Unit7 - The Law of Agency

Question 1

Provide the definition of a CONTRACT OF MANDATE.

Answer 1

The mandator concludes a contract with a mandatory in order to perform a task (a mandate).

Eg. an estate agent and a buyer.

Estate Agent need to find the buyer a house, but cannot conclude the contract on his behalf.

Question 2

Provide the duties of the Mandator.

2 Points

Answer 2

1. The Mandator must compensated the Mandatary for all expenses incurred in order to perform the tasks.
2. Indemnify Mandatary for liabilities that may arise from the execution of the mandate.

Note: if task is not complete, no remuneration will be paid.

Question 3

Provide the duties of the Mandatary.

5 Points

Answer 3

1. He must try his best to perform the task.
2. If unsuccessful due to supervening impossibility to perform, he will not be held liable.
3. Must not act outside of the scope of the mandate otherwise he will be held liable for any damages occurred.
4. He has a duty to act with due care, skill, diligence and in good faith.
5. He has a duty to give all accounts.

Question 4

Provide the instances in which a mandate may be terminated.

Answer 4

1. Death of either party.
2. Sequestration of either party’s estate.
3. Insanity of either party.
4. Revocation by the mandator for a legally valid reason.
5. Renunciation by the mandatory a for legally valid reason

Question 5

Explain the concept of AGENCY

Answer 5

It is the same as the contract between SDL and PFA. SDL act as the agent/representative for PFA as we market there products. We conclude contracts with clients which binds PFA and the client and not SDL and the client.

Question 6

Say a contract has been concluded without the necessary authority. What methods can be taken to fix this.

Answer 6

1. Ratification

2. Estoppel

Question 7

Explain the meaning of ESTOPPEL.

Answer 7

The principal has given a third party the wrong impression that the “agent” has the authority to act on his behalf. The third party act on this wrong impression and concludes the contract. The principal is then in ESTOPPEL. Meaning that the cannot deny the authorisation.

E.g. telling people that I have the authority to conclude contracts on his behalf.

Question 8

What are the three requirements for ESTOPPEL?

Answer 8

1. Principal must have made the wrong impression about the “agent’s” authority.
2. This misrepresentation must have the potential to mislead a third party.
3. The third party must have made his decision on the strength of this misrepresentation.

Question 9

Explain the meaning of RATIFICATION.

Answer 9

The Agent acted without the necessary authorisation and without the principal’s knowledge. The principle provide the necessary authority after the fact. Thus, he ratify’s this action.

Question 10

What are the 4 requirements for RATIFICATION?

Answer 10

1. Principal must have existed once “agent” acted on his behalf.
2. “Agent” must have made it clear that he was acting on behalf of the principal.
3. Principal must be named or must be ascertainable.
4. Principal must have the capacity to ratify the action.

Question 11

Explain the duties and obligations of an AGENT.

4 points

Answer 11

1. It is his duty to follow instruction within the scope of authority provided.
2. Should exercise reasonable care and diligence.
3. Duty of good faith - he has a fiduciary responsibility to he principal.
4. It is his duty to account properly.

Question 12

Explain the duties and obligations of the PRINCIPAL.

3 point

Answer 12

1. To pay remuneration.
2. To reimburse agent for all necessary expenses.
3. To indemnify agent against all losses and liabilities occurred within the process of carrying out the mandate.