the Law of Agency in Business
AGENCY
BY
MRS C M SIMBOTWE
LAW OF AGENCY
•
The common law position is that “
he who can act
for himself may also act through an agent
” and
this is summed up in the Latin maxim “
QUI FACIT
PER ALIUM FACIT PER SE
.”
•
However, there are two exceptions to this
position:
1.
Where personal performance is required; and
2.
Where the parties involved expressly or by
necessary implication prohibit delegation.
Definition of Agency
•
An agency relationship involves three very specific parties
namely:
•
(i) Principal
•
(ii) Agent
•
(iii) Third Party
•
The
Principal
is the person on whose behalf the contract is
made. It is a person on whose behalf the agent acts.
•
The
Third Party
is the party with whom the agent contracts
on behalf of the principal and who as a result of the very
special rules enjoys a series of mutual rights and obligations
with the principal, but there is no contractual relationship
with the agent.
Definition of Agency
•
In law the word
‘agent’
is used to refer to a person who
has legal authority to bind another by entering into
contract with a third person on that other’s behalf.
•
An agent is a person employed to do any act for
another, or to represent another in dealing with third
parties or persons.
•
The important feature of the relationship is that the
agent has power to bind his principal to a contractual
relationship with a third party without the agent
himself becoming a party to the contract.
Essential and Legal Rules for a Valid
Agency
•
The essential features for a valid agency are as follows:
•
(1) There should be an agreement between the
principal and the agent.
•
According to this element, the agency must be created
by an agreement between the principal and agent.
•
Therefore there must be an agreement by which a
person is appointed as an agent by the other.
•
The agreement may be
express
(that is, by words of
mouth or in writing), or
implied
(that is, it may arise by
the conduct of the parties, by necessity or
circumstances of the cases).
•
(2) The agent must act in the representative capacity.
•
The agent
must represent his principal and act on his
behalf.
•
Moreover, the agent must have the power to create
legal relationship of his principal with third parties.
•
Therefore, the true nature of the relationship should
be seen. If the agent acts in representative capacity
and had the power to bind his principal with third
parties, the relationship is that of ‘agency’.
•
3) The principal must be competent to contract.
•
The principal must be competent or have capacity
to enter into a valid contract, that is, he must of
sound mind, and have attained the age of
majority.
•
Therefore, a minor or a person of unsound mind
(insane) cannot appoint an agent to act on his
behalf.
•
An appointment of an agent, made by an
incompetent person is void.
•
(4) The agent need not be competent to contract
or have capacity to contract.
•
As a general rule there is no requirement that an
agent must have full contractual capacity when
he acts on behalf of the principal.
•
This is because the contract is that of the
principal, and not the agent
.
•
The principal must, however, have contractual
capacity at the time the contract in question is
entered into.
•
It is therefore legally possible for a minor to act
on behalf of an adult principal in bringing about a
binding contractual relationship with a third party
who has contractual capacity.
•
However, the agency contract between the
principal and agent will not be binding on the
agent because of the agent’s minority.
•
For the same reasons the law denies minors from
entering into contractual relations of any kind,
minors are generally not engaged as agents for
persons with full contractual relations.
Classification of Agents
1.
GENERAL AGENTS-
appointed to perform some task
in a general area. He has authority to enter into any
contract on behalf of his principal are normally
within the scope of the trade, business or profession
in which the agent is employed.
2.
UNIVERSAL AGENTS-
has unlimited authority to
enter into any contract for which his principal has
contractual capacity.
3.
SPECIAL AGENTS-
engaged to undertake or perform a
particular task or special function only.
Creation of Agency
•
The relationship of PRINCIPAL and AGENT may be
created in any of the following ways:
1.
By EXPRESS agreement.
2.
By IMPLIED agreement.
3.
By Operation of the LAW, that is,..
a.
Agency of Necessity
b.
Agency by Ratification
c.
Agency by Estoppel
d.
Agency Under Statutory Provisions
(1) Agency by Express Agreement
•
An agency may be created by express
agreement.
•
In this case, an agent is appointed by an
agreement in writing or by words of mouth.
•
It may, however, be noted that no particular
form or set of words is required for the
appointment of an agent.
(2) Agency by Implied Agreement
•
An agency may also be created by an implied
agreement.
•
In this case, a person becomes an agent of the
other due to the conduct of the parties or the
course of dealing between the parties or the
situation of the particular case, for example,
when one person places another in such a
situation in which the other person is understood
to represent or act on his behalf, he becomes an
implied agent.
•
In
Hely-Hutchinson v. Brayhead Ltd [1967] 3 All ER 98
:
The directors of a company allowed the chairman to
act as though he was in fact the Managing Director,
although he had never been appointed to that role and
so had no express authority to bind the company.
•
The company was held to be bound by transactions
entered into by the Chairman as a result.
•
Similarly, in
Mullens v. Miller (1882) 2 Ch D 194
: An
estate agent was held to have implied authority to give
details and make warranties in respect of properties
that he was selling.
•
See also
Watteau v. Fenwick (1893) 1 QB 346
(3) Agency by Operation of Law
•
In certain instances agency will arise without the
parties expressly stating that such a relationship
has come into existence between them or indeed
that they desire such a relationship be created.
•
The following are the circumstances under which
the an agency relationship will be deemed to
have come into existence by operation of the law:
•
(a) Agency of necessity
•
(b) Agency by Cohabitation
•
(c ) Agency under Statutory Provisions
(a) Agency of Necessity
•
The law recognizes that in certain situations emergencies
arise which may necessitate a person to act promptly in
order to protect the interests of another by doing acts
which that other person may have done if he were himself
present.
•
In such circumstances, the law implies authority on the part
of a person to bind another by any act honestly done on his
behalf under the pressure of a real commercial necessity
even if the person acting in fact acts without the authority
or consent of the person on whose behalf he acts.
•
Agency is said to arise in such situations by implication of
the law. The agency that so arises is known as agency of
necessity.
•
A typical example of a situation when an agency
of necessity will arise is where a carrier of
perishable goods suffers a breakdown and
engages another transporter to carry the goods
to their destination or sells them off quickly at
the nearest available market to avoid the loss of
the consignment.
•
However, to constitute a valid agency of necessity
the following conditions must be satisfied:
•
(i) There must be a genuine or real commercial
emergency
•
Agency of necessity will only arise where there is an
emergency.
•
Where the circumstances are such as not to imply an
emergency, the law will not recognize the person
acting on behalf of another as being an agent of
necessity.
•
In
Great Northern Railway v. Swarfield (1874) LR 9
:
The Defendant consigned a horse with the Plaintiff, the
Great Northern Railway. When the horse reached the
destination, nobody came to take its delivery.
•
The Plaintiff had no arrangement of its own to keep the
animals. Therefore, it delivered the horse to a stable-
keeper for its maintenance and safe custody.
•
It was held that the Plaintiff was an agent of
necessity, and was entitled to recover charges of the
stable-keeper.
•
Similarly, in
Sims & Co. v. Midland Railway Company
(1913) 1 KB 103
: The defendant consigned certain
quantity of butter with the plaintiff, Midland Railway
Company. Due to the strike, the butter was delayed in
transit. The plaintiff sold the butter as it was of
perishable nature.
•
It was held that the sale was binding on the
owner the Defendant , and that the plaintiff
was an agent of necessity.
However, in
Prager v. Blastpiel, Stamp and
Heacock Ltd (1924) 1 KB 566
:
It was held that
there was no necessity and that the sellers had
not acted bona fide, and were not therefore
agents of necessity to resell the goods.
•
Couturier v. Hastie (1856) 5 HLC 673,
a
cargo of corn
was in transit being shipped from the Mediterranean
to England. The owner of the cargo sold the corn to a
buyer in London. The cargo had however, perished and
been disposed of before the contract was made. The
seller sought to enforce payment for the goods on the
grounds that the purchaser had attained title to the
goods and therefore bore the risk of the goods being
damaged, lost or stolen.
The court held that the contract was void because the
subject matter of the contract did not exist at the time
the contract was made.
•
(ii) It must have been impracticable to obtain
instructions from the principal or the agent must not
be in a position to communicate with the principal or
to obtain instructions.
•
It must be shown that the person who acted on behalf
of another could not obtain that other’s instructions
before acting because it was impracticable to or
commercially impossible to obtain instructions.
•
This requirement is however, getting more and more
watered down with the improvements in
communication.
•
Whereas before, the quickest means of
communication would have been the telex
machine where no phone facilities existed, the
world has in recent years witnessed phenomenon
increase in modes of communication such as fax
machine, cell phone, the internet, etc, which have
made communication easier and fast.
•
This in turn makes the satisfaction of this
requirement in proving agency of necessity less
easy.
•
In
Springer v. Great Western Railway (1921) 1 KB 257; 24 LT 79
:
The plaintiff instructed the defendant railway company to transport
tomatoes from the Channel Island to London, by ship to Weymouth
and by train to London. Owing to bad weather, the ship was
detained at Channel Island for three days. When the ship finally
arrived at Weymouth, the railway company’s employees were on
strike, and so offloading was delayed for two days. Worried that the
tomatoes would go bad, the railway company sold the tomatoes off
locally without communicating, as they could have done, with the
plaintiff. The plaintiff then brought the action claiming damages for
breach of the contract of carriage. The defendant sought to justify
their action of selling the tomatoes under the agency of necessity.
•
It was held that for there to be an agency of
necessity, it must have been practically
impossible for the ‘agent’ to obtain the owner’s
instructions as to what should be done. In the
circumstances of this case the defendant should
have communicated with the plaintiff when the
ship arrived at Weymouth, in order to get the
plaintiff’s instructions. There was no agency of
necessity in this case since communication was
not impossible.
•
See also
The Choko Star (1990) 1 Lloyd’s Rep. 516
•
(iii) The act must be done with the principal’s best
interest in mind.
•
The law does not encourage people to employ
themselves all in the name of agency of necessity and
thereby impose liabilities on other persons behind
their backs.
•
Therefore, it is a requirement that the agent must have
acted bona fide in the principal’s interests rather than
the agent’s own interests, and must have acted
reasonably in the circumstances. The best interests of
the principal will however not override the express
instructions given.
•
In
Fray v. Voules (1859) 120 ER 1125
: An attorney
was engaged to conduct a case on behalf of his
client . He reached a compromise on the advice
of counsel. The compromise was contrary to the
express instructions given by the client.
•
It was held that an attorney has no authority to
enter into a compromise against the directions
of the instructing client even if he is acting bona
fide in the interests of his client.
•
See also
Sachs v. Miklos (1948) 2 KB 23; Munro v.
Willmont (1949) 1 KB 295
(b) Agency by Cohabitation
•
A wife who lives or cohabits with her husband is regarded
has having authority of her husband to buy articles of
household necessity.
•
This means that the wife is considered an implied agent of
the husband for the purpose of buying household
necessaries on credit, and the husband becomes bound to
pay for the same.
•
In
Debenham v. Mellon (1880) 6 AC 24:
A man and his wife
were manager and manageress respectively of the hotel in
which they cohabited. The husband gave his wife an
allowance for clothes but expressly forbade her from
purchasing goods on his behalf as an agent. The wife
ordinarily purchased clothes from the plaintiff in her own
name.
•
On one occasion, however, she purchased clothes and
pledged her husband’s credit.
•
It was held that there was no agency in this case as the
husband had expressly forbidden it. No agency could be
implied from cohabitation either as the couple was not
cohabiting in a domestic situation. As the plaintiff well
knew, the couple lived in a hotel as manager and
manageress, not as a family. The husband was not
consequently liable for the debt incurred.
•
The presumption of cohabitation is rebuttable by the
husband showing that his wife is adequately supplied with
necessaries or that the goods supplied are not necessaries.
•
See
Phillipson v. Hayter (1870) LR 6 CP 38
c ) Agency under Statutory Provisions
•
Provisions of certain Acts of Parliament provide for the
existence of an agency relationship between parties.
•
(i)
Partnership Act, 1890
– section 5, provides that every
partner is an agent of the firm and his partners for
purposes of the business of partnership;
•
(ii)
The Income Tax Act
– section 84 provides that any
person or partnership may be declared by the
Commissioner General to be an agent for the payment of
tax due by another person or partnership.
•
(iii)
Bank of Zambia Act
– section 48 provides that the Bank
(BOZ) shall act as agent for the Government for such
purposes and on such terms and conditions as the Minister
may determine.
(4) Agency by Estoppel
•
An agency relationship may arise by operation of the
doctrine of estoppel where a person holds out another
as having authority to represent him.
•
The term ‘estoppel’ may be defined as prevention of a
claim or assertion by law. In other words, when
someone makes another person to believe that a
particular thing or fact is true, then later on he cannot
be allowed to deny the truth of that thing.
•
Therefore, when a person, by his conduct or statement,
willfully leads another person to believe that a certain
person is an agent, then he is estopped or prevented
from denying the truth of the agency.
(5) Ratification
•
The term ‘ratification’ may be defined as the confirmation
of the acts already done.
•
Ratification occurs where the agent does an act on behalf
of his principal without the principal’s prior authority and
the principal subsequently adopts the act done.
•
Ratification need not be expressly done; it may be inferred
from an act showing an intention to adopt the act
performed on behalf of another without that other’s prior
authority.
•
The acts of a person not appointed agent by another may
bind that other if he does an act that amounts to
ratification of those acts
.
•
See
Waithman v. Wakefield (1807) 170 ER 898
•
There are a number of conditions that must be
satisfied for there to be a valid ratification:
•
(i)
The principal must be in existence at the time
the act was done
.
See
Kelner v. Baxter (1866) LR
2 CP 174; Newborne v. Sensolid Ltd (1953) 1 QB
45
•
(ii)
The principal must be ascertainable or known.
See
Watson v. Swann (1862) 11 CB (NS) 756;
Keighley, Maxted & Co. v. Durant (1901) AC 240
•
(iii) The
principal must have had capacity to contract at
the time of the act. See
Grover v. Grover Ltd v.
Matthews (1910) 2 KB 401
•
(iv)
The act must be ratifiable. See
Williams v. Moor
(1843) 11 M & W 256; Brook v. Hook (1871) LR 6 Exch
89; Ashbury Railway carriage & Iron Co. v. Richie
(1875) LR 7HL 653
•
(v)
The ratification must be made within a reasonable
time. See
Grover v. Grover Ltd v. Matthews (1910) 2
KB 401
•
(vi)
The acts to be ratified should be valid and lawful
AUTHORITY OF AN AGENT
1.
ACTUAL AUTHORITY-
conferred on the agent by the principal
under the terms of the agreement or contract between them. If
the Principal has given prior consent to the agent before acting
on his behalf then the agent is said to have actual authority
(
Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd
2 QB 480).
2.
APPARENT OR OSTENSIBLE AUTHORITY-
legal relationship
between the principal and the third party created by
representation, made by the principal to the third party, intended
to be and in fact acted upon by the third party, that the agent has
authority to enter on behalf of the principal into a contract of a
kind within the scope of their apparent authority, so as to render
the principal liable to perform any obligations imposed upon him
by such contract
(Freeman case above).
•
USUAL AUTHORITY – the principal is liable for
all acts of the agent which are within the
authority usually confided to an agent of that
character, notwithstanding limitations, as
between the principal and the agent put upon
that authority (
Watteau v Watteau [1893] 1
QB 346
)
AGENT’S RELATIONSHIP WITH THIRD
PARTIES: GENERAL
•
The general rule is that where an agent makes
a contract on behalf of his principal, the
contract is between the principal and the third
party and only the principal can sue on that
contract.
•
The agent acquires no rights under the
contract, nor does he incur any obligation.
•
He drops out of the picture having performed
the task asked of him by his principal.
DISCLOSED AND UNDISCLOSED
AGENCY
•
The rights and liabilities of the principal and agent
against third parties may differ according to whether
the agency is disclosed or undisclosed.
•
Agency is disclosed where the agent reveals that he is
acting as an agent – if the agency is disclosed it is of no
legal significance that the principal is named.
•
The distinction between disclosed and undisclosed
agent is important as it affects the principal’s ability to
ratify the agent’s actions.
•
Furthermore, the agent’s liability to third parties may
depend on whether the agency was disclosed or not.
DISCLOSED AGENCY
•
Where an agent makes a contract disclosing the
agency, the normal rule is that a direct contractual
relationship is created between the principal and the
third party and either party can sue the other on the
contract.
•
If an agent acts without the principal’s actual authority,
the principal can ratify the agent’s actions provided
that the agent purported to act on the principal’s
behalf.
•
Only a disclosed principal can ratify an unauthorized
contract (
Keighley, Maxted and Co v Durant (1901) AC
240)
UNDISCLOSED AGENCY AND THE
THIRD PARTY’S RIGHT OF ELECTION
•
If the agent contracts with a third party without disclosing
that he is acting as an agent, the agency is undisclosed.
•
The contract is initially between the agent and the third
party and each may enforce the contract against the other.
•
However, if the third party discovers the principal’s
existence, he may enforce the contract either against the
agent or the principal
BUT NOT
both (
RIGHT OF ELECTION-
Boyter v Thomson (1995) 3 All ER 135
).
•
The agent still remains liable even when the third party
discovers the existence of an undisclosed principal.
•
Moreover, provided that the agent acted with his authority,
the principal can intervene and enforce the contract against
the third party.
Duties of an Agent
•
(i)
Duty to obey or follow instructions of the principal
.
See
Ireland v. Livingstone (1872) 27 LT 79
•
(ii)
Duty to show proper skill and care. See
Keppel v.
Wheeler (1927) 136 LT 203; Armstrong v. Jackson
(1916 -17) ER 1117
•
(iii)
Duty not to make secret profits from agency
.
See
Anderson v. Ramsay & Co. (1903) 2 KB 635
•
(iv)
Duty not to delegate
.
Delegatus non potest
delegare
See
De Bussche v. Alt (1878) LT 370; Calico
Printers v. Barclays Bank (1931) 145 LT 51
•
(v)
Duty not to disclose confidential information.
Lamb
v. Evans (1893) 68 LT 131
Rights of an Agent
•
(i)Right to receive remuneration. See
Way v.
Latilla (1937) 3 All ER 759
•
(ii)Right to be Indemnified
•
(iii) Right to set-off
•
(iv) Right of Lien.
TERMINATION OF AGENCY
1.
Notice
2.
Completion of Assignment
3.
Mutual Agreement
4.
Lunacy, Death or Bankruptcy
5.
Illegality
6.
Dissolution (where principal and/or agent are
corporations)
7.
Destruction of Subject-matter
8.
Expiration of Time/ Elapse of Time
THANK YOU
The Law of Agency governs relationships involving principals, agents, and third parties. It highlights essential features for a valid agency, emphasizing the agreement between parties, representative capacity of the agent, and the competence of the principal. Learn about the Latin maxim "Qui Facit Per Alium Facit Per Se" and exceptions to the common law position regarding agency relationships.
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Presentation Transcript
AGENCY BY MRS C M SIMBOTWE
LAW OF AGENCY The common law position is that he who can act for himself may also act through an agent and this is summed up in the Latin maxim QUI FACIT PER ALIUM FACIT PER SE. However, there are two exceptions to this position: 1. Where personal performance is required; and 2. Where the parties involved expressly or by necessary implication prohibit delegation.
Definition of Agency An agency relationship involves three very specific parties namely: (i) Principal (ii) Agent (iii) Third Party The Principal is the person on whose behalf the contract is made. It is a person on whose behalf the agent acts. The Third Party is the party with whom the agent contracts on behalf of the principal and who as a result of the very special rules enjoys a series of mutual rights and obligations with the principal, but there is no contractual relationship with the agent.
Definition of Agency In law the word agent is used to refer to a person who has legal authority to bind another by entering into contract with a third person on that other s behalf. An agent is a person employed to do any act for another, or to represent another in dealing with third parties or persons. The important feature of the relationship is that the agent has power to bind his principal to a contractual relationship with a third party without the agent himself becoming a party to the contract.
Essential and Legal Rules for a Valid Agency The essential features for a valid agency are as follows: (1) There should be an agreement between the principal and the agent. According to this element, the agency must be created by an agreement between the principal and agent. Therefore there must be an agreement by which a person is appointed as an agent by the other. The agreement may be express (that is, by words of mouth or in writing), or implied (that is, it may arise by the conduct of the circumstances of the cases). parties, by necessity or
(2) The agent must act in the representative capacity. The agent must represent his principal and act on his behalf. Moreover, the agent must have the power to create legal relationship of his principal with third parties. Therefore, the true nature of the relationship should be seen. If the agent acts in representative capacity and had the power to bind his principal with third parties, the relationship is that of agency .
3) The principal must be competent to contract. The principal must be competent or have capacity to enter into a valid contract, that is, he must of sound mind, and have attained the age of majority. Therefore, a minor or a person of unsound mind (insane) cannot appoint an agent to act on his behalf. An appointment of an agent, made by an incompetent person is void.
(4) The agent need not be competent to contract or have capacity to contract. As a general rule there is no requirement that an agent must have full contractual capacity when he acts on behalf of the principal. This is because the contract is that of the principal, and not the agent. The principal must, however, have contractual capacity at the time the contract in question is entered into.
It is therefore legally possible for a minor to act on behalf of an adult principal in bringing about a binding contractual relationship with a third party who has contractual capacity. However, the agency contract between the principal and agent will not be binding on the agent because of the agent s minority. For the same reasons the law denies minors from entering into contractual relations of any kind, minors are generally not engaged as agents for persons with full contractual relations.
Classification of Agents 1. GENERAL AGENTS- appointed to perform some task in a general area. He has authority to enter into any contract on behalf of his principal are normally within the scope of the trade, business or profession in which the agent is employed. 2. UNIVERSAL AGENTS- has unlimited authority to enter into any contract for which his principal has contractual capacity. 3. SPECIAL AGENTS- engaged to undertake or perform a particular task or special function only.
Creation of Agency The relationship of PRINCIPAL and AGENT may be created in any of the following ways: 1. By EXPRESS agreement. 2. By IMPLIED agreement. 3. By Operation of the LAW, that is,.. a. Agency of Necessity b. Agency by Ratification c. Agency by Estoppel d. Agency Under Statutory Provisions
(1) Agency by Express Agreement An agency may be created by express agreement. In this case, an agent is appointed by an agreement in writing or by words of mouth. It may, however, be noted that no particular form or set of words is required for the appointment of an agent.
(2) Agency by Implied Agreement An agency may also be created by an implied agreement. In this case, a person becomes an agent of the other due to the conduct of the parties or the course of dealing between the parties or the situation of the particular case, for example, when one person places another in such a situation in which the other person is understood to represent or act on his behalf, he becomes an implied agent.
In Hely-Hutchinson v. Brayhead Ltd [1967] 3 All ER 98: The directors of a company allowed the chairman to act as though he was in fact the Managing Director, although he had never been appointed to that role and so had no express authority to bind the company. The company was held to be bound by transactions entered into by the Chairman as a result. Similarly, in Mullens v. Miller (1882) 2 Ch D 194: An estate agent was held to have implied authority to give details and make warranties in respect of properties that he was selling. See also Watteau v. Fenwick (1893) 1 QB 346
(3) Agency by Operation of Law In certain instances agency will arise without the parties expressly stating that such a relationship has come into existence between them or indeed that they desire such a relationship be created. The following are the circumstances under which the an agency relationship will be deemed to have come into existence by operation of the law: (a) Agency of necessity (b) Agency by Cohabitation (c ) Agency under Statutory Provisions
(a) Agency of Necessity The law recognizes that in certain situations emergencies arise which may necessitate a person to act promptly in order to protect the interests of another by doing acts which that other person may have done if he were himself present. In such circumstances, the law implies authority on the part of a person to bind another by any act honestly done on his behalf under the pressure of a real commercial necessity even if the person acting in fact acts without the authority or consent of the person on whose behalf he acts. Agency is said to arise in such situations by implication of the law. The agency that so arises is known as agency of necessity.
A typical example of a situation when an agency of necessity will arise is where a carrier of perishable goods suffers a breakdown and engages another transporter to carry the goods to their destination or sells them off quickly at the nearest available market to avoid the loss of the consignment. However, to constitute a valid agency of necessity the following conditions must be satisfied:
(i) There must be a genuine or real commercial emergency Agency of necessity will only arise where there is an emergency. Where the circumstances are such as not to imply an emergency, the law will not recognize the person acting on behalf of another as being an agent of necessity. In Great Northern Railway v. Swarfield (1874) LR 9: The Defendant consigned a horse with the Plaintiff, the Great Northern Railway. When the horse reached the destination, nobody came to take its delivery.
The Plaintiff had no arrangement of its own to keep the animals. Therefore, it delivered the horse to a stable- keeper for its maintenance and safe custody. It was held that the Plaintiff was an agent of necessity, and was entitled to recover charges of the stable-keeper. Similarly, in Sims & Co. v. Midland Railway Company (1913) 1 KB 103: The defendant consigned certain quantity of butter with the plaintiff, Midland Railway Company. Due to the strike, the butter was delayed in transit. The plaintiff sold the butter as it was of perishable nature.
It was held that the sale was binding on the owner the Defendant , and that the plaintiff was an agent of necessity. However, in Prager v. Blastpiel, Stamp and Heacock Ltd (1924) 1 KB 566: there was no necessity and that the sellers had not acted bona fide, and were not therefore agents of necessity to resell the goods. It was held that
Couturier v. Hastie (1856) 5 HLC 673, a cargo of corn was in transit being shipped from the Mediterranean to England. The owner of the cargo sold the corn to a buyer in London. The cargo had however, perished and been disposed of before the contract was made. The seller sought to enforce payment for the goods on the grounds that the purchaser had attained title to the goods and therefore bore the risk of the goods being damaged, lost The court held that the contract was void because the subject matter of the contract did not exist at the time the contract was made. or stolen.
(ii) It must have been impracticable to obtain instructions from the principal or the agent must not be in a position to communicate with the principal or to obtain instructions. It must be shown that the person who acted on behalf of another could not obtain that other s instructions before acting because it was impracticable to or commercially impossible to obtain instructions. This requirement is however, getting more and more watered down with communication. the improvements in
Whereas communication would have been the telex machine where no phone facilities existed, the world has in recent years witnessed phenomenon increase in modes of communication such as fax machine, cell phone, the internet, etc, which have made communication easier and fast. This in turn makes the satisfaction of this requirement in proving agency of necessity less easy. before, the quickest means of
In Springer v. Great Western Railway (1921) 1 KB 257; 24 LT 79: The plaintiff instructed the defendant railway company to transport tomatoes from the Channel Island to London, by ship to Weymouth and by train to London. Owing to bad weather, the ship was detained at Channel Island for three days. When the ship finally arrived at Weymouth, the railway company s employees were on strike, and so offloading was delayed for two days. Worried that the tomatoes would go bad, the railway company sold the tomatoes off locally without communicating, as they could have done, with the plaintiff. The plaintiff then brought the action claiming damages for breach of the contract of carriage. The defendant sought to justify their action of selling the tomatoes under the agency of necessity.
It was held that for there to be an agency of necessity, it must impossible for the agent to obtain the owner s instructions as to what should be done. In the circumstances of this case the defendant should have communicated with the plaintiff when the ship arrived at Weymouth, in order to get the plaintiff s instructions. There was no agency of necessity in this case since communication was not impossible. See also The Choko Star (1990) 1 Lloyd s Rep. 516 have been practically
(iii) The act must be done with the principals best interest in mind. The law does not encourage people to employ themselves all in the name of agency of necessity and thereby impose liabilities on other persons behind their backs. Therefore, it is a requirement that the agent must have acted bona fide in the principal s interests rather than the agent s own interests, and must have acted reasonably in the circumstances. The best interests of the principal will however not override the express instructions given.
In Fray v. Voules (1859) 120 ER 1125: An attorney was engaged to conduct a case on behalf of his client . He reached a compromise on the advice of counsel. The compromise was contrary to the express instructions given by the client. It was held that an attorney has no authority to enter into a compromise against the directions of the instructing client even if he is acting bona fide in the interests of his client. See also Sachs v. Miklos (1948) 2 KB 23; Munro v. Willmont (1949) 1 KB 295
(b) Agency by Cohabitation A wife who lives or cohabits with her husband is regarded has having authority of her husband to buy articles of household necessity. This means that the wife is considered an implied agent of the husband for the purpose of buying household necessaries on credit, and the husband becomes bound to pay for the same. In Debenham v. Mellon (1880) 6 AC 24: A man and his wife were manager and manageress respectively of the hotel in which they cohabited. The husband gave his wife an allowance for clothes but expressly forbade her from purchasing goods on his behalf as an agent. The wife ordinarily purchased clothes from the plaintiff in her own name.
On one occasion, however, she purchased clothes and pledged her husband s credit. It was held that there was no agency in this case as the husband had expressly forbidden it. No agency could be implied from cohabitation either as the couple was not cohabiting in a domestic situation. As the plaintiff well knew, the couple lived in a hotel as manager and manageress, not as a family. The husband was not consequently liable for the debt incurred. The presumption of cohabitation is rebuttable by the husband showing that his wife is adequately supplied with necessaries or that the goods supplied are not necessaries. See Phillipson v. Hayter (1870) LR 6 CP 38
c ) Agency under Statutory Provisions Provisions of certain Acts of Parliament provide for the existence of an agency relationship between parties. (i) Partnership Act, 1890 section 5, provides that every partner is an agent of the firm and his partners for purposes of the business of partnership; (ii) The Income Tax Act section 84 provides that any person or partnership may Commissioner General to be an agent for the payment of tax due by another person or partnership. (iii) Bank of Zambia Act section 48 provides that the Bank (BOZ) shall act as agent for the Government for such purposes and on such terms and conditions as the Minister may determine. be declared by the
(4) Agency by Estoppel An agency relationship may arise by operation of the doctrine of estoppel where a person holds out another as having authority to represent him. The term estoppel may be defined as prevention of a claim or assertion by law. In other words, when someone makes another person to believe that a particular thing or fact is true, then later on he cannot be allowed to deny the truth of that thing. Therefore, when a person, by his conduct or statement, willfully leads another person to believe that a certain person is an agent, then he is estopped or prevented from denying the truth of the agency.
(5) Ratification The term ratification may be defined as the confirmation of the acts already done. Ratification occurs where the agent does an act on behalf of his principal without the principal s prior authority and the principal subsequently adopts the act done. Ratification need not be expressly done; it may be inferred from an act showing an intention to adopt the act performed on behalf of another without that other s prior authority. The acts of a person not appointed agent by another may bind that other if he does an act that amounts to ratification of those acts. See Waithman v. Wakefield (1807) 170 ER 898
There are a number of conditions that must be satisfied for there to be a valid ratification: (i) The principal must be in existence at the time the act was done. See Kelner v. Baxter (1866) LR 2 CP 174; Newborne v. Sensolid Ltd (1953) 1 QB 45 (ii) The principal must be ascertainable or known. See Watson v. Swann (1862) 11 CB (NS) 756; Keighley, Maxted & Co. v. Durant (1901) AC 240
(iii) The principal must have had capacity to contract at the time of the act. See Grover v. Grover Ltd v. Matthews (1910) 2 KB 401 (iv) The act must be ratifiable. See Williams v. Moor (1843) 11 M & W 256; Brook v. Hook (1871) LR 6 Exch 89; Ashbury Railway carriage & Iron Co. v. Richie (1875) LR 7HL 653 (v) The ratification must be made within a reasonable time. See Grover v. Grover Ltd v. Matthews (1910) 2 KB 401 (vi) The acts to be ratified should be valid and lawful
AUTHORITY OF AN AGENT 1. ACTUAL AUTHORITY- conferred on the agent by the principal under the terms of the agreement or contract between them. If the Principal has given prior consent to the agent before acting on his behalf then the agent is said to have actual authority (Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd 2 QB 480). APPARENT OR OSTENSIBLE AUTHORITY- legal relationship between the principal and the third party created by representation, made by the principal to the third party, intended to be and in fact acted upon by the third party, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of their apparent authority, so as to render the principal liable to perform any obligations imposed upon him by such contract (Freeman case above). 2.
USUAL AUTHORITY the principal is liable for all acts of the agent which are within the authority usually confided to an agent of that character, notwithstanding limitations, as between the principal and the agent put upon that authority (Watteau v Watteau [1893] 1 QB 346)
AGENTS RELATIONSHIP WITH THIRD PARTIES: GENERAL The general rule is that where an agent makes a contract on behalf of his principal, the contract is between the principal and the third party and only the principal can sue on that contract. The agent acquires no rights under the contract, nor does he incur any obligation. He drops out of the picture having performed the task asked of him by his principal.
DISCLOSED AND UNDISCLOSED AGENCY The rights and liabilities of the principal and agent against third parties may differ according to whether the agency is disclosed or undisclosed. Agency is disclosed where the agent reveals that he is acting as an agent if the agency is disclosed it is of no legal significance that the principal is named. The distinction between disclosed and undisclosed agent is important as it affects the principal s ability to ratify the agent s actions. Furthermore, the agent s liability to third parties may depend on whether the agency was disclosed or not.
DISCLOSED AGENCY Where an agent makes a contract disclosing the agency, the normal rule is that a direct contractual relationship is created between the principal and the third party and either party can sue the other on the contract. If an agent acts without the principal s actual authority, the principal can ratify the agent s actions provided that the agent purported to act on the principal s behalf. Only a disclosed principal can ratify an unauthorized contract (Keighley, Maxted and Co v Durant (1901) AC 240)
UNDISCLOSED AGENCY AND THE THIRD PARTY S RIGHT OF ELECTION If the agent contracts with a third party without disclosing that he is acting as an agent, the agency is undisclosed. The contract is initially between the agent and the third party and each may enforce the contract against the other. However, if the third party discovers the principal s existence, he may enforce the contract either against the agent or the principal BUT NOT both (RIGHT OF ELECTION- Boyter v Thomson (1995) 3 All ER 135). The agent still remains liable even when the third party discovers the existence of an undisclosed principal. Moreover, provided that the agent acted with his authority, the principal can intervene and enforce the contract against the third party.
Duties of an Agent (i) Duty to obey or follow instructions of the principal. See Ireland v. Livingstone (1872) 27 LT 79 (ii) Duty to show proper skill and care. See Keppel v. Wheeler (1927) 136 LT 203; Armstrong v. Jackson (1916 -17) ER 1117 (iii) Duty not to make secret profits from agency. See Anderson v. Ramsay & Co. (1903) 2 KB 635 (iv) Duty not to delegate. Delegatus non potest delegare See De Bussche v. Alt (1878) LT 370; Calico Printers v. Barclays Bank (1931) 145 LT 51 (v) Duty not to disclose confidential information. Lamb v. Evans (1893) 68 LT 131
Rights of an Agent (i)Right to receive remuneration. See Way v. Latilla (1937) 3 All ER 759 (ii)Right to be Indemnified (iii) Right to set-off (iv) Right of Lien.
TERMINATION OF AGENCY 1. Notice 2. Completion of Assignment 3. Mutual Agreement 4. Lunacy, Death or Bankruptcy 5. Illegality 6. Dissolution (where principal and/or agent are corporations) 7. Destruction of Subject-matter 8. Expiration of Time/ Elapse of Time
