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Commercial Law > Agency > Flashcards

Agency Flashcards

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1
Q

Define agency

A

refers to the legal situation here one person (a agent) who is duly authorized, performs a juristic act on behalf of another person (the principal) e.g. concluding a contract with a third party.
In which the principal acquires all rights and duties

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2
Q

Explain the 3 Golden rules of Agency

A
  1. Agency always involves at least three parties - a tripartite relationship between a principal, agent and third party
  2. Agent must have permission from the principal to act on his behalf. Also must within the confines of authority
  3. Only the principal and third party acquire rights and duties even though contract was concluded by the agent and third party
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3
Q

How can authority be granted to the agent by the principal?

A

Authority can be granted contractually, for instance via a mandate or employment contract or can arise from ratification, estoppel or by operation of law

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4
Q

Explain the act of agency

A

The juristic act that the agent performs on behalf of the principal such as the conclusion of a contract, but it can include other actions

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5
Q

What are the legal consequences of the act of agency?

A

The legal consequences will be attributed to the principal and not the agent, provided that the agent was properly authorized to perform the relevant act and did so within the confinements of authority granted to him

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6
Q

Disclose the normal requirements for a valid act of agency

A
  1. there must be consensus
  2. the parties must have contractual capacity
  3. the contract must be legal
  4. performances must be possible
  5. all formalities, if any, must be fulfilled
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7
Q

Are there any limitations to juristic act that the agent cannot perform?

A

Certain acts must be performed by the principal in person and therefore cannot be concluded by the agent on his behalf. In circumstances where the act is of personal nature or matter is of importance for the third party that the principal has to perform

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8
Q

What happens when a the agent acts outside the confinement of authority?

A

The agent might incur personal liability for the duties that stem from the act of the agency

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9
Q

Name the sources of authority

A
  1. Contractual authority
  2. Ratification
  3. Ostensible authority
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10
Q

Explain contractual authority

A

The principal makes an offer to the agent whereby he requests the agent yo perform a certain juristic act(s) on his behalf .

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11
Q

What occurs when one party (the principal) does not have the required contractual capacity?

A

The agent’s authority cannot granted via contract but can inly be established, if applicable by the operation of law

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12
Q

Discuss ratification

A

Involves the express or tacit approval by the principal after the agent has already acted, hence without having had the necessary authority to act or having acted outside the confines of authority that had been granted.
The act of agency was performed validly and thus the juristic act will be of full legal force and will bind the principal to its terms with retrospect effect as if the agent had the necessary authority when the act was performed.

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13
Q

List the requirements for a valid ratification

A

a) the principal must have existed when the alleged agent performed the juristic act
b) the principal must have the intention to ratify the unauthorized act
c) the principal must have unilaterally declare that the he ratifies or confirms the unauthorized act
d) the principal must ratify the unauthorized act within a fixed or reasonable time after the act was performed
e) the agent must have intended to perform the unauthorized act on behalf of a specific or ascertainable principal, and thus not for himself
F) the act of agency must have been valid

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14
Q

What occurs when the requirements for a valid ratification is not meet?

A

The unauthorized act will become authorized and the principal will be retrospectively bound by the consequences of the juristic act, thus from the date when the agent performed the act

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15
Q

Explain ostensible authority (estoppel)

A

The principal created the impression that the agent has the authority to act in a certain way, even though he does not have such authority

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16
Q

What are the requirements for a principal to held liable towards the the third party under the doctrine of estoppel?

A

a) the principal must have created, either intentionally or negligibly, a representation
b) the representation must have been of such a nature that one can reasonably expect it to have misled the third party
c) the third party must have acted on the strength of the representation
d) the third party must have experienced prejudice ass a result of acting on the representation

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17
Q

What is a mandate?

A

A mandator instructs the mandatary to do something on his behalf. The mandatary can then accept or reject the instruction (offer). If mandatary accepts there is consensus between the parties and thus the necessary authority to act on the principal’s behalf comes into existence and must comply with the normal requirements for a valid contract.
The contract between an agent and principal usually takes form of a mandate.

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18
Q

Explain employment

A

Sometimes employee’s job to act as agent of principal (employer). But, agent not usually under control and supervision of employer. Agent usually acts independently and has freedom of choice regarding whom he negotiates with

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19
Q

Discuss implied authority (by operation of law (ex lege))

A

There are number of instances where certain persons are generally authority by virtue of a rule of common or statutory law perform juristic acts on behalf of another, hence where the principal did not or could not grant contractual authority (mental health care user) to the principal.

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20
Q

In a instance of an partnership. How does implied authority implemented ?

A

A partner has authority by operation of law to act on behalf of the partnership, unless the partnership agreement determines otherwise and provided that the act falls within the ambit of the partnership business

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21
Q

How are the agents of company in regards of the statutory authority?

A

Board of directors

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22
Q

Name the different types of scope of authority

A

> Express authority

> Tacit authority

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23
Q

Explain scope of authority

A

Used after determining the scope of authority. To determine what will bind the principal from the agents actions

24
Q

At what extent can a agent perform juristic act on the behalf of a principal?

A

Sometimes the agent can perform all juristic act on the behalf of the principal . But authority can be limited.

25
Q

What is express authority?

A

Is the simplest and clearest way to determine the scope of an agent’s authority.. It details of the agent’s authority were clearly expressed, either in writing or verbally, by the principal to the agent in exact terms

26
Q

Does express authority require every single juristic act an agent can perform?

A

No, the principal may allow the agent a discretion and freedom of action under certain circumstances. Eg. who to conclude a contract with

27
Q

Name the different types of tacit authority

A

a) General/related authority
b) Special/customary authority
C) Normal authority of professional persons

28
Q

Explain tacit authority

A

Refers to authority that was actually given but in an unspoken way. It is based on consensus between the parties and/or the principal’s actual intention albeit unspoken or not expressly stated

29
Q

Discuss general/related authority

A

When an agent is given express general authority to perform certain tasks or is appointed to a certain position. In addition to his express authority, he also has the tacit authority to perform tasks that relates more broadly to the general task that was expressly given to him.

30
Q

Explain special/customary authority

A

Where the agent was granted special authority to perform a specific task, it may be that the principal also tacitly authorized the agent to do certain things that include all the necessary and usual means of executing it with effect. Also, the authority does not include only the means which are necessary and proper for the accomplishment of the purpose, but also all the various means which are justified or allowed by the usages of the trade.

31
Q

What is normal authority of professional persons?

A

When a professional person is appointed and given authority to conduct work in the that capacity. To do everything that someone in that profession usually does unless the parties agree otherwise

32
Q

Discuss formalities when granting authority: power of authority

A

Authority can be given (contractually) without complying with any formal requirements. Power of authority must be in writing, signed by the principal and must clearly stipulate what the agent’s specific or general authority involves

33
Q

Name the requirements for the legality of power of authority

A

a) Section 2(1) off the Alienation of land Act 68 of 1981 requires that, when one person authorizes another person to purchase land on his behalf, the authority must be granted in writing
b) In order to transfer ownership of land from one person to another, or in order to register a mortgage bond, a conveyancer must be in possession of a power of attorney granted to him by the relevant person(s)
c) For a legal practitioner to lodge or oppose an appeal in the high court on behalf of his client, he must have a power of attorney to do so.

34
Q

In what ways is Authority can be terminated?

A

a) when the authority has been executed, hence when the task given to the agent has been completed (also when the agent is no longer able to perform under the authority)

B) when the authority was granted for a specific period expires

C) when the principal and the agent terminate the authority through mutual agreement.

D) If the authority had its source in a specific legal relationship between the parties and that relationships ends.

E) when there is a change in status of the parties, for instance when the principal or agent becomes mentally ill, when the principal or agent dies. Or when the principal declared insolvent as the principal might revoke the authority

F) when the principal revokes the authority that he granted to the agent. However, such revocation is not possible if the authority was granted irrevocably or if the authority has ready been executed. Both the agent and third parties dealing with the agent must be informed that the principal has revoked the authority, otherwise the revocation will have no effect against them. The agent has a claim against the principal if he has suffered damage as a result of the revocation.

E) when the agent at any stage renounces the authority that was granted to him. However he may not do so if the principal will be prejudiced or will suffer a loss due to the renunciation. The agent will not be held liable for any such losses if he had a valid reason for renouncing the authority, e.g health issues

35
Q

Discuss the relationship between principal and the third party

A

The legal relationship between the principal and the third party is determined by the terms of the contract concluded between the third party and the agent. Being if the contract was concluded within the bounds of the authority granted by the principal to the agent. Thus the principal is not bound to anything done by the agent that was not covered by the form of authority. Therefore the agent might be personally liable towards the third party

36
Q

What is liability towards third party?

A

If the agent commits any delicts against the third parties, the principal will be liable

37
Q

Under what conditions is the principal liable to when an agent committed a delict?

A

A) if the agent is the principal’s employee and the agent committed the delict while executing, his duties as employees in terms of the doctrine of vicarious liability
B) if the agent is not an employee, but the act which caused the damage was authorized by the principal or the principal otherwise had knowledge thereof

38
Q

What happens when the agent makes fraudulent that causes the third party to suffer damages?

A

The principal is liable for such damage, provided that the act of misrepresentation must have been committed while the agent was acting within the ambit of his authority.

39
Q

Explain the sequences of events if the principal had granted authority to an agent to sell his property but the agent then sells it to a third party in his own name

A

The principal may claim the property from the third party (with the property remedy known as the rei vindicatio) but only if he repays the purchase price to the third party

40
Q

Discuss relationships between agent and third party

A

The agent and the third party have no legal relationship and thus are not liable towards or entitled against each other. The only legal relationship that comes into existence is the relationship between the principal and the third party. Hence only these two acquire rights and duties towards each other when the agent performs the act of agency on the principal’s behalf

41
Q

What are the circumstances which the agent is liable to the third party?

A

A) Absence of authority
B) Express warranty
C) Misrepresentation

42
Q

Explain absence of authority

A

If an agent concluded a contract with a third party while not having the necessary authority or while acting outside the scope of the authority granted to him. The principal will not be held bound to the contract unless he ratifies the agents actions. Instead the agent will be liable towards the third party for any damage suffered as a result of the unauthorized actions

43
Q

What conditions will the agent will not be held liable towards third party when he can acted outside his authority?

A

A) if both the agent and third party laboured under the false impression that the agent indeed had the necessary authority
B) if the third party knew or should have known that the agent did not have the required authority

44
Q

Explain express authority

A

If an agent gave an express warranty to a third party that he possessed the required authority to contract on the principal’s behalf, he will be liable for a breach of warranty (breach of contract) if he did not have the relevant authority. The third party can consequently claim contractual damages from the agent in terms of the warranty.

45
Q

What is misrepresentation?

A

If the agent creates the impression that he has the necessary authority to act, while he does not have it, he may be liable towards the third party for damage suffered when the third party acts on the strength of the agent’s misrepresentation.

46
Q

What are the liabilities of misrepresentation?

A

A) If misrepresentation was fraudulent or negligently. the agent will be liable towards the third party under the normal rules of delict
B) misrepresentation regarding authority to amount to an implied warranty of authority, in which case the agent will be liable for contractual damages as result of breach of warranty

47
Q

List the different types of principals

A

A) non-existing principal

B) undisclosed principal

48
Q

Explain non existing principal

A

A cannot conclude a contract on behalf of a principal who does not exist at the moment of the conclusion of the contract. It is also impossible to ratify a contract if the principal were to come into existence subsequently.

49
Q

What is exception to an non existing principal?

A

The exception exist in the company law context with reference to so called pre-incorporation contracts. Section 21 of the Companies Act 71 of 2008 provides that a person may conclude a written contract on behalf of an entity that is intended to be incorporated in terms of the act but that does not yet exists at the time.

50
Q

When is agent liable in terms of non existing?

A

A) the entity is not incorporated as initially intended

B) after incorporation, the company rejects any part of the contract concluded or action performed on its behalf

51
Q

Discuss undisclosed principal

A

If someone concludes a contract in his own name while he is really acting as the agent of another person (the undisclosed principal) - thus without telling the third party that he is acting as mere agent - then a contractual relationship forms both between the principal and the third party and between the agent and the third party. The effect of his rule is that, when the third party discovers that the person he contracted with acted as the agent of another, the third party can choose which contractual relationship to rely on. Therefore he can enforce his rights against either the agent or the principal.

52
Q

Name the different types of agents

A 
A) Brokers
B) Estate agents
C) Auctioneers
D) Company representatives
E) Intermediaries in terms of the Consumer Protection Act
53
Q

Explain Brokers

A

Refers to any person who, in terms of the contract of mandate (and probably against remuneration) assists another person with the conclusion of a contract or concludes a contract on that person’s behalf with a third party, Can acts as middleman

54
Q

What is an estate agents?

A

The 1976 Act Section I defines an estate agent as any person who holds himself out as someone who, or advertises that he on behalf of someone else :
A) sells or buy’s immovable property or business undertakings
B) leases or lets immovable property or business undertakings
C) collects any money in terms of a lease of immovable property

55
Q

Discuss company representatives

A

A registered company is a juristic person which of course does not have the physical capability to act in person, and therefore a natural person must act on its behalf.

56
Q

Explain intermediaries in terms of the Consumer Protection Act

A

The Consumer Protection Act 68 of 2008 defines it as a person who, in ordinary course of business and for remuneration or gain, engages in the business of :
A) representing another person with respect to the actual or potential supply of any goods or services
B) accepting possession of any goods or other property from the purpose of offering the property for sale
C) offering to sell to a consumer, soliciting offers or selling to a consumer any goods or property that belongs to a third party, or service to a supplied by a third party

Commercial Law (15 decks)

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