AGENCY

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AGENCY

• Rosemary Craig BA LLB LLM PGCHEP

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Learning Objectives

• The meaning of the term agency.
• The different ways in which the agency
  relationship can be created.
• The authority of an agent.
• The duties of an agent.
• The rights of an agent.
• The relationship between the agent and third
  parties.
• Termination of the agency relationship.
• Legal protection for commercial agents.

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Agency

• Definition A consensual relationship in which
  one (the agent) holds in trust for and subject to
  the control of another (the principal) a power to
  effect certain legal relations.
• Contracts with third parties will be valid and
  binding on principal provided the agent acts
  within the scope of his actual authority.
• Agency relationship created by express agreement
  (oral/ written), or by ratification.

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Ratification

• Principal will not be liable for any contract
  made on his behalf by an agent acting ultra
  vires, or someone with no authority acting as an
  agent, unless the principal ratifies the
  contract.
• Effects of ratification
• principal becomes liable
• ratification operates retrospectively
• agent relieved from liability to principal for
  acting ultra vires
• agent relieved from liability to 3rd party for
  breach of warranty of authority.

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Conditions for Ratification

• Contractual capacity.
• Principal must be in existence when contract was
  made. Kelner v Baxter 1866.
• Principal must be identified at time contract is
  made.
• Principal must be aware of all material facts.
• Unauthorised act must be capable of ratification.
• Principal must ratify whole contract.
• Contract must be ratified within a reasonable
  time.

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Estoppel/ Agency by Holding Out

• Principal holds out another as having authority
  to make contracts on his behalf.
• As such, principal is estopped from denying that
  this person has appropriate authority is bound
  by such contracts as if he had expressly
  authorised them.
• Doctrine operates where principal fails to notify
  3rd parties that agents authority has been
  terminated and where principal allows agent to
  appear to have more authority than he actually
  has.

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Estoppel

• To create agency by estoppel there must be
  representation, express/ implied, from conduct of
  the principal to a third party who relied upon it
  that the agent has the authority to enter into
  such contracts. Freeman Lockyer v Buckhurst
  Park Properties Ltd 1964
• Necessity Pre- existing legal relationship
  emergency impossible for agent to communicate
  with principal agent acting in best interests of
  principal. Great Northern Railway v Swaffield
  1874
• Implication

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Authority of an Agent

• Actual authority the authority that a principal
  has agreed an agent should have.
• Express- obligations and precise powers of agent
  to carry out obligations set out in an agreement.
• Implied- discretion given to agent to act where
  terms are ambiguous, the law will imply authority
  to allow agent to carry out express duties.
  Watteau v Fenwick 1893
• Apparent/ ostensible authority.
• Agent acting without authority will not bind
  principal. No contract between agent 3rd party,
  however he will be liable for breach of warranty.

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Duties of Agent to Principal

• Fiduciary duty.
• Agent must not allow personal interest to
  conflict with that of the principal
• Agent must always act in principals best
  interests
• Agent must not accept secret profit or bribe.
  Boston Deep Sea Fishing Ice Co Ltd v Ansell
  1888.
• Duty of care skill.
• Perform contractual duties. Turpin v Bilton
  1843.
• Perform duties in person account for all money
  property received.

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Effect of Breach of Duties

• Breach of agency agreement, agent liable for any
  loss.
• Serious breach agent can be dismissed and
  principal can refuse to pay him any commission.
• Any benefit/ profit obtained by agent can be
  recovered by principal.
• Where 3rd person is fraudulently a party to the
  breach, the principal may avoid the contract with
  the 3rd party.

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Rights of an Agent against the Principal

• To claim remuneration/ commission for services
  performed.
• To claim an indemnity against the principal for
  all expenses reasonably incurred in carrying out
  his obligations.
• To exercise a lien over the principals property.

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Relations with Third Parties

• Where the agent acts for a disclosed principal -
  existence of principal made known to 3rd party.
• General rule - contract between principal and 3rd
  party. Agent is not liable/ entitled under the
  contract.
• Where the agent acts for an undisclosed principal
  - principals existence not made known to 3rd
  party.
• 3rd party can treat the principal/ agent bound by
  the transaction when the true position is
  discovered.

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Termination of the Agency Relationship

• Termination by the act of the parties
• By express agreement
• Agent has carried out his obligations
• Passing of time.
• Termination by operation of law
• Death of agent/ principal
• Bankruptcy of agent/ principal
• Insanity of agent/ principal.

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Legal Protection for Commercial Agents

• Commercial Agents ( Council Directive)
  Regulations 1993
• A commercial agent is a self employed
  intermediary who has the continuing authority to
  negotiate the sale or purchase of goods on behalf
  of a principal.
• Mandatory rights obligations written
  statement, fiduciary duty, commission.
• Termination of agency agreement.