on others a great deal to get
things done. They rely on agents to perform some of their jobs. People now rely more and
more on agents to perform certain works with economic development. They rely on
experts to do some jobs efficiently and economically. Some agents have very important
role in our financial and social life. Agents play remarkable role in economic activities in
global commodity and foreign exchange trade. The financial and stock markets also are
field of their activities. The efficiency of agents is indicator of economic development in
a free market atmosphere.

The businesses are run by executives who are agents of shareholders. Corporates are
artificial entities. The management of the corporate entities has contributed to the
importance of the law of agency as these can act only through human agents. The
multinational companies expand theirbusiness to overseas countries through agents like
local agents or managing agents or employees.

In course of dealing all are following the laws of agency. In law, an agent is a person who
has been authorized by his principal to perform an act that has the power to affect the
principal's legal relations with a third party. An agent, being empowered by his principal,
can enter into a binding contract with a third party. Through the intermediation of the
agent, the principal's legal relations will be altered because the agent's acts will bring the
principal into a contractual relationship with others. The agent has to have some authority
through different methods of appointments such as express authority given in a written
contract that defines positions, duties, and expectations of parties; implied authority
where it is customary or the norm in a specificbusiness context; ostensible agency when
actions cause a third party to assume someone as an agent. There are some more agencies
created by estoppel when an agent's unauthorized activity causes a third party to believe
the agent has that authority. Agency by ratification occurs when the unauthorized action
of the agent is accepted by the principal after post facto approval.

The agency may be of various types: universal agency provides broad authority for an
agent to act on behalf of a principal; a general agency limits agent's authority to a
particular type of transaction orbusiness ; a special agency or "limited agency" in which
the agent is not able to bind the principal. The agency of management of a company
registered under company's act, more precisely the public company, is statutory agent --
an individual or organization -- called managing agent whose address is used even to
receive officialbusiness and due process legal papers for a specific business entity.

There are a few laws of agency in different countries but there is no such specific law in
Bangladesh. The agency is mostly governed under the law of contract and common law.
Under common law, agency is the fiduciary relationship which results from the
manifestation of consent by one person to another that the other shall act on his behalf
and subject to his control, and consent by the other so to act. The one for whom action is
taken is the principal and one who is to act is the agent. Agency is created when the
principal (the buyer or seller) delegates authority to the agent to perform acts on behalf of
the principal and the agent consents to the delegation. An agency relationship does not
require writing a contract. An agency can also be created by the conduct of the parties
toward each other regardless of whatever is their identity to describe their relationship.
Thus, agency relationships can result unintentionally, accidentally, or inadvertently. A
seller's agent represents and owes client level services to sellers, works "for" sellers and
works "with" buyers as customers, not clients. Similarly, a buyer's agent represents and
owes client level services to buyers, works "for" buyers and works "with" sellers as
customers, not clients.

According to Wikipedia, agency is an area of commercial law dealing with a contractual

or quasi-contractual, or non-contractual set of relationships when an agent is authorized
to act on behalf of another (called the Principal) to create a legal relationship with a third
party. Succinctly, it may be referred to as the relationship between a principal and an
agent whereby the principal, expressly or impliedly, authorizes the agent to work under
his control and on his behalf. The agent is, thus, required to negotiate on behalf of the
principal or bring him and third parties into contractual relationship. This branch of law
separates and regulates the relationships between:

l Agents and Principals;

l Agents and the Third Parties with whom they deal on their Principals' behalf; and

l Principals and the Third Parties when the Agents purport to deal on their behalf.

A principal may be liable for the acts of a person who is not actually an authorized agent,
where the person appears to be an agent. On the other hand, there are certain extra
responsibilities of an agent. In some countries "Agents are liable for their acts, to their
principals, and to third person"; "in the case of agents or factors, acting for merchants in
aforeign country, they will be considered liable whether they disclose their principal or
not, this being the usage of the trade"; "An agent is liable for misfeasance as to third
persons, when, intentionally or ignorantly, he commits a wrong, although authorized by
his principal, because no one can lawfully authorize another to commit a wrong upon the
rights or property of another."

In Bangladesh, the Import and Export Control Act, 1950 is one of the commercial laws
which have some provisions related to agency. The Chief Controller of Import and
Export issued the Importers, Exporters and Indentors (Registration) Order, 1981. In
sector 2 of definition in sub-section (g), "Indentor" means a firm, institution, body,
organization, person or group of persons registered as an Indentor and holding sole
agency, dealership or distribution right from a supplier abroad. The Indentors are agent
offoreign suppliers abroad.

Bangladesh Bank (BB) has given a definition of agent for the purpose of Section 18 A of
the Foreign Exchange Regulation Act, 1947 as follows:

In terms of section 18A of the Foreign exchange Act 1947, permission of Bangladesh
Bank is required for any person (which includes individuals, firms, business organization
or concerns incorporated or not) to accept an appointment to act as an agent in trading
and commercial transactions or as a technical or management adviser of any person
resident outside Bangladesh or of a person resident in Bangladesh but not citizen of
Bangladesh. For the said purpose of the said section the definition and role of an agent
will be the same as sections 182 and 186 respectively of Chapter X of the Contact Act,
1872.

The National Board of Revenue (NBR) issued SRO no: 200-Ain/2010/549-Mushak dt

10th June 2010. This has given another definition of Indenting agents: Indenting agents
are in business of negotiation, coordination and contract of sale and purchase of between
buyers and seller.
These three agencies of Government have given three definitions of Agents, particularly
the Indenting agents who is actually agent of overseas companies or individuals. There
are some obvious reasons of defining the profession for convenience of their
administration and enforcement of their own law and regulations as per their own choice.
Bangladesh Bank insists on written agreement between principal and agent as per their
standard format. BB has imposed certain rule of prior approval by them to run the
business of agency. Indentors have some more obligation of regularly reporting to BB
regarding foreign exchange they earn. But NBR defined differently to ignore the foreign
exchange earning activities of Indentors. Indentors are foreign exchange earners like
wage-earners or exporters and are not required to pay VAT. NBR has given a different
definition to justify VAT on earning of Indentors and other agents.

Conflicting definitions of a profession by different regulators are confusing. There should

be a uniform definition of a business profession.

The writer is part-time teacher, Leading University. He can be reached at e-mail:

shah@banglachemical.com