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Commercial Agency (1)

Privity of contract: Only parties to a contract can sue. Address issue of fairness, between 3 rd party and agent and principle. Think about the rule, does it promote freedom of contract, fairness etc. y Necessary to distinguish between agency relationship and buyer and seller relationship. It affects who can sue and be sued by who. (Y sells to Z on behalf of X, Y can sue Z for the cost and Z can sue Y. ) y Where the agent discloses his agency there will be no privity of contract between himself and the 3rd party. The agent cannot be held liable therefore for any contracts he makes on behalf of the principal. This is so even where the agent has no authority (Lewis v Nicholson) but they will however face liability for breach of warrant of authority. Although this is the normal position it has been qualified so that in certain circumstances, the agent will face personal liability on the contract. y y Agency:A legal relationship in which a person (Agent) has power to affect the relationship of another person (Principal) with third parties. (Agent can legally represent or act for another (Principal) in dealings with a third party. (The agent has the power to bind the principal .)

Substance not form: Mercantile International Group Plc v Chuan Soon Huat Industrial Group Ltd [2002] (Rix J): [T]he word agent can be carelessly and indiscriminately used, and the test is ultimately one of substance rather than form. Was the relationship one of resale or agency? Agent s power to affect Principal s legal position is critical: AMB Imballaggi Plastici SRL v Pacflex Ltd [1999] Bought goods from manufacturers in an outright purchase and could sell to 3 rd parties in any way they liked. Held there was no agency relationship because in dealing with 3rd parties they never purported to negotiate, nor did it have a contract or other authority to negotiate a sale with the prinicipal. (manufacturer). Also agent sold them on commission. Cf: Mercantile International Group Plc v Chuan Soon Huat Industrial Group Headed agency agreement and MIG was appointed as sales and forwarding agents on behalf of CSH. There were certain features indicating sale and resale. Manufacturers decided on price, no remuneration, could sell higher than confirmed pri ce. Agency relationship as substance indicated that the retailers could negotiate on behalf of the manufacturers. Cf: Sagal v Atelier Bunz GmbH [2010] Own invoices, no substance to indicate the traders had the power to negotiate on behalf of the manufacturers. Agency Relationships Auctioneers and sellers (and sometimes, auctioneers and buyers): Hinde v Whitehouse (1806) Auctioneer has the power to sell once sent item to them. Agency relationship Directors and company- Companies Act 2006, s.154 ; Lovett v Carson Country Homes Ltd [2009] acting on behlf of the company, can sue company. Cf: Stone & Rolls Ltd v Moore Stephens [2009] Partners and partnership- Partnership Act 1890, s.5 Every partner is an agent of other partners and partners of the firm. Legal representatives and clients (eg in compromise): Waugh v HB Clifford & Sons Ltd [1982] Compromise agreement, lawyer has power to enter into a compromise agreement.

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Sources of Agency Law Cases (most common) Statutes European rules, eg: EC Directive 86/653 implemented as Commercial Agents (Council Directive) Regulations 1993 S.I. 1993/3053 (for self-employed commercial agents) (come in to protect consumers) Aim of directive to harmonise the relationship between principle and agent and to provide protection on certain key issues for the agent. They do not offer any assistance in detailing the rights or obligations of either party as against a 3rd party. Such matters being determined solely by reference to the common law. Regulations deal with following issues in the relationship between commercial agent and principles. y Rights and obligations of both agent and principle y Remuneration of agents y Conclusion an termination of agency contracts y Restraint of trade clauses.

Creation of Agency
Agreement- consensual but not necessarily contractual Yasuda Fire and Marine Insurance Co. of Europe Ltd v Orion Marine Insurance Underwriting Agency Ltd [1995] QB 174 at 185 (Colman J) Implication from conduct Garnac Grain Co. Inc. v HMF Faure and Fairclough Ltd [1968] AC 1130 at 1137 (Lord Pearson) Court can imply consent from conduct of the parties. Party A sold goods to B who sold to C who sold to D etc. One agent company became insolvent. If agent has no money then can sue the principal. Cf- Silence cannot amount to consent. Fine line between silence and conduct: Burnside v Dayrell (1849) 3 Exch 224 Operation of law E.g.- Consumer Credit Act 1974, s.56(2) broker/supplier are deemed to be agents of the creditor. Formalities: General rule- No formal requirement: Heard v Pilley (1869) oral agreement is sufficient to create an agency relationship. Exceptions (statutes)Commercial Agents (Council Directive) Regulations 1993 S.I. 1993/3053, reg.13(1)
Right to signed written statement of terms of agency contract 13. (1) The commercial agent and principal shall each be entitled to receive from the other, on request, a signed written document setting out the terms of the agency contract including any terms subsequently agreed. (2) Any purported waiver of the right referred to in paragraph (1) above shall be void.

Law of Property Act 1925, ss.53(1), 54

53. Instruments required to be in writing. (1) Subject to the provision hereinafter contained with respect to the creation of interests in land by parol (a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorised in writing, or by will, or by operation of law; (b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will; (c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will. 54. Creation of interests in land by parol. (1) All interests in land created by parol and not put in writing and signed by the persons so creating the same, or by their agents thereunto lawfully authorised in writing, have, notwithstanding any consideration having been given for the same, the force and effect of interests at will only.

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(2) Nothing in the foregoing provisions of this Part of this Act shall affect the creation by parol of leases taking effect in possession for a term not exceeding three years (whether or not the lessee is given power to extend the term) at the best rent which can be reasonably obtained without taking a fine.

The Concept of Authority in Agency Power to affect the relationship with third parties is known as authority. Types of Authority (2 main types) Actual (express/implied) Apparent (Ostensible) Usual?

Actual authority
Express: what has been written down or said is the authority. Implied

Express Actual Authority

Actions expressly permitted by the principal. (not necessarily in writing) Consent: Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 502 (Diplock LJ) An actual authority is a legal relationship between principal and agent created by a consensual agreement to which they alone are parties. Its scope is to be ascertained by applying ordinary principles of construction of contracts, including any proper implications from the express words used, the usages of the trade, or the course of business between the parties. Co. had no MD appointed, but somebody was acting as MD to the knowledge of the board of directors. Court held: There was express consent although there was no formal appointment.  Scope and Interpretation: Ireland v Livingston (1872) Ambiguous interpretation: agent is entitled to act on one Butwick v Grant [1924] Buyer bought goods from agent of owner of goods. Not given power to collect payment on behalf of the owners of goods and buyers knew the agent had no power to collect the money. Buyer paid the agent and the agent went off with the money. The principal could claim the money from the buyer and so they have to pay twice. Cf: Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co. Ltd [1972] AC 741 at 772 (Lord Salmon) Should put decision in context. Modern means of communication, should refer to principal to find out the meaning. Cf: European Asian Bank AG v Punjab and Sind Bank (No.2) [1983] 1 WLR 642 at 656 (Goff LJ) Same decision was taken as in Woodhouse, should try and contact the principal. Also need to prove that you act reasonably.

Implied Actual Authority

Activities not expressly permitted under the principal s instructions but which are reasonably connected to, and necessary for, the fulfilment of the principal s instructions. Does not however incorporate actions contrary to the agreement even if they are reasonably required by the principal s instructions. Hely-Hutchinson v Brayhead [1968] Chairman of Co. not appointed MD but acted as the MD, entered contracts, made financial payments on behalf of the co. The board of directors were aware of his acting as de facto MD. Entered into contract of indemnity on behalf of the co. Co. sought to avoid honouring the guarantee arguing that he had no authority to enter into the contract. Court held co. was liable. Denning M.R : It is implied when it is inferred from he conduct of the parties and the circumstances of the case, such as when the board of directors appoint one of their

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number to be MD. They thereby impliedly authorise him to do all such things as fall within the usual scope of that office. (current case on apparent authority) Sorrell v Finch [1977] Estate agent collected deposit and disappeared. Potential buyer wanted the deposit back court said no. Nothing to imply that the estate agent had the power to collect the deposit on behalf of the seller. Domb v Isoz [1980] Sale of land transaction. Court held where you have a solicitor representing you in sale of land transaction they have the power to exchange the contracts. Scope and Interpretation: - Incidental authority: SMC Electronics Ltd v Akhter Computers Ltd [2001] Employee into contract, commission contract, court said as an employee he had the incidental power and it was part of his duties and need not state it expressly. Cf: Hamer v Sharp (1874) LR 19 Eq 108 Not incidental duty for estate agent to enter into a contract of sale of the house if the duty is just to advertise the house. Usual authority: Hely-Hutchinson v Brayhead [1968] 1 (company managing director); Waugh v HB Clifford & Sons Ltd [1982] Ch 374 (solicitor)

Customary authority: Custom- practises of a group of people. To be bound by a custom you must be a member of the group. Robinson v Mollett (1875) LR 7 HL 802 Sellers (Liverpool) instructed agents (London) to sell goods. Agents sold goods in accordance with custom of people living in London. Sellers were bound, court said no. Not bound by a custom you are unaware of. Necessity: an agent has apparent authority to deal with emergencies. The Argos (1873-74) LR 5 PC 134 (accident and emergency) goods were contracted to be delivered to a certain port at noon. However when got to port there was ammunition around port. Goods were petroleum products port authorities said it is too dangerous to deliver them there. Court held the owners to pay for the travel and other expenses. Sims v Midland Railway Co. [1913] 1 KB 103 at 112 (Scrutton J) (perishable goods) Food items supposed to be delivered by railway co. No fixed time for delivery stated. Employees of railway co. went on strike. Goods would be spoiled because of delay. Sold goods and court held they w ere right to do so and had the authority. Cf: Springer v Great Western Railway similar facts, perishable tomatoes. Held necessity doctrine did not apply since the agent had the opportunity to contact the owners and take instructions on how to proceed. Appropriate today with fast modern communication. China-Pacific SA v Food Corp of India, The Winson [1982] AC 939 Ship had problems while at sea. To recover goods the Salvage co. sued cargo co. Ship owner was agent and had right to salvage goods otherwise they would have been lost and therefore had to pay. Prager Sellers resold fur arguing the condition was deteriorating. Held no commercial necessity as deterioration was only slight and sellers had been dishonest motivated by the inc . in value.

Apparent Authority
Apparent: as it appears to other people. Subjectively from view of 3rd party-believes agent has authority to act on behalf of the principal. An agency relationship can be formed despite there being no express agreement; estoppel is established. The courts can find that there is an agent-principle-3rd party relationship in effect and enforce the contract: a) Where an individual (principal) leads a 3 rd party to believe that another person is acting as his agent accordingly. (objectively) b) To discover the existence of an agency relationship and also expand on nature of ag ent s authority where e.g. the agent s actual authority did not encompass the particular agreement with the 3rd party.

Lord Denning s speech where he describes apparent authority. The Tatra [1990] 2 Lloyd s Rep 51 Domb v Isoz [1980] Ch 548 Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 Rama Corporation LD v Proved Tin and General Investments LD [1952] 2 QB 147 Director (agent) of co. contracted on behalf of co. Issue was whether the agent had the authority to do so. Corporate constitution suggested that the director did. Other party didn t know anything about the corporate constitution. Court said there was no apparent authority as the other party hadn t seen it and how can it be apparent if they have not seen it. Todd v Robinson (1825) 1 Ry & M 217 Pacific Carriers Ltd v BNP Paribas (2004) 78 AJLR 10 Bank(BNP) had manager authorised , authenticate signatures. Forbidden from signing indemnity letters but she did it. She had the apparent authority, anyone who received such a letter from a bank manager would believe they had the authority to do so. Lovett v Carson Country Homes Ltd [2009] EWHC 1143 (Ch); [2009] 2 BCLC 196 Co. had 2 directors who divided finance and operations matters. Financial matters director was in habit of replicating using, forging signature of other director. Operation s director knew of this. Court said there was authority as would believe the signature was every time validly obtained.

- Similarity between apparent authority and implied actual authority? Hely-Hutchinson v Brayhead [1968] 1 QB 549 at 115(see above) (Lord Denning MR)In most cases usual or implied actual authority coincides with implied actual authority. In some situations apparent authority exceeds usual authority. (e.g. Director of co. can enter into a contract on behalf of co. This would be usual and actual. If co. limits director s authority a certain amount; there is still apparent authority but usual authority would say that directors should have limits to their ability. Waugh v HB Clifford & Sons Ltd [1982] Ch 374 - Conditions: In order for 3 rd party to argue successfully the principal is bound by actions of agent must satisfy (Rama): 1) A representation by the principal to the 3 rd party that the agent has authority.

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2) 3rd party must rely on representation. 3) 3rd party must not be aware that the agent is acting without authority.

Representation: Rama Corporation Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147 (Slade J) Silence does not amount to representation. What is representation? The Raffaella [1985] Shipping, bank credit s manager signed undertaking with the buyers saying the bank can return your purchase money. Credit manager lacked authority to make this representation. Court held by the fact of employment of credit manager and indication that the manager has authority to deal with clients there is apparent authority. Representation by Principal: United Bank of Kuwait v Hammoud [1988] 1 WLR 105 at 1066 (Lord Donaldson MR): [I]t is trite law that an agent cannot ordinarily confer ostensible authority on himself. He cannot pull himself up by his own shoe laces. Representation cannot be made by agent himself however representation can be made by another(intermediate) agent with actual authority to make such a representation.

Representation by Intermediate Agent: British Bank of the Middle East v Sun Life Assurance Co. of Canada (UK) Ltd [1983] (noted Collier [1984] CLJ 26) Bank wanted to lend money to business people on condition that insurance co. would sign an indemnity. Bank dealt with unit manager and requested confirmation of authority from branch manager (actual and apparent authority?) Insurance co. not bound. (pract ise was to ask insurance co. for confirmation) Cf: Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 (Diplock LJ) If intermediate lacks authority to give authority The representation which creates apparent authority may take a variety of forms of which the commonest is representation by conduct, that is, by permitting the agent to act in some way in the conduct of the principal s business with other persons. Representation by Agent: The Raffaella [1985] In principle, an agent can have apparent authority to make representation as to his own authority but cases are rare. First Energy (UK) Ltd v Hungarian International Bank Ltd [1993] 2 Lloyd s Rep 194 (noted Reynolds (1994) 110 LQR 21 A co. appointed a man as senior manager within bank business. Steyn LJ: It seems to me that the law recognises that in modern commerce an agent who has no apparent authority to conclude a particular transaction may sometimes be clothed with apparent authority to make representations of fact. . Cf: Armagas Ltd v Mundogas SA, The Ocean Frost [1986] AC 717 Agent was known to have no general authority to enter transactions. Third party could therefore not rely on the agent s own representation despite the principal employing the agent in a senior position in its organization. Position which in the outside world is generally regarded as carrying authority to enter into transactions of the kind in question (Lord Keith)will be sufficient to bind the principal through recourse to apparent authority but not where the agent is known not to have that authority. Implied representation from course of conduct: Summers v Solomon (1857) 7 E & B 879 Conduct can indicate a state of affairs. Not everything need be stated. Agent managed his principal s shop for a no. of years. In course of managing the shop the agent did on many occasions, buy goods on behalf of his princip al form the 3 rd party for which the principal paid. Agent absconded but purchased goods purporting to do so on

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behalf of his (old) principal. After absconding agent was clearly not acting with actual authority but principal was liable on the contract since the previous c ourse of dealing constituted a representation sufficient to clothe the agent with the necessary authority.

Reliance: 3rd party must be aware of the representation but it seem reasonably clear that they need not rely on it to their detriment. If reliance is unreasonable The Tatra [1990] Gatehouse J: the only detriment that has to be shown in such a case is the entering into the contract by the party relying on that authority . Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 Rama Corporation Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147 Pharmed Medicare Private Ltd v Univar Ltd [2003] 1 All ER (Comm) 321 Business over 18 month period. Contract on behalf of buyer were signed by one person. Usually used th e buyers purchase order forms. Used invoice. Employee signing on behalf of buyer made substantially higher order than what the parties had customarily been dealing. There was reliance, nothing to indicate that use of invoice Reasonableness: Overbrooke Estates Ltd v Glencombe Properties Ltd [1974] 1 WLR 1335 Auctioneers lacked the authority to bind the owner of the goods. Still relied on this depite reading the document. Unreasonable reliance. Reckitt v Barnett [1929] AC 176 Power of attorney given to agent. To do everything on my behalf. Agent paid in a cheque for his own personal use. Bank knew it was not for the donor but for the attorney s private use. Court said it was unreasonable for bank to accept this.

Usual Authority
An agent will be deemed to have the authority that an agent in his position would normally have. A clear overlap between usual authority and implied actual authority. Whilst the principal has given no representation to the 3 rd party that the agent has the authority to perform the act, appointing the agent to a role which would usually carry the authority to conduct the transaction in question Hely-Hutchinson when MD is appointed they thereby impliedly authorize him to do all such things that fall within the usual scope of the Offic e clear therefore that where an agent belongs to a particular trade or profession he will have the usual authority to do whatever is necessary to fulfil his express authority as agent. Will be the case even where the principle is unaware that the usage is reasonable. It will be regarded as reasonable where it is not inconsistent with the principal s express instructions.(Robinson v Mollett) The Ocean Frost Lord Keith the ostensible authority is general in character, arising when the principal has placed the agent in a position which in the outside world is generally regarded as carrying authority to enter into transactions of the kind in question. Does it exist in its own right as an independent category of authority or does it emanate from other types particularly actual implied and apparent. Watteau v Fenwick [1893] affirms this. Owner of beerhouse gave management to agents who put their own name over door. Manager entered contract with 3rd party to supply beerhouse with items he was prohibited from doing. 3 rd party sued beerhouse for payment and the court held the principal liable despite expressly prohibiting the act. Wills J was influenced by the fact the principal was undisclosed. In order to prevent allowing secret limitations on the liability of all undisclosed principals Wills J was happy to extend the liability of usual authority. Justified on grounds of public policy but heavily criticised. Dawn v Simmins (1879) 41 LT 783

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The Rhodian River [1984] Bingham J described Watteau as a somewhat puzzling case I would myself be extremely wary of applying this doctrine if it exists Seems likely that Watteau will narrowly construed and not applied in future.