Ch2+3 Flashcards
Nature and scope and policy reasons of agent’s authority as between principal and agent
Agent affects legal relationship of principal. Principal can be vicariously liable for torts of agent.
Agent can have actual authority (express or implied (a) usual - see freeman v lockyer (b) customary)).
They can also have ostensible authority which means apparent authority where P made or permitted a representation of agent authority and 3P reasonably relied on it to detriment. Operates as estoppel.
Agents have duties to principals:
(1) duty to perform obligations of agency
(2) fiduciary duties .. including (a) loyalty (no secret profits, no conflict of interest), (b) Duty of care, (c) duty not to delegate, (d) duty to keep proper accounts.
Principals have duty to remunerate agent (even where no express agreement), to pay expenses incurred and indemnify against agent losses. Agent must be acting within the scope of their actual authority for this, unless the agent is an exclusive agent (where they will be paid regardless if they are the effective cause of the transaction).
Agency is terminated by act of parties (either notice or a specified act in the agreement), or by operation of law (death, bankruptcy, frustration).
Nature/ scope/ policy reasons for agents authority re: third parties
Ostensible authority: where P made or permitted a representation that the agent had authority to act on their behalf, and the 3P reasonably relied to detriment, this will operate as estoppel and prevent P from avoiding contract. * note 3P is required to made reasonable inquiries
Policy: protection of 3p reliance, least cost avoidance is usually on P, if P never contracted with agent and it is complete fraud - probably least cost would go to whoever had contact.
Breach of warranty of authority: where agent had no actual or ostensible authority, 3P can bring this action against agent. Elements: (i) agent represented they had authority (ii) representation is false (iii) 3P relied to detriment. Damages would be expectation measure - put into place they would be if agent representation was true.
Undisclosed Principal: where agent doesnt disclose they are acting for P. Cant disclose P and agency relationship to sue the 3P if the 3P was looking to agent to perform (objective test). Requires (i) terms of contract saying agent will perform, (ii) circumstances clearly indicate - can mean personal aspects to contract, services of agent only, etc. Not enough to just say they wouldnt have contracted if they had known, have to show corroborating circumstances (ex.banned from trading with them via statute).
If made out, 3P can sue agent and principle, and if P takes action against 3P, 3P can use rights they would have had against agent and use any defence that they would have against the agent. If agent sued 3P, might have duress, mistake, or misrepresentation as defence.
Policy: mutual benefit, potential unjust enrichment of 3p if they can avoid performance after P carries out contract, and unjust enrichment of P if they can escape liability where 3P carries out contract.
Ratification: can ratify but must be the person on whose behalf agent was purporting to act, must have been in existence/ascertainable at time of act, and must have had legal capacity to do the act at the time the agent acted and at the time of ratification. Ratification can be express, conduct, or acquiescence. Must be done based on knowledge of all relevant facts. Once ratified, it goes back to time of offer/acceptance. The P can sue 3P and vice versa, and the agent is no longer libale for breach of warranty of authority OR to P for exceeding authority. P must remunerate/indemnify/pay reasonable expenses of agent.
Policy: Mutual benefit of transaction, unjust enrichment of P at expense of agent, unjust enrichment by P at expense of 3P via speculation, prevents unjust enrichment of 3P at expense of P where the reneg to get better deal, and cures defect leading to litigation in grant of authority (over whether agent acted within authority - between P and 3P or A and P)
Tort liability: P liable for torts of agent committed in scope of authority.
P does not have to benefit nor does agent have to intend to benefit P (lloyd v grace)
If we said P never gives authority to commit fraud, would allow them to be availed of fraudulent agents (mackay)
Enough to have put them in the place to do that class of acts (Barwick)
Sufficient to use facilities to perform services normally carried out / OCOB (Ernst & Young)
Policy: deterrence, least cost avoidance, compensate victims, cost allocation to the activity causing the loss. Note Lloyd v grace maybe concerned of accessibility of legal services (dont want ppl afraid of fraud).
