Creation Of Agency Flashcards
The relationship of principal and agent may arise in how many ways?
Agreement (contractual or not) (express or implied)
Ratification of acts done on the principal’s behalf subsequently
Doctrine of estoppel
Operation of law (agency of necessity and matrimony)
The commonest and by far the simplest and most encouraged way of creating an agency
relationship
By express agreement in the form of a contract
In modern times, states Fridman, “it is correct to say that in most instances of an agency relationship there is a contract of agency between the principal and agent.”
In such a case the ordinary rules of contract demands that the parties must consent freely
to the creation of the relationship between them, i.e. their minds must be ad idem, there must be no fraud, duress, misrepresentation or mistake.
Is it of consequence whether an agent who is expressly appointed as such is appointed orally, or in writing or under seal?
So it is of little consequence whether an agent who is expressly appointed as such is appointed orally, or in
writing or under seal.
In fact, as stated by one author, the majority of agencies are created orally, and very often without any express arrangements at all. But writing is advisable because a
written appointment will facilitate the solution of the question on what terms and with what authority was the agent appointment?
So subject to this, an oral express appointment is just as
effective for its purpose as an appointment in any other form.
There are a few cases in which an agent’s appointment must be under seal
Appointment under seal (or by deed) is necessary where the
agent is given power on behalf of his principal to make contracts under seal.
An appointment in this form is termed a power of attorney, which may be described as an authority, given under seal, authorizing the person to whom it is given (the attorney) to act for the principal for the
purpose therein set out.
It is commonly given by a person temporarily leaving the country to an agent who is to look after his affairs during his absence.
A power of attorney can be made irrevocable. This may be so for example, where it is granted to a purchaser for value who gives consideration for the power; the power is permanently irrevocable and is not even determined by
the death disability or bankruptcy of the principal. The purchaser of land that is let to tenants, for instance, can receive such a power to collect arrears of rent. However, a power of attorney can
also be made irrevocable without the purchaser giving consideration, but then it must be limited to a fixed time not exceeding one year. (Law of Property Act 1925, secs. 126, 127).
……
If you’re leaving the country temporarily, you might give someone you trust (an agent) a “power of attorney.” This lets them manage your affairs while you’re gone.
A regular power of attorney can be canceled whenever you want. But a power of attorney can also be “irrevocable,” meaning it can’t be canceled.
There are two ways to make a power of attorney irrevocable:
* If someone pays you for it: If, for example, someone buys land from you and you give them power of attorney to collect rent from the tenants, and they pay you for the land (and thus, effectively, for this power), that power of attorney is permanently irrevocable. Even if you die or become incapacitated, they still have the right to collect rent.
* Even if they don’t pay you: You can also make a power of attorney irrevocable even if no money changes hands, but only for a maximum of one year. After that, it’s no longer irrevocable.
There are a few cases in which an agent’s appointment must be in writing
Appointment in writing is necessary in certain cases e.g. where the disposition of land or an interest in land is concerned.
In this connection section 78 of the Property and Conveyancing
Law 1959 which was applicable in the states of former Western region of Nigeria and Bendel
State, provided that an agent could not create or dispose of an interest in land or dispose of an equitable interest or trust on behalf of a principal unless he himself had been appointed in
writing.
Are all agency agreements contractual?
Although agency is a consensual relationship, resulting from agreement between the parties, it does not follow that all such agreements are strictly contractual manifesting all the features of the common law contract.
An agency may be gratuitous. If so, it is not truly contractual. The main difference between purely consensual and contractual agency lies in the absence or presence of consideration, in the form of remuneration of the agent for what he undertakes to do.
Apart from expressly creating the relationship an agency relationship may be formed in what way under an agreement?
It may be implied from the conduct of the parties.
The court will imply such an agreement if the parties have by their conduct consented to a state of affairs which is explicable only in terms of agency.
In general, however, it will be the assent of the principal which is more likely to be implied, for, except in certain cases, “It is only by the will of the employer that any agency may be created.
Such assent may be implied where the circumstances clearly indicate that he has given authority to another to act on his behalf. This may be so even if the principal did not know the true state of affairs.
Biggar v Rock Life Insurance
Biggar v Rock Life Insurance
- Mr. Biggar took out a life insurance policy with Rock Life Assurance Co⁽¹⁾.
- He did not disclose certain pre-existing medical conditions in the proposal form⁽²⁾.
- After his death, the insurance company refused to pay out the claim, citing misrepresentation⁽³⁾.
Court’s Decision:
- The court held that Mr. Biggar had indeed failed to disclose material facts that were necessary for the insurance contract.
- Because the proposal form was inaccurately filled out, the insurance company had the right to deny the claim.
Significance:
- This case emphasizes the importance of full disclosure when taking out insurance policies.
- It reinforced the principle that insurance contracts rely on utmost good faith, and any misrepresentation or non-disclosure can void the contract⁽³⁾.
Distinction between an implied contract of agency and agency by estoppel
The former is an instance of agency created by agreement between the parties before the agent acts on behalf of the principal. The principal is willing that the agent should act on his behalf. The agent in fact has authority so to act. But the existence and scope of his authority are discoverable by reference only to the conduct of the parties, and not by the examination of any express agreement.
On the other hand agency by estoppel exist even where
the principal did not want or appoint, the agent to act on his behalf. There is no contract of
agency implicitly in existence between the parties. None the less, the law considers the agency relationship to exist and gives effect to such a relationship.
Ratification
The agent’s authority to act is granted before the exercise of that authority. But with
ratification, the situation is reversed.
In ratification, what is done on behalf of the principal is
done at a time when the relationship of principal and agent does not exist; in that the agent has no authority to do what he does at the time he does it. But it so happens that subsequent to the act, the person on whose behalf it is done accepts or adopts it. The process of adopting the act or
transaction is known as ratification.
Ratification may occur by one of two ways
First, it may occur when the agent though contracting as an agent and having a principal in contemplation was not in fact given such authority to so act.
Secondly, it may occur when the agent was in fact given authority to act by a principal but
exceeded the authority so given.
So it may be safe to say that this kind of agency usually comes
about when a person without authority or who having an authority, exceeds that authority and act on behalf of another and that other afterwards confirms and adopts that act.
In either case, ratification duly made, puts the parties in exactly the same position in which they would have been if the agent had the principals authority at the time that the contract was made.
Ratification need not take a particular form.
In most cases any act or statement which clearly
shows the intention of the principal may be a sufficient act of ratification (even for a written contract).
But if the contract made by the agent is in the form of a deed, then the principal’s ratification must be by deed.
Oxford Corp. v. Crow (1893) 3 Ch. 535.
Oxford Corp. v. Crow
- The lessee offered to surrender his lease and build new buildings for a new lease.
- The corporation accepted, subject to council approval.
- The council approved without an official seal.
- The lessee withdrew the offer later.
- The court held that the contract was unenforceable since it lacked the corporation’s seal or authorization.
A problem which sometimes arises in ratification is
whether ratification must be in writing where the agent has
entered into a contract which itself must be in writing or evidenced by some writing.
In Soames v. Spencer it was held that a parol ratification was good even though the agent’s contract with the third party had to be in writing.
Mutual Aid Society Ltd. V. Akerele
In Soames v. Spencer
it was held that a parol ratification was good even though the agent’s contract with the third party had to be in writing
Mutual Aid Society Ltd. V. Akerele
- Parties: Mutual Aid Society Ltd. (plaintiffs) vs. S.R. Kukoyi (defendant).
- Dispute: Land ownership and the validity of transactions by an agent on behalf of the principal.
- Plaintiffs’ Claim: Granted parcels of land by the Bale of Ogbere for farming and residence.
- Defendant’s Actions: Received land from the Bale but later encroached on plaintiffs’ land, claiming a larger expanse.
- Relief Sought:
- Declarations of title.
- Damages for trespass.
- Injunction against further encroachment.
- Defendant’s Defense: Claimed absolute land grant in 1914 and long-term possession.
- Key Aspect: Role of the Forestry Department’s land acquisition and boundary demarcation central to the dispute.
What are the requirements for ratification?
- The Agent must expressly contract as an Agent
- The Principal must be in Existence
- Capacity of the principal to contract
- Knowledge of the facts
- The legal quality of the act
- Ratification of the whole contract
- Reasonable time
- Proof of Ratification
The Agent must expressly contract as an Agent:
This simply means that the agent must purport to act as agent for a principal who is in contemplation.
This based on the principle that a man may not incur liability on his account and then assign it to someone else under colour of
ratification.
Therefore the possibility of ratification does not depend upon what the agent’s state of mind actually was, but upon the way his statements and conduct were reasonably understood by the 3rd party.
Authorities under The Agent must expressly contract as an Agent:
the leading case of Keighley Maxsted & Co v Durant, The
point to be decided was laid down by Lord Davey in the following words:
“The question of law is whether a contract made by a man purporting and professing to act
on his own behalf alone and not on behalf of a principal but having an undisclosed intention
to give the benefit of the contract to a third party, can be ratified by that third party, so as to render him able to sue or be liable to be sued on the contract.”
The House of Lords were unanimous in saying that this could not be done. The rationale of the judgment is succinctly summarized by Lord Macnaghten’s remark that “civil obligations are not to be created by, or founded upon, undisclosed intentions.”
Folashade v Duroshola
Keighley Maxsted & Co v Durant
- Keighley Maxsted & Co authorized Roberts to buy wheat.
- Roberts bought wheat from Durant without disclosing the principal.
- The purchase price was higher than authorized.
- Keighley Maxsted & Co agreed to take the wheat on joint account with Roberts but failed to collect it.
Court Held:
- A contract made by an agent for an undisclosed principal cannot be ratified after the contract is made.
- Keighley Maxsted & Co was not bound by the contract.
Folashade v Duroshola
- Abigail Folashade (plaintiff) and Alhaji A. A. O. Duroshola (defendant).
- Dispute over land ownership at Lagos-Ikorodu Road, Mushin, Ikeja district.
- Plaintiff claimed the land was sold to Aminu Alfa in 1926 and 1927 by agents of Charles Olayemi Blaize, later purchased from Alfa’s next of kin in 1949.
- Defendant contended he purchased the land from Ade Akodu in 1956, who had bought it from Charles Olayemi Blaize in 1952.
- Court ruled in favor of the defendant, holding that the plaintiff’s deed of ratification in 1955 could not retroactively validate the earlier sales, and that the defendant had a better title to the land.
The Principal must be in Existence:
In order that the intended principal may ratify the
contract, he must have been in existence, and ascertainable at the time the contract was made.
Fridman: “No one can purport to act as an agent for a person who will come into existence at some future date, even if the agent can reasonably expect that his acts will be adopted”
This means that the principal must be a live human being or a
juristic person.
The Principal must be in Existence: What did Fridman say?
“No one can purport to act as an agent for a person who will come into existence at some future date, even if the agent can reasonably expect that his acts will be adopted”
The Principal must be in Existence: Why is this rule important?
This rule is important for example in its bearing on the liabilities of Companies for preincorporation
contracts.
Since a company has no
legal existence before incorporation, the common law position is still that the company cannot ratify any contract made prior to incorporation.
