What is the law of agency, how is it construed. What are its legal implications etc is outlined in these slides

1. THE LAW OF AGENCY
LYLA LATIF
COMMERCIAL LAW DEPARTMENT, SCHOOL OF LAW

2. INTRODUCTION TO THE LAW OF
AGENCY

3. THE PRINCIPAL
• AUTHORITY
• DIRECTION
• CONTROL
• TO ACT FOR AND ON
HIS BEHALF

4. THE AGENT
Types:
• General
• Special
• Agent of
necessity
• Del Credere
• Factor
• Broker

5. THE AGENCY CONTRACT
THE PRINCIPAL AGENT RELATIONSHIP
Agency by:
• Agreement/Express
• Implication
• Estoppel
• Necessity/Operation of
law
• Ratification
• Cohabitation

6. DEFINITIONS
• Fiduciary relation which results from the manifestation of consent by one person
to another that the other shall act on his behalf and subject to his control, and
consent by the other so to act.
• Legal relationship whereby one person, an agent, is authorised by another, a
principal, to act on that person’s behalf, and is empowered to do what the
principal could lawfully do in person.

7. THE PRINCIPAL – AGENT
RELATIONSHIP
• The Principal – Agent relationship is generally created by an employment
agreement between the parties in the form of a contract, or is donated via a
power of attorney.
• A contract of employment is not necessary, however, for the creation of an agency.
All that is required is mutual consent, the principal expressly or by implication
indicating a willingness to be represented by another person, with the agent,
either expressly or impliedly, indicating a willingness to act under the direction and
control of the principal.

8. FORMATION OF AGENCY
BASIC RULES
• Creation of agency is easy. Because it is easy, therein lies the danger of creating
responsibilities and duties accidentally, inadvertently, or unintentionally.
• An agency may subtly come into being when the conduct of the principal implies to a third
party that a relationship is in effect, although neither the principal nor the agent may be
aware of its existence.
• The authorizing party in an agency relationship is the principal. Some action or conduct by
a principal is necessary to create the relationship.
• Anyone who can be a principal can be an agent. The requirements of an agency contract
are the same as for any other contract. The parties must be legally competent, i.e., they
must have the legal capacity or power to enter into such a contract and commit
themselves to the performance of its terms.

9. CONTINUED
• To qualify as legally competent, individuals must be of age and must be mentally
competent. If an incompetent enters into an agency agreement, technically the
agreement does not exist. It is void. Therefore, because minors and mental
incompetents lack the capacity to contract, they cannot be principals except
through guardians. While an agency contract entered into by a minor as agent is
not enforceable by the principal against the minor, the minor as agent can bind the
principal and third parties in unauthorized contracts. The capacity of the principal is
at issue in this case.
• A person who has an interest adverse to a principal cannot serve as an agent
without knowledge and consent of that party.

10. AGENCY AUTHORITY
• Actual
Actual authority is by far the most common type. It is the authority specifically and
clearly conferred by a principal. It consists of expressed authority and implied
authority.
• Expressed
Expressed authority, commonly termed ‘express authority,” is given to the agent in writing
or orally, and sometimes by the conduct of the principal. The most obvious example of
expressed authority is the written employment contract or listing agreement.
• Implied
Implied authority is that which the agent reasonably needs to perform expressed
authority. For example, an administrative assistant is employed to manage a real estate
brokerage office. The assistant is not expressly told to hire and fire custodial employees,
but implied authority allows the assistant to do so.

11. CONTINUED
• Apparent
Apparent authority, also known as ‘ostensible authority,” is conferred on an agent by
force of law to protect innocent third parties who rely on the impression created by
the principal that appropriate authority has been conferred on a would-be agent.
Such authority may be created by the “principal’s silence” when there is a duty to
speak. It results when the following conditions exist:
• One willfully or negligently conveys the impression that another is his agent.
• A third person, in reliance on the false impression, deals with the alleged agent and as a
result of the dealing, adversely changes his legal position (some use the term “suffers
damage”).

12. TYPES OF AGENTS
• The type of agency created depends on the scope of responsibility given to the
agent. Classification of agents is based on the amount of authority given by the
principal, ranging from very little to complete. There are many types of agents and
degrees of authority.

13. CONTINUED
• General agent. This is an agent who has the principal’s unlimited authority to carry
out contracts on behalf of the principal without recourse to the principal on each
and every point in a transaction.
• Agent of necessity. Here, the agency comes into being as a result of circumstances.
There is no formal appointment, express or otherwise. The agent steps into the
agency with a view to minimise damages or loss to the goods of principal.
• Del Credere agent. This agent undertakes to guarantee the goods or indemnify the
principal for any losses arising from the agency transaction. In return for this
assurance, the agent receives an extra remuneration from the principal.

14. CONTINUED
• Special Agent. This is an agent who has been appointed to carry out only a
designated task. On completion of the task, the agency terminates. Example, a
polling agent.
• Broker. This is an agent who does not have possession of the goods at the time of
sale. The transaction concluded by such an agent on behalf of the principal,
nevertheless binds the principal.
• Factor. The basic feature of the agent is that the agent has possession of the goods
before sale. In this case, such an agent can sell in his/her own name and may even
pledge the goods as security to raise money in the name of the principal.

15. CLASS DISCUSSIONS ON
AUTHORITY
1. Actual express authority
2. Actual implied authority
3. Apparent authority
4. Estoppel
5. Ratification
6. Inherent agency power

16. ACTUAL EXPRESS AUTHORITY
• What happens when an agent goes outside the powers specifically mentioned in
the written authority?

17. CHOLMONDELEY VS CLINTON
(1820)
• The canon of construction still purports to discover “real intention of the framer of
the deed, the written declaration of whose mind it is always considered to be”.
• So what are these canons of construction”
• Strict interpretation – where T is approached by a special agent i.e., one appointed to
do only certain specific acts, a rule of strict construction would seem correct not only
because the specified terms may be taken to express P’s real consent but also because
T ought not to trust a special agent beyond the express or limited authority presented
to him.
• Liberal interpretation – gives rise to apparent authority in so far as general agents are
concerned.

18. THE CASE OF ATTWOOD VS
MUNNINGS (1827)
• What was the type of power conferred upon the agent in this case?
• Brief facts:
• Before going abroad, P gave a power of attorney to his wife and to A, his agent and
partner with whom he had engaged in large scale mercantile speculations. The power
was drawn to give A the most extensive authority. In addition P’s wife was given a
further power mainly to deal with P’s personal business.
• What happened later was that A, to raise money to pay some of P’s urgent creditors
drew 4 bills of exchange upon P which bills were accepted by P’s wife.
Was P liable on these bills?

19. THE ARGUMENT
• Surely the powers were comprehensive enough to make the answer self evident.
• Surely the partner had the right to draw and the wife to accept a bill to pay
creditors.
• However, P argued that the 2 powers were separate and that the wife’s power of
accepting bills was confined to P’s private affairs.
What do you think was the court’s decision?

20. THE DECISION
• The Kings Bench accepted P’s argument. “If a person is acting ex mandato those dealing
with him must look to his mandate”.

21. AMBIGUOUS WRITTEN AUTHORITY
• Suppose that the written authority from P is somewhat vague or ambiguous; what
is A to do?
• Must he refer back to P before he can act? A duty to refer back would destroy
must of the agent’s use; and it is clear that A must have some discretion to
interpret the written instructions sent to him.

22. IRELAND VS LIVINGSTONE (1872)
ON THE EXERCISE OF DISCRETION
• P instructed A, his commission agent in Mauritius, to procure 500 tons of sugar for
shipment to England.
• It was impossible to purchase a large quantity of sugar in one lot, but A succeeded
in getting from several brokers 14 different lots amounting to 393 tons. A could
get no more at that time and he also had to reduce the commission he usually
charged to keep within P’s limits as to his maximum price.
• Prices had begun to fall and P countermanded his order, though this reached
Mauritius a month after the sugar had already been shipped.
• When the cargo arrived, P refused to take it. His excuse: his instructions were not
complied with since A had only shipped 393 tons. He was to ship 500 tons or not
operate at all.

23. HOUSE OF LORDS DECISION
• “P’s order had been given in such uncertain terms as to be susceptible to 2 different
meaning, and the agent bona fide adopts one of them and acts upon it, it is not
competent to the principal to repudiate the act as unauthorised because he meant
the order to be read in the other sense of which it is equally capable. It is a fair
answer…to tell the principal that the departure from his intention was ocassioned by
his own fault, and that he should have given his order in a clear and unambiguous
terms”.
• Ambiguous terms given A a discretionary power to act.

24. PRINCIPAL’S LIABILITY FOR
UNAUTHORISED ACTS
• P’s legal relations with T are affected not only where the agent has authority, but
also in certain cases where the agent has no authority.
• Where there is apparent authority
• Where there is no apparent authority

25. APPARENT AUTHORITY
• P is liable for unauthorised acts within the apparent authority of A where P has
made a representation; by conduct or words, that A has authority to act as his
agent to T calculated to deceive T and in fact relied upon by T.
a. P has made a representation;
b. By conduct or words;
c. That A has authority to act as his agent;
d. To a third party (T);
e. Calculated to deceive T;
f. And in fact relied upon by T.

26. NO APPARENT AUTHORITY
• 3 rules to determine this:
• Where A has acted within his usual authority
• Where A has acted within his authority, but for his own benefit
• Where A has disposed of goods entrusted to him by P