AGENCY Flashcards
(18 cards)
What is the definition of agency?
Agency is a contract in terms of which one person (the agent) is authorised and usually required by another (the principal) to contract or to negotiate a contract on the latter’s behalf with a third person.
What creates obligations between the principal and the agent in an agency relationship?
The agency contract.
What is the role of the agent in the agency relationship?
The agent concludes another contract with a third party.
What are the implied duties of the agent?
- To perform the mandate
- To be honest and show good faith
- No secret profits
- No conflict of interests
- No delegation of authority
- No disclosure of information
- To exercise due care
- To act in accordance with the principal’s instructions
- To allow inspection of books and to render an account to the principal.
What are the implied duties of the principal?
- To pay the agent the agreed remuneration if the mandate is substantially performed
- To reimburse the agent for expenses properly incurred
- To indemnify the agent for all losses suffered as a result of executing the mandate.
What are the requirements for a person to act as an agent?
- The principal must be in existence
- The principal must have contractual capacity
- The agent must have at least limited contractual capacity
- The agent must have authority to perform
- The agent must make it clear to the third party that they act for a principal.
What are the commercial advantages of empowered agents?
- Do not need to enter a contract personally
- May authorise a representative
- Necessary for commercial juristic entities to function.
What legal issue arises if an agent acts without authority?
The agent cannot bind the principal and might be personally liable.
What is the essence of authority in the context of agency?
If the agent acted with authority, the contract is between the principal and the third party, not the agent and the third party.
What are the five ways for an agent to be authorized?
- Express authority
- Implied authority
- Ratification
- Ostensible authority/apparent authority
- Authorisation by operation of law.
What is express authority?
Principal expressly authorises the agent, verbally or in writing.
What is implied authority?
Authority can be implied by the circumstances surrounding the agency.
What is ratification in agency?
When the principal elects to ratify the agent’s action after the fact.
What is ostensible authority?
When the principal creates the impression that the agent has authority, binding the principal to the contract.
What are the requirements for a third party to rely on ostensible authority?
- Representation made by words or conduct
- Representation made or permitted by the principal
- Representation made to the contracting third party
- It could reasonably be expected to mislead the third party.
What happens if an agent exceeds their mandate?
The agent could be liable based on warranty of authority.
What are the ways an agent’s authority can be terminated?
- Mutual consent of the principal and agent
- Revocation by the principal
- Renunciation by the agent
- Due performance of respective obligations
- Expiry of the period of time for which the authority was granted
- Death of either the principal or agent
- Insanity of the principal
- Insolvency of the principal.
True or False: An agent must disclose the principal’s name to the third party.
False.
