Contract - Agency

Question 1

Define ‘Agency’

Answer 1

The relationship that arises when one person (agent) acts on behalf of another (principal) and has the power to effect the principal’s legal position with regard to a third party

Question 2

What two ways can agency arise? (+Authority)

Answer 2

Freeman and Lockyer:
1- Actual authority
2- Apparent Authority

Question 3

What is actual authority?

Answer 3

An agent has actual authority when they have been expressly appointed by the principal

Question 4

What three things must occur to show apparent authority?

Answer 4

1- Representation by P to 3rd party that A has authority
2- Reliance on representation by 3rd party
3- Alteration of position by 3rd party on reliance on representation

Question 5

If an agent has authority, what is the effect on a contract?

Answer 5

There will be a valid contract between the Principal and third party. The agent will ‘drop out’

Question 6

If the agent exceeds his authority, what is the effect on a contract?

Answer 6

There is no authority if authority is exceeded so the contract will be voidable

Question 7

What is the effect if the agent does not have authority?

Answer 7

1- Principal cannot sue/ be sued by the third party
2- The third party can sue the agent in:
2.1- In the tort of deceit if agent knew he lacked authority
2.2- In contract for the breach of implied warranty of agency