Chapter 9 Agency Flashcards
What is the doctrine regarding privity of contracts?
Name the case study and its relevant details
What are the exception?
The doctrine of privity states that only parties who enter into a contract can sue or be sued
Case study: Price V Easton
Details: a debtor owed price money. Easton agreed to pay the debt if the debtor did work for him. After the work was done, Easton failed to pay the debt to Price.
Court held that Price was not privy to the contract between the debtor and Easton.
Exception 1: Contracts rights of third parties act (CRTA)
Exception 2: Agency
Define the concept of Agency
The concept of agency states that an agent can act on behalf of his principal. As a result, the agent can alter any legal relationship the principal has with a third party.
Define the concept of liability of agent
An agent is not liable to his principal or third party as long as he acts within the scope of authority given to him by his principal. Any liability flowing to him flows to his principal instead.
What are the two types of actual authority
- Expressed Actual Authority
(Principal has expressly stated that the agent is acting on his behalf, this can be done through written terms or oral terms.) - Implied Actual Authority
(When an agent is empowered to do all acts or which are within the reasonable customs and usage of the particular trade where he is engaged. He has implied actual authority.
Describe the concept of ratification for agency
Ratification is the process where a principal retrospectively confirms the actual authority of an agent’s act. Once contract is ratified, principal adopts all the benefits and liabilities of the contract made by the agent.
What are the conditions needed for ratifications. ALL CONDITIONS NEEDED
(NECUR)
- Named : Principal has to be named in order for ratifications
- Exist: Principal has to exist at the time of ratification
- Capacity: Principal has to have capacity to enter the contract and ratify
- Unconditional Acceptance: Principal has to unconditionally ratify all the terms
- Ratification: Ratification by the principal must be given in an acceptable period.
What is the legal effect of ratifying a contract?
What is the relevant case study for this?
The legal effect of ratifying a contract in an agency is to grant retrospectively the agent authority to act on behalf of the principal. Ratification is effected at the time of the contract.
(basically, principal ratifies contract, law sees it as the principal accepted contract when agent received it)
Case study: Bolton Partners V Lambert
An agent of a company purporting to act on company’s behalf without actual authority. Agent accepted an offer by a third party. However the third party tried to withdraw his offer but the company ratified the agent’s acceptance.
Court held that ratification came earlier than the revocation, therefore contract was accepted and both parties were bound
Define the concept of ostensible authority.
If the principal did not provide the agent with actual authority and does not want to be bound by the contract. Third party can argue on ostensible authority
What proof is needed to show ostensible authority {ALL NEEDED}
AAIC
- A representation that the agent had authority to enter
- Such a representation was given by someone with ACTUAL AUTHORITY
- Third party was induced into the contract and relied on the ostensible authority
- Company was not deprived of the capacity to enter into the contract.
What are the exceptions to ostensible authority? In other words, how can someone disprove ostensible authority?
Exception 1. If third party knows of the agent’s lack of actual authority. Third party cannot argue ostensible authority
Exception 2. If contract was offered under a bribe or generally illegal.
What can a third party do if he cannot argue for ostensible authority but would want to hold agent liable?
Third party can invoke a breach of warranty of authority.
If the agent did not have any actual authority and the principal refused to ratify the contract and the third party cannot argue ostensible authority. The third party can instead sue the agent for breach of warranty of authority.
What are the duties of Agent to Principal?
[BADICC]
- Bribe : Agent has duty not to take bribes
- Accounts: Agent has duty to keep separate accounts for the recording of the principals transaction with third parties.
- Delegate: Agent has duty not to delegate duties
- Instructions: Agent has duty to follow instructions given by the principal.
- Conflict of interest: Agent has duty to not put himself in a position where he has a conflict of interest with his principal
- Care of skill: Agent has duty to use standard care and skill. “ A reasonable person would expect from an agent in that industry”
What are the duties of principal to agent?
[RIL]
Remuneration: Agent has the right of remuneration from his principal after he has completed and fulfilled his duties.
Indemnity: Agent has the right of indemnity to claim all liabilities and disbursements in the course of fulfilling his obligations to the principal
Lien: Agent has the right of lien. If a principal is indebted to his agent. The agent has the right of lien over the principal’s property until he is paid back.
What is the general rule regarding Principal and Third Party Relationship?
A principal is bound to a third party for all acts performed by the agent as long as:
1) Agent does not exceed authority
2) Agent has ostensible authority
3) Principal has LAWFULLY ratified contract with third party
What is the doctrine behind undisclosed principal?
An undisclosed principal is generally still bound to a third party through agency contracts. Even when at the time of the contract between agent and third party, the third party still does not know of the principal’s existence.
However, generally, this would adopt a lot more liabilities for the agent. Hence, agents would normally disclose their principal.
