Agency Flashcards
(23 cards)
The Law of Agency
A typical agency transaction involves 3 persons:
1. The Principal (e.g. shop owner)
2. The Agent (e.g. shop employee)
3. The 3rd Party (e.g. customer)
An agency appointment can arise in 5 ways
- By agreement: EXPRESS authority
- By conduct: IMPLIED authority (no exclusive agreement but agency is expected on behalf of the principal)
- By Operation of law: Agency of NECESSITY
- Arising due to estoppel: APPARENT authority
- Ratification: authority is only granted subsequently
Describe Express (actual) authority
where an agency agreement (written or verbal) states the authority of the agent
Describe Implied authority
Where the law has deemed authority to be bestowed by the principal upon the agent as a result of dealings, circumstances, relationship or conduct
i.e. the agent is expected to act on behalf of the principal
Describe Usual/Customary authority
The agent represents the principal when necessary for effective performance of his duties
- Authority is derived from established practices or norms in the organisation or industry
Apparent / Ostensible authority
The principal becomes legally responsible for the actions of the agent who has authority, even if it is limited
- Happens through estoppel (the principal is estopped from denying an agency relationship where his words or conduct previously indicated it did)
Conditions for Apparent authority
Conditions:
- Representation was made by the principal that the agent has authority to enter the contract
- Reliance on that representation: the 3rd party must have relied on the representation that the agent had authority to enter into the contract
Agency of Necessity
- Agent is allowed authority where the principal is unable to grant permission
- The agent’s actions must be performed in the principal’s interests
- The agent’s actions must be reasonable + prudent
Implied Authority case - Hely-Hutchinson v Brayhead Ltd
Facts:
- Chairman of Brayhead acted as the company’s managing director with the Board’s approval
- He indemnified the 3rd party (Hely-Hutchinson) (acted as a guarantor of another company)
- When the other company went into liquidation, Brayhead refused to provide the guarantees
Held: Although the chairman had no express authority, as the board approved of him acting as the managing director, he had implied authority, therefore Brayhead had to prove the guarantee.
Apparent authority case - Freeman & Lockyer v Bursthurst Park (Mangal) Properties Ltd
Facts:
- ONe director of Bursthurst undertook dail activities while the other director spent most of his time abroad
- The director decided to develop land and engaged an architectural firm, Freeman & Lockyer, to apply for planning permission
- Bursthurst later refused to pay the on grounds that the director did not have the authority to act on their behalf
Held: Conditions of implied authority were met; appointing a director means he would be able to enter into contracts that someone in the same position would be able to + the claimants relied on that representation. Therefore, Buckfurst had to pay Freeman & Lockyer because the director had apparent authority to act on the company’s behalf.
Agency of necessity case - The Winson
Facts:
- On a voyage, a bulk carrier of wheat got stranded
- Luckily, the cargo was salvaged and on arrival the salvors arranged storage for the wheat.
- The salvors wanted to recover costs of recovery and storage from the cargo owners
Held: The storage was both reasonable and necessary for the preservation of the cargo so the salvors had to be paid.
Describe Ratification
- Approving authority AFTER the agent has acted
- Effective ratification is equivalent to giving the authority to act b4, therefore it is still valid from the beginning
Ratification case - Koenigsblatt v Sweet
Facts: The vendor’s solicitor altered a contract after the vendor had signed it to correspond to the copy signed by the purchaser
Held: The vendors later approved the changes, effectively ratifying them and making the alterations valid + binding as if they were present from the beginning
Breach of Warranty of Authoriuty
- When the agent acts outside of their granted scope of authority
- Does not need to happen on purpose, may occur accidentally
Breach of warranty of authority case - Yonge v Toynbee
Facts:
- Toynbee retained solicitors to defend him in a libel action (a legal claim of publishing a false or defamatory statement)
- He was later certified of being insane but the solicitors (agent) were not aware and continued to act for him
Held: The principal’s certification of insanity terminated their authority, therefore the solicitors were personally liable for the costs incurred.
i.e. the authority to act on behalf of Toynbee ceased when he became mentally incapacitated, even without their knowledge.
Name the Agent’s duties
Competence:
- To obey instruction ( not obliged to carry out an illegal or void act)
- Of care and skill (judged objectively)
- O personal performance (unless authorised to delegate)
Good Faith:
- Fiduciary duties:
- to avoid any conflict of interest
- not to make a secret profit
- not to take a bribe
- to account
- to disclose to principal and maintain confidentiality towards outsiders
Duty to obey instruction case - Turpin v Bilton
Facts:
- Bilton (agent) was instructed by Turpin (principal) to insure the ship against the perils of the sea
- Bilton did not obtain insurance and the uninsured ship as lost at sea following a storn
- Turpin sued for damages
Held: Bilton was in breach of contract as he failed to obey instructions and ordered to pay damages
Duty of care + skill case - Chaudhry v Prabakhar
Facts:
- Chaudhry sought investment advice from his friend Prabakhar who is a expert surveyor
- He acted on the advice and made an investment only to suffer losses later on
- He made a negligence claim on Prbakhar claiming he breached duty of care
Held: Despite the absence of a formal relationship, Prabakhar owed Chaudhry duty of care due to his expertise and Chaudhry’s reliance on his advice created a reasonable expectation of care.
Fiduciary duties case - Boardman v Phipps
Facts:
- Members of a family’s trust held shares in a private company
- The trust’s sollicitor (Boardman) and another beneficiary of the trust sought to purchase a controlling interest in the company to reorganise it for the benefit of the trust
- ANother beneficiary of the trust (Phipps) claimed that they profited from their fiduciary position without proper accountability
Held: The solicitor and the beneficiary were liable to account for the profits they mad even though they acted in good faith without any intent to defraud the trust.
Name the Rights of an Agent
- To indemnity: security against legal liability for ones actions
- To be paid
- Right of Lien: The agent has the right to lien on the principal’s goods (hold on to assets of the principal) to be discharged upon payment and or indemnity
Name the liabilities of an agent
- Liability to the principal
- Liability to 3rd party
Liability to 3rd party case - Said v Butt
Facts:
- Said employed soeone as his agent to buy a ticket for him without disclosing his name
- He was then refused entry at the performance
- He submitted a claim or breach against the managing director (Butt)
Held: A director cannot be legally liable for inducing a company’s breach of contract unless he is acting in bad faith or outside the director’s scope of durty; here, Butt is acting in good faith, therefore there is no breach of contract.
Name methods to terminate agency
- UNder agreement
- By breach
- By performacne
- By operation of law (death, insolvency, insanity, supervening illegality or frustration)
- By revocation
