Agency

Question 1

Parties

Answer 1

Principal - person who appoints and legally empowers the agent (home owner)

Agent- enters into contractual obligations for the principal (estate agent)

3rd party- person who enters into contract with principal (buyer)

Question 2

Agent

Answer 2

Drops out of the picture and has no rights or liabilities in respect to the underlying transaction between the principal and third party

In exam the types of agent are:

1) Partners - agent of the firm and may bind the firm by his acts
2) Commercial agents - independent self employed individual (individual or company) who had continuing authority in connection to the principals business or the sale and purchase of goods
3) Directors- may be held to be an agent of the company

Question 3

Creation of agency

Answer 3

1) by consent- expressly created - oral or written ( if attorney must be writing)
2) by estoppel- principals acts in a way which makes others think the agent has authority, and is stopped from going back on it

3) by necessity:
a) pre existing contractual relationship
b) agent had no practical way of contacting principal to obtain his instructions
c) agent acted in good faith and in interests of the principal
d) agents action was reasonable and prudent in the circumstances

4) By ratification - principal approves previous act done on his behalf by an agent when they had no authority
- principal must have been in existence at the time of agents act
- principal must have legal capacity to make the contract himself - both at the time the act was carried out and at date of ratification
- Agent must at the time of making the contract name of sufficiently identity the principal on who’s behalf he’s acting
- Principal must ratify the contract within a reasonable time and a ratification of part of the contract will operate as a ratification of the entire contract
- The principal must expressly or impliedly communicate their intention to ratify

Question 4

Duties and rights of agents

Answer 4

Based on trust and is a fiduciary relationship

Law implies following duties on an agent

• Be accountable for all transactions
• Avoid conflicts of interest
• perform all of his contractually agreed obligations
• To obey his principals lawful and reasonable instructions- even if he feels disobedience would be in the principals best interests
• Maintain standard of skill and care expected
• Act in person and NOT delegate (except in exceptional circumstances)
• To keep his knowledge of his principals affairs confidential

Question 5

Authority of an agent 3 types

Answer 5

-Actual Express authority:
agents authority agreed with principal in writing or verbally

extent depends on words used (eg buy me x product from y seller at z per unit)

-Actual Implied authority:
in absence of express.

Implied by the POSITION held, e.g. company secretary assumed to have power to bind the company on administrative contracts

Apparent or ostensible authority (not actual) - where principal previously made representations to 3rd party - agent has power to bind.

Must be shown that the third party relied on the Rep

Created by estoppel not actual authority but can be greater depending on the rep by the principal

Doesn’t matter if pre existing agency relationship or not

Where principal represented to third party that agent has authority and then revoked authority he will not escape liability

He must notify the third party that he revoked the agents power otherwise he’s liable for the agents actions

Question 6

Liability of the parties

Answer 6

AGENT HAS AUTHORITY AND IS KNOWN TO BE ACTING AS AN AGENT :

Principal and third party may sue and be sued

Agent has no rights and liabilities (unless intended otherwise by parties)

AGENT DOES NOT NAME PRINCIPAL:
It is likely that he will be considered a contracting party

May incur liability if :

• Normal in that trade to have an agent
• Adds his name to negotiable instrument (eg cheque) depends on facts
• enters a contract under seal, unless done as a trustee for the principal or the law provides otherwise (case of powers attorney )

WHERE THE AGENT HAS AUTHORITY, BUT IS NOT KNOWN TO BE AN AGENT

Agent or principal can sue
Either can be sued (which one is decided by 3rd party)

WHERE THE AGENT HAS NO AUTHORITY
-Principal cannot sue or be sued - unless he chooses to ratify the contract

• if the agent knows he has no authority and makes a representation on the contrary (deceit) and causes a loss to the 3rd party - may be liable for the Tort of deceit
• if the agent believes he has authority but is wrong- may be liable for breach of warranty (duty)