Agency

• Primary purpose the agents to bring the principal and third-

party into direct contractual relationship
• Latin maxim he who acts through another acts for himself
• Asian and agency has specific legal meanings in the
Kennedy v De Trafford (1897) – Lord Herschel stated “no
word is more commonly and constantly abused on the
word agent. Person may be spoken of as an agent, and no
doubt in the popular sense of the word may properly be
said to be an agent, although when it is attempted to
suggest that he is an agent under such circumstances as
creating the legal obligations attaching to agency that word
is only misleading
 The nature of agency
• A Retail assistant as a good example an agent
working on behalf of the principal(a limited
liability company)
• Partners in illegal partnership will be agents of
the partnership and for each other when
transacting business on the half of partnership
 Creation of agency
• In the majority, Agency is the result of an agreement
between principal and agent
• It can be expressed or implied majority are contractual but
this is not a necessity
• Agency can arise through a matter of law all be implied
from the circumstances of the case
• Spearmint rhino ventures v commissioners for her
Majesty’s revenue and customs (2007) – Mann J held lap
dancers who entertain customers were acting on their own
behalf as principles and not as agents for the club when
negotiating and receiving fees. Thus, the owner was not
liable to account for the VAT on the supply of services
provided by the dances
 The agents authority
• Questions on agency tender focus on the extent of agents authority
how this affects any transactions made by him for his principal
• Be clear how the agents authority arises,
• What kind of authority he has,
• How this might affect the transaction concerned

• An agent can only bind his principle if he has some kind of authority
to do so otherwise the principal not be bound to the contract with
a third party.
• It is important to consider on what basis the agent has the authority
to bind and what happens when he acts without authority or where
he exceeds his authority as it can exist without consent of the
principal
 Types of authority
• Actual authority
• Principle gives the agent actual authority to enter into an
arrangement with the third party, expressly or implicitly

• Express or actual authority –this agreement which need not be in

writing should also set out the scope of the agents authority
• Freeman and Lockyer v Buckhurst Park Properties (19640 Diplock
LJ– “a legal relationship between the principal and agent created by
consensual agreement to which they alone are parties. Its scope is
to be ascertained by applying ordinary principles of construction of
contract, including any proper implications from the express words
used, the usages of the trade, all the course of business between
the parties
 Implied actual authority
• It is still actual authority in that there is an agreement between principal and agent
that the latter shall have authority but the scope of the authority will be more
difficult to determine.
• It typically arises out of the relationship between principal and agent, or as a result
of the conduct of the parties
• Helly-Hutchinson v Brayhead (1968) – the chairman of the company actors as it’s
managing director although he had never be appointed to that role. He signed, on
behalf of the company, contracts of guarantee and indemnity in favour of the third
parties debts. In the companies try to avoid this liability it was held that it was
bound by the contracts because it had, by conduct, granted to the chairman
implied authority as a managing director.
• Lord Denning – it is implied when it is inferred from the conduct of the parties
under circumstances of the case, such as on the Board of Directors appoints one of
their number to be managing director. They thereby impliedly authorized him to
do all such things as forwarding the usual scope of that office
• It should be noted that where the principal has expressly instructed agent not to
act in a particular way in the agent would not have employed actual authority to
act in that way as it is in direct contravention of the principles instructions Waugh
v HB Clifford and Sons (1982)
 Apparent (ostensible) Authority
• Freeman and Lockyer v Buckhurst Park Properties (1964)
• A legal relationship between the principal and third-party created by a
representation, made by the principal to the third party, intended to be and in fact
acted upon by the third-party, that the agent has authority to enter on the half of
the principal into a contract of a kind within the scope of the apparent authority,
so as to render the principle liable to perform any obligations imposed upon him
by such contract
• The representation when acted upon by the third-party by entering into a contract
with the agent, operates as an estoppel, preventing the principle from asserting
that he is not bound by the contract. It is irrelevant whether the agent had actual
authority to enter into the contract
• This is authority without the consent or agreement of the principal. It arises
merely as a result of what is deemed to be a representation knees by the principle
to the third party to the effect that the agent has authority to act on his behalf
whereas in fact he lacks the authorities to so act.
• Once a third party has this impression of authority, an acts in reliance of it, under
principle is stopped from denying that the agent has his authority and therefore
will be bound
 Apparent authority continued
• Whereas actual authority derives from an agreement between the
principal and the agent, apparent authority arises whether principal
makes a representation so as to give impression to the third-party
debt agent has authority to act on his behalf.
• Apparent authority is not auth. In the strict meaning of the word it
is no more than an illusion of authority created by the principles
representation. It is the authority of the agent as it appears to the
third-party.
• Toulson J in ING Re (UK) Ltd v R&V Versicherung AG (2006) – the
doctrine of apparent authority is based on estopple by
representation. Where principal represents or causes it to be
represented to a third party that an agent has authority to act on
P’s behalf and T deals with a as P’s agent on the faith of that
representation, P is bound by these acts to the same extent as if a
had the authority which he was represented as having. Call
 Apparent authority continue
• Representation creates apparent authority take
many forms
• Most common misrepresentation by conduct;
that is by permitting the agent to act in the
conduct of the principle’s business of third
parties. Or doing so the principle is representing
the agent has his authority to enter into contracts
with third parties on the kind widget agent
usually has factual authority to make
 The three requirements for apparent
authority
• Rama Corperation Ltd v Proved Tin and general investments
(1952)
• (1) the principle or somebody authorised by him, List of
representative of third-party the agent had authority to act on
behalf of the principal. This representation which may be of fact all
law may be made by words or conduct or maybe employed by
previous dealings between the parties or from the principles
conduct. In Armagas Ltd v Mundogas SA (1986) HL – confirm that
the representation must come from the principal not the agent
• (2) the third party must have relied on the representation
• (3) third-party must have altered his position although not
necessarily to his detriment – nowadays can be satisfied simply by a
third-party entering into the contract itself eg Freeman and Lockyer
v Buckhurst Park Properties (1964)
 Third-party knows agent has no
authority
• First Energy Ltd v Hungarian Intl Bank (1993)
• the Bank wanted a senior manager to warranties branches. The
manager told the third-party customer hey did not have the
authority to grant a loan facility and that only his head to head
office had such authority. Sometime later he told the customer that
head office had authorised the loan. In fact, the manager had been
mistaken and the head office had not granted the loan. The Court
of Appeal held that boy the bank appointing the senior manager to
his world the bank had represented to the customer that the
manager had apparent authority to communicate to his customer
the lending decisions of the head office. He did not have the
authority to grant below in himself and maybe this plane to his
customer. This means had he told his customer he had himself
authorised the loan then no question of the apparent authority
would have arisen
 Usual authority
• Constant debate on whether usual authority actually exists in its own right
• Could be said to emanate from the other kinds of authority, particularly implied actual authority
and apparently authority and is little more than an extension of these kinds

• As in implied actual authority, in Helly-Hutchinson v Brayhead (1968) Lord Denning stated that
when Board of Directors points one of their number to be managing director ‘they thereby
impliedly authorise him to do all such things as fall within the usual scope of that office’. Therefore,
in cases where an agent belongs to a particular class of trade or profession he will normally have
the usual authority to do what ever is necessary in order to him to fulfil his express authority as
agent

• For example Panorama developments Ltd v Fidelis furnishing fabrics (1971) – the company
secretary-vehicles purportedly for his company which were in fact for his own private use. The
company refuse to pay arguing that it was not bound by the higher contracts.
• Held – the Court of Appeal stated that as company secretary he had apparent authority to enter
into contracts that were connected with the administrative side of the business from which he had
usual authority all Tasks such as hiring of vehicles. Because these sorts of contracts were within the
usual authority of the company secretary the company was therefore bound by these contracts are
liable for the debt

• This illustrates usual authority as an extension of employee actual authority and apparent authority
• Watteau v Fenwick (1893) – H was the manager of F’s pub.
H’s Nadine appeared on the license and was painted the
door, F’s existence was concealed. F expressly prohibited H
from purchasing certain goods pub unless F supplied the. In
contravention of this prohibition, H bought from W cigars
on credit terms. W thought that Hache was the owner. F
refuse to pay the cigars arguing that he was not bound by
the contract to purchase then as he had expressly
prohibited H from doing so
• Held – F was liable for the debt notwithstanding that he
expressly prohibited page from purchasing the cigars
• Class