Module 6: Law of Agency Flashcards
What is agency?
Between the principal the agents
Empowers the agent to act on the principals behalf
Agent acts as principals intermediary
What will the actions of the agent affect?
The legal position of the principal
Frequently bring principal into contractual relationship with a 3rd party
Resultant contract after agent contracts on principals behalf?
Between principal and 3rd party
Agent drops out and generally acquires no rights or obligations
How may the authority of an agent arise?
Agreement between principal and agents
Matter of law e.g. company law provides that company director is company’s agent
What are the 4 ways an agency relationship may be created?
Express agreement
Implied agreement
Ratification
By necessity
What is express agreement for agency?
No special formalities required
Writing or verbal
Principal and agent must have necessary contractual capacity
How is agreement implied for agency?
By actions of the parties
As a result of the relationship between parties
As a matter of law e.g. director of company
What is ratification?
When no agency actually exists
Party claims to have acted on behalf of another as his agent
What conditions must be satisfied for ratification?
Agent must have made clear he was acting for a known principal
Principal must have been in existence at time contract was made and have capacity
Must be in possession of all material facts when making decision to ratify
Ratification must be timeous
How can agency be created by necessity?
Result out of emergency situation where impossible to contract the principal
E.g. carrier of perishable goods delayed sell rather than go off
Acts for free
Entitled to recover outlays incurred on behalf
Has duty to take care of dealings and may be liable to damages
The authority of an agent to bind his principal?
Resultant contract between principal and 3rd party
Bound and acquires rights and obligations
Agent drops out and gets none
With what authority is the principal bound by the agent?
Express authority
Implied authority
Ostensible authority
What is express authority?
Expressly given
Verbal or in writing
Define nature
What is implied authority?
Implied from the nature of the agents activities or from what is usual or customary
Watteau v Fenwick 1893
Pub manager doesn’t have express authority to buy goods other than beer
Orders cigars but doesn’t pay
Pub owner was liable because buying cigars fell within the usual authority of a pub manager
Only if supplier told of limited nature of manager’s authority would pub not been bound
What is actual authority?
Express and implied together
What is ostensible (apparent) authority?
Authority which an agent appears to have but does not actually have
3rd party reasonably entitled to believe he has
Principal may still be bound even if not authorised
Principal may limit but if 3rd party doesn’t know can still be bound by agent
International Sponge Importers v Andrew Watt and Sons 1911
Ostensible authority of salesman
ISI knew cheques made out to salesman personally
Salesman kept cheque and ISI tried to claim payment from W
W did not have to pay
ISI failing to object allowed W to rely on ostensible authority of the salesman to accept cheques
If agent exceeds his actual authority but principal bound on basis of ostensible authority what could happen?
Agent in breach of agency agreement
May sue or terminate
Agent may be liable to pay damages
Forfeits commission
What happens when an agent acts out of actual AND ostensible authority?
Principal not bound by contract
Agent personally liable
What may be included in express agreement regarding agent remuneration?
Commission basis
Salary
Basic salary or retainer plus commission
What if there is no express agreement with regards to agent remuneration?
Right to be paid at the customary rate in that trade
In absence of this rate the agent will be paid a reasonable rate calculated on a quantum meruit basis - what his efforts merit
Dudley v Barnet 1937
Estate agents found new tenants and arranged they’d take over lease
Existing tenants accepted different offer and refused to pay commission to estate agents
Estate agents entitled to be paid despite not going through principal
Remuneration if contract not carried out
Reimbursement of Expenses and indemnity for agents?
Entitled to recover
Entitled to be indemnified by the principal where he was acting within his actual authority
