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What is the contract of agency?


The relationship between principal and agent is governed by a contract of agency. It may be an express contract, which may be entered into either in writing or orally.
There is no requirement that the contract be a written one. [ S1 of the RWSA 1995)


How else may a contract of agency arise?


Agency may also arise as an implied contract, the actings of principal and agent being used as a basis from which to infer the existence of the consent necessary on both sides to form the contract of agency.

In certain circumstances, ratification may operate in order to create an agency relationship

Agency relationship arises by way of an express contract, implied contract and by ratification and (possibly) by this concept of ad hoc agency (question on whether this is a means to create an agency relationship).


What is an implied contract?


Actions by which the agent and the principle are enough to show that X has been appointed as Y’s agent.


What is an express contract?




What is ad hoc agency?


A Scottish judge (L Drummond Young) decided three cases in the Outer House in a ‘creative way’ using his concept of ‘ad hoc agency’. None of the three cases have been appealed, and no other Outer house decision has endorsed the concept. As such this is not binding. Lecturer thinks it is a bad idea.
In effect L Drummond Young said that certain problems in commercial law could be solved by creating an agency relationship. Companies often operate in complex structures with multiple subsidiaries which have different functions. What if the wrong company does something which is legally binding? L Drummond Young has held that the wrong company was just acting as an agent for the right company (despite the fact that under company law this is wrong - subsidiaries don’t act as agents to each other).


Whitbread Group plc v Goldapple Ltd (No 2) 2005


Whitbread were tenants of a pub and Gold Apple were the landlords. W wanted an order from the court stating the lease continued despite gold apply ending it due to unpaid rent.
- The rent was due on 10 May - Whitbread did not pay then.
- On 27 May Fair Bar issued a charge for rent - it was returned by Gold Apple as it had not been received by Whitbread.
- Gold Apple position as Landlord - Rent had not been paid (tenant was not obliged to accept a charge for rent from anyone else).
- Rent was outstanding so lease could be brought to an end.
- LDY: One reason the lease remained ineffective was that the cheque on 23 May was a valid payment of the rent due. Fair Bar were not assignators or involved in the contract - why could they make the payment when they had no obligation?
- LDY said at the time the cheque was issued Fairbar was acting as Whitbread’s agent.
- In the decision LDY noted it was common for a payment to be made other than by someone obliged to the debtor (I.e. Money due by a wife paid by a husband).
- Key to the analysis of this is Ad Hoc aAgency - the existence of this relationship for the purpose of a single transaction only.
- There was no reason the landlord/creditor who was entitled to be paid should be entitled to refuse payment by an ad hoc agent as the agents act was attributed to the principle and should be treated in law as coming on behalf of whitbread (the principle).
[Bad explanation - Look this case up


Laurence McIntosh Ltd v Balfour Beatty Group Ltd and the Trustees of the National Library of Scotland, [2006]


Same idea as Whitbread: These decisions remain good law as they haven’t be repealed.

  • Some have argued that decisions were wrongly decided as there was very little evidence of agency. No basis for ad hoc agent to have been asked - could not see an implied contract - principle and agent by their actions did not enter into an agency relationship. (?)
  • LDY was trying to deal with harsh results of separate legal personality - policy motivated.
  • Criticism of the cases - must treat these with caution.

John Stirling t/a M & S Contracts v Westminster Properties Scotland Limited [2007]