Chapter 4 - Law of Agency

Question 1

What are the principals of an insurance agent?

Answer 1

• Giving general advice
• Granting cover
• Collecting premiums
• Completion of proposal form
• Adhering to the consumer act of 2012

Question 2

What are the duties of an agent?

Answer 2

• Obey the principals instructions - may be liable in damages if not carried out.
• Exercise proper care and skill
• To perform duties personally - do not delegate unless authorised
• Good faith
• Accounting for moneys received

Question 3

What are the remedies for breach of duty?

Answer 3

• Sue the agent for damages to breach of contract?
• Sue the agent in tort

Question 3

What are the remedies for breach of duty?

Answer 3

• Sue the agent for damages to breach of contract
• Sue the agent in tort
• For a serious breach (bribery) dismiss the agent without notice or compensation
• Sue the agent to recover a bribe paid to the agent
• 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 4

What are the rights of the agent?

Answer 4

• Remuneration
• Indemnity

Question 5

What is a lien?

Answer 5

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

Question 6

What is actual authority?

Answer 6

• The authority of the agent is real, given expressly or by implication.

Question 7

What is apparent (ostensible) authority?

Answer 7

The agent has no real authority to do the act in question, however from the eyes of the third party is that the agent does have this authority.

Question 8

What is the law of agency?

Answer 8

The law of agency is an area of commercial law dealing with relationships that involve a person (the agent), that is authorised to act on behalf of another (the principal) to create legal relations with a third party.

Question 9

What are the three ways agency can be created?

Answer 9

• Agreement
• Ratification
• Necessity

Question 10

What is meant by appointment by express agreement?

Answer 10

Most agencies, including insurance agencies, are created in this way. The agreement may be a formal one, in writing, or an informal oral agreement

Question 11

What is appoint by implied agreement?

Answer 11

An agency agreement may be implied by the conduct of the parties and the relationship between them.

Question 12

What is an agency by ratification?

Answer 12

In some cases, the relationship of principal and agent can be created retrospectively (i.e. after the ‘agent’ has carried out their task) under the doctrine of ratification.

Question 13

What are the principals of an insurance agent?

Answer 13

• Giving general advice
• Granting cover
• Collecting premiums
• Completion of the proposal form
• Consumer insurance

Question 14

What are the duties of an insurance agent?

Answer 14

• Obedience
• Care and skill
• Perform duties personally
• Act in good faith
• Account for monies

Question 15

What are the remedies for breach of duty?

Answer 15

• Sue the agent for damages
• In some cases, sue the agent in tort
• For a serious breach. dismiss the agent without notice or compensation
• Sue the agent to recover a bribe

Question 16

Who is responsible under the law of agency?

Answer 16

an action that is carried out by an agent is treated in law as the principal’s own action

Question 17

What rights do agents have?

Answer 17

• Right of remuneration
• Right to indemnity

Question 18

When does an agent not have a right to indemnification?

Answer 18

• their act was not authorised (or ratified) by the principal;
• they are in breach of their duties as the agent (for example, by failing to obey instructions); and
• the act for which they claim indemnity is illegal or void by statute.

Question 19

What is a lien?

Answer 19

A lien is the right to retain the goods of another as security for a payment

Question 20

What are the two different authorities of an agent?

Answer 20

• Actual authority - Real authority
• Apparent authority (ostensible) - No authority

Question 21

What are the two forms of actual authority?

Answer 21

• Express actual authority
• Implied actual authority

Question 22

What is agency by estoppel?

Answer 22

Sometimes a person may ‘hold out’ another person as being their agent when the latter has no authority at all, with the result that the third party is deceived.

Question 23

What is a disclosed principal?

Answer 23

A disclosed principal is one whose existence is known to the third party at the time the contract is made.

Question 24

What is an undisclosed principal?

Answer 24

The position is different if the existence of the principal is undisclosed – i.e. the third party is unaware that they are dealing with an agent.

Question 25

What are the various ways an agency can be terminated?

Answer 25

• Agreement between both parties
• Performance - once a task has been carried out the agency can end
• Time - lapse after agreement
• Withdrawal of authority - agent may revoke rights
• Renunciation by the agent
• Death of principal or agent
• Bankruptcy
• Insanity - agent incapability
• Frustration