B3 - Formation of Agency

Question 1

Garnac Grain v HMF Faure

Answer 1

Agreement to Agency can be implied by conduct. A might have appointed B to a position where B is usually A’s Agent. The principal acquiesing to another’s act is another example of a principal’s implied consent.

Question 2

Yasuda v Orion

Answer 2

No contract needed for A.

Question 3

Formalities of Agency

Answer 3

There are generally no formalities necessary, agreement can be in writing, verbal or even implied. Exceptionally, agency has to be in writing (for A to deal with land). Power of Attorney has to be created by deed.

Question 4

Kelner v Baxter

Answer 4

Only person who can ratify is the person on whose behalf the act is done. Company hadn’t been formed yet, but they ordered wine and later tried to ratify it. Not possible, the company didn’t have capacity at time of act.

Question 5

Grover v Matthews

Answer 5

Time limit on ratification. A, without authority, insured the P’s goods. Fire took place, then P ratified. Too late, the ratification should have come before the loss.

Question 6

Keighley v Durant

Answer 6

Ratification. Undisclosed agency. P can only ratify an act done on their behalf and cannot ratify an act which the agent has done on the agent’s behalf. The P had authorized the A to buy corn at a certain price. A bought corn at slightly higher price in his own name without revealing he was buying as an agent. Held he could not ratify. When acting as an “undisclosed agent”, P cannot later ratify.

Question 7

General rules of ratification of agency

Answer 7

Where an act is ratified, it gives retrospective validity to the agent’s act. Rat. cannot divest a property right, not possible after a time limit, not possible where it causes unfair prejudice aainst the party against whom it is invoked. When P ratifies, A is protected. Once ratified, commission is due and expenses paid. It is essential that at the time the agent acted, they professed to act on behalf of the P who subsequently ratifies. P must have capacity. Identity of P needs to be possible to establish.

Question 8

National Oilwell v Davy Offshore

Answer 8

An agent can act for an unidentified principal where the A does not name or identify the P to the 3P. In such case, there can be later ratification by the principal.

Question 9

Hely-Hutchinson v Brayhead

Answer 9

4. Implied Actual Authority inferred from the conduct of the parties and the circumstances of the case. Actual authority, implied. Actual authority is implied when it is inferred from the conduct of the parties and teh circumstances of the caseWhere there is an agency agreement, there is actual authority. The Directors allowed the chairman to act as MD. It was held that he had implied authority to act as MD. He definitely had ostensible authority so that Brayhead was bounda anyway, but went farther and said that here he had actual authority by the circusmtances of allowing him to act as MD, no matter the internal limitations imposed.

Question 10

Garnac Grain v MHF Faure

Answer 10

Actual authority may be implied by the conduct of the parties, the conditions of the case, trade or custom.

Question 11

Generalities of external effects of agency

Answer 11

If the A has no authority, P is not bound to 3P. A P who is bound to 3P is liable for the agent’s acts, including misrepresentations and fraud, even if they were not fraudulent. P liable only if A acts within the authority granted. A who exceeds actual authroity commits breach of contract against the P and 3P can sue A for breach of warranty of authority.

Question 12

Ireland v Livingstone

Answer 12

Actual authority, express. Whether an A has authority is a question of fact - if P gave prior consent to A, he has ‘actual’ authority. - Legal relationship between P and A created by a consensual agreement to which they alone are the parties.

Asked him to ship 500 tons of sugar and said 50 tons more or less of no matter if you can get a good price. Shipped 400, he didn’t want to take them. He was held to have to take them as he construed letter in a reasonable manner.

Question 13

Robinson v Mollett

Answer 13

3. Customary Authority. Actual authority can be implied by conduct, conditions of the case, trade or custom, but not against the express instructions of the P. In this case, it was normal for a broker to sell own goods to the P, but here it was expressly forbidden. An A 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, as long as they are reasonable and lawful, but can’t go against instructions.

Question 14

Waugh v HB Clifford

Answer 14

2. Usual authority. When one person is appointed to a role that usually comes with authority to do certain acts, that person is giving authority to do these things. Here the case was of the solicitor reaching a compromise in litigation, this is usual authority. An agent has implied actual authority to do what is usual n his trade, profession, or business for the purpose of carrying out his authority or anything necessary or incidental thereto.

Question 15

Watteau v Fenwick

Answer 15

Usual authority. the P is liable for all the acts of the A which are within the authority usually confided to an agent of that character, notwithstanding limitations as between the P and A put upon that authority. Limits to Watteau v Fenwick: 1. needs to be an existing agency relationship and possible to identify “usual” powers; 2. will not apply where A acts for himself and not P; 3. Where 3P knows, or ought reasonably to know, of the restriction of A’s authority. Liability of an undisclosed P for unauthorize contracts entered into it by the P’s agent.

Question 16

Rama Corp v Proved Tin

Answer 16

Apparent or ostensible authority. P is bound by the acts of his A whether or not they are authorized, or even in breach of prohibition, if his words or actions give the impression that he has authorized them. Ostensible or apparent authority is merely a form of estoppel. i. a representation, ii. reliance on it, iii. alteration of position from the reliance. “Ostensible or apparent authority is merely a form of estoppel, requires 1. a representation, 2. reliance on the representation, 3. alteration of position based on reliance.

Question 17

AG for Ceylon v Silva

Answer 17

Apparent or ostensible authority, 1. Representation. Agency arises where the P represents someone is acting as their A. Statement of fact to the 3P. The P may not have given any authority or may even have prohibited it, but is bound to the 3P if that party thinks the A has authority. Where there are limitations to authority but the 3P doesn’t know about them, A’s actions will be binding. The representation that the A has authority must be made by the P and not the A himself.

Question 18

Summers v Solomon

Answer 18

Apparent authority, 1. Representation. P employed A to manage jewelry shop. After leaving employment, ordered jewels on credit. He was liable to the 3P as the P had not informed the 3P the A was no longer employed by him. This was a case of implied apparent authroity.

Question 19

ING v Versicherung

Answer 19

Apparent authority, 1. Representation. Apparent authority is based on estoppel by representation where P represented to 3P that A1 has authority to act for P, and A1 represents to 3P that A2 has authority, and 3P deals with A2 as P’s agents on the faith of that representation, P is bound by A2’s acts. A1 must be able to trace his actual authority back to a representation made by the P. This usually happens when A1 has usual authority.

Question 20

Agency by statutory authority

Answer 20

Statutes such as Consumer Credit Act 1974, Bills Exchange Act 1882, Trustee Delegation Act 1999 and Trustee Act 2000 can confer authority on agents.

Question 21

Freeman v Buckhurst

Answer 21

Apparent Authority. Had formed a company to purchase and resell a large estate, they were the directors. Articles allowed for an MD but none was appointed, however K was acting as if MD with the acquiescence of the board. K was held to have apparent authority. 4 conditions to create apparent authority that can be enforced by 3P: 1. A representation is made, 2. that representation is made by a person who has ‘actual’ authority, 3. the representation was relied upon (he entered into the C based on the representation), 4. 4 is now irrelevant. Apparent authority cannot be real authority; rather, it creates the appaearance of authority which, for policy reasons, the law recognises as giving the agent power to affect the legal relations of the P.

Question 22

Kelly v Fraser

Answer 22

An unauthorized employee of the company told one of the employees that additional funds into the pension scheme were duly transferred to the new scheme, but the formalities hadn’t been completed. Board hadn’t given the person authority, but it was found to be binding based on the apparent authority of the person since he was generally having the right to make representations for the company (like Company Secretaries), and bound the company.

Question 23

Necessary for Apparent Authority

Answer 23

1. Representation, 2. Reliance, 3. Alteration of Position, 4. Subsequent conduct

Question 24

Spiro v Lintern

Answer 24

Subsequent conduct and estoppel. Wife contracted to sell her husband’s house, but had no apparent authority as she said house was heres. After the contract, husband said nothing. Later he said wife didn’t have authority, but he was estopped from denying it. This type of estoppel DOES require detrimental reliance, unlike normal estoppel.

Question 25

The Tatra

Answer 25

In normal cases of apparent authority, detrimental reliance not necessary, simply an alteration of position for estoppel to apply and bind the P.

Question 26

General and special agents

Answer 26

General agents can act generally on behalf of the principal. Special agents are appointed for a specific task. Bradgate thinks this is a historical difference and special agency is not attractive

Question 27

Mercantile agent/factors

Answer 27

Mercantile agents dispose of goods on behalf of principals and the P gives them possession of the goods in order to dispose of them. They can contract in their own name and receive payment. Factors Act 1999 gave A the authority to pass title to goods in their possesion, can pass on title to 3P even in the absence of express authority - 3P gets title only if acting in good faith

Question 28

Brokers

Answer 28

A broker is an A who ‘negotiates contracts for the sale and purchase of goods and other property but does not have possession of the goods. Cannot sell in their own name, unlike a factor

Question 29

Del credere agent

Answer 29

‘negotiates contracts for the a principal and guarantees to the P that the 3P will pay any sums due. The del credere agent charge an extra commission for guaranteeing the payment, and will have to pay price to the P if 3P defaults or becomes insolvent. Useful for oversees transactions or when buyer and seller don’t know each other. DOes not have to be evidenced in writing.

Question 30

Auctioneer

Answer 30

Has authority to sell at an open sale, but has no authority to provide a warranty unless expressly authorized to do so. they are A of the sellers, but may be the A of the buyer for certain purposes.

Question 31

Confirming House

Answer 31

Usually acts on behalf of intl clients who wish to import goods. There are many different mechanisms for how this could work.

Question 32

Estate agents

Answer 32

Do not have power to conclude contracts on behalf of P, simply find a buyer for the P.

Question 33

Gratuitous agents

Answer 33

Non-contractual agents, only a minority of A are gratuitous.

Question 34

Commercial agents

Answer 34

“A SELF-EMPLOYED intermediary who has CONTINUING AUTHORITY to negotiate the sale or purchase of goods on behalf of another person (the P), or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of that P. People who buy and sell on their own in their name are not commercial agents. Commercial Agents (Council Directive) Regulations 1993 governs this kind of relationship. P owes the A commercial duties: -NEcessary documents relating to the goods, obtain for the agent necessary information about the contract, notify the agent if the expected transactions are significantly lower than expected, notitfy the agent of the acceptance or refusal of a commercial transaction which the agent has got for the principal, under a duty to look after the interests of the P and act dutifully and in good faith and the A must make proper efforts to negotiate and conclude transactions. A must communicate to the P all necessary information and comply with reasonable instructions given by the P.

Question 35

Agent of necessity

Answer 35

Arises when a person acts on behalf of another in an emergency. The A has authority to act even though there is no actual authority. Four requirements: 1. Must be an emergency. 2. As a result of the emergency, it has become impossible to receive instructions from the P. 3. A must act in the bona fide interests of the P. 4. A must act reasonably. Where the requirements are met, A has power to enter into contracts with 3P and dispose of property. A’s action must benefit the P. If P sues A, A will have a defense and can seek reimbursement for expenses. P can not have forbidden agent’s acts in advance.

Question 36

Rosenbaum v Belson

Answer 36

1. Incidental authority. An A has implied actual authority to do everything necessary for, or ordinarily incidental to, the effective exeuction of his express authority in the usual way. Here, an A instructed to sell a house was held to have incidental authority to sign the agreement of Sale.

Question 37

Implied Actual Authority can arise in 4 ways

Answer 37

1. Incidental authority
2. Usual authority
3. Customary authority
4. Implied from conduct and the circumstances

Question 38

The Raffaella

Answer 38

Apparent authority, 1. Representation. Mr Booth signed a letter of guarantee alone, but did not have actual authority to bind the bank by his sole signature, but he told the client that his signature was sufficient. Mr Booth had actual authority to make representatioms, this representation was held to be binding on the bank, since the 3P had no reason to doubt he didn’t have the authority as he was entitled to make representations for the company.

Question 39

Apparent authority, 2. Reliance

Answer 39

1. The representation must be relied on for apparent authority to arise. 2. There must be a causal connection between representation and 3P dealing with the A. 3. No reliance if 3P knew, or ought reasonably to have known, restrictions on A’s authority. 4. 3P must pay special attention to contracts that appear to be against P’s interests, 5. Can rely on A’s apparent authority as long as it it not dishonest or irrational (turning a blind eye)

Question 40

The Tatra

Answer 40

Apparent Authority, 3. aleration of position. Many cases preceeding this one required detrimental reliance to rely on estoppel of apparent authority, but in this case, Gatehouse J seems to say that the only detriment needing to be proved is that the party entered into the agreement via the reliance.

Question 41

Spiro v Lintern

Answer 41

Apparent authority, 4. Subsequent conduct. A wife contrated to sell her husband’s house. She had no actual authority, because she seemed to be the owner. After the contract was made, neither one did anything, but later the husband tried to impede the sale. He was estopped from doing so - if he saw what was happening and that 3P was behaving in a manner that implied they had a binding C, he has the obligation to tell them. Here there must be a detriment, it is a different kind of estoppel.

Question 42

Doctrine of Agency of Necessity

Answer 42

1. A person may have authority to act on behalf of another in certain cases where he is faced with an emergency in which the property or interests of that other are in imminent jeopardy and it becomes necessary, ir order to preserve the property or interest, to act.
2. In some cases this authority may entitle him to affect his P’s legal position. In other it may merely entitle ihim to reimbursement of expenses or indmenity against liabilities incurred, or to a defence against a claim that what he did was wrongful as against the person whose benefit he acted.

To be a true agent of necessity: 1. impossible or impractical for the A to communicate with the P. 2. the action is necessary for the P’s good. 3. The A acts bona fide in the interests of the P. 4. The action taken by the A is reasonable and prudent. 5. The P has not given the A express instructions to the contrary.

Question 43

The Winson

Answer 43

Agency of Necessity. Chartered teh Winson to carry wheat from the US to Bombay. During the voyage the ship stranded on a reef. The hip’s master into a Lloyd’s Open form with the salvors. The salvors shipped the wheat to warehouse for storage, and then looked at the cargo owners for reimbursement. They were upheld as being liable as the master had acted as an agent of necessity

Question 44

Brook v Hook

Answer 44

Ratification. An act which is void ab initio cannot be ratified. Here, Here there was a forgery of the P’s name on a promissory note by the A. P count not ratify as it was a nullity. Here the A wasn’t showing himself as the A of the P, but as the P himself. Also, P cannot ratify contracts that are contrary to statute, but otherwise can ratify an unlawful act.

Question 45

Bolton Bros v Lambert

Answer 45

Effect of ratification. Labmert made a lease offer to an A of Bolton. A accepted on Bolton’s behalf even though he had no authority to do so. Lambert removed the offer before it could be ratified. BOlton claimed specific performance and were allowed. Ratification goes back to the moment the act was concluded (in this case, before the withdrawal took place), and the contract was binding. Ratification can be seen to be very beneficial to the P, who takes an option on the contract and can later ratify the acts, or not, and then not be bound. Limiations: 1. Must be within a reasonable time; 2. This case will not apply if the 3P’s offer was expressly made subject to ratification, or the 3p’s acceptance was esxpressly made contingent on ratification, the offer can be withdrawn at any time until ratification. 3. Ratification will not allow P to sue for any breach which occured before the time of ratification (this doesn’t make much sense…). 4. A and 3P may cancel the unauthorized transaction by mutual consent (Walter v James). 5. Ratification is not allowed where it would unfairly prejudice a 3P. Bolton v Lambert may not be as prejuidicial to the 3P as may seem: 1. There are a number of exceptions; 2. If P ratifies, 3P gets what he wanted, if they don’t he can sue the A; 3. The real prejudice is the uncertainty while he is waiting, but that can be curtailed too if he serves notice to the P of withdrawing from C.