Agency

Question 1

Restatement of the Law: Agency (American Law Institute) 1.01:

Answer 1

Agency is “the fiduciary relationship that arises when one person (a ‘principal’) manifests assent to another person (an ‘agent’) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act.”
So three elements: fiduciary relationship, consensual relationship, action

Question 2

Sir John Donaldson MR in Potter v Customs (1985)

Answer 2

“The use of the word ‘agent’ in any mercantile transaction is, of itself, wholly uninformative of the legal relationship between the parties, and the use of the words ‘independent agent’ takes the matter no further. Either is consistent with a self-employed person acting either as a true agent who puts his principal into a contractual relationship with a third party or with such a person acting as a principal.”

Pure effect of agency = direct relationship between P and 3P

Question 3

Lord Denning MR in Phonogram v Lane (1982)

Answer 3

Classical form of Agency:
“The general principle is, of course, that a person who makes a contract ostensibly as an agent cannot afterwards sue or be sued upon it”.
Contrast other forms of agency, e.g. undisclosed agency: agent acting for an undisclosed principal is a party to the contract with the third party until the principal chooses to disclose himself/herself.

Question 4

Dowrick: “The Relationship of Principal and Agent” (1954)

Answer 4

“The essential characteristic of an agent is that he is invested with a legal power to alter his principal’s legal relations with third persons: the principal is under a correlative liability to have his legal relations altered. It is submitted that this power-liability relation is the essence of the relationship of principal and agent.”

Power-liability theory of agency

Question 5

Pollock, The Principles of Contract (1876)

Answer 5

“by agency, the individual’s legal personality is multiplied in space”
A has legal power to alter relationship not only for himself but someone else too
And P can alter his won legal relationships as well as having A do it for him

Question 6

Krebs’ view of agency

Answer 6

Offer and Acceptance model, A is jjust means of communication between P and X

Question 7

McMeel “Philosophical Foundations of the Law of Agency” (2000)

Answer 7

There are two separate liabilities:
“First, the principal’s having conferred power upon the agent, he is subject to obligations and liabilities to third parties under the transactions thereby effected. Secondly, the agent’s: if he chooses to act in accordance with the powers entrusted to him, he must do so in accordance with the legal consequences which attend agency. He must act with reasonable care and skill and he is subject to the stringency of the fiduciary regime.”
A must act w certain case and skill, and is subject to fiduciary regime

Question 8

Examples of Agency

Answer 8

Directors
Solicitors and counsel
Nb Estate agents: no usual power to act on behalf of P, only to make representations about the property (Sorrell v Finch), no power to amke contract between client and pros[ective buyer unless specifically authorised to do so (as in Spiro v Lintern)
Factors
Commercial agents. Define din ommercial Agents Regulations 1993 as a “self-employed intermediary who has continuing authority to negotiate the sale and purchase of goods on behalf of another person (‘the principal’), or to negotiate and conclude the sale and purchase of goods on behalf of and in the name of that principal”

Question 9

What is agency of necessity?

Answer 9

The term ‘agency of necessity’ has been used where the law recognises that, in an emergency, C may have: (i) powers to act for benefit of D; (ii) right to indemnity from D for costs thus reasonably incurred.
eg China-Pacific SA v Food Corpn of India, The Winson [1982] AC 939 (HL)).
Likely that (i) can be explained on basis of apparent authority, and (ii) on unjust enrichment principles.
Is not really agency at all

Question 10

re Nevill (1870-1)

Answer 10

Agency v sale and resale
Mellish LJ: “[I]f [N] is at liberty, according to the contract between him and [T], to sell at any price he likes, and receive payment at any time he likes, but is to be bound, if he sells the goods, to pay [T] for them at a fixed price and a fixed time…whatever the parties may think, their relation is not that of principal and agent.”

Question 11

Agency v Trusts

Answer 11

Both are fiduciaries, but T doesn’t act on behalf of B in a way that puts B in direct relationship w 3P
Ad re internal aspect: T necessarily holds rights subject to duties owed to B in relation to those rights - othherwise, similarities to agency, but no general power f B to revoke T’s position

Question 12

Agency v Bailment

Answer 12

External: As is the case w a trust, bailee’s action do not create contractual relations between X and bailor
Internal: Similarities. Note powers of bailee, even if not expreely agreed to by bailor (e.g. to have property repaird - see eg teppenden v Artus)

Question 13

Agents v Independent Contractors or Employees: Vicarious Liability?

Answer 13

Some independent contractors and employees may have agency powers to perform certain acts. Difficult question arises of VL. Usually Q is whther it occurred in course of employment, or re Agents, whether it occurred in course of performing what A was asked to do

Question 14

Lord Woolf MR in Credit Lyonnais v Export Creditors (2000)

Answer 14

“[t]he wrong of the servant of agent for which the master or principal is liable is one committed in the case of a servant in the course of his employment, and in the case of an agent in the course of his authority. It is fundamental to the whole approach to vicarious liability that an employer or principal should not be liable for acts of the servant or agent which are not performed within this limitation. In many cases particularly cases of fraud, the question arises as to whether the particular conduct complained of is an unauthorised mode of performing what the servant or agent is engaged to do.”

Question 15

Lloyd v Grace (1912)

Answer 15

clerk at a firm of solicitors was engaged to conduct firm’s conveyancing – widow was induced by clerk to give him instructions to sell her property to the clerk – firm of solicitors vicariously liable for clerk’s fraud as committed in the course of his employment or authority

Question 16

Diplock LJ in Freeman and Lockyer (1964) re Scope of AA

Answer 16

“An ‘actual’ authority is a legal relationship between principal and agent created by a consensual agreement to which they alone are parties. Its scope is to be ascertained by applying ordinary principles of construction of contracts, including any prior implications from the express words used, the usages of the trade, or the course of business between the parties. To this agreement [between P and A] the contractor [X] is a stranger…”
Doesn’t say contract, only need consent
To determine terms of consesual agreemnt, look at arties’ expressed words, usages of the trade, and course of business between the parties

Question 17

Express AA

Formal grant of authority

Answer 17

Express terms contained in documents (eg Power of Attorney - power conferred on A by P by way of deed)
Why appoint by deed? Bowen LJ in Powell v London (1893): “It is well-known law that an agent cannot execute a deed, or do any part of the execution which makes it a deed, unless he is appointed under seal”
Construction of authority conferred by deed: Scrutton LJ in Reckitt v Barnett (1902): “A power of attorney is to be construed strictly. The recitals show its objects and contract its meaning, and general words only refer to the special powers.”

Question 18

Express AA

Authority conferred otherwise than by a deed

Answer 18

By document or orally

Construction is more liberal than in relation to authority conferred by deed

Question 19

Lord Chelmsford in Ireland v Livingston (1871)

Answer 19

What if words are ambiguous in express authority conferred otherwise than by a deed?
“If the principal gives an order to an agent in such uncertain terms as to be susceptible of two different meanings, and the agent bonâ fide adopts one of them and acts upon it, it is not competent to the principal to repudiate the act as unauthorised because he meant the order to be read in another sense of which it is equally capable.”

Question 20

Robert Goff LJ in European Asian Bank AG v Punjab & Sind Bank (No 2) [1983]

Answer 20

Contrast w Chelmford in Ireland
it may well be right (especially with the facilities of modern communications available to [the agent]) to have his instructions clarified by the principal if time permits, before acting upon them.”

Question 21

Hely-Hutchinson v Brayhead (1968)

Answer 21

Chairman of company acting on behalf of company.
per Lord Denning MR at 584-5: “[A] had authority implied from the conduct of the parties and the circumstances of the case…[A] acted as de factor managing director of [B Ltd]. He often committed [B Ltd] to contracts without the knowledge of the board and reported the matter afterwards…[A] had actual authority, such authority being implied from the circumstance that the board by their conduct over many months had acquiesced in his acting as their chief executive and committing [B Ltd] to contracts without the necessity of sanction from the board.”
Him being chairman isnt enough, need AA conferred.
No express evidence, but in past when he acted on behalf of company, did so w/out express authority
Track record of reporting and approving, there was certain conduct

Question 22

What is apparent authority?

Answer 22

Diplock LJ in F&L
“…[apparent authority] is a legal relationship between [P] and [X] created by a representation, made by [P] to [X], intended to be and in fact acted upon by [X], that [A] has authority to enter on behalf of [P] into a contract of a kind within the scope of the ‘apparent’ authority, so as to render [P] liable to perform any obligations imposed upon him by such contract. “
“The representation, when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract. It is irrelevant whether the agent had actual authority to enter into the contract… “
“The representation which creates ‘apparent’ authority may take a variety of forms of which the commonest is representation by conduct, that is, by permitting [A] to act in some way in the conduct of [P’s] business with other persons. By so doing [P] represents to anyone who becomes aware that [A] is so acting that [A] has authority to enter on behalf of [P] into contracts with other persons of the kind which an agent so acting in the conduct of his principal’s business has usually ‘actual’ authority to enter into.”

Question 23

Barrett v Deere (1828)

Answer 23

APA may arise is P allows A to appear to 3Ps as his A when in fact he is not
Tenderden CJ at 202: “The debtor has a right to suppose that the tradesman has control over his own premises, and that he will not allow persons to come their and intermeddle in his business without authority”.

Question 24

Summers v Solomon

Answer 24

APA may arise if P allows A to continue to appear as “A” after the agency terminated
Nephew ordering jewellery for uncle’s shop after agency had actually terminated, uncle still liable to pay
Coleridge J at 884: “The question is, now what was the actual relation between the defendant and his nephew, but whether the defendant had not conducted himself as to make the plaintiff suppose the nephew to be the defendant’s… agent”

Question 25

Lord Denning in Hely-Hutchinson v Brayhead (1968) re APA

Answer 25

APA may arise if P equips an officer of company w certain title, status and facilities and the representation of greater authority to act on P’s behalf may flow from this status
“[W]hen the board [of directors of the company] appoint the managing director, they may expressly limit his authority by saying he is not to order goods worth more than £500 without the sanction of the board. In that case his actual authority is subject to the £500 limitation, but his ostensible authority includes all the usual authority of a managing director. The company is bound by his ostensible authority in his dealings with those who do not know of this limitation.”

Question 26

Thanakharn Kasikorn v Akai Holdings (2011)

Answer 26

Lord N
“In a commercial context, absent dishonesty or irrationality, a person should be entitled to rely on what he is told”
“it is no defence to an action for rescission that the representee might have discovered its falsity by the exercise of reasonable care” – per Chitty on Contracts
“If the representation is clear and unequivocal … he is under no obligation to make investigation or inquiry to ascertain whether it is true.”

Question 27

Subsequent cases when N’s TKTC v Akai judgment is applied

Answer 27

Quinn v CC Automotive Group Ltd (2011)

LNOC Ltd v Watford Association Football Club Ltd [2013]

Question 28

Is Lord N’s TKTC v Akai judgment too favourable to 3P and harsh on P?

Answer 28

Maybe
He compares to misrepresentation cases, but there the person who relies can say that there is a dfinite intention by misrepresentor to make it and enter into a contract
But in Agency case, if P sends A to buy £500 worth of gods and he comes back with £1mn, P does not intend to enter the contract.

Question 29

Can apparent authority derive from the representation made by “A” where X knows “A” has no authority?

Answer 29

Clear that if X knows that A would not normally have authority, but relies instead on A’s claim of authority, then P not bound: see e.g. Armagas Ltd v Mundogas SA (The Ocean Frost) [1986] AC 118 (HL) (although X has claim v A for breach of warranty of authority)

Question 30

Can apparent authority derive from the representation made by “A” where X knows “A” has no authority?
Part 2: “But see…”

Answer 30

First Energy (UK) Ltd v Hungarian International Bank Ltd [1993]
X knows that A, senior manager of P Bank, has no authority to approve a loan but had authority to sign a letter with an offer of a loan (thus communicating that the offer was approved)
X received a letter with an offer of loan signed by A
P Bank refuses to make a loan
held, P bound on basis that A had apparent authority to notify X that loan approved
see further note by Reynolds (1994) 110 LQR 25: “If the reasoning is correct, some modification of the existing theoretical basis of apparent authority may in the end be needed.”

Question 31

Liability of P based on VL?

Answer 31

VL of P can arise as result of act carried out in course of A’s employment, even if unathorised (eg tort)
Can it be similarly said that, via APA, O can be made liable on contract P did not authorise A to enter if A acted in course of employment?
Lord Keith in The Ocean Frost (1986)
): “it was maintained [A] was acting in the course of his employment though not within the scope of his actual or ostensible authority, so [P] was liable. In my opinion the attempted distinction has no validity in this category of case. Lord Macnaghten in Lloyd v Grace, Smith & Co [1912] AC 716 at 736 regarded the two expressions as meaning one and the same thing. The essential feature for creating liability in the employer is that the party contracting with the fraudulent servant should have altered his position to his detriment in reliance on the belief that the servant’s activities were within his authority, or, to put it another way, were part of his job, this belief having been induced by the master’s representations by way of words or conduct.”

Question 32

Estoppel as basis of APA?

Answer 32

Slade J in Rama v Proved Tin: “Ostensible or apparent authority.. is merely a form of estoppel… and you cannot call in aid estoppel unless you have three ingredients: (i) representation, (ii) reliance on representation, and (iii) an alteration of your position resulting from such reliance”.
Estoppel by representation requires “clear and unequivocal” representation, who must also intend particular reliacnce n that representation, and has to be to detriment of representee
Also, effect of true etoppel is only that which is enough to satisfy equity raised
In APA, the representation cane be “very general indeed” and the detriment “may be small” (Rama)
Gatehouse J in The tatra “the only detriment that has to be shown is the entering into the contract”
Result of applciaiton of true estopppel (achieve only enough to satisfy equity raised) would generate uncertainty in “a doctrine designed to satisfy commerical certainty” (Bowstead & Reynolds)

Question 33

Basis of APA as standard contract law pricniples?

Answer 33

Krebs: : “As long as [A] operates according to the objectively manifested will of [P], [P] is bound by the consequences for that reason alone…[agency law] is based on a straightforward offer and acceptance model…The ‘real’ wishes of contractual parties matter but rarely, if ever: the law of contracts looks to the intentions of the parties as objectively manifested to the other party to the contract. Once this is appreciated, the distinction between ‘actual’ and ‘apparent’ authority falls away.”
But note, mere fact that con is covered by A’s APA does not itself allow P to sue X, P must raify the contract, and the O&A model is inconsistent w current law of ratification as set out in Bolton v Lambert
Krebs: ]: “The rule in Bolton v Lambert …defies both contractual principles, and the result is not just objectionable doctrinally, it also disturbs the equilibrium between the parties…”

Question 34

Lord Sterndale MR in Koenigsblatt v Sweet (1923)

Answer 34

“Ratification… is equivalent to antecedent authority.”

Question 35

Wilson v Tumman (1843)

Answer 35

“an act done, for another, by a person, not assuming to act for himself, but for such other person, though without any precedent authority whatever, becomes the act of the principal, if subsequently ratified by him, is the known and well-established rule of law. In that case, the principal is bound by the act, whether it be for his detriment or his advantage and whether it be founded on a tort or on a contract, to the same effect as by, and with all the consequences which follow from, the same act done by his previous authority.”

Question 36

Boston Fishing v Farnham (1957)

Answer 36

eg of rule that P must have had, at time of acts of A, power and capacity to make the contract
where P is enemy alien at time of A’s act, and so would then have been unable to make a valid contract directly with X, ratification is not possible

Question 37

Kelner v Baxter (1866)

Answer 37

eg of rule that P must have been in existence at time of A’s act
A newly incorporated company cannot ratify a prior contract

Question 38

Reach of ratification?

Answer 38

Bolton v Lambert
Lambert (X) writes to Scratchley (A), director of P (Bolton Partners), offering to take a lease – A has no authority to agree but agrees – X changes mind and tries to withdraw – P later claims specific performance – X, now aware of limits to A’s authority, claims he had power to withdraw as A had no authority to bind P.
Cotton LJ: “The rule as to ratification by a principal of acts done by an assumed agent is that the ratification is thrown back to the date of the act done, and that the agent is put in the same position as if he had had authority to do the act at the time the act was done by him…[it has been noted] how favourable the rule [is] to [P], because till ratification he [is] not bound, and he [has] an option to adopt or not to adopt what [has] been done.”
“when and as soon as authority was given to [A] to bind [P] the authority was thrown back to the time when the act was done by [A], and prevented [X] withdrawing his offer, because it was then no longer an offer, but a binding contract.”

Question 39

Limitations on rule in Bolton v Lambert

Answer 39

Ratification must take place w/in reasonable time (Asylums Board v Kingham)
rule does nto apply where X’s offer was expresslly subject to ratification (Fry LJ in Asylums Board v Kingham)
Ratification not effective where it would affect property rights that have arisen in favour of X (eg Bird v Brown)

Question 40

Bird v Brown (1850)

Answer 40

: goods ordered and shipped to X – whilst on the ship X do not pay – A attempts to exercise a right of stoppage in transit but this is unauthorised – P sought to ratify after stoppage ended “but it was then too late for him to stop. The goods had already become the property of [X], free from all right of stoppage” (at 800). So, P cannot ratify A’s attempted stoppage in transit where this would divest X of rights acquired under the sale.

Question 41

Kidderminster v Harwick (1873)

Answer 41

(not cited in Bolton v Lambert) suggests that a X may withdraw from its obligations altogether prior to any ratification by P

Question 42

Bolton criticised in

Answer 42

NM Superannuation Pty Ltd v Hughes (1992)(Cohen J) (SC of New South Wales
Seavey and Krebs in “ratificaiton”
Bush, Macgregor and Watts in “Agency Law in Commercial Practice”