Agency Flashcards
Agency Law
Describes the relationship which exists where one party, the agent, acts on behalf of another, the principal.
What are the 3 Parties involved in an agency relationship?
- The principal- is the individual who wants a task performed, and engages someone else to do it on their behalf.
- The Agent - The agent is the individual the principal engages to do something on their behalf.
- Third party - The third party is the person the agent contracts with on behalf of the principal.
If the agent is acting within their authority the contract is binding between the principal and the third party.
Agency by consent
An agency agreement can be created by Consent may be express or implied
this can be expressed or implied by the actions of the principal and the agent. It can be created orally or formally in writing. An agency must be created by deed (giving the agent power of attorney) if the agent is to execute deeds on the principal’s behalf.
Express Agreement
Principle specifically appoints the agent and acts on behalf of the principle
Implied agreement
this arises when an agency relationship is created due to the relationship between the parties.
Agency by estoppel
- The principle implied there is an agency relationship and fails to notify 3rd parties
- The principle allows his or her agent to appear to have more authority than he or she actually has
Agency of necessity
Arises where a person is faced with an emergency and not possible for the agent to communicate with the principle
- Agent is acting in good faith in the best interests of the principle
Agency by ratification
Ratification validates past acts of the agent to create an agency relationship, as if the agency were authorised to act from the beginning
(third party needs to be aware of this)
Duties of an agent - Accountability
An agent must provide full information to the principal of his agency transactions and account to him for all the monies arising from them e.g bribes
Duties of an agent - No conflict of interest
The agent has an obligation to avoid situations where their own personal interests conflict with those of the principal.
Duties of an agent - Performance
the agent should properly perform the task he or she has been engaged to do and is justified in refusing to perform an illegal act
Duties of an agent - Obedience
the agent should obey the principles legal and reasonable orders
Duties of an agent - Skill
An agent must maintain and deploy the standards of skill and care to be expected of a person in their profession.
Duties of an agent - Personal performance
the agent should do the work by themselves
Duties of an agent - Confidentiality
The agent should keep confidential what he or she knows about the principle’s affairs event after the agency relationship has finished
what are the effects of a breach of duty by an agent?
- a breach of agency agreement and agent is liable to the principle for any loss
- serious breach the principle may dismiss the agent and refuse to pay him or her any commission
- the principle may recover any benefit obtained or profit made by agent
- where a third party is fraudulently party to the breach the principle may avoid the contract
Rights of an agent - Indemnity
The agent is entitled to be repaid his expenses, provided his acts are done properly within the limits of his authority
Rights of an agent - Remuneration
The principal must pay the agent the agreed remuneration for the tasks performed.
Remuneration can be expressly agreed, or can be inferred from the normal trade or professional practice. If no amount of remuneration has been specified, the agent is entitled to a reasonable amount.
Rights of an agent - Lien
If the principal owes money to the agent, the agent is able to retain and hold the principal’s goods until such time as the debt is paid. This is called a ‘lien’.
Authority of the agent - Actual express authority
Expressly given by the principal in respect of a particular contract
Authority of the agent - Actual implied authority
-Authority to do all things usual or incidental to an express authority, employment or office
- Created due to relationship between agent and principle
Authority of an agent - Ostensible authority
- Authority is created by the principal either expressly or inaction
- Is often wider than actual authority
Liability of the parties - Agent has authority and was known to be an agent
(Disclosed principle)
- Third Party: May sue and be sue by the principal
- Principal: May sue and be sued
- Agent: Usually none
Liability of the parties - Agent had authority but is not known to be an agent
(undisclosed principle)
This means the third party does not believe they are contracting with someone else, they believe they are contracting with the agent on their own behalf.
The third party can sue the agent, or if they later discover the existence of the principal they may elect to sue them instead.
Liability of the parties - Agent had no authority
- Third Party: No rights against principal but may have claim against the agent
- Principal: No obligations
- Agent: Potential liability under the tort of deceit breach of warranty of authority
situations will an agent be liable on a contract?
- Where it is usual business practice for the agent to be liable
- Where the agent acts on their own behalf even though they purport to be acting for the principal
4 ways in which an agency can rise
- Agent by consent
- Agency by estoppel
- Agency of necessity
- Ratification
Ostensible authority
the authority that the principle represents to other persons they have given to the agent
