3. Agency and Negligence Flashcards
Define the agency relationship
The principal is the person who has legally empowered the agent to enter into contractual relations with a third party. The contract itself though is between the principal and the third party
The agent effectively drops out of the picture and has no _____ or ______ in respect of the underlying transaction between the principal and the third party
Rights, liabilities
In what four ways can a relationship between principal and agent be created?
- By consent
- By estoppel (impression agent has authority)
- By necessity (requiring pre-existing contractual relationship, no practical way of contacting the principal, a pressing need for action, good faith in the interests of the principal and reasonable actions in the circumstances)
- By ratification (in retrospective effect)
What seven duties are implied by law onto an agent?
- To be accountable for all transactions
- To avoid conflicts of interest
- To perform his contractually agreed obligations
- To follow his principal’s lawful and reasonable instructions
- To maintain the standard of skill and care reasonably expected
- To act in person and not delegate
- To keep in confidence what he knows of his principal’s affairs
What are the three rights of any agent?
- To claim remuneration for services performed
- To be indemnified by the principal for expenses incurred
- To exercise lien over property owned by the principal
Where an agent’s authority has been agreed with the principal, their authority is said to be what?
Actual express authority
In the absence of express authority, the agent’s power to bind may be by what?
Actual implied authority
Define apparent/ostensible authority
Where a principal has previously made representations to a third party that the agent has the power to bind
In what three particular circumstances may the agent incur personal liability?
- Under rules of trade usage
- Where he adds his name as a party to a negotiable instrument
- Where he makes a contract under seal
When can both agent and principal sue or be sued?
Where the agent has authority, but is not known to be an agent, where a principal becomes known at a later date
When can the principal not be sued or sue?
Where the agent has no authority
Define the tort of deceit
If an agent, knowing that he has no authority, makes a representation to the contrary and causes loss to the third party
Define breach of warranty of authority
If an agent genuinely believes that he has authority, but is in fact mistaken
Define tort
An act or omission by the defendant, which act or omission is responsible for causing injury or damage to the claimant
In order to prove negligence, the claimant must prove what three things?
- A duty of care is owed to the claimant
- There has been a breach of that duty of care by the defendant
- The breach of duty caused the harm to the claimant
Define the neighbourhood principle
Every person owes a duty of care to his ‘neighbour’, to ‘persons so closely and directly affected by my act that I ought to reasonably have them in contemplation as being so affected’
What four tests are there for establishing whether there is a duty of care?
- Reasonable foreseeability
- Proximity
- Fair, just and reasonable
- Public policy
What is the standard of care owed by an individual in any given set of circumstances?
What seven factors can adjust the above?
Standard of care: the level at which a reasonable man, guided upon those considerations which ordinarily regulate the conduct of human affairs’
- Particular skill (e.g. being a doctor)
- Pack of skill (e.g. learner driver)
- No hindsight
- Body of opinion (professional opinion justifying the course of action taken)
- Emergency
- Vulnerability (higher standard expected)
- Advantage vs risk
A person will only be compensated for tort of negligence if he is able to demonstrate what?
That he suffered injury or loss and that this was a result of the breach
If something happened after the defendant’s breach, then the defendant’s liability will what?
Cease at that point
The claimant of tort of negligence must prove losses sustained were ______
Foreseeable
Where the claimant for tort of negligence shows the loss was suffered a result of breach of duty, that loss must not be too _____
Remote/far down the chain of causation
In what four circumstances can auditors be held accountable for a claim of negligence?
What kind of relationship is this known as between auditor and client?
- Where a client requests a professional opinion
- The auditor gives an opinion acting in a professional capacity
- The client relies upon the opinion
- The client suffers an economic loss as a result of reliance upon the opinion
A ‘special relationship’
If an auditor prepares accounts but is not aware an individual relies upon these to invest in said company, does the auditor have a duty of care towards this individual?
No
Statements prepared for general circulation will or will not give rise to a duty of care?
Will not
A special relationship and duty of care arises if what three factors are present?
- The bidder had been identified to the defendant
- It was intended that the bidder should rely on the accounts
- Express representations had in fact been made to the bidder by the defendant
If an auditor puts misleading or false matter to a material extent in a auditor’s report, under what act is this an offence?
Companies Act 2006
What is a liability limitation agreement?
An agreement between auditor and company, limiting the auditor’s liability for negligence in the course of auditing accounts to a fair and reasonable amount
What four defences may avoid, reduce or limit liability against accusations of negligence?
- Contributory negligence
- ‘Volenti non fit injuria’ (where the claimant voluntarily agrees to undertake the legal risk of loss or damage at his own expense)
- Exclusion clauses
- Limitation Act (six years from breach of contract or damage caused from tortious act
Define vicarious liability
The legal doctrine under which one person can be held legally responsible and liable for the tortious acts of another person
A principal is _____ _____ for a tort committed by an agent acting within their authority and carrying out the acts for which they were appointed
Vicariously liable
A partnership is liable for any wrongful act or omission of any ____ acting in the ordinary course of the business of the firm (which causes loss or injury)
Partner
