1. Question no 1.

Answer

 The fiduciary nature of an agency relationship is a fundamental principle that governs the interactions between the
principal and the agent. In legal terms, a fiduciary relationship is one in which one party (the agent) is entrusted to
act on behalf of another party (the principal) and is expected to act in the best interests of the principal. Here are
some key aspects of the fiduciary nature of agency relationships:

1. Trust and Confidence

The agency relationship is built on trust and confidence. The principal relies on the agent to perform tasks, make
decisions, and manage affairs that may require specialized knowledge or skills. This trust creates a duty for the agent
to act with integrity and loyalty.

2. Duties of the Agent

Agents have several fiduciary duties to their principals, including:

• Duty of Loyalty: The agent must act solely in the interest of the principal and avoid conflicts of interest. This means
that the agent should not profit from the relationship without the principal's consent.

• Duty of Care: The agent must perform their responsibilities with the care, competence, and diligence that a
reasonable person would exercise in similar circumstances.

• Duty to Act in Good Faith: The agent is expected to act honestly and fairly in all dealings related to the agency.

• Duty of Disclosure: The agent must keep the principal informed of all relevant information that could affect the
principal’s decisions or interests.

3. Legal Implications

The fiduciary nature of the agency relationship has legal implications. If an agent breaches their fiduciary duties, they
can be held liable for any damages caused to the principal. This can include lost profits, financial losses, or other
forms of harm resulting from the agent's actions.

4. Scope of Authority

The agent's authority can be actual (express or implied) or apparent. Regardless of how authority is granted, the agent
must act within the scope of that authority. Actions taken outside this scope may not bind the principal and can lead to
liability for the agent.

5. Termination of Agency

The fiduciary duties continue even after the termination of the agency relationship, particularly concerning
confidentiality and non-disclosure of sensitive information acquired during the relationship.

6. Consequences of Breach

If an agent violates their fiduciary duties, the principal may seek remedies such as:

• Damages: Compensation for losses incurred due to the breach.

• Disgorgement of Profits: Any profits made by the agent from the breach may need to be returned to the principal.

• Injunctions: Legal orders preventing further breaches or requiring specific actions.

 Conclusion:-

The fiduciary nature of agency relationships establishes a framework of trust and responsibility that is essential for
effective collaboration between principals and agents. Understanding these duties helps ensure that agents act in a
manner that protects the interests of their principals, thereby fostering ethical business practices and maintaining legal
compliance.

2. Question no 2. Answer
 Agency is a specific type of legal relationship characterized by a fiduciary duty where one party (the agent) acts
on behalf of another party (the principal). While agency relationships share some similarities with other legal
relationships, they also have distinct features. Below, I will compare and contrast agency with three other legal
relationships: partnership, employment, and trust.

1. Agency vs. Partnership

Definition:

• Agency: An agent acts on behalf of a principal to create legal relations with third parties.

• Partnership: A partnership is a business relationship between two or more individuals who share profits and
responsibilities in running a business.

Key Differences:

• Nature of Relationship: In agency, the agent acts on behalf of the principal and does not have ownership in the
business. In a partnership, partners share ownership and management responsibilities.

• Liability: In agency, the principal is generally liable for the acts of the agent performed within the scope of their
authority. In a partnership, all partners can be personally liable for the debts and obligations of the partnership.

Example:

• Agency: A real estate agent (agent) represents a homeowner (principal) in selling their property.

• Partnership: Two individuals starting a bakery together, sharing profits, losses, and management responsibilities.

2. Agency vs. Employment

Definition:

• Agency: An agent acts on behalf of a principal to create legal relations with third parties.

• Employment: An employment relationship involves an employer hiring an employee to perform work under certain
terms and conditions.

Key Differences:

• Fiduciary Duty: Agents have fiduciary duties to their principals, while employees may not have the same level of
fiduciary responsibility to their employers.

• Control: Employers typically have more control over employees regarding how work is done, while principals may
have limited control over agents' actions as long as they act within their authority.

Example:

• Agency: An insurance agent sells policies on behalf of an insurance company.

• Employment: A software developer works for a tech company under an employment contract with specified duties
and compensation.

3. Agency vs. Trust

Definition:

• Agency: An agent acts on behalf of a principal to create legal relations with third parties.

• Trust: A trust is a fiduciary relationship where a trustee holds and manages property or assets for the benefit of
beneficiaries.

Key Differences:

• Purpose: The primary purpose of an agency is to facilitate transactions and manage affairs on behalf of the principal,
while a trust is established to manage assets for the benefit of others.

• Legal Status: In agency, the agent does not have ownership of the principal’s assets; they merely act on behalf of the
principal. In a trust, the trustee holds legal title to the trust property, while beneficiaries hold equitable interest.

Example:

• Agency: A travel agent books flights and accommodations on behalf of clients (principals).

• Trust: A family establishes a trust where a trustee manages investments for the benefit of minor children until they
reach adulthood.

Summary:-

While agency shares some characteristics with partnerships, employment relationships, and trusts, it is distinct in its
purpose, structure, and legal implications. Understanding these differences helps clarify the roles and responsibilities
inherent in each type of relationship:

• Agency focuses on representation and fiduciary duties.

• Partnership emphasizes shared ownership and joint liability.

• Employment centers around work performed under an employer's control.

• Trust involves managing assets for beneficiaries' benefit.

Each relationship has its own legal framework that governs rights, obligations, and liabilities.

3. Question no 3. Answer
 The distinction between common law and civil law systems in terms of their conception of agency is rooted in
several doctrinal premises. These differences reflect the broader legal traditions, principles, and methodologies
that characterize each system. Here are some key doctrinal premises that illustrate how common law and civil law
approach agency:

1. Source of Law

• Common Law: The common law system primarily relies on judicial precedents and case law. Agency law has
developed through court decisions, leading to a body of case law that interprets and applies agency principles. The
flexibility of common law allows for the evolution of agency concepts based on judicial interpretation and societal
needs.
• Civil Law: In contrast, civil law systems are based on comprehensive legal codes and statutes. Agency is typically
codified in specific provisions within civil codes (e.g., the French Civil Code or the German Civil Code). The
principles governing agency are more static and defined by written law rather than evolving through case law.

2. Nature of Agency Relationship

• Common Law: The common law conception of agency emphasizes the fiduciary nature of the relationship, where
the agent has a duty to act in the best interest of the principal. The focus is on the authority granted to the agent (actual
or apparent) and the consequences of the agent's actions on third parties.

• Civil Law: While civil law also recognizes the fiduciary aspect of agency, it tends to focus more on the contractual
nature of the relationship. The agency agreement is often viewed as a specific type of contract, with formal
requirements and obligations clearly outlined in the code.

3. Authority of the Agent

• Common Law: In common law jurisdictions, the distinction between actual authority (express or implied) and
apparent authority is crucial. Agents can bind principals based on their authority, and third parties can rely on the
apparent authority exhibited by agents.

• Civil Law: Civil law systems may not emphasize the distinction between types of authority as strongly as common
law does. Instead, the focus is often on the duties and responsibilities outlined in the agency contract and how they
relate to third-party interactions.

4. Liability

• Common Law: In common law, principals are generally liable for the acts of their agents performed within the scope
of their authority. The concept of vicarious liability is significant, as it holds principals accountable for agents' actions
that cause harm to third parties.

• Civil Law: While civil law systems also impose liability on principals for agents' actions, the framework may differ.
The civil code may specify conditions under which principals are liable, and there may be more emphasis on the
contractual obligations between parties.

5. Termination of Agency

• Common Law: Termination of an agency relationship can occur through various means, including mutual
agreement, completion of purpose, expiration of time, or by operation of law. Courts often interpret these terminations
based on case law.

• Civil Law: Civil law systems may provide specific statutory provisions outlining how an agency can be terminated.
The process may be more formalized, with clear guidelines established in legal codes.

6. Formality Requirements

• Common Law: Generally, agency relationships can be formed informally without strict adherence to formalities
(except in cases like real estate transactions). Oral agreements can suffice, although written agreements are often
preferred for clarity.

• Civil Law: Civil law jurisdictions may impose stricter formal requirements for certain types of agency agreements
(e.g., requiring written contracts for specific transactions). This reflects a broader tendency in civil law to prioritize
formal documentation.

Conclusion:-
The doctrinal premises distinguishing common law from civil law regarding agency reflect deeper philosophical
differences between the two systems. Common law's reliance on judicial interpretation and precedent contrasts with
civil law's structured approach based on codified statutes. These differences influence how agency relationships are
understood, managed, and litigated within each legal tradition. Understanding these distinctions is essential for legal
practitioners working in or across different jurisdictions.

4. Question no 4. Answer

 Thus, as provided under art. 2179 of the civil code, the authority to act on behalf of another may derive
from law or contract. Accordingly, the authority of an agent is the power of agency which the agent
acquirs by the operation of the law or by a contract concluded between the agent and the principal to this
end. The details will be discussed as fuscous.
A. Authority derived from a contract.
Agency which is derived from a contractual relationship is the most usual kind of agency. Accordingly, for
many authors consent is the basis of the law of agency and it explains why the agent can represent the
principal.the agency arising out of bilateral agreements between principal and agent as articulated under
art.2199 of the civil code.
‘’Agency is a contract where by a person, the agent, agrees with another person, the principal, to represent
him and to perform on his behalf one or several legally binding acts’’
As we can see from the above provision, an agency is a contract, which is formed between the agent and the
principal.
Obviously, under such agency relationship, which arises out of a contract, we find two independent
contracts. These are regarded as
Internal contract [subordinate contract]
External contract [main contract]
I. Internal contract [subordinate contract]
Internal contract is a contract that exists between the principal and an agent.
II External contract [main contract]
External contract is a contract that exists between the principal and a third party.
B. Authority by Judicial Act
A different kind of source of agency is authority granted by the court. That is, an authority to act on behalf
of another may emanate form the court’s decision. Courts, upon evolvements of some conditions, may
appoint some other person to do activities pertaining to the other. The provisions governing court
authorization are provided here in after:
This situation is not an agency either by a prior agreement of the parties or by the lawmaker. But it arises by the order
of the court upon application. This case of agency is governed by Arts 2253-2256. The person appointed by order of
the court is called the curator. Thus the parties involved in here are the person represented and the curator. This
appointment of curator is usually necessitated when the person whose interest (s) are (is) to be represented is not in a
position to appoint an agent by reason of being a way, ill or any similar causes (Art 2255). In these cases only limited
persons (relatives, spouse and nobody) shall apply to a court with jurisdiction for the appointment of an agent to
protect the interest of the person to whose benefit a curator is required. (Art 2254). Only relatives and/or spouses have
these rights in order to protect the interest of the person represented against misuse of his interest. The person to be
appointed is going to carry out those “acts as are of an urgent nature” [Art. 2255(2)]

The curator is expected to work for the interest of the person represented, and the court may give directions on how to
carry out the obligations and may impose liability on the curator. The curator has to inform his appointment as soon as
possible to the person he/she represent. The curator is a contractual agent for all the rights and duties [Art. 2256].
Because of lack of space and time we cannot write down the relevant provisions of this subsection. Thus, you are
advised to refer frequently to the Civil Code provisions, relevant and cited above.

Article 2253 Principle

The authority to do an act or acts of certain kind on behalf of another may be given by the
court to a person here in after called a curator.
Article 2254 application for appointment
1) an application for the appointment of a curator may be made to the court by a relative or
by the spouse of the person to be represented.
2) It may be made by no other person
Article 2255 Decision of the court
1) The court shall not grant the application unless the person to be represented is not in
apposition to appoint
C. Authority Derived from the Law.
In most cases, the source of agency is authority of an agent derived from the agreement of the parties, that
is, a bilateral agreement between a principal and an agent. Apart from this usual source, agency relationship
could emanate from the operation of the law, that is, agency authority is derived from the law itself.
Consequently, the consent of the principal has no role in creating the agency relationship and hence it is
beyond the principal’s consent that agent –principal relationship comes into existence. This usually happens
where a person to be represented is not in a poison to appoint his agent for one thing or another. Moreover,
it is due to the necessity to safeguard the interest of the person to be represented. Further, agency is created
by operation of the law, as opposed to agency created as a result of agreement of the principal and agent;
there is already a single contract, that is, a contract which is concluded by the representative, on behalf of
the one represented, with the third party. Hence, the internal relationship between the representative and the
represented, in this case, is legal and not contractual since it is created by the operation to the law.
In spite of the legal relation created between the representative and the represented, the rights and duties
arising there from are governed by the provision pertaining to agency contract once the law has established
the relation.
# Other sources of agency
Under Ethiopian law, the sources of agency are primarily derived from the Civil Code of Ethiopia, which provides a
comprehensive legal framework governing various aspects of agency relationships. The key sources of agency in
Ethiopian law include:

1. Civil Code of Ethiopia

The primary source of agency law in Ethiopia is the Civil Code, which was enacted in 1960. The relevant provisions
concerning agency are found primarily in Book III, which deals with obligations and contracts. The Civil Code
outlines the definition, formation, rights, duties, and termination of agency relationships.

• Definition of Agency: Article 214 of the Civil Code defines an agent as a person who is authorized to act on behalf
of another (the principal) to create legal relations with third parties.

• Types of Authority: The Civil Code distinguishes between actual authority (which can be expressed or implied) and
apparent authority. This distinction is important for determining the extent to which an agent can bind the principal in
transactions.

2. Contractual Agreements

Agency relationships can also arise from contractual agreements between the principal and the agent. The parties may
enter into a specific contract that outlines the scope of authority, duties, and obligations of the agent. Such contracts
must comply with general contract law principles under the Civil Code, including capacity, consent, and lawful
purpose.

3. Statutory Provisions

Certain statutory provisions may also govern specific types of agency relationships or particular sectors (such as
commercial agency). For example, laws related to trade and commerce might provide additional regulations for
commercial agents, including registration requirements and obligations towards clients or customers.

4. Judicial Precedents

While the Civil Code serves as the primary legal source for agency law, judicial precedents can also influence the
interpretation and application of agency principles in Ethiopia. Courts may rely on previous rulings to address
disputes arising from agency relationships and to clarify ambiguous provisions in the Civil Code.

5. Customary Practices

In some cases, customary practices and usages in specific industries or communities may also inform agency
relationships. These practices can play a role in shaping how agency is understood and implemented in different
contexts, particularly in rural or traditional settings.

6. International Treaties and Conventions

Ethiopia is a party to various international treaties and conventions that may have implications for agency law,
particularly in commercial contexts. Such international instruments can influence how agencies operate, especially in
cross-border transactions.

Summary:-
In summary, the sources of agency under Ethiopian law are primarily rooted in the Civil Code, which provides a
detailed framework for understanding agency relationships. Additionally, contractual agreements between parties,
statutory provisions, judicial precedents, customary practices, and international treaties contribute to the overall legal
landscape governing agency in Ethiopia. Understanding these sources is essential for practitioners and individuals
engaged in agency relationships within the country.

5. Question no 5. Answer
 Furthermore, it must be noted that agency is one of the special types of contract and thus, the rules
applicable to the formation of a valid contract, are of necessity, applicable to the agency relationship.
Accordingly, the elements required under the law for the formation of a valid contract as enumerated
under art. 1678 of the civil code are required in agency contract as well. These elements are
A. The parties must be capable of contracting and give their consent sustainable at law.
B. The object of the contract must be sufficiently defined, possible, and lawful.
C. The contract must be made in the form prescribed by the law, if any.
Therefore, the formation of a valid agency relationship requires the existence of certain essential elements.
 For the sake of clarification, we need to see the basic elements of contract agency under the
following subtopics.
 Capacity
The first essential requirement for the validity of a contract is the capacity of the parties. The literal meaning of
capacity is the ability to do something. Since agency relationship is a special type of contract the party who wishes to
enter into an agency relationship must have the capacity to do so. Thus, capacity to a contract means competence to
enter into a legally binding agreement.All persons do not have the same legal capacity to make a contract. In some
cases; the legal capacity of a person has no relation to the individual’s actual ability. That is, there is a distinction
between natural capacity and legal capacity. For instance, natural capacity may itself be either the capacity to own
property or the capacity to exercise rights over a property. When dealing with legal, contractual capacity, we mean the
capacity to exercise rights, not the capacity to own the property. This is so because, under Art 1 of the civil code, it is
provided that “Human person is the subject of rights from its birth to its death.” Once born, a human baby can acquire
rights, even a child merely conceived is considered born and acquires rights wherever his interest so requires provided
he is born alive and viable. Therefore, legal or contractual capacity requires only the capacity to exercise rights. That
is, the mere possession of rights and duties does not presuppose the capacity of a person to enter into legally binding
agreement.The Ethiopian civil code, under the agency law nowhere specifically provides that an agent has to posses a
legally required capacity to act on behalf of the principal. Thus it is far from being clear whether our law requires
capacity of an agent. However one argument could arise that the Ethiopian civil code quite exceptionally requires that
an agent shall have the legal capacity pursuant to art. 2182 [1] and art. 2230[1] of the civil code. The latter article for
example states as follows,

‘’Unless other wise agreed a contract of agency shall terminate by the death of the agent or where he is
declared absent, become incapable or is adjudicated bankrupt.’’
Reading into this article envisages that the article refers only to an agent who had capacity at the time of
authorization but declared incapable at a latter time in which case a principal should not be denied the right
to terminate the agency relationship where his agent becomes incapable. Hence, to construe the stated
article, as it requires the agent’s legal capacity may be inconsistent with the intention of the drafter of the
civil code. Admittedly, what is provided under art.2182 is not different from the above mentioned.
Therefore, the requirement of the agent’s capacity even under the Ethiopian law is apparent.
 Consent
 Consent is an agreement that is free from any defect. The freedom of contract is expressed in consent.
There are two aspects to consent. First, there must be an agreement on each detail (identity, price mode and
day of delivery and payment etc), and secondly consent is the willingness of the parties to be bound by the
agreement. If the contract is affected by a defect in consent, it may be invalidated at the request of the party
who invokes the mistake.
Many authors believe that consent is the basis of the law of agency, and it explains why the agent can represent the
principal. For example agency is defined as the relationship which exists between two persons, one of whom
expressly consents that he should impliedly act on his behalf. Similarly, 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 defines an agency.” The vices of consent for
a contract are covered by art.1696-1710 of the civil code. Like any other contracts, if the consent of either the
principal or the agent is vitiated by any of theses vices, the contract of agency becomes voidable. The party whose
consent has been vitiated can have the voidable contract invalidated according to art.1808 [1] of the civil code. With
regard to the main contract entered into by the agent with the third party, in the name of the principals,
art.2189 [2] of the civil code gives the principal the right to avail himself of the defect in the consent of the
agent. Likewise, sub article [3] of art.2189 of the civil code entitles the third party to set up the fraud of the
agent against the principal. Hence the principal can demand the invalidation of the contract between the
third party and himself in accordance with art. 1808 [1] of the civil code on the ground that the consent of
his agent has been vitiated during the making of the contract. In the same way the third party that has been
defrauded by the agent can request the invalidation of the contract pursuant to art.1808 [1].

Article 2189 of the civil code seems to favor the principal in that it gives more protection to him than to the third
party. Under sub art [2] of art. 2189 the principal can avail himself of any defects in the consent of the agent. This sub
art does not put a restriction as to the type of defect, which the principal can employ, as a ground for invalidating the
contract. On the other hand, under sub art [3] of art 2189 the only defect that the third party can raise against the
principal is the fraud of the agent. The defect that the third party can invoke for the purpose of invalidating the
contract is limited to only one kind of defect. This means that he cannot invoke mistake, duress, false statement, etc,
as a defense against the principal. Therefore it is clear that art. 2189 of the civil code provides less protection to the
third party than to the principal.

 The Object of Agency Relationship

The object prescribed in the general provisions of the contract is not the object that can be seen or touched,
but the obligations undertaken by the parties. So the object of the contract may be positive or negative. The
obligations to give something or to do something are positive obligations whereas an obligation not to do
something is a negative one.
Under art.1711 of the Ethiopian civil code, contracting parties are free to determine their obligation but their
freedom is not an absolute one-it is subjected to such restrictions and prohibitions as is provided by law. On
the other hand, under art.1678 (b) of the civil code, the law imposes on the contracting party to engage in a
defined, lawful and possible obligation.
The object of the contract must be defined with sufficient precision. A contract shall be of no effect where the
obligations of the parties or of one of them cannot be ascertained. An obligation that is not defined by the parties
cannot be defined by courts of law. As art. 1714 of the civil code stipulates, the court may not make a contract for the
parties under the guise of interpretation.

The object of the contract must be lawful as provided under art.1716 of the civil code, where the obligations of the
parties or one of them are unlawful or immoral, the contract ends in invalidation.

Moreover, the object of the contract must be possible of performance. A contract shall be of no effect where the
obligations of the parties or one of them relate to a thing or a fact that is impossible and such impossibility is absolute
and insuperable, as provided in Art 1715.

As far as the contract of agency is concerned, there is special problem on the question of lawfulness or possibility of
its object. However, problems are usually faced with the requirement of the sufficiently defined object. This is
especially true with the extent of the power given to an agent. It is extremely difficult to exactly fix the limits of such
power. Since the agent deals with third parties usually in the absence of the principal, he has nothing to rely on in
determining whether the interest of the principal would best be served by performing a certain juridical act except the
power of attorney given to him by the principal in advance. As a matter of fact, it may not be possible to enumerate in
the power of attorney all the acts whose performance by the agent would further the interest of the principal. On the
other hand, if the principal authorizes the agent to do everything that he thinks promotes the interest of the former,
there is the danger of abusing the power on the part of the agent.

The Ethiopian civil code has adopted the same solution similar to the French for the problem. As provided by art.
2203 of the civil code, authority granted in general terms includes only acts of management. Naturally, a question
would arise here regarding what are acts of management are Art. 2204 gives the answer to this question. Acts done for
the preservation or maintenance of property, cancellation of debts, discharge of debts, sell of perishable things and
goods intended to be sold, interalia, are acts of management under art.2204. Art 2205 of the civil code explicitly states
that express authority is required for the performance of the transactions other than acts of management. Sub-art two
of this article particularly forbids the agent to alienate or mortgage real state property without special authority. Thus
an agent with the general power of attorney cannot sell the property of the principal. For this purpose, he needs a
special authorization. But if he sells one of the properties of the principal without such authority, the latter will not be
bound to the third party. Unless the principal ratifies the act of the agent, the agent will be liable towards the third
party in the contract.

 Form of Agency Contract

 As a general rule, for the formation of an agency contract no special form is required unless the law
provides that the contract of agency be made in a specified form (article 1719(2) and 2180 of the civil
code), or the parties stipulate that their contract be made in a special form (article 1719(3) of the civil
code).
 There is no special requirement for the form of agency contract. It can be made in any form. But if the law for the
contract that the agent concludes in the name of the principal prescribes a special form, the authority to make such
 a contract should be given in the same form. As provided under art 2180 of the civil code, for instance, art.1725 of
the civil code provides that a contract of insurance shall be concluded in writing. Supposing principal (P)
authorizes the agent to make a contract of insurance for him, the authority for this purpose must be given in
writing. Apart from this, the contract of agency can be expressed, that is, written or oral, or it can be implied, that
is, it can be inferred from the conduct of the parties as provided under art.2200 [1] of the civil code.
 As briefly discussed above these elements of the contract should be fully satisfied before a valid contract of
agency can be formed. The absence of any of these elements renders the agency either voidable or void abinitio as
the case may be, and it will be subjected to invalidation by the proper authority.
 In this case a question would arise what would be the fate of the contract entered into by the agent in the name of
the principal with a third party when the agency contract between the principal and the agent is invalidated for the
lack of any of the elements of the contract, which we have discussed above? This issue may be resolved in two
different ways. First, it can be argued that since the agency contract is the basis of the main contract, the
invalidation of the former should automatically cause the invalidation of the latter. This approach renders the
position of the third party insecure in that it makes the validity of the contract that exists between the third party
and the principal totally dependent on the existence of the contract between the principal and the agent to which
the third party has no connection. This problem can be minimized to a large extent by the application of art.1816
of the civil code, which provides that acts done in the performance of a contract shall not be invalidated when the
interest of the third party in good faith so requires. Therefore, although the agency contract is invalidated by the
principal or the agent or by any other interested parties in accordance with art. 1808 of the civil code, the main
contract, which the agent concluded in the name of the principal with the third party in performance of the agency
contract, remains in force as between the principal and the third party where the interest of the third party so
demands. This is however subjected to the qualification that such third party must not have been aware of the
facts that caused the invalidation of the agency contract. Hence a third party, which contracted with the agent
knowing the possible causes of the invalidation of the agency contract cannot invoke art. 1816 of the civil code.
 The second solution is based on the doctrine of separation. According to this doctrine, mandate [the relationship
between the principal and the agent] and representation [the relation of the principal and the third party] are
independent. Thus there may exist mandate without representation and vise versa. Therefore since the relationship
between the principal and the agent on the one hand, and the relation of the principal with the third party on the
other are separate phenomena, the invalidation of the agency contract should not by itself constitute a ground of
invalidation for the main contract.
 According to the above arguments, it is better to adopt the second solution in Ethiopia. because, in the first place,
the solution is in line with the doctrinal basis of the Ethiopian law of agency, which is the doctrine of separation,
and secondly compared to art.1816 of the civil code, it affords more protection for third parties that the protection
under this solution is not restricted by the requirement of good faith on the part of the third party. In other words,
since this solution maintains the main contract effective, despite the invalidation of the agency contact, third
parties who are aware of the fact that caused the invalidation of the agency are protected as well as those who are
ignorant of such facts during the conclusion of the main contract. This seems logical because, as the third party
has no connection with the contract of agency, the fact that he is aware of the possible causes of invalidation of
such contract should not affect the validity of the contract between the third party and the principal.
6. Question no 6. Answer
 It is provided under Art. 2195 that the principal is liable with the agent in three cases:
i) Where the principal has informed a third party of the existence of the power of attorney but failed to
inform him of the partial or total revocation of such power;
ii) Where the principal failed to demand the return of a document evidencing power of attorney, if any;
iii) Where the statement, behavior has made third parties believe the existence of authority.
Now let’s discuss each of the cases that give rise to apparent authority.

i) Third party being informed of the existence of authority by the principal.

What is meant by power of attorney? There is confusion in the usage of the phrase power of attorney within
the agency provisions of the Civil Code. It used to mean a written authority which is named a deed under
the common law. As well it is used to mean power of authority. Look at the Amharic version of article
2182(1)… ከአንድ ጽሁፍ የተገኘዉ ስልጣንይቀራል፡፡
The English versions of Arts 2181, 2182, 2195(a) speaks of a “power of attorney”.
The French merely uses the word “power” (pouvior) or the words “power of representation” (pouvior de
representation), neither of which embodies a requirement or implication of formality or of a written
document. The same is true of the Amharic (ስልጣን ወይም የእንደራሴነት ስልጣን). Therefore the English words
“power of attorney” within the Civil Code should be read merely as “power” without any implication of
special formalities or of a written document.
Hence, the term attorney under Art 2195(a) is the authority the agent has acquired.
ii) Failure of the principal to demand for the return of document evidencing agency: when the power to act for
another is evidenced by a written instrument the revocation of authority is not alone sufficient to terminate the
relationship between the principal, the agent and third parties. This is because the agent even when his
authorities are terminated conceptually may act in the name of the principal supported by the written evidence
unless this document is returned to the principal. To protect the interest of the principal on the one hand and
the third party on the other hand the principal is entitled to demand the return of the document to him upon
revocation (Art. 2184).When the agent alleges that the document is lost/destroyed the principal needs to seek
a judicial remedy, i.e. declaration that the power evidenced by the written instrument is revoked. This is
supported by Art. 2185 of the civil code.
A close look at Art 2195(b) has provided the return of the document and seeking a judicial remedy cumulatively.
However, it is provided cumulatively under art 2195(b) in the sense that the principal must do both of them (secure
the return of the document and seek declaration of end of authority), it is provided under Art. 2184 cum 2185 that the
principal has a right and duty to demand return of document when the authority comes to an end. But the agent may
not return the document because it may be lost/destroyed. In the latter case the principal may demand the court to
declare that the document is revoked at the expense of the agent. Hence to seek a judicial declaration to the effect that
a power is revoked works in place of a return of a document. Finally the cumulative requirement for return of the
document and judicial declaration is meant when the agent fails to return the document and not as an additional duty
on the principal on top of the return of document.
iii) Where the principal causes in a certain manner for a third party to believe the existence of authority:
This one is the third cause making the principal liable with the agent towards third parties. In this last case, what is
explained is: there was no contract of agency between the agent and principal earlier unlike the above two cases. It is
the case where the “principal” and/or the “agent” alone has made certain statements or acts that give rise to third
parties to believe that these two persons have agency principal relationship among themselves. Here it is not proper to
use the terms agency and principal, because these persons have not agreed to develop agency-principal relationship.
But a mere statement or act made by the individual in front of third parties enabling the latter to believe that there is
agency principal-relationship legally makes the principal liable with the agent. For example, in a certain place where
people get together, X has declared in the presence of Y that he is an agent to the latter in doing some juridical acts.
When Y remains silent, third parties may perceive that there is agency principal relationship among these persons.
This is true even when the principal has not intended to employ any agent. Similarly, when a housewife has
acknowledged acts of a maid/servant while she has committed a credit sale for certain periods, third parties are in a
position to believe reasonably that the wife has granted authority to the servant to buy goods of at least the same kind.
And hence, the lady is liable with the maid.

This relationship under the common law gives rise to agency-principal relationship. But it does not give rise to
agency-principal relationship in the Ethiopian context. Yet, it does not mean that it shall have no legal effect. When
one of the causes we have mentioned above is evident by virtue of Art. 2195, the agent is liable towards third parties
for she/he has acted in the absence of an authority. And the principal is also liable together with the agent for his
statement, remaining silent, failure to act and generally because of his conduct. Generally, we can conclude that there
is nothing called apparent agency in Ethiopia. But the principal is liable towards the third party with the agent to the
occurrence or otherwise of one of the acts under Art 2195 of the civil code.

7. Question no 7. Answer
 under Art 2189 of the Civil Code shall bring effects of agency. The other two forms of agency explained under
Art. 2197 of the Civil Code are not capable of affecting the principal and hence bringing the effects of agency.

Under Ethiopian law, the concept of undisclosed agency refers to a situation where an agent acts on behalf of a
principal without disclosing the existence of the agency relationship to the third party with whom the agent is dealing.
This can have significant legal implications for both the agent and the principal, as well as for the third party involved
in the transaction. Here are the key effects and considerations regarding undisclosed agency under Ethiopian law:

1. Legal Framework

• The Ethiopian Civil Code governs agency relationships, including undisclosed agency. The relevant provisions
outline the rights and obligations of agents, principals, and third parties.

2. Agent's Liability

• When an agent acts without disclosing that they are acting on behalf of a principal, the agent may be personally
liable to the third party for any obligations arising from the transaction. This means that if the agent makes a contract
or enters into an agreement, they may be held accountable as if they were acting on their own behalf.

3. Principal's Liability

• In cases of undisclosed agency, the principal may still be bound by the actions of the agent if those actions fall
within the scope of the agent’s authority. However, because the third party is unaware of the principal's identity, they
may not be able to directly enforce any rights against the principal until the agency relationship is disclosed.

4. Third Party's Position

 • The third party dealing with an undisclosed agent does so at their own risk. If the agent does not have actual
authority or if the principal later denies the agency relationship, the third party may find themselves unable to enforce
their rights against either party.

• If the third party later discovers the identity of the principal, they may have the option to pursue claims against
either the principal or the agent, depending on the circumstances and any agreements made.

5. Disclosure and Authority

• If an agent acts without disclosing their status and exceeds their authority, the principal may not be bound by those
actions. Conversely, if the agent acts within their authority but does not disclose their agency status, the principal may
still be held liable for those actions.

6. Implications for Commercial Transactions

• Undisclosed agency can create uncertainty in commercial transactions, as third parties may be unaware of who
they are actually contracting with. This can lead to disputes and complications if issues arise regarding performance or
obligations.

• Parties engaging in transactions should be cautious when dealing with agents who do not disclose their agency
status to avoid potential liabilities or losses.

7. Remedies

• In cases where an undisclosed agent has acted inappropriately or has exceeded their authority, the principal may
seek remedies against the agent for breach of fiduciary duties or other claims arising from their actions.

Conclusion:-

Undisclosed agency under Ethiopian law creates a complex legal landscape where both agents and principals must
navigate their responsibilities carefully. While agents may face personal liability for their actions, principals can still
be bound by those actions if they fall within the scope of authority. Third parties engaging with undisclosed agents
should exercise caution and seek clarity regarding the nature of their dealings to protect their interests. Understanding
these dynamics is essential for effective business practices and legal compliance within Ethiopia's legal framework