Chapter 10 Flashcards
How may a person who wishes to transact do so? (2)
(1) by himself
(2) through an agent.
What is an agency relationship?
When one person (principal) appoints another person (agent) to transact business on his behalf
Who may be an agent? (5)
(1) employee of principal
(2) sales assistant of shopkeeper
(3) partner of a firm of partners
(4) directors of a company
(5) independent contractor
What is the distinctive characteristic of the agency relationship?
The agent has the power to make a binding contract between his principal and the third party, without becoming a party himself.
How is an agency relationship created? (4)
(1) express agreement
(2) implication
(3) estoppel
(4) ratification
How is an agency relationship created by express agreement? What if the principal wants to authorize the agent to execute a deed on his behalf?
The agent may be appointed verbally or in writing. The principal must appoint the agent by way of a deed.
How is an agency relationship created by implication?
An agency may arise from the conduct of or relationship between the principal and agent, despite the absence of an express agreement.
How is an agency relationship created by estoppel?
If A by his words or conduct, causes B to falsely believe that C is A’s agent. Upon relying on such belief, B transacts with C.
What is the effect of B transacting with C? Why?
The transaction would bind A because A is responsible for the illusion created in B’s mind
Who would be estopped, from what?
A would be estopped from denying an agency relationship between A and C.
Why is A estopped?
It is unfair for A to deny the agency relationship after misleading B, and B had relied on A’s representation of conduct.
How is an agency relationship created by ratification?
Z may enter into a contract with Y even though Z had not been authorized by X to represent X. Thereafter, X may decide to adopt Z’s earlier actions by ratification.
What is the effect of X’s act of ratification?
An agency relationship is created between X and Z, after the transaction had taken place.
What are the conditions to be fulfilled for ratification? (4)
(1) Agent Z must have transacted the business in his capacity as an agent for principal X.
(2) Principal X must have the contractual capacity to transact business at the time of the actual transaction and ratification.
(3) Principal X must show a clear intention whether expressly or by his conduct, to ratify the act of agent Z.
(4) Principal X must ratify everything which agent Z had transacted, and not merely the beneficial aspects while disregarding the burdensome.
Ratification is ___ by nature.
retrospective
Why ratification is retrospective?
It binds the principal from the time when the contract was entered into by the agent, rather than from the time when the agent’s act was ratified.
Is it possible to ratify an illegal contract? Why?
No because it is void and incapable of ratification.
What is the first duty of an agent?
He must carry out his principal’s lawful instructions, unless he is acting ‘gratuitously’.
What does ‘gratuitously’ mean?
Without receiving consideration/payment.
What is the second duty of an agent?
He must exercise reasonable care and skill in the performance of his duties. The degree of skill expected of him depends on the circumstances.
When is more skill required from the agent? (2)
(1) When the agent is a professional.
(2) When payment has been made.
When is less skill required from the agent?
When the agent is a layman merely advising a friend.
What is the third duty of an agent?
He must act in good faith and for the benefit of his principal.
How did the third duty arise?
The principal places the agent in a position of trust and the law is concerned that the agent does not abuse that trust.
