4. Agency

Question 1

How can a person become an agent

Answer 1

Agreement
Estoppel
Necessity
Ratification

Question 2

How can you become an agent by agreement

Answer 2

Express agreement - principal has specifically agreed that the agent will act on behalf of the principal.
Implied agreement - agent is appointed due to the relationship/conduct between the parties.

Question 3

How can a person become an agent by estoppel

Answer 3

The principal has given the impression that someone is an agent in certain dealings. If this is implied, the principal will be bound by the agents actions.

Question 4

How can someone become an agent by necessity

Answer 4

An agent is acting on behalf of a principal in an emergency situation to protect their property. 
No way to contact the principal before acting.
Agent is acting in good faith on behalf of the principle.

Question 5

How can someone become an agent by ratification

Answer 5

Agent was not appointed in advance but the principal later accepts the actions of the agent and therefore bound by the contract.

Question 6

What are the conditions to become an agent by ratification

Answer 6

Principal exists at the time of the contract (company cannot be principal if wasn’t formed yet).
Principal must have the capacity at the time of the contract.
Principal is aware of all terms of the contract.
Third party is aware of the principal.

Question 7

What must a principal do to ratify a contract

Answer 7

Ratify the whole contract - purported ratification of part will operate as ratification of the whole.
Ratify within reasonable time.
Communicate with clear intention of ratifying i.e. refusing to return goods purchased for them by the agent who lacked authority.

Question 8

What are the general duties of an agent

Answer 8

Act in good faith and for the benefit of the principal.
Act in accordance with the principals instructions.
Execute contracts on the principals behalf and negotiate in a fair and proper manner.

Question 9

What are the general duties of a principal

Answer 9

Give notice of termination of contract.
Provide compensation for termination.
Provide all relevant info.

Question 10

What are the duties of an agent at law

Answer 10

Accountability 
Conflict of interest 
Performance 
Obedience
Skill
Personal performance 
Confidentiality

Question 11

Re the duties of an agent at law, what is accountability

Answer 11

• Provide all info of the agents transactions and account for all monies arising from them.
• If the agent accepts any commission/reward from the other party this is a bribe and therefore the contract is fraudulent. The principal can dismiss the agent and claim any bribe given to them.

Question 12

Re the duties of an agent at law, what is Conflict of Interest

Answer 12

Agent should not put themselves in a position where their interests are conflicted.

Question 13

Re the duties of an agent at law, what is Performance

Answer 13

• Agent should properly perform their task

- The agent is justified in refusing to perform illegal acts

Question 14

Re the duties of an agent at law, what is Obediance

Answer 14

Agent should obey any legal and reasonable orders.

Question 15

Re the duties of an agent at law, what is Skill

Answer 15

Agent should show reasonable skill of those in their profession.

Question 16

Re the duties of an agent at law, what is Personal Performance

Answer 16

Agent should do the work themselves

Question 17

Re the duties of an agent at law, what is Confidentiality

Answer 17

Agent should keep confidential info private even after the relationship has finished.

Question 18

Re the rights of an agent, what is Indemnity

Answer 18

Agent is entitled to be paid expenses and indemnified against any losses and liabilities.

Question 19

Re the rights of an agent, what is Remuneration

Answer 19

Principal must pay the agreed remuneration for tasks performed which can be specifically agreed or inferred from general practice.

Question 20

Re the rights of an agent, what is Lien

Answer 20

Agent can hold Principals goods until debt is paid to them.

Question 21

What happens if an agent breaches his duties to the principal

Answer 21

Treated like a breach of contract:

• End the agreement
• Refuse to pay the agent the agreed sum
• Claim damages for losses suffered

Question 22

What happens if an agent fraudulently entered into a contract on behalf of their principal

Answer 22

The contract is binding between the third party and the agent, not the principal.

Question 23

In what ways can authority be given to an agent

Answer 23

Actual express
Actual implied
Apparent or Ostensible

Question 24

What is actual express authority

Answer 24

When authority is given specifically and explicitly by the principal

Question 25

What is actual implied authority

Answer 25

Authority implied by the principle’s actions or relationship to the third parties.

Question 26

What is apparently/ostensible authority

Answer 26

Where the principal acts as if the agent has the authority to bind them but has not been expressly told.
Only way to escape liability from this is for the principal to inform the third party of the change in circumstance.

Question 27

Who is the liable party if the principal is disclosed

Answer 27

The principal unless:

• Agent has indicated personal liability
• The agent won’t identify the principal
• Principal is made up
• It’s usual for the agent to be liable
• Agent makes a contract under seal

Question 28

Who is the liable party if the principal is undisclosed

Answer 28

The agent but if the third party finds out about the principal they can elect to sue them too

Question 29

Who is liable if a contract is breached where the agent had no authority to enter the contract in the first place

Answer 29

Agent is liable to the third party who can sue for damages for losses suffered but the principal cannot sue or be sued unless the contract is ratified by the principal