5: Agency Flashcards
What are the roles in agent relationships?
Intermediary - the agent
Principal - who the agent represents
Customer doing the buying - third party
Who is an agency contract enforceable by?
Both the principal and third party, as if the contract has been formed by them initially
Agent enters to privity of contract
Most important type of agency relationship in exam?
Partner - agent of the business
- enters into transactions on behalf of the business
- will be binding to business and all other partners
Director - agent of the company
- enters into contracts on behalf of company, binding on company itself, not other directors
4 ways an agency relationship can be created?
Consent
Estoppel
Necessity
Ratification
How does agency by consent work?
Agreement created by express or implied consent
Express
- principal appoints agent
- can be in writing or oral
- commercial transactions are normally in writing
- if agent given power of attorney, appointment must be made by deed
Implied
- implied from parties conduct or relationship
- extent is indicated by all circumstances, including:
relationship of parties, usual authority of agent, nature of principal’s orders
How does agency by estoppel work?
Principal holds out another as having the authority to make contracts on their behalf
Apparent or ostensible authority
Arises:
- where principal fails to notify that agent’s authority has been terminated
- where principal allows agent to appear to have more authority than they actually have
Representation by the principal to a third party who relies on it and believes that the agent has authority to act
How does agency by necessity work?
By operation of law. Happens if all three of these conditions are met:
- emergency situation
- not possible for agent to communicate with principal
- agent is acting in good faith, and action was reasonable and prudent
Only happens if existing contractual relationship
Never happens nowadays!
How does agency by ratification work?
When agent exceeds authority, principal has no liability unless contract is ratified
If ratified
- principal becomes liable and entitled
- ratification is retrospective and principal is bound from date contract is actually made
- agent is relieved
- no authority for future acts
Can only ratify if.
- principal is in existence
- principal had the legal capacity to make contract himself
- agent sufficiently identified principal
- principal made aware of all terms
Condition for ratification to happen?
Whole contract must be ratified
Ratified within a reasonable time
Must communicate a sufficiently clear intention of ratifying such as refusing to return goods
Contract must not be void or illegal!
Duties of the agent?
Fiduciary in nature
Agent must:
- act in good faith, benefit of principal
- act in accordance with principal’s instructions
- execute contracts on behalf of principal
- negotiate in a fair and proper manner
Duties of the principal / rights of the agent
Principal must act in a proper manner to agent
Must:
- give notice of contract termination
- provide compensation for termination
- give all relevant info
What are the duties of the agent by law?
Accountability
- no bribes!
- if bribes, principal can dismiss agent and recover bribe amoint
Conflict of Interest
Performance
Obedience
Skill
Personal performance
Confidentiality
What is the effect of a breach of agent’s duty?!
Agent is liable for any loss
If serious, principal can dismiss agent and refuse to pay compensation
Principal can recover any benefit or profit made by agent
If third party is fraudulent, principal may avoid contract
What are the rights of the agent by law?
Indemnity
- agent repays expenses
- entitled to be indemnified
Remuneration
- getting paid
- if not fixed, reasonable amount
Lien
- a right to possess property of others until obligation met
- agent has a right to exercise lien
Three ways an agent can get authority?
Express
Implied
Apparent/ostensible
What is actual express authority?
Stately expressed, specifically and explicitly by P to A
Determined by documents or other evidence
What is actual implied authority?
Factors taken into consideration
- behaviour which is customary or usual
- past conduct/authority
Things incidental to actions expressly authorised and things usually done by agent
What is apparent or ostensible authority?
Principal ‘holds out’ that agent has authority
By virtue of the principal’s conduct, authority has extended
Apparent authority - not restricted
If principal makes representation about level of authority, then authority revoked, liability will only be escaped if third party is INFORMED
What is the liability when the principal is disclosed?
Agent is not liable or entitled unless:
- agent has shown an intention to undertake personal responsibility
- trade usage or custom
- agent refuses to identify principal
- agent acting for fictitious principal
- agent makes a contract under seal (as a trustee)
What is the liability when the principal is undisclosed?
When third party discovers true position, can elect to treat principal or agent as being bound
Undisclosed principal cannot intervene when:
- terms of contract are inconsistent with agency
- identify of principal or agent is of material important to third party
- agent did not have the actual authority to make contract
What is the liability when the principal is undisclosed?
When third party discovers true position, can elect to treat principal or agent as being bound
Undisclosed principal cannot intervene when:
- terms of contract are inconsistent with agency
- identify of principal or agent is of material important to third party
- agent did not have the actual authority to make contract
What is the liability when agent acts without authority!
No valid contract! Principal cannot sue or be sued.
Principal can ratify if they want
Third party can take action against the agent for any loss. Agent liable to the third party for misrepresentation.
If intention to deceive - tort of deceit!
