1Definition of an agent How is an agent definied?

? ------1Definition of an agent An agent (A) is a person who is authorised to act for another (the principal (P) ) in the making of legal relations with third parties. 1Definition of an agent Who is the contract made between?------1Definition of an agent The resulting contracts are made between the principal and the third party, and not directly with the agent. 1Definition of an agent Where can an agency relationship exist? ------1Definition of an agent - A director acts as an agent for his company - A partner acts as an agent for his partnership - An estate agent is appointed by a seller of a house to find a buyer - A travel agent is appointed by a holiday company to make bookings with custome rs 2How the agency relationship arises What are the five ways an agency relationship can be established?------ 2How the agency relationship arises - express agreement - implied agreement - by necessity - by ratification - by estoppel. 2How the agency relationship arises How is an ageny relationship establised by express agreement? ------2How the agency relationship arises This is where P actually appoints A as his agent. The agreement can be made oral ly or in writing 2How the agency relationship arises How is an ageny relationship establised by

implied agreement? ------2How the agency relationship arises This is where P has not expressly agreed that A should be his agent. However, th e agreement can be implied from the parties conduct or relationship. 2How the agency relationship arises 1) How is an ageny relationship establised by necessity? 2) Case law------2How the agency relationship arises 1) This requires four conditions to be satisfied: - Ps property is entrusted to A - an emergency arises making it necessary for A to act - it is not possible to communicate with P - A acts in the interest of P 2) Great Northern Railway v Swaffield (1874) Facts: There was a contract between the two parties whereby GNR agreed to transp ort the defendants horse to a particular railway station from where it would be c ollected. When no one arrived to pick it up, the station master, having tried un successfully to contact the defendant, placed the horse in a stable overnight Held: GNR was entitled to recover the costs of stabling because it had become th e agent of the defendant by necessity 2How the agency relationship arises 1) How is an ageny relationship establised by ratification? 2) What is the effect of ratification? 2) Case law------2How the agency relationship arises 1) If a properly appointed agent exceeds his authority, or a person having no au thority purports to act as an agent, the principal has no liability on that cont ract unless the principal ratifies the contract. 2) The effect of ratification is to backdate As authority to act as agent. This r equires P to - have the contractual capacity to make the contract - have been in existence both when the contract was made and at the date of rati fication - be identified when the contract is made - be aware of all the material facts - clearly signify his intention to ratify the whole contract within a reasonable time 3) Kelner v Baxter (1866) Facts: The promoters of a company entered into a contract on behalf of a company before it was incorporated, to purchase some property. The other party was not paid

Held: As the company did not exist at the time the contract was made, the compan y could not ratify the contract. The promoters were personally liable to the sel ler. 2How the agency relationship arises 1) How is an ageny relationship establised by estoppel? 2) Case law------2How the agency relationship arises 1) This arises where P implies that A is his agent even though he is not. He is then prevented or stopped from denying As authority. 2) Freeman & Lockyer v Buckhurst Park Properties Ltd (1964) Facts: The defendant company had four directors, none of whom had been appointed as the managing director. One director effectively ran the business by himself and entered into a number of contracts with the claimants. On previous occasions , the board on behalf of the company had honoured the contracts and paid the cla imants. However, on this occasion, the board refused to pay arguing that the dir ector had no express authority to make the contract because he was not the manag ing director Held: Although the director had no express authority to make the contract, the d irector had acquired authority by estoppel. This was because by honouring simila r contracts in the past, the company (as the principal) had given the impression that the director had the authority to make this sort of contract. The claimant s had relied on this representation by continuing to deal with the director when purporting to act on behalf of the company. 3Authority The authority of an agent is a central issue in the concept of agency. What does it determine?------ 3Authority The powers that the agent has on behalf of the principal, and for which acts the principal is liable. 3Authority What are the three ways in which authority may be given? ------3Authority - Express - Implied - Apparent 3Authority How is express authority given?------3Authority This is authority that P has explicitly given to A 3Authority

 How is implied authority given? ------3Authority An agent has implied authority to do things which: - are reasonably incidental to the performance of an expressly authorised act - an agent occupying that position would usually have authority to do - have not been expressly prohibited by P. 3Authority 1) How is apparent authority given? 2) How can the representation by P arise? 3) Case law------3Authority 1) Such authority arises where A is held out by P as having authority 2) The representation by P may arise from: - the appointment of A to an office or position (in which case A has authority t o do those things which are usually done by a person occupying that position) - previous dealings (allowing A to make contracts in the past is a representatio n that A has authority to continue to do so in the future). - However, a third party cannot rely on apparent authority when he knows of the lack of actual authority 3) Facts: The new owners of a hotel continued to employ the original owner as the m anager. In the agency agreement the new owners ordered the agent not to buy cert ain items, including cigars. The manager still bought cigars from a third party. The owners then refused to pay for the cigars. Held: The purchase of the cigars was within the usual authority of a manager of a hotel. The contract was binding on the owners. (If a limitation on the usual a uthority is going to be effective, it must be communicated to the third party be fore any contract is made.) 4Liability When is a principal considered disclosed?------4Liability A principal is disclosed where the existence of the principal has been made know n to the third party. It is not necessary for the principal to be identified to the third party. 4Liability As a general rule, who is the contract between?------4Liability As a general rule, the contract is between the principal and the third party. Th e agent is neither liable nor entitled under the contract. 4Liability In which situations will an agent be personally liable? ------4Liability

- where the agent showed an intention to undertake personal liability, e.g. by s igning a written contract in his own name - trade usage or custom - where the agent refuses to identify the principal - where the agent is acting on behalf of a fictitious principal 4Liability Who is liable if the agent acts for an undisclosed principal? ------4Liability An undisclosed principal is where the principals existence has not been made know n to the third party. When the third party discovers the existence of P, he can elect to treat P or A as bound by the transaction. 4Liability What are the consequences of anagent s fiduciary relationship with his principal? ------4Liability - A must not allow his personal interests to conflict with those of - A must always act in the best interests of P - A must not make a secret profit - A has a duty to account to P for all money and property received 4Liability Where an agent is in breach of his fiduciary duty,what remedies are available? ------4Liability - P can repudiate the contract with the third party - A can be dismissed without notice. - P can refuse to pay any money owed to A or recover any money already paid - P can recover any secret profit made or any bribe 4Liability Under the principals liability to the agent, the agent has the right to:------4Liabil ity - To claim remuneration or commission for services performed. Usually the amount of remuneration or commission to be paid is stated in the agency agreement. Whe re it is not specified and it is a commercial agreement, the court will imply a term into the agreement requiring a reasonable amount to be paid. - To claim an indemnity against P for all expenses reasonably incurred in carryi ng out his obligations. - To exercise a lien over Ps property. The lien allows the agent to retain posses sion of Ps property that is lawfully in As possession until any debts due to A, e. g. arrears of remuneration, have been paid by P.