How did Rudolf von Jhering and Paul Laband change European ideas about agency?

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agency Portrait of Hugo de Groot (Hugo Grotius), oil on panel by the workshop of Michiel Janszoon van Mierevelt, 1631; in the Rijksmuseum, Amsterdam.

In the second half of the 19th century, Rudolf von Jhering and Paul Laband fundamentally transformed European legal thought regarding agency by introducing a critical conceptual distinction.

Prior to their work, legal theory viewed agency solely through the lens of the relationship between the principal and the agent, effectively equating agency with the mandate (the contract) between them. Jhering and, most notably, Laband, were the first to sharply distinguish between two separate legal elements:

The Power of Representation: The agent’s authority to create legal rights and obligations directly for the principal.
The Internal Relationship: The contractual agreement governing the personal rights and duties between the principal and the agent.

This distinction allowed for a more precise understanding of how an agent acts on behalf of another, moving away from the previous, more limited view that tied agency strictly to the underlying mandate. Their analysis was widely adopted by continental European legal systems and subsequently codified in several countries, providing a more systematic framework for the law of agency.1