Commercial law forms the legal foundation for procurement professionals, governing relationships and transactions between parties. The law of agency is especially critical in procurement management because agents often act on behalf of principals to negotiate contracts, purchase goods, or manage suppliers. Understanding how agency relationships are formed and the scope of an agent’s authority ensures procurement officers comply with legal requirements and avoid disputes in Kenyan public and private sector procurement. This chapter explores the formation and classification of agents and the nature of agents’ authority within procurement contexts.

5.1 Formation and Classification of Agents

The formation and classification of agents determine the legal relationship between the principal and the agent, shaping the agent’s capacity to bind the principal in contracts. In procurement, understanding the type of agency relationship is essential to know the extent of the agent’s powers and potential liabilities. Kenyan procurement officers must recognize these distinctions to ensure proper delegation and control over procurement activities.

5.1.1 General Agent

A general agent is authorized to act on behalf of the principal in all matters relating to a particular business or trade. This type of agent has broad authority to conduct ongoing transactions and manage affairs within a defined scope. For example, a procurement manager appointed by a county government to oversee all procurement activities during a financial year acts as a general agent.

Characteristics of a General Agent

• Continuous Authority: The general agent has ongoing authority to act without needing separate approval for each transaction, facilitating operational efficiency.
• Wide Scope of Actions: Their powers cover all acts necessary to carry out the business or trade entrusted to them, such as negotiating contracts, ordering supplies, and managing suppliers.
• Binding the Principal: Transactions entered into by a general agent within the scope of authority legally bind the principal, making the principal responsible for contracts made.
• Accountability: The agent must act in good faith and keep proper records of dealings to ensure transparency with the principal.
• Termination by Notice: The principal may revoke the agent’s authority by giving notice, which ends the agent’s power to act on the principal’s behalf.

In procurement, appointing a general agent is common where a procurement officer must manage multiple contracts and suppliers continuously. For instance, a procurement officer at a university may act as a general agent for all purchases related to academic materials.

5.1.2 Special Agent

A special agent is appointed for a specific task or transaction, with authority limited to that particular purpose. Once the task is complete, the agency relationship ends. For example, a procurement officer hired to handle a single tender process for a county’s medical supplies operates as a special agent.

Features of a Special Agent

• Limited Authority: The agent’s powers are confined strictly to the transaction or task assigned, such as negotiating a single contract or sourcing a particular good.
• Temporary Relationship: The agency ceases when the specific task is completed or the transaction is finalized.
• No Authority Beyond Instructions: The special agent cannot bind the principal beyond the scope of the specific task, preventing unauthorized commitments.
• Focus on Performance: The agent must diligently perform the assigned duty within the agreed timeframe.
• Clear Termination: The agency ends automatically upon completion of the task or by mutual agreement.

In procurement management, special agents are frequently engaged for one-off purchases or tender evaluations. For example, a procurement specialist contracted by a SACCO to secure office equipment for a particular project acts as a special agent.

Classification of Agents

Agents in commercial law can be classified based on the scope and duration of their authority, as well as the nature of their appointment. In Kenyan procurement, recognizing these classifications helps organizations assign the right responsibilities and manage risks effectively. The main classifications include:

1. General Agents: These agents have broad authority to conduct all acts related to a particular business or trade, such as a procurement manager at a county government who oversees all procurement activities throughout the year.
2. Special Agents: Appointed for a specific task or transaction, their authority is limited to that assignment. For example, a procurement officer hired by a SACCO to manage a one-time purchase of office equipment.
3. Universal Agents: These agents are authorized to act on behalf of the principal in all matters that can be lawfully delegated. Although rare in Kenyan procurement, a universal agent may be used in cases where a principal is abroad and needs someone to manage all commercial affairs, such as an expatriate business owner appointing a trusted representative in Nairobi.
4. Sub-Agents: Appointed by an agent with the principal’s consent to assist in carrying out the agency’s work. For instance, a procurement manager at Kenyatta National Hospital may appoint a sub-agent to handle specific supplier negotiations during a busy period.
5. Del Credere Agents: These agents guarantee the performance of third parties in addition to acting as agents, often used in high-value procurement contracts. For example, a del credere agent in a large construction firm in Kenya may guarantee supplier performance to secure a tender.

Chapter Summary

This chapter explored the formation and classification of agents, distinguishing between general agents who handle a broad range of tasks and special agents appointed for specific transactions. It examined the scope of agents' authority, highlighting how it enables them to act on behalf of principals within defined limits. The duties of agents were detailed, emphasizing their obligations to perform diligently, obey lawful instructions, exercise care and skill, avoid acts leading to estoppel, maintain accurate accounts, and personally carry out assigned tasks. The rights of agents were also covered, including their entitlement to sue for owed commissions and their right to retain goods under lien until payment is received. Various methods of terminating an agency relationship were discussed, such as mutual agreement, withdrawal by either party, death, completion of the agreed task, lapse of time, insanity, and bankruptcy. Understanding these principles equips students with the knowledge to navigate agency relationships effectively within commercial law.