Agency Law

Question 1

What is an agency relationship?

Answer 1

A successful business owner is likely have workers who, on their behalf, deal with third parties such as suppliers, customers, other employees and other businesses.

Question 2

What is an agent?

Answer 2

Someone who acts on behalf of another in dealing with third parties. May be an individual or corporation.

Question 3

What is the principal in agency law?

Answer 3

The person the agent is acting for. May be an individual or corporation.

Question 4

What are some examples of agents?

Answer 4

• Employees.
• Auctioneers.
• Solicitors.
• Real estate agents.
• Stockbrokers.

Question 5

What are the five main types of agents?

Answer 5

• Universal agent.
• General agent.
• Special agent.
• Mercantile agent.
• Del Credere agent.

Question 6

What is a universal agent?

Answer 6

Has unrestricted authority to act on behalf of the principal and can do almost anything in the principal’s name that the principal could do themselves.

Question 7

What is a general agent?

Answer 7

Has broad but not unrestricted authority to act on behalf of the principal.

Question 8

What is a special agent?

Answer 8

Has limited authority to act on behalf of the principal, often in relation to a single transaction.

Question 9

What is a mercantile agent?

Answer 9

An agent appointed to sell the property of the principal.

Question 10

What are the two types of mercantile agents?

Answer 10

• Factor (when the agent is given possession of the principal’s property).
• Broker (when the agent does not have possession of the principal’s property).

Question 11

What is a Del Credere agent?

Answer 11

Has agreed to indemnify the principal in the event of non-performance by the third party.

Question 12

What are the five main ways in which an agent can be authorised to act on behalf of a principal?

Answer 12

• Express Actual Authority
• Implied Actual Authority
• Apparent Authority
• Agency Of Necessity
• Authority By Ratification

Question 13

What is express actual authority?

Answer 13

The principal can expressly authorise the agent, in writing or verbally, to act on the principal’s behalf. The authorisation should state:
- The duration of the agent’s appointment.
- The precise scope of the agent’s authority.
- The agent’s entitlement to any commission or payment.

Question 14

What is implied actual authority?

Answer 14

The principal can authorise the agent to act on the principal’s behalf by implication. This occurs by either instructing the agent to carry out a particular task on the principal’s behalf, or appointing the agent to a particular position where it is obvious that the agent will be required to enter into a contract with a third party on the principal’s behalf.

Question 15

What is a grant of implied authority?

Answer 15

When an agent is expressly authorised to act on behalf of a principal to do all things incidental to carrying out the main task.

Question 16

What is apparent authority?

Answer 16

The principal allows the third party to believe that the agent has authority to act on the principal’s behalf.

Question 17

What are the three requirements for an agent to have apparent authority?

Answer 17

1. The third party did not know that the agent did not have actual authority.
2. The principal ‘held out’ the agent as having authority to act on the principal’s behalf.
3. The third party relied upon that holding out, and reasonably assumed that the agent had actual authority.

Question 18

What happens if the agent has apparent authority to act on behalf of the principal?

Answer 18

• The principal will be legally bound by the actions of the agent,
• even if the principal expressly told the agent that the agent was not to enter into such a contract or act in that manner on the principal’s behalf.

Question 19

What is agency of necessity?

Answer 19

The principal may not have actually authorised the agent to act on their behalf but the agent will nevertheless have authority if the agent has to deal with the third party on behalf of the principal or deal with the property of the principal in order to protect the interests or property of the principal.

Question 20

What four requirements are required for an agency of necessity?

Answer 20

1. The agent has possession or control of property belonging to the principal.
2. The property of the principal is under threat.
3. The agent cannot contact the principal to get express instructions.
4. The agent acts in good faith to protect the property of the principal.

Question 21

What is authority by ratification?

Answer 21

Even if an agent acts without actual or apparent authority it is still possible for the principle, upon later learning of the agents action, to consent to that action by authorising it retrospectively.

Question 22

What are the seven duties of an agent?

Answer 22

1. Duty to follow instructions.
2. Duty to communicate information.
3. Duty to act personally.
4. Duty of care.
5. Duty to act in the best interests of the principal.
6. Duty of confidentiality.
7. Duty to account.

Question 23

What is a remuneration?

Answer 23

A payment by the principal to the agent for the time and effort expended by the agent in carrying out the principal’s instructions.
An agent has no inherent right to remuneration unless the principal and agent have agreed that the agent should be paid.

Question 24

What are the four types of agencies in terms of real estate agents?

Answer 24

1. Exclusive agency.
2. Sole agency.
3. Open agency.
4. Multiple listing.

Question 25

What is an exclusive agency in real estate?

Answer 25

The real estate agent has the exclusive right to sell the property.

Question 26

What is a sole agency in real estate?

Answer 26

Similar to an exclusive agency however if the client finds a buyer themselves no commission is payable to the agent.

Question 27

What is an open agency in real estate?

Answer 27

When the property is listed with a number of different agents.

Question 28

What is a multiple listing in real estate?

Answer 28

The agent appointed by the client is a member of a network of different agents who work together to try to sell the property.

Question 29

What is indemnity?

Answer 29

All agents are entitled to be reimbursed for payments made, expenses incurred and liabilities assumed while carrying out the principal's instructions.

Question 30

What is a lien?

Answer 30

If the principal owes money to the agents (either remuneration or indemnity) and refuses to pay the amount owing, the agent is entitled to a lien over any property of the principal in the agent's possession.

Question 31

What are the three circumstances where the agent may be personally liable to the third party?

Answer 31

1. Intentional liability 2. Undisclosed liability 3. Breach of warranty of authority

Question 32

What is intentional liability?

Answer 32

An agent will be personally liable if the circumstances show that the parties intended that the agent be personally liable.

Question 33

What is an undisclosed principal?

Answer 33

If the agent did not tell the third party they were acting as an agent.

Question 34

What is breach of warranty of authority?

Answer 34

The agent will be personally liable if they represent themselves as having authority to act on behalf of the principal and they do not in fact have any such authority. An agent may also be liable to the third party in the torts of deceit or negligence.

Question 35

What are the three requirements for an agent to be liable to the third party for breach of warranty of authority?

Answer 35

1. The agent claimed they were making the contract on behalf of the principal. 2. The agent did not in fact have authority to act on behalf of the principal. 3. The third party relied upon the agent's representation, and would not have entered into the contract in the absence of the representation.

Question 36

What is vicarious liability of the principal?

Answer 36

The principal will be personally liable under any contracts created on behalf by an agent acting within the scope of their authority.

Question 37

When and when not will the principal be held vicariously liable for torts or crimes committed by their agent?

Answer 37

- If the agent is an independent contractor and not subject to direct control by the principal, the principal is unlikely to be held liable for the agent's actions. - If the agent is an employee of the principal, the principal is more likely to be held vicariously liable for the agent's torts and crimes.

Question 38

When is the agency concluded?

Answer 38

- The agent completes the tasks they were appointed by the principal to complete. - The duration of the appointment established by the principal expires. - The principal and the agent agree to terminate the relationship. - The principal dismisses the agent because they have breached the contract between them or breached any of the duties owed by the agent to the principal. - The principal revokes or limits the authority of the agent to act on their behalf.