Agency relationship Essay

1. Introduction

Agency is a fiducial relationship created by express or implied contract or by jurisprudence. in which one party ( the agent ) may move on behalf of another party ( the principal ) and bind that other party by words and/or actions. The etymology of the word agent or bureau says much. The words are derived from the Latin verb ago. agere ( the respective noun agens. agentis ) . The word denotes one who acts. a actor. force or power that accomplishes things. 1 Agency is the exclusion to the philosophy of privity under the jurisprudence of contract.

2. LIABILITY OF A PRINCIPAL AGAINST THIRD PARTIES

Lord Alverstone CJ in THE QUEEN V KANE2 defined an agent merely as ‘any individual who happens to move on behalf of another’ . A principal is one who authorizes another to move on his or her behalf as an agent.

The general regulation is that where an agent makes a contract on behalf of his principal. the contract is between the principal and the 3rd party and leading facie at common jurisprudence. the lone individual who can action and be sued on the contract is the principal. The agent acquires no rights under the contract. nor does he incur any duty. Having performed his undertaking by conveying about a contract between his principal and a 3rd party. the agent drops out of the image capable to any outstanding affairs between him and principal. 3 The burden is on the individual avering that he entered into a contract with another individual through an agent to turn out that in fact the agent was moving as such. Agents of the province can ne’er be personally apt for the state’s failure to execute a contractual duty as stated in STICKROSE ( PTY ) LIMITED V THE PERMANENT SECRETARY MINISTRY OF FINANCE

4. In jurisprudence. agents are recognized as holding the power to impact the legal rights. liabilities and relationships of the principal. In CAVMONT MERCHANT BANK v AMAKA AGRICULTURAL HOLDINGS5. the Supreme Court held that where an agent in doing the contract discloses both the involvement and the names of the principal on whose behalf he purports to do a contract. the agent as a general regulation is non apt to the other undertaking party. Apart from holding the power to impact the legal rights. liabilities and relationships of the principal. the agent may besides impact the legal place of his principal in other ways. For case. he may dispose of the principal’s belongings in order to reassign ownership to a 3rd party or he may get belongings on his principal’s behalf. Sometimes the actions of the agent may do the principal reprehensively apt as illustrated in the instance of GARDENER v ACKEROYD

6. The rights and liabilities of chief and agent against 3rd parties may differ harmonizing to whether the bureau is disclosed or undisclosed. The differentiation between disclosed and disclosed bureau is of import as it affects the principal’s ability to sign the agent’s actions. Furthermore. the agent’s liability to 3rd parties may depend on whether the bureau was disclosed or non. Agency is disclosed where the agent reveals that he is moving as an agent ; if the bureau is disclosed it is of no legal significance that the principal is non named. If an agent contracts with a 3rd party without unwraping that he is moving as an agent the bureau is undisclosed.

7 An unrevealed principal can step in on the contracts of an agent within his existent authorization.

Where an agent makes a contract unwraping the bureau. the normal regulation is that a direct contractual relationship is created between the principal and the 3rd party and either party can action the other on the contract. It is of import to observe that merely a disclosed principal can sign an unauthorized contract. In KEIGHLEY MAXTED V DURANT8 a principal authorized an agent to purchase wheat at a given monetary value in the joint names of the principal and the agent. Having failed to buy wheat at that higher monetary value. the agent bought wheat in his ain name at a higher monetary value. The chief being satisfied with this act supposedly ratified the wheat purchase understanding at a higher monetary value but failed to take bringing of the wheat.

The marketer so sued the principal reasoning that the sale contract had been ratified. It was held that the action could non win because the agent’s act was unauthorised and since the principal’s individuality had non been disclosed to the sellor. the principal could non sign and accordingly was non apt on the contract. Where the principal is disclosed. he and non the agent is apt on the contract and may action and be sued. In GADD v HOUGHTON & A ; CO. 9 Houghton & A ; Co. sold to the purchasers Gadd. a measure of oranges under a ‘sold note’ which stated. inter alia. that ‘we have this twenty-four hours sold to you on history of James Morand & A ; Co … . ’ and signed ‘Houghton & A ; Co. ’ The marketer holding failed to present the oranges. the purchaser sued Houghton & A ; Co for amendss for non-delivery. The action failed. since by the words of the sold note Houghton & A ; Co had clearly indicated that they were non to be personally apt.

They were simply agents. Lord Mellish stated that “where you find a individual in the organic structure of the instrument handling himself as the marketer or character. you can state that he intended to adhere himself. ” In SUI YIN KWAN & A ; ANOTHER V EASTERN INSURANCE CO. LTD10 it was held that the philosophy of unrevealed chief applied. Where an agent Acts of the Apostless within his existent authorization the unrevealed principal may step in and get the rights/liabilities of the agent. In this instance. the agents acted within their existent authorization and hence. the relations could retrieve from the insurance company.

Lord Lloyd summarized the jurisprudence as follows: ( 1 ) an unrevealed principal may action and be sued on a contract made by an agent on his behalf. moving within the range of his existent authorization. ( 2 ) In come ining into the contract. the agent must mean to move on the principal’s behalf. ( 3 ) The agent of an unrevealed principal may besides action and be sued on the contract. ( 4 ) Any defense mechanism which the 3rd party may hold against the agent is available against his principal. ( 5 ) The footings of the contract may. expressly or by deduction. except the principal’s right to action. and his liability to be sued. The contract itself. or the fortunes environing the contract. may demo that the agent is the true and merely chief.

Sometimes the agent contracts with 3rd parties after unwraping the fact. that he is an agent but without unwraping the name of his principal. In such instances. the principal is bound by the contracts made on his behalf. And therefore. the principal is apt to 3rd parties for his agent’s Acts of the Apostless done on behalf of the principal. However. such Acts of the Apostless must be within the range of the agent’s authorization. and the nameless chief must be in being at the clip of contract. As a affair of fact. when the agent contracts after unwraping his representative character. the contract will be the contract of the principal. For all such Acts of the Apostless. the agent is non personally apt. However. the agent is personally apt if he declines to unwrap the individuality of the principal when asked by the 3rd parties.

11 When there is unrevealed bureau. the contract is ab initio between agent and the 3rd party and each may implement the contract against the other. However. if the 3rd party later discovers the principal’s being. he may implement the contract against either the agent or the principal. Provided that the agent acted within the range of his existent authorization. the principal can step in and implement the contract against the 3rd party.

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3. Fortune WHEN AN AGENT MAY BE HELD PERSONALLY LIABLE If an agent continues to move after his authorization has been terminated. he may incur personal liability for breach of implied guarantee of authorization. Sometimes an agent may endure a possible hazard when his authorization is terminated automatically without his cognition. In the instance of YONGE V TOYNBEE13 where canvassers were moving in judicial proceeding for a client who. unknown to them. became mentally incapacitated so that the bureau was considered to be terminated. However. they continued to litigate for the client and were held apt for their breach of warrant of authorization and were ordered to pay the costs of the other litigator.

There are three exceeding instances where the unrevealed principal can non action or be sued. by the 3rd party. The first is where the contract between the agent and the 3rd party expressly provides that the agent is the exclusive chief U. K MUTUAL STEAMSHIP ASSURANCE ASSOCIATION V NEVILL14. The second is where the footings of the contract are inconsistent with bureau. In HUMBLE V HUNTER15. an agent signed a charter-party in his ain name and described himself as “owner” of the ship. It was held that his unrevealed principal could non action.

The 3rd instance where an unrevealed principal can non action is where the individuality of the principal is material to the 3rd party. One such instance is where the contract made between the agent and the 3rd party is excessively personal to allow an unrevealed principal to step in. for illustration. contracts for personal service. In the instance of SAID V BUTT16. a theatre critic knew the direction of a peculiar theater would non sell him a ticket because of articles he had written. He obtained a ticket through an agent. It was held that the theater could forestall the principal from come ining the theater. McCardie J said that “the critic could non asseverate a right as an unrevealed principal since. as he knew. the theater was non willing to contract with him” .

Even where the unrevealed principal’s being is discovered. the agent remains apt on the contract and the 3rd party may take to implement the contract against either chief or the agent but non both. This is known as the right of election. A 3rd party has an elected right to action either the agent or the principal where the agent does non unwrap the principal. In BOYTER V THOMSON17 the marketer instructed agents to sell on his behalf a cabin patrol car under a securities firm and bureau understanding. The purchaser purchased the boat believing it was owned by the agents and he was non told that the agents were moving as such nor the name of the proprietor nor that the proprietor was non selling in the class of a concern although he was cognizant that the boat was being sold under a securities firm agreement.

The boat proved to be unseaworthy and was unfit for the intent for which she was purchased. The purchaser sued the marketer for amendss which were granted. The marketer appealed to the House of Lords where goods were sold by an agent moving in the class of concern for an unrevealed principal the purchaser was entitled to action non merely the agent but besides the principal. Once the 3rd party chosens to action one party. his option to action the other is extinguished. However. non any action by the 3rd party proposing action against one party in penchant for another will be construed as the exercising of the right of election. In CURTIS V WILLIAMSON18. one Boulton looking to move on his ain behalf purchased some gunpowder from the complainant. Later. the complainant discovered that Boutlton was moving on behalf of an unrevealed principal. the suspect mine proprietors.

Boulton so filed a request of settlement and the complainant filed an affidavit in those proceedings in an effort to retrieve the debt owed for the gunpowder. However. the complainant changed their head and sued the suspect principal. It was held that one time an unrevealed principal is discovered the 3rd party may elect to action that chief ; and secondly. that the filing of the affidavit against the agent did non forestall the action against the principal. The 3rd party will non be bound by an election unless he has unambiguously indicated his purpose to keep one party apt and let go of the other. The philosophy of the unrevealed chief exists for intents of commercial convenience. it is of import to keep protections for the 3rd party. In the state of affairs where the agent has failed to go through the payment to the 3rd party. either the principal or the 3rd party will lose and it seems fairest to put the loss on the principal. 19

4. HOW AGENCY MAY BE DETERMINED

As the relationship between the agent and his principal is based on consent. existent authorization is of paramount importance. An agent is merely entitled to be paid if he acts within his existent authorization. If he acts outside his authorization he may be apt to his principal. The relationship between the principal and a 3rd party depends on the agent’s power to adhere his principal. However. what is of concern to the 3rd party is the agent’s evident authorization as this is what he relies on in the ordinary class of events. There are several types of authorization. These are: a ) Express Authority – the understanding between a principal and agent may be express or implied. Express understanding may be made orally. in composing or by title. In general. if an agent is appointed to put to death a title his assignment is by title called a power of lawyer. B ) Implied Authority arises where. although a peculiar action is non sanctioned by express understanding between the principal and the agent. the principal is however taken to hold impliedly consented to the action or dealing in inquiry.

In GARNAC GRAIN CO. V H. M. F. FAURE AND FAIRCLOUGH20 the House of Lords stated that “the relationship of principal and agent can merely be established by the consent of the principal and agent. They will be taken to hold consented if they have agreed to what sums at jurisprudence as a relationship even if they do non acknowledge it themselves and even if they have professed to disclaim it. An agent who has express authorization to transport out a peculiar undertaking may besides hold extra authorization to make certain Acts of the Apostless incidental to his authorised undertaking For case. an agent authorized to sell the principal’s belongings has implied incidental authorization to subscribe a contract of sale. ” degree Celsius ) Apparent Authority – a individual may be bound by the Acts of the Apostless of another done on his behalf without his consent or even in breach of an express prohibition if his words or behavior create the feeling that he has authorized the other individual to move on his behalf.

This is described at jurisprudence as “apparent bureau or authority” or “ostensible bureau or authority” . The differentiation between existent and evident authorization was explained by Diplock L. J. in FREEMAN & A ; LOCKYER V. BUCKHURST PARK PROPERTIES21. “Apparent” or “ostensible” authorization. is a legal relationship between the principal and the contractor created by a representation. made by the principal to the contractor. intended to be and in fact acted on by the contractor. that the agent has authorization to come in on behalf of the principal into a contract of a sort within the range of the “apparent” authorization. so as to render the principal apt to execute any duties imposed on him by such contract.

To the relationship so created the agent is a alien. He need non be ( although he by and large is ) aware of the being of the representation. The representation. when acted on by the contractor by come ining into a contract with the agent. operates as an estoppel. forestalling the principal from asseverating that he is non bound by the contract. It is irrelevant whether the agent had existent authorization to come in into the contract.

vitamin D ) Agents of Necessity – A individual who acts in an exigency. for case. to continue the belongings or involvement of another may be treated as an agent of necessity. His actions will be deemed to hold been authorized even if no existent authorization is given. Like evident authorization. an bureau of necessity can originate even in the absence of consent from the principal. Agency of necessity merely arises in extreme fortunes where there is existent and definite commercial necessity for the agent’s actions. The undermentioned must be satisfied for an bureau of necessity to be:

( I ) There must be an exigency – something unanticipated.

( two ) It must be practically impossible to acquire instructions for the principal. ( three ) The agent must move bona fide in the involvement of the principal instead than to progress his ain involvements. He must non take advantage of the principal. ( four ) The agent must move moderately in the fortunes.

vitamin E ) Agency originating out of Co-habitation – It is argued that a married woman has authorization to plight the recognition of her hubby for necessities ( or frailty versa ) . However. others argue that societal conditions now make it old fashioned to propose that existent or evident authorization should non originate between hubby and married woman.

The jurisprudence recognizes the undermentioned as agents even though they do non bear the rubric of agent22: ( a ) Company Directors and other company functionaries – being an unreal individual. a company has to move through human agents. Then authorization to move as company agents is vested in the board of managers. This authorization may be delegated to one or more executive managers by the articles of the company to let him to pull off the daily operations of the company. ( B ) Partnerships – as a partnership has no separate legal individuality from its members. every spouse in a house is an agent of the house every bit good as all other spouses for the intent of the concern of the house.

Therefore. a spouse who performs an act for the intent of transporting out the concern of the house. binds the house every bit good as the other spouses. ( degree Celsius ) Employees – may be retainers working under a contract of service or an independent contractor working under a contract for services. An employee e. g. a store helper is the agent of the store proprietor for the intents of doing a contract of sale for the proprietor. He has the authorization to do statements about goods that are adhering on the store proprietor. his employer. ( vitamin D ) Professionals – moving on behalf of clients may be the agents of those clients. E. g. a attorney carry oning judicial proceeding is his client’s agent and may hold authorization to settle the instance and that colony will adhere the client. Thus the attorney. non the client. usually marks a consent judgement. Similarly. an accountant’s understanding or statement to ZRA will adhere his client in conformity with bureau rules.

The relationship between principal and agent depends on consent. If withdrawn. the bureau will automatically stop. every bit good as the agent’s existent authorization to adhere the principal. An bureau relationship may be terminated in the undermentioned ways: ( a ) By common consent between the agent and the principal.

( B ) By either party one-sidedly withdrawing consent.
( degree Celsius ) An agent may hold been appointed for a fixed period of clip or for a specific undertaking or set of undertakings. Once the clip elapses or the undertaking ( s ) is/are completed the bureau will end. ( vitamin D ) By operation of jurisprudence e. g. if the public presentation of the bureau relationship becomes illegal ( e. g. one party becomes the citizen of an foreign enemy ) or impossible ( where it will be ended by the bureau contract being frustrated ) . Death of either party will besides end the bureau and any contract made between them. If an agent becomes insane. the relationship is automatically terminated. The bankruptcy of either the agent or the principal will besides stop the bureau. 23

The Effect of Termination vis a vis Third Parties

The agent may go on to hold evident authorization even if existent authorization has been terminated. If the principal’s behavior is such as to propose to a 3rd party that the agent continues to hold authorization. Until the chief brings the expiration of the agent’s authorization to the notice of a 3rd party. the agent may go on to hold evident authorization on the strength of the principal’s representation. DREW 5 NUNN24 the principal became insane but his married woman. who was his agent. continued to move in his name. When he recovered from his insanity he tried to disclaim liability for Acts of the Apostless done by his married woman during his insanity/incapacity. Held: The agent i. e. his married woman. had evident authorization and hence he was edge. However. where an agent’s existent authorization is terminated by the principal’s decease or bankruptcy the agent will automatically discontinue to hold evident authorization.