Chapter 4

Question 1

As an agent, what rights does Gary have over his principal

Answer 1

The right to have reasonable expenses reimbursed

Question 2

A lien is

Answer 2

A right to retain goods as security for the payment of a debt

Question 3

In arranging insurance for their business premises, the insured gave information about the nature of the risk to an insurance intermediary. The intermediary was acting on behalf of the insurer but failed to pass this information on to the insurer. In the event of a subsequent related claim, what would the position be?

Answer 3

The insurer would be bound by the contract because the insurer would be regarded as having the same information as the agent

Question 4

The concept of agency is tripartite. What are the three relationships:

Answer 4

• Principal and agent
• Agent and third party
• Principal and third party

Question 5

What are the types of authority an agent has

Answer 5

Actual authority & apparent authority

Question 6

Define Actual authority

Answer 6

The authority of the agent is real, in the sense that they have been given the right to act on behalf of the principal, either expressly or implication

Question 7

Define apparent authority (ostensible)

Answer 7

The agent has no real authority to do the act in question. However it appears in the eyes of the third party, that they have such authority and are, therefore, able to bind their principal

Question 8

3 ways an agency may be created

Answer 8

By Agreement
By Ratification
By Necessity

Question 9

Ratification agency creation

Answer 9

Created retrospectively
The agent must appear to be doing it on the principals behalf and not on the agents own behalf i.e. selling a car, must make it clear its the principles car and not their own
The principal must have existed and had the contractual capacity to do the act at the time it was done
Ratification must take place within a reasonable time frame
No void/illegal acts
The whole contract must be ratified

Question 10

Agency by necessity example

Answer 10

Where a person is entrusted with goods belonging to another and an emergency makes it necessary to do something to preserve them

Only when it is impossible to contact the relevant person

Not very common nowadays due to communication technology

Question 11

Provide 5 duties of an agent

Answer 11

Obedience
Personal performance
Due care and skill
Good Faith
Accounting for monies received

Question 12

Give 3 duties of a principal/ rights of an agent

Answer 12

Remuneration
Indemnity
Lien

Question 13

Discuss remedies for breach of duty

Answer 13

• Sue the agent for damages for breach of contract
• In certain cases, sue the agent in tort (i.e. agent has refused to return the principals property
• For a serious breach (such as taking a bribe), dismiss the agent without notice or compensation
• If the breach is fraudulent, rescind any contract made through the agent and refuse commission
• Sue for an account if the agent fails to disclose full financial details of his agency dealings

Question 14

2 types of actual authority

Answer 14

Express & Implied

Question 15

What is express authority?

Answer 15

Agent has been told by contract that he or she may act on behalf of the principal

Question 16

What is implied authority?

Answer 16

Given in cases where someone (usually an employee) is wearing a company uniform or interacting with the public on behalf of a company or organization

Question 17

Example of usual authority?

Answer 17

Issuing a cover note

This is falls under the category of implied authority

Question 18

Disclosed Principal

Answer 18

One whose existence is known to the third party at the time the contract is made

Question 19

What is meant by imputed knowledge

Answer 19

When the law assumes that the principal is aware of the information which has been given to the agent.

What is known by an agent is deemed to be known to the principal too. Important in relation to the duty of disclosure in non-consumer insurance.

Question 20

Duties of an agent

Answer 20

Obey principals instructions
To exercise proper care and skill
To perform duties personally
To act in good faith towards the principal
Account for monies received on behalf of the principal

Question 21

Against whom may the third party enforce the contract when the principle is wholly undisclosed?

Answer 21

The third party can enforce the contract and has the option of doing so either against the agent or against the principal