Business Organisations Law Flashcards
Define an ‘agent’
A person who has authority to act for and on behalf of another (called the principal) in contracting legal relations with third parties
What are the purposes of an agent?
Can contract on behalf of the principal, sign documents, handle juridical stuff, transfer property, bring action in a court of law, appeal, make and accept payments.
Why do companies need ‘agents’?
Because companies cannot act as they have no legal personality. Agents act on behalf of the company.
How can you determine an ‘agents’ limitations?
With a legal contract between the agent and principal stating the boundaries or inferred from principals authority = can’t do anything he couldn’t do.
Does the principal and agent require contractual capacity and why?
Principal needs it because they are the one entering a legally binding agreement.
Agent does not require contractual capacity as they aren’t entering into any contracts for themselves.
What are the four types of agents?
Universal agent = unlimited authority, can perfrom all kinds of transactions.
General agent = broad authority in wide range of transactions.
Limited agent/ad hoc = only made agent for a specific task.
Del credere agent = agent is a guarantor of third party insolvency.
What are the three types of principals?
Disclosed principal = third party knows they’re an agent and knows who the principal is.
Unidentified principal = third party knows they’re an agent but don’t know who principal is.
Undisclosed principal = third party don’t know they’re an agent at all.
How are non-commercial agents regulated?
Common law.
How are commercial agents regulated?
Commercial Agents (Council Directive) Regulations 1993.
What are the three steps in determining whether an agent is a ‘commercial agent’.
s 2(1) A. must be self employed.
B. have continuing authority to negotiate the sale of purchase of GOODS on behalf of the principal.
C. not be excluded in the regulation.
Describe Parks v Esso Petroleum Co Ltd 2000
Parks leased service station from Esso under agency agreement. Only buy fuels and lubricants from Esso at their prices and couldn’t sell other products. Sale of fuel was by Parks as an agent of Esso so never belonged to him. Agreement terminated for breaches, Parks issued claim for damages under Commercial Agents Act. Court held he didn’t satisfy definition of a CA because he didn’t have authority to negotiate sale or purchase. Only had limited discretion in choosing payment methods. Negotiating is core term and not satisfied. Not a CA, claim dismissed.
Define ‘continuing authority’
Excludes one-off transactions/must be ongoing.
Includes agents authorised to negotiate and conclude contracts.
All of the transactions can result from one contract though.
CA exceptions - who aren’t covered by the regulations?
An agent who doesn’t negotiate (no agent effort).
Officer of company, partners, insolvency practitioner, unpaid CA, gratuitous agents.
People whose agent activities are secondary (don’t participate in commercial or price discussions).
Define a gratuitous agent
Someone who does it for free.
Describe PJ Pipe and Valve Co Ltd v Audco India
the agent was deemed to be a commercial agent in his role to introduce contractors to its principals and did not have the authority to negotiate terms or pricing of sales. The principal ended the agreement 12 months before was set to end so the CA was entitled to compensation for the commission he would have earned in this period. Was protected by the CA Regulations.
Describe Nigel Fryer Joinery Services Ltd v Ian Firth Hardware Ltd [2008]
employed as a sales representative but then became self employed and was paid salary plus commission. Agreement terminated and Fryer demands damages compensation under CA. he had no authority to negotiate or conclude sales without head office approval when finding potential customers. Held not a CA and he breached agreement so termination was valid and claim dismissed.
Define ‘secondary agent activity’ in Scottish and English contexts.
England – determined by comparing non-agency activities the agent may have had with principal. Sufficient difference to make his agency actions primary?
Scotland - should be determined based on the purpose of the agency arrangement.
Describe Gailey v Environmental Waste Controls
gave a wide meaning to secondary activities, was deemed not to be a CA. Requirement of goodwill not met and principal did not own goods, the manufacturer did so principal didn’t benefit from the agency goodwill.
Many agree that where the agency is helping to build goodwill and bring business matters this is indicative of being primary. TRUE OR FALSE?
TRUE
What are the 6 methods of forming agency relationships?
- Express
- Implied
- Holding out
- Doctrine of Negotorium Gestio/Agent of Necessity
- Ratification
- Operation of Law
Define ‘express’ (forming agency relationship)
Clearly appointed - go buy this for me.
Define ‘implied’ ((forming agency relationship))
By circumstances or actions “pete can you take care of this for me”.
Define ‘holding out’ (forming agency relationship)
Principal gives agent appearance of being their agent and its the principal that makes them look like this to a third party.
Define ‘doctrine of negotorium gestio/agent of necessity (forming agency relationship)
First term Scottish, second term English.
Property at imminent risk, necessary to take action.
Define ‘ratification’ (forming agency relationship)
Retrospective approval of an agents act by the principal.
Define ‘operation of law’ (forming agency relationship)
Law states partners as agents of each other and that directors are agents of company. No agreement, just imposed as fact by law.
How do you form agency relationships under the CA Regulations?
Contract - “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”
Describe ‘agent of necessity’ (English)
- Need to safeguard property/interest of someone else.
- Can bind another person without authority to protect property/interest.
- May increase authority an agent has already or could create an agency relationship.
- Intention to have relationship is irrelevant.
Describe the ‘agent of necessity’ test (England).
- Actions must be necessary. Doesn’t matter what agent believes, necessary whether a reasonable person would regard the action as necessary.
- Not necessary for the agent to have communicated to the principal. Not reasonable in emergency situations.
- Actions must act in the principals’ interests.
- Principal must have been competent at the time of the agents act.
Describe ‘doctrine of negotorium gestio’ (Scotland)
- Borrowed from Roman Law
There are 4 elements.
1. A person (negotiorum gestor) who usefully and benevolently intervenes in the affairs of another (2. transactions)
3. Who is absent or incapable at the time of the intervention
4. With the intention to benefit the dominos (owner)
Then the gesture (agent) will be entitled to be relieved of liabilities and expenses.
Are secondary activities protected by the CA Regulations?
No, only primary.
Name the 9 things required for ratification to operate
- agent must have acted outwith authority.
- principal must decide to ratify - can be express or implied.
- principal must have legal capacity when the act happen and when he decides to ratify.
- principal needs capacity at time of act so also needs to have existed at time of act.
- agent must have purported to act for a principal. (unidentified OR disclosed principal)
- principal must be aware of all facts.
- ratification must take place within any time limits/reasonable time.
- contract principal wants to ratify must not be void or illegal.
What rule did the Bank Melli Iran v Barclays Bank (Dominion, Colonial and Overseas) [1951] case establish? (rati)
ratification can be implied by the principal’s inaction for a reasonable period of time in circumstances where the principal should have taken action
What rule did the Boston Deep Sea Fishing and Ice Co Ltd v Farnham [1957] 1 WLR 1051 case establish? (rati)
Principal must have capacity at time of act AND ratification.
What rule did the Tinnevelly Sugar Refining Co Ltd v Mirrlees, Watson & Yaryan Co Ltd (1894) case establish? (rati)
If the principal must have had capacity at the time of the act, the principal must have existed at the time of the act
What rule did the Keighley Maxsted & Co v Durrant [1901] AC 240 case establish? (rati).
Agent must have purported to act for a principal, can’t be an undisclosed principal.
What rule did the Forman & Co Proprietary Co v The Liddesdale [1900] case estalish? (rati)
Principal must be aware of all material facts and must make an informed choice
What rule did Grover and Grover Ltd v Matthews [1920] establish? (rati)
The ratification must take place within any time limits fixed by the parties, or if no time was fixed, within a reasonable time
What rule did Bedford Insurance Co v Instituto de Resseguros do Brasil [1985] establish? (rati)
The contract that the principal seeks to ratify must not be void or illegal
the principal cannot ratify if ratification would unfairly prejudice the rights of third parties.
TRUE OR FALSE
TRUE