Agency

Question 1

What is agency?

Answer 1

The relationship between two parties whereby one, the agent, is considered in law to represent the other, the principal, in dealings with third parties, with a view to forming a contract between the principal and the third party

Question 2

What is agency regulated by?

Answer 2

The common law and the Commercial Agents Regulations 1993

Question 3

What is a principal?

Answer 3

The principal is the party which instructs the agent to carry out certain tasks or duties

Question 4

What is an agent?

Answer 4

The agent is the person who is authorised to act for another in the making of legal regulations with third parties

Question 5

What is a third party?

Answer 5

The party with whom the agent deals on behalf of the principal

Question 6

What are the three separate relationships?

Answer 6

Principal and agent, agent and third party, and the principal and third party

Question 7

What does an agent represent?

Answer 7

The principal, and creates a legal relationship between the principal and a third party

Question 8

What are the different types of agents?

Answer 8

General, special and commercial agent

Question 9

What is a general agent?

Answer 9

An agent who is engaged to carry out any or all of the business of a principal

Question 10

What is a special agent?

Answer 10

An agent who is authorised to carry out one specific particular transaction or a series of identifiable transactions

Question 11

What is a commercial agent?

Answer 11

A self-employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another person

Question 12

What is an example of agency?

Answer 12

A travel agent is appointed by a holiday company to make bookings with customers

Question 13

How is an agency relationship established?

Answer 13

Express agreement, implied agreement, holding out, necessity or ratification

Question 14

What is express agreement?

Answer 14

Where P actually appoints A as his agent (orally or in writing)

Question 15

What is implied agreement?

Answer 15

Where P has not expressly agreed that A should be his agent.
However, the agreement can be implied from the parties’ conduct or relationship

Question 16

What is holding out?

Answer 16

Where one party holds another out as his agent, and a third party believes that he is acting as an agent - an agent can be deemed to have ostensible/apparent authority

Question 17

What is necessity?

Answer 17

Where in an emergency or critical situation an agent carries out essential actions for a principal without having been instructed to do so

Question 18

What is ratification?

Answer 18

If an agency relationship does not exist, but one party acts on behalf of another, the latter may subsequently ratify the action with the effect of forming an agency relationship retrospectively
Ratification may be express or implied by the actings of the principal

Question 19

What does the authority of an agent determine?

Answer 19

The powers that the agent has on behalf of the principal and for which acts the principal is liable

Question 20

What are the two main categories of authority?

Answer 20

Actual and ostensible

Question 21

What is the actual authority of the agent made up of?

Answer 21

Express authority and usual or implied authority

Question 22

What is express actual authority?

Answer 22

The authority that P has explicitly given to A

Question 23

What is usual or implied actual authority?

Answer 23

An agent has implied authority to do things which are reasonably incidental to the performance of an expressly authorised act, an agent occupying that position would usually have authority to do, and have not been expressly prohibited by the principal

Question 24

What is apparent/ostensible authority?

Answer 24

Arises where the agent is held out by the principal as having authority

Question 25

How does apparent or ostensible authority bind the principal?

Answer 25

The principal must have created a particular impression, usually by means of some form of direct representation or allowing a set of circumstances to continue, etc

Question 26

Can a third party rely on apparent/ostensible authority when he knows of the lack of actual authority?

Answer 26

No

Question 27

What are the remedies available to the principal if an agent is in breach of their fiduciary duty?

Answer 27

The principal can repudiate the contract with the third party, the agent can be dismissed without notice, the principal can refuse to pay any money owed to the agent or he can recover any money already paid, and the principal can recover any secret profit made or any bribe

Question 28

What are the agent’s duties/principal’s rights?

Answer 28

To perform instructions, good faith/fiduciary duty, exercise skill and care, and to keep accounts

Question 29

What are the agent’s rights/principals duties?

Answer 29

To be remunerated and reimbursed, to be relieved of liabilities and to enjoy rights of lien and security

Question 30

What does a right of lien mean?

Answer 30

It allows the agent to retain possession of the principal’s property that is lawfully in the agent’s possession until any debts due to the agent have been paid by the principal

Question 31

What does the extent of an agent’s liability to a third party on a contract depend on?

Answer 31

The agent acts as an agent and the agent exceeds his/her authority

Question 32

What happens if an agent discloses that they are an agent, that there is a principal and identifies the principal?

Answer 32

The principal will be bound into a contract with the third party and the agent will incur no personal liability

Question 33

What happens if an agent discloses that he is an agent, that there is a principal but fails to name and identify the principal?

Answer 33

If the agent declines to name the principal when asked to do so, then the agent will incur personal liability

Question 34

What happens if an agent fails to disclose the existence of a principal?

Answer 34

The agent incurs liability to the third party with whom he contracts unless the third party, on learning of the existence of the principal, elects to hold the principal liable

Question 35

What happens if an agent has no authority or exceeds their authority?

Answer 35

Then the principal may ratify the contract and become liable. However, if the principal does not ratify, then the agent will be liable to the third party for breach of warranty of authority because he warranted or promised that he had authority which he did not possess

Question 36

What are the different ways of ending an agency relationship?

Answer 36

Termination by the agent or principal, termination under the agency contract or termination by frustration