Agency Flashcards
What is agency according to Bowstead
“Agency is the fiduciary relationship which exists between two persons, one of whom expressly or impliedly manifests assent that the other should act on his behalf so as to affect his relations with third parties, and the other of whom similarly manifests assent so to act or so acts pursuant to the manifestation”
(Bowstead and Reynolds on Agency, 20th ed, 2014)
What is commercial agent
“commercial agent” means a self-employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another person (the “principal”), or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of that principal… Regulation 2(1) Commercial Agents (Council Directive) Regulations 1993
How can a relationship of principal and agent be created
The relationship of principal and agent can be created in 4 ways:
• By express or implied agreement between principal and agent;
• Under the doctrine of apparent authority;
• By operation of law;
• By ratifications of an unauthorised agent’s acts by the principal
• In the commercial context, agency is primarily based on a contractual agreement which evidences the consent.
The agent is under a contractual obligation to carry out his functions and principal has a corresponding obligation to remunerate.
Note: that there is no necessity for a contract and can be gratitutious, i.e. no consideration.
Yasuda Fire & Marine Insurance Co v Orion Marine Insurance [1995] QB 174
What is the commercial agency regs 1993
- — (1) The commercial agent and principal shall each be entitled to receive from the other, on request, a signed written document setting out the terms of the agency contract including any terms subsequently agreed.
(2) Any purported waiver of the right referred to in paragraph (1) above shall be void.
Types of agent authority
Actual authority
Scope of authority will be ascertained by ordinary principles of construction and interpreted liberally, with regard to the purpose of the agency and to the usages of trade or business.
Ashford Shire Council v Dependable Motors Pry Ltd [1961] 1 AC 336
• The Agent should seek clarification of ambiguous instructions
‘the critical question is not limited to whether the agent’s interpretation was reasonable; it is whether he behaved reasonably in acting on the interpretation’
Patel v Standard Chartered Bank [2001] Llpyd’s Rep Bank 229
Implied Actual Authority
• Incidental authority i.e. the agent has implied actual authority to do everything necessary for, or ordinarily incidental to, the effective execution of his express authority.
• Usual authority, i.e. an agent has implied actual authority to do what is usual in the trade or business for the purpose of carrying out his authority or anything necessary or incidental to.
• Customary authority, i.e. an agent has implied actual authority to act in accordance with the usages and customs of the particular place, market or business in which he is employed, so long as those usages or customs are reasonable and lawful.
- A usage or custom will be unreasonable if inconsistent with the agents instructions.
• Authority implied from conduct of parties and circumstances of the case, e.g. a board of directors in allowing an agent to act as de facto managing director, his authority to act as such was implied from the conduct and circumstances.
Key things to know about exp v implied acc authority
express- agreement
implied- incidental, usual, customary/conduct
Key things to know about acc authority
- Where the Agent acts within their actual authority, this binds the Principal to the third party.
- Where the agent exceeds his authority or does something prohibited by his Principal, the Agent does not have actual authority and the Principal is not bound to the third party.
• The Principal will be bound by prohibited acts of his agent if;
(a) Those acts fall within the authority which an agent of the type in question would usually possess, and;
(b) The third party dealing with the agent is not aware of restrictions which the principal has placed on the agent’s authority
What is apparent authority
Can operate to;
a) Create authority where there was none before;
b) To enlarge an agent’s actual authority;
c) To clothe an agent with authority where he would usually have actual authority but for the existence of a restriction unknown to the third party;
d) To extend an agent’s authority before termination of the agency relationship.
When does apparent authority arise
• A Principal allows another to appear to Third Party to be his agent when in fact he is not
• A Principal may allow the impression to be given that his Agent has greater authority than is in fact the case
- This can also happen if the Principal fails to inform the Third Party of the limitations imposed to the Agent’s authority
• A Principal may allow his Agent to continue to appear as his Agent after the agency has terminated.
Result: The third party relies on the apparent authority (not knowing the actual authority) and the principal is bound.
What is representation
- A representation by the Principal that the Agent has authority;
- The representation may be made expressly (orally or in writing); impliedly (e.g. through a previous course of dealings), or by placing an agent in a specific position which carries usual authority (e.g. appointing as a Managing Director of a company).
What is reliance
• The third party must have relied on the principal’s express or implied representation that the agent had authority.
• If the third party knew or ought to have known that the agent did not authority, he cannot bind the principal on grounds of apparent authority.
Overbrooke Estates Ltd v Glencombe Properties Ltd [1974] 1 WLR 1335
What is alteration of position
• Estoppel requires alteration to detriment but agency cases only require alteration as a result of representation which need only amount to entering into contract
‘[t]he only detriment that has to be shown… is entering into the contract’
The Tatra [1990] 2 Lloyd’s Rep 51 at 59.
What is authority by operation of law
• a person faced with an emergency where the interests of another person may be in imminent demise or jeopardy, derives authority under the operation of law to act on behalf of that other person (without that other person’s prior consent), and in that process may affect that other person’s legal position with third parties because it is of necessity to so act in order to preserve that other person’s interest.
Bowstead and Reynolds on Agency
E.g. where the ship’s master of a vessel may become an agent of necessity to save cargo and/or ship from imminent demise or danger, such as contracting (third party) salvors to salvage the vessel or cargo from sinking or loss without authority from the principle
See: China-Pacific SA v Food Corpn of India, The Winson [1982] AC 939• It is impracticable or impossible to communicate with principal – Springer v Great Western Rly Co [1921] 1 KB 257.
• The action must be necessary for the benefit of the principal and the agent must act bona fide in the interest of the principal – Prager v Blatspiel, Stamp and Heacock [1924] 1 KB 566
• The agent’s action must be one that is reasonable and prudent. – F v West Berkshire Health authority [1990] 2 AC 1
• The principal has not given specific and express instructions contrary to the agent’s action.
What is ratification
- If an Agent acts without authority or exceeds his authority, his actions cannot bind the Principal on whose behalf he purports to act.
- The Principal may subsequently ratify the acts.
- Ratification validates the Agents acts with effect from the time those acts took place.
- Ratification can be express or implied by the Principal’s conduct.
- Silence or inactivity alone will not amount to ratification as they do not provide clear and unequivocal evidence of the Principal’s approval and adoption of the agents actions.
- The Principal can only ratify acts which the agent purported to do on the Principal’s behalf, i.e. not on the agents own behalf.
• The principal must be existence at the time of the agent’s act. Kelner v Baxter (1866) LR 2 CP 174, company formed after contract
• A must purport to act for disclosed P who can be ascertained even if not identified Watson v Swann (1862) 11 CBNS 756
• An act which is void ab initio cannot be ratified
Brook v Hook (1871) LR 6 Exch 89
• Ratification must take place within a reasonable time after the acceptance of the offer by the unauthorised agent, Metropolitan Asylums Board v Kingham (1890) 6 TLR 217
• Ratification is not effective if it would unfairly prejudice the Third Party
What are the duties of the agent
Primarily, contractual and fiduciary but can also arise from statute and tort and restitution.
• Contractual duties
Duty to carry out their undertaking and instructions under the contract. Failure to do so renders the Agent liable for a breach of contract, e.g. Turpin v Bilton (1843) 5 Man & G 455
• Duty of care and skill
- The duty can be both contractual and tortious, Henderson v Merrett Syndicates Ltd [1995] 2 AC 145
- The Agent ought to exercise the degree of care, skill and diligence that is to be anticipated of an agent employed in that particular role.
- Whether Agent has complied is a question of fact to be established on a case by case basis.
• Fiduciary Duties
Fiduciary obligations arise from ‘the relationship of trust and confidence’, Millet LJ, Bristol & West BS v Mothew [1998] Ch. 1 at 18:
‘The distinguishing obligation of a fiduciary is the obligation of loyalty… This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he must not act for his own benefit or the benefit of a third person without the informed consent of his Principal.’
Duty to avoid conflict between his duty and his interests – where the agents interest conflict with his own interests or the interests of another principal
Aberdeen Railway v Blaikie Bros (1854) 1 Macq 461
- Strict duty – only full disclosure and principals consent can relieve.
- In cases of breach the contract is voidable.
Duty not to make a profit out of his trust – Secret Profits
The agent has a duty not to exploit his position or to use his Principal’s property or confidential information to make a personal secret profit.
- Rule applies even if A acts in good faith and achieves Principal’s benefit.
Regal (Hastings) Ltd v Gullivar [1967] 1 ALL ER 378
- A is accountable for profits obtained in breach of duty and regarded as holding them on trust for P
- Duty not to accept bribes (secret profit)
‘A bribe consists in a commission or other inducement, which is given by a third party to an agent as such and which is secret from his principal’ Anangel Atlas Compania SA v Ishikawajima- Harima Heavy Industries Co [1990] 1 Lloyd’s Rep 167 - The agent may be dismissed and will be liable to forfeit their right to commission or remuneration otherwise entitled to and pay the bribe over to the principal.
