4 - Law of Agency Flashcards
What is an agent?
A person who has authority/power to act on behalf of another, known as the principal
How may agency be created?
By agreement/consent, ratification, or necessity
What is agency by agreement?
The principal and agent have an agreement, called a contract by agency, for the agent to act on the principal’s behalf. This could be express or implied. Note that if no consideration is given by the principal to the agent the agreement may not constitute a binding legal contract
Is an agent party to a contract they arrange on a principal’s behalf? What is the implication of this?
No, they drop out of the picture. This means that they do not need full contractual capacity.
What is agency by ratification?
The agent acts on behalf of the principal but without their knowledge, and the principal later retroactively accepts the agreement
What is agency by necessity?
When the agent is entrusted with property of the principal and acts in an emergency to preserve them (eg moving them in a fire to avoid their destruction)
Does an insurance broker act as an agent of the insured or the insurer?
Both at different times
When does an insurance broker act as an agent of the insured?
When giving advice or assisting with completion of the proposal form
When may an insurance broker act as an agent of the insurer?
When collecting premiums, asking questions at the instruction of the insurer, or when granting cover, if empowered to
What are duties of an agent?
- To obey the principal’s instructions
- To act with proper skill and due care
- Personal performance
- Good faith
- Account for principals money
Can an agent delegate their duties?
Generally no, unless the principal allows it, it is a routine clerical/admin task, it is customary, or it is necessary
What is meant by “imputed knowledge”?
It is assumed that knowledge possessed by an agent is also known to the principal
What are the two main rights of an agent?
Remuneration and indemnity
What is an agent’s remuneration?
Payment for acting on the principal’s behalf generally by commission. Generally this would be expressly stated in the contract, if not they are owed standard rates or a reasonable sum fixed by a court
What is meant by an agent’s right to indemnity?
The principal should be pay back the agent any expenses they incur when carrying out their duties
What is a lien?
The right to retain the goods or property of another as security for a debt
What are the two main categories of authority?
Actual authority and apparent authority (also called ostensible authority)
What is actual authority?
Express actual authority is when an agent is given instructions by the principal
Implied actual authority is to do anything that is incidental or necessary when carrying out their express instructions, or is customary for that trade (this is called usual authority)
What is apparent authority?
When a third party believes that an agent has authority due to a representation by the principal. Even if the agent actually has no right to do a certain thing, the principal may still be bound by it
What is the difference between a disclosed and undisclosed principal?
When a third party is making a contract with an agent, if they are aware that there is a principal then that is a disclosed principal. If they are not aware they are dealing with an agent then that is an undisclosed principal
How can a third party enforce a contract made with a disclosed principal?
By suing the principal
How can a third party enforce a contract made with an undisclosed principal?
By suing either the principal or the agent
They can only sue one, and having commenced proceedings cannot then sue the other
When can a third party sue an agent?
If there is an undisclosed principal
For breach of warranty of authority
Under tort, if the agent knowingly deceives or acts recklessly
Is a principal’s debt to a third party discharged by paying the money to the agent to pass on?
No - if the agent fails to pass it on the principal is still liable unless the third party has induced the principal to pay the agent
Is a third party’s debt to a principal discharged by payment to the agent?
Generally no, unless the agent has authority to receive payment on the principal’s behalf which is often the case. If the agent dos have authority but fails to pass the money to the principal, then the principal must sue the agent
How can agency be terminated?
Agreement between the parties
Withdrawal by principal
Renunciation by agent
Performance
Lapse of specified time
Death of either party
Bankruptcy of principal
Insanity of principal (i.e losing contractual capacity)
Frustration
Bankruptcy/insanity of agent may end the agency if it renders them unable to perform their duties
