Rerlations between the Agent and Third Persons

Question 1

When is a separate contract between the agent and a 3rd party created?

Answer 1

When the agent makes a commitment to the 3rd party about the agent’s relationship with the principal and its bona fides.

Question 2

What is the nature of the separate contract?

Answer 2

A warranty by the agent that he does indeed have authority to bind his principal.

Question 3

What happens if the warranty is breached?

Answer 3

The agent will be obliged to compensate the 3rd party in damages for any loss the 3rd party might suffer if the agent does not have the authority they claim to have.

Question 4

What are the forms of warranty?

Answer 4

1. Express warranty of authority
2. Tacit warranty of authority
3. Residual warranty of authority

Question 5

What case outlines the rule for the residual warranty of authority?

Answer 5

Nebendahl v Schroeder.

Question 6

What did the court hold in Nebendahl v Schroeder?

Answer 6

Ordinarily when a person signs as agent, it is reasonable to infer a representation that he is duly authorised to make a contract.

Question 7

What are the requirements to be satisfied to bring an action based on a breach of the residual warranty?

Answer 7

1. A representation of authority
2. Inducement ( a causal relationship between the agent’s representation of authority and the conclusion of the contract has to be established)
3. Absence of authority in fact
4. Fault or whether a bona fide but mistaken agent is also in breach (depends of type of action)

Question 8

What are the leading cases on the residual warranty?

Answer 8

1. Blower v Van Noorden
2. Claude Neon Lights v Daniel