Agency Flashcards
Montgomerie v UK Mutual Steamship Association
Where the agent contracts for the principal the contract is the contract of principal and, prima facie, at common law only the principal may sue or be sued.
The general rule is that in a disclosed agency the agent cannot sue or be sued on the contract made with the third party because it is not the agents contract.
Irvine & Co v Watson & Sons
Where P owes T some money under a contract made by A on P’s behalf (eg. a contract to purchase goods from T) if P pays A and A defaults, P is still liable to T. A must be acting within scope of A’s authority.
Where the agent is acting on behalf of a disclosed principal and the third party settles with the agent then he will be deemed to have settled with the principal provided the agent had either actual or apparent authority to accept monies on behalf of the principal.
Payment by T to A only constitutes payment to P in the following circumstances, in other words, it does not discharge a debt owed to P unless:
A has the actual authority from P to receive payment
an express or implied term of the contract specifies this method of payment
this method of payment was ratified by P, meaning T will be discharged if payment is made to A who had no authority to receive it, yet A passes it to P and P accepts it. Failure to notify all affected by A’s lack of authority is an implied ratification to those transactions and an implied grant of authority for future transactions of a similar nature.
P represented that payment to A would discharge the debt
Disclosed Principal
If an agent enters into a contract with a third party and prior to the contract A names the principal or, at least, the principal can be identified, this is a disclosed agency (also known as disclosed principal)
Express Actual Authority - Aviva Life & Pensions UK v Strand Street Properties
Express actual authority is the authority which the principal expressly gives to the agent, and this may be contained in documents and/or conversations between the parties.
Where instructions from P to A are ambiguous A must seek clarification from P, unless there is a reasonable excuse for not doing so Cooper v National Westminster Bank.
Implied Actual Authority (incidental or usual) - Hely-Hutchinson v Brayhead
Such authority is implied when it is inferred from the conduct of the parties and the circumstances of the case; they thereby impliedly authorise him to do all such things as fall within the usual scope of that office – Hely-Hutchinson v Brayhead
- Frequently A is expressly assigned a task but the minor details are not spelled out in the oral or written authority. It can be safely assumed that A has implied authority to do what must be done in order to accomplish the purpose of the express agency. This implied authority is usually defined in general terms to include authority to do what is usual, customary and necessary.
- Covers conduct of P and A.
- However, if T knows of limits on A’s authority, there can be no implication that would contradict such knowledge Hely-Hutchinson v Brayhead
(although the chairman and chief executive of a company acted as its de facto managing director, he had never been formally appointed to that position. Nevertheless, he purported to bind the company to a particular transaction. When the other party to the agreement sought to enforce it, the company claimed that the chairman had no authority to bind it. It was held that, although the director derived no authority from his position as chairman of the board, he did acquire such authority from his position as chief executive and thus the company was bound by the contract he had entered into on its behalf as it was within the implied authority of a person holding such a position.)
Watteau v Fenwick
The court held that usual authority is an independent category in its own right and held…
A agent has usual authority to act on his principal’s behalf and to bind him to a contract even though the principal had expressly forbidden to make it.
It is restricted to the following criteria:
1 • T must be unaware that a principal exist and believes A is acting for himself.
2 • The agent has no actual authority because he is forbidden by P to do the act.
3 • The contract made by A must be usual for an agent in his position.
Even if the above criteria are met it is unlikely to be followed because of the criticism received.
This decision is unlikely to be followed. At the core of the objections to treating this as a case on agency is, therefore, the simple fact that H was not an agent in regard to the purchase of the cigars. H had no actual authority, the owner did not make any representation to the third party that H acted as agent in the purchase and, even if H had apparent authority to represent his own authority (like the manager in First Energy), he did not do so - as throughout third party believed H was the principal.
(Defendant owned a hotel-pub that employed Humble to manage the establishment. Humble was the exclusive face of the business; Humble’s name was on the bar and the license of the pub. Defendant explicitly instructed Humble not to make any purchases outside of bottled ales and mineral waters, but Humble still entered into an agreement with Plaintiff for the purchase of cigars. Plaintiff discovered that D was the actual owner and brought an action to collect from D. The issue was whether D is liable for damages resulting from an agreement between Plaintiff and Humble, who is knowingly acting outside his actual authority as an agent for D. Defendant is liable for damages. Humble was acting with an authority that was inherently reasonable for an agent in that position. The situation is analogous to a partnership wherein one partner is silent but is still liable for actions of the partnership as a whole. The decision could not be based on apparent authority because the principal is disclosed under the doctrine of apparent authority. The principal is held liable for actions by an agent that are expressly forbidden, but the case limits a principal to actions of an agent that are reasonable under the circumstances.)
Freeman & Lockyer v Buckhurst Park Properties (Mangal) – Apparent Authority
Where the principal’s representation to a third party causes the third party to reasonably believe that the principal consents to have the act done on his behalf by the person purporting to act for him P is bound by the contract as giving the alleged agent apparent (or ostensible) authority.
• Apparent authority is present if there was
(1) representation by the Principal,
(2) reliance by third party and
(3) the third party alter his position, though not necessarily to his detriment.
In looking at apparent authority it must be asked, did the principal indicate to a third party in some way that the agent had such authority to act as its agent – Freeman & Lockyer v Buckhurst Properties.
Also called “ostensible authority”. This is authority where a third party reasonably believes an agent has, based on the third party’s dealings with the principal, even though the principal did not confer or intend to confer the authority.
Put another way, this is authority without consent or agreement of the principal. It arises merely as a result of what is deemed to be a representation made by the principal to the third party to the effect that the agent has authority to act on his behalf whereas in fact he lacks the authority to so act.
There are three requirements for it to exist.
1 • The principal or someone authorised by him (not the agent), must have represented to T that A had authority to act on behalf of P. Representation could have been by words or conduct or implied by dealings between the parties – however, representation must come from the principal and not A – Armagas v Mundogas.
2 • The third party must have relied on the representation.
3 • T must have altered his position, though not necessarily to his detriment. This is satisfied simply by entering into the contract.
Where apparent authority exist (but no actual authority), P is fully liable to T (although A may be liable to P for breach of their agency agreement). P, however will not be able to enforce the contract against the third party. This is because, even though he had made a representation the third party, the third party made no representation to him. Where the agent has apparent (but not actual) authority then
If apparent authority does not exist, that is A exceeded his authority, P is not liable to T, but A may be liable to T for breach of the implied warranty of authority as, by representing such authority to T, A promises that he has such authority.
Again, T is protected so long as T acted reasonably. Sometimes termed “agency by estoppel” or the “doctrine of holding out”, where P will be estopped from denying the grant of authority if T changed his positions to his detriment in reliance on the representations.
(Kapoor acted as the Managing director although he was not formally appointed, however, he had the approval of the board to act in such a position. The issue arose when Kapoor entered into a contract.with a firm of architects and surveyors and refused to pay them for their services they performed. Held: the company had held out Kapoor to be its managing director and, as such, they were bound by his actions. Kapoor in this instance had apparent authority to hire the firm of architects and surveyors, as this was the customary authority of a managing director.)
First Energy v Hungarian International Bank
An agent who has no apparent authority to conclude a transaction might nevertheless have apparent authority to make representations of fact concerning it (such as the fact that his principal had given the necessary approval for it).
A principal confers actual or apparent authority on an agent to make representations on the company’s behalf but no actual authority on A to enter into the specific transaction, such a representation made by A as to his authority may be reasonably relied on by a third party.
The decision in Armagas v Mundogas is preferred.
(T wished to arrange credit facilities through the bank and dealt with A, who was senior manager of the bank. T knew that A was not uthorised to grant the credit facilities and that these could only be agreed to by head office. Incorrectly and without authority, A wrote to T saying
that head office (P) had approved the credit facility. Held: as a manager A had apparent authority to write to T informing them of the decision made by head office, and, therefore, the bank was bound by A’s letter indicating that head office had agreed to give the facilities. The court took the view that, although J did not have authority to make the decision, his position as senior manager clothed him with the authority to communicate to T decisions from head office)
ING v R & V Versicherung
A third party cannot hold a principal liable by claiming that he relied on a representation he knew was not meant for him.
With regards to apparent authority, for a third party to claim that a principal is estopped from denying A’s authority to act as agent, it must be shown that the principal made a representation about A’s authority to third party himself. Third party cannot claim that a representation has been made in circumstances where the third party believes the relevant statement about A was not intended either for the third party or for the world at large.
(the key document was a particular fax (the “September fax”). The Court accepted that, on one level, the September fax confirmed to ING that Risk had authority to enter into the treaty. However, the person who received the September fax at ING conceded that he thought at the time this was a document he was not meant to have seen. Apparent authority is based on the concept of “estoppel”, which is an equitable doctrine. Accordingly, the judge did not see how ING could successfully base its case on a document which the recipient believed he was not intended to see. The judge compared this to eavesdropping on a conversation: an eavesdropper would not be entitled to treat what he heard as though it were a representation to him.)
Armagas v Mundogas
For apparent authority to exist the representation must come from the principal that A has such authority, it cannot come from the agent.
An agent cannot be said to have authority solely on the basis that he has held himself out as having it.
An agent will not have apparent authority to make such a representation where the third party knows, or ought to know, that the agent does not possess authority.
A third party’s knowledge of the agent’s actual authority cannot be overridden by claims as to apparent authority. The reason is that in such a situation the third party has not relied on the representation by the principal.
(Vice president, A, had actual authority to agree to a sale of a ship but not to agree to a three year charterback of the ship. The third party knew that a person in A’s position did not have the usual authority to deal with the transaction. However the third party was told falsely by someone not within the company that A obtained specific authority for it. Held: there had been no representation by the company that A had such authority and therefore he was not ostensibly authorised. And the manager was held not to be in a position that would lead the third party reasonably to believe that the manager had authority to undertake the transaction)
Agency of necessity – Springer v Great Western Railway
Highly unlikely to arise with today’s methods of communication, and if it does it is usually restricted to maritime cases.
Where there has been no agreement between the parties however an imminent threat arises (emergency) and a person (the agent) acts to protect the interests of another (the principal), an agency of necessity may arise.
Requirements:
• The agent must be in control of P’s property
• A’s intervention must be a necessity
• it must be impossible (or at least not reasonably practicable) for A to contact P for instructions
• A’s actions must be bona fide and in the interest of P
• A must be reasonably prudent in all circumstances
• P must be competent when A intervened.
(Bad weather and a strike delayed the delivery by sea of a consignment of tomatoes. Agent felt he had to sell them before they perished. Because he could have communicated with P before selling the court refused to impose an agency of necessity and thus he was liable for P’s losses)
Ratification and Undisclosed Principal
In the case of an undisclosed principal, he can sue the third party on a contract made by the agent even though the third party didn’t know that the agent contracted on the principal’s behalf. However, this undisclosed principal will only be able to bring a claim against the third party if the agent had actual authority to make the contract. It follows that the third party can sue either the agent or the principal, but not both since he cannot recover twice for the same wrong (The doctrine of election and the undisclosed principal).
In the following cases P will not be able to sue or intervene:
- Where there is a “express” term of the contract between A and T that excludes the relationship of agency. In other words, where A expressly undertakes that he is not acting for some other person the undisclosed principal cannot intervene in the contract.
- Where by “implication” there is a term of the contract between A and T that excludes the relationship of agency. Occurs where the agent may signs a document or the like indicating that he is the owner, for example – Humble v Hunter.
- Where the third party intended to contract with the agent personally and not as agent – Dyster v Randall.
If A does not disclose the nature of his agency (the fact that he acts on behalf of another) and thus does not disclose the name of P, A may be held personally liable for his actions.
If T knows of P’s existence but does not know his name then P is disclosed, named or unnamed.
Here A and T are the contracting parties, until T discovers there is a P standing behind A, in which case T can elect to sue P rather than A, if there is a breach; or before that occurs, P may intervene to enforce the contract. It is important to emphasize that the contract is between the agent and a third party. The undisclosed principal, therefore, intervenes in an existing contract.
• Where the third party settles with an undisclosed agent then he will be deemed to have settled with the principal. This will be the case even if the agent then fails to account to the principal for this money.
(P authorized agent to make a contract of charter in relation to a ship owned by principal. Agent did make such a contract with third party without disclosing that he was acting for a principal and describing himself in the charterparty as `owner’of the ship. It was held that principal could not enforce the contract. To allow evidence that principal was really the owner would be to contradict the terms of the contract and agent had impliedly contracted that he was the only principal.)
Ratification by Undisclosed Principal
Ratification by an undisclosed principal is not possible because P is not identified to T at the time of A’s act. In other words, it is essential to the doctrine of ratification that the third party is told that the ‘agent’ is acting as such.
Dyster v Randall
A mere failure to disclose does not necessarily mean the agency is undisclosed.
Mere non-disclosure as to the person actually entitled to the benefit of a contract does not amount to misrepresentation, even though the contracting party knows that, if the disclosure were made, the other party would not enter into the contract.
Where the identity of the agent was not a material ingredient of the contract the third party is liable to comply.
An undisclosed principal cannot intervene where the third party clearly intended to contract with the agent only and no one else.
(Dyster knew that Randall would not agree under any circumstances to sell certain land to him. He therefore employed an agent to negotiate the purchase of the property without revealing the fact that he was acting for a principal. Upon discovering that the agent had been acting for Dyster, Randall sought to resist performance of the contract on the grounds that he had been deceived by the agent. The court held that the contract could be enforced by Dyster. It was not a personal contract and the identity of the real purchaser consequently was not a material ingredient.)
Said v Butt
Where the personal element is strikingly present between the third party and the agent, an undisclosed principal cannot intervene.
• The case is not preferred. The intervention of the “principal” in the contract was opposed on the grounds of his personal defects; normally, the issue has been whether the personal attributes of the ‘agent’ are such that the third party intends only to deal with them.
(A dramatic critic was refused a ticket to a theatre performance so he got an agent to acquire a ticket for him. The agent did not disclose that he was an agent. On arrival at the theatre the critic was refused entry. Held, where the personal element is strikingly present between the third party and the agent an undisclosed principal cannot intervene.)
