HideShow resource information
  • Created by: Nikki
  • Created on: 13-04-16 19:58


P = principal who instructs agent

A = agent

T = third party with whom agent deals on behalf of principal 

internal relationship = between A and P

external relationship = between P and TP 

A can construct privity of contract directly between P and T, so long as he has authority

Transaction entered into by A within scope of actual authority from P will bind P

P also bound if A acts with apparent authority --> though A does not have the right to enter into the trasnaction on behalf of P, thw law invests him with the power to commit his principal to the trasnaction 

1 of 17

Authority of A to bind P (1)

  • A acting within scope of his authority is able to bring about a direct contractual relationship between P and T without the need for P to confirm any contract made on his behalf
  • A person who has the appearance of such authority has the power to achieve the same outcome between P and T --> 
    • may happen if A exceeds authority in fact conferred upon him
    • may happen in case of a person with no authority at all
  • where it is an appearnc eof autohrity that brings about a contract between P and TP, it is useful to say that A has the power if not the autohirty to bind P


  • actual = what A does is in fact authroised by P, whether expressly or impliedly
  • usual = authority which a person occupying or put into the same kind of position as A would normall possess 
    • A has both implied and apparent authority to do what is usual for someone in his position
    • authority may be restircted by terms of his isntructions from P, but T dealing with him without notice of restriction is still entitled to rely on his apparent authority
2 of 17

Authority of A to bind P (2)


  • often referred to as ostensible authority or agency by estoppel 
  • usual authority arises here when a person placed in a aprticular commercial position is instructed by principal that his authority is limited, but this restriction is not brought to the attention of T
  • whether by words or condcut, P represents to T that A has authority 
  • broader view --> putting A in a position that it appears to TP that A has authority to act
  • A can have apparent authroity in 2 cases:
    (1) limited authority A exceeds;
    (2) A has no authroity at all but P makes it appear as though A did/does have authority 
  • appearance must derive from P's words or conduct; cannot be derived from A's words or conduct
3 of 17

Authority to bind P (3)

  • conditions needed to be able to invoke apparent authority
    • (1) a representation by P 
      • A who is not authorised to enter intoa contract cannot represent his own authority to conclude the contract so as to commit P unless he is authorised to make such a representation by P or by a person having actual or apparent authority from P to authorise the making of that representation
      • P's holding out of A as so authorised may be direct or through another A, and may also be effected by investing A with a position or function in which he would have usual authority to condcut the trasnaction which he represents he has autohrity to condcut
      • without such holding out A's rep of his own aurhotiy to contract does no commit P, but will expose A to an action by T for damages for breach of warranty of authority 
      • if A has no apparent authority to conclude a contract on behalf of P, he will not normally have apparent authroity to convey tot T the approval of the transaciton by P or by someone authorised to approve it on P's bhealf 
    • (2) reliance 
      • T cannot invoke doctrine of apparent authority unless he acted in reliance on P's express/implied representation that A had authority
    • (3) contract within capacity of P
      • A cannot effective coommit P to a contract which P himself has no power to make
4 of 17

Authority of A to bind P (4)

Grant of autohrity from P to A has to be interpreted --> subject to normal rules of contract interpretation

Ambiguous authority

  • P words can be ambiguous
  • A will  have actual authrity in case of ambiguity if A follows a reasonable interpretation of those instructions
  • If A is aware of the ambiguity he should go backa nd seek further instructions if possible --> but completely unsettled what effect A's knowledge would have over relationship with T

If A has apparent authority but not actual authroity, T can sue P on basis of that authority 
- but in order for there to be a contract betwen T and P in cases of apparent authority, P has to ratify A's actions

5 of 17

Agency of necessity

When urgent action is necessary to save P's interest and A is unable to communicate with P or to obtain an adequate response to his request for instruction may as an agent of necessity be endowed with actual authority even though such authroity has not be conferred 

Distinction drawn between cases where A has an existing agency relationship with P but acts from necessity beyond his express or implied authority and cases where no pre-existing agency relationship (law reluctant to allow claims in second situation)

China Civic

6 of 17

Delegation of authority

Normal rule = A is employed for his personal qualities so that performance by an unauthorised sub-agent is not permissble

But delegation of ministerial duties is permissible, doesn't require permission from P, and delegation may also be actual or apparent authority to delegate 

Double TP effect here:
(i) might give rise to a contractual relationship between P and TP dealing with sub-agent
(ii) may give rise toa  contract of agency between P and sub-agent

7 of 17

Termination of authority

  • Authority can normally be retracted, even if in breach of contract
  • A's remedy is to sue for damages for breach --> not entitled to keep acting as if still authorised (in case above)
  • In some cases, once conferred, authority is irrevocable
  • A autohrity can be terminated by 
    • agreement
    • P's unilateral act of giving notice of revocation of authority
    • by operation of law in various circ, e.g. P's bankruptcy
  • P can terminate A's authority in part of completely
  • Authority coupled with an interest --> irrevocable until A's interest has been satisfied, and until then it continues, even after P's bankruptcy
  • A's position on termination
    • until recently A's entitlement to compensationw as purely a matter of contract
    • under EEC Agency Directive, on termiantion of agency contract A is entitled to be compensated or, if so provided by agency agreement, indemnified 
    • aim of indemnity is to reflect continuing benefit P will derive from A's work and loss of ocmmission A would have earned in respect of sales 
  • Effect of termination on TP --> doesn't normally affect TP who dealt with P before termination or who acts on basis of usual authoirty and are unaware that A's autohrity has come to and end
8 of 17


  • where A exceeds his authority it may often suit P to adopt the transaction
  • in some of these cases, P might be bound as a matter of apparent authority
  • ratification would nevertheless put the matter beyond doubt
  • in most cases, ratification has a retrospective effect --> backdated to time of A' sact
    • this appraoch rejected as regards law of options, where timely performance is enforced strictly, in Dibbens v Dibbens
  • ratification will not be permitted if in the mean time TP and A cancel the contract by mutual consent 
  • not allowed to upset a proprietary right acquired by some fourth party
  • what you need to do to ratify
    • affirmative action from P
    • doesn't need to be communicated to TP but has to be evidenced
    • in order to be effective, strict requireemnts of elections and affirmation do not apply
  • undisclosed P is not allowed to ratify 
9 of 17

Undisclosed agency

  • Where TP deals with A believing A to be P in his own right when this is in fact not the case --> instead A is bound by contract to someone else, the true P, of whose existence he was not aware
  • Anomaly
  • Limits --> Suu Yin Kwan
    • A must act wihtin its actual authority if there are to be direct contractual dealings between P and TP
    • in its dealings with TP, A must intend to act on behalf of P
  • As a result of A's efforts, A besides having brought A and TP into privity of contract, also incurs liability on the contract with TP and may enforce taht contract
    • A may be personally liable
    • TP may enforce the contract 
  • Set-off 
  • Terms of contract negotiated between A and TP must not be inconsistent with existence of undisclosed party 
  • Undisclosed A and ratification --> undisclosed P cannot ratify A's action by subsequent conduct
  • personal contracts --> if personality of contractual counterparty (a) is sufficiently important in the contract concluded by A on behalf of P --> if in eyes of TP the personality of A is of sufficient importance --> TP entitled to say that they are only dealing with A
10 of 17

Personal liability of A

Contractual liability -->
- normal rule that A incurs no contractual liability but there are exceptional cases, such as undisclosed agency, where A's personal liability arises in addition to that of P

Breach of warranty of authority 
- liability of A for misrepresenting his authority 

Promoters and unformed companies
- current provision = s51 Companies Act
- contract takes effect and A personally liable

11 of 17

Duties of A to P

(1) performance of duties imposed on him by express or implied terms of the agency agreement

(2) fiduciary obligations 

rise of financial and commercial conglomerates makes it almost impossible for A to avoid conflicts of interest --> must manage them 

law allows most of these duties to be excluded or qualified by agreement with P after full disclosure by A of all the material facts

certain limits 
- cannot exclude liability for fraud
- art 3 EEC DIrective on Commercial Agents

Remedies avaialble to P for breach of A's contractual duties are normal remedies available for breach of contract, inc damages

REmedies for breach of fid duty vary according to circumstances --> personal remedies or remedies for the enforcement of proprietary rights

Infringement of A's duties under directive and regulations may also be seaparately actionable as a breach of statutory duty 

12 of 17

Duties of P to A

Hitherto, duties owed by P to A have been left to be determined by express or implied terms of the agreement

EEC Directive on Commercial Agents has changed this --> Art 4 imposes various duties on P from which no derogation is permitted -->

Whether A is entitled to be remnerated for his services depends on express or implied terms of agency agreement

A's remedies for breach of duty by P may be personal or proprietary 

13 of 17

Duties of P to A

Hitherto, duties owed by P to A have been left to be determined by express or implied terms of the agreement

EEC Directive on Commercial Agents has changed this --> Art 4 imposes various duties on P from which no derogation is permitted -->

Whether A is entitled to be remnerated for his services depends on express or implied terms of agency agreement

A's remedies for breach of duty by P may be personal or proprietary 

14 of 17

Position of TP: agency disclosed

  • Where A contracts expressly as agent for P as named or identifable P, T's contract is with P, not with A, and only P can sue and be sued on teh contract
  • This is so even where A exceeds his autohirty in making the contract, though in such a case he becomes liable to T for damages for breach of implied warranty of authority 
  • A can expressly undertake liability, either in substitution for or in addition to that of P
  • In case of signed contracts in writing there is an established rule taht where A signs his own name, he is personally liable unless it is clear from the document that he is signing in his capacity as agent
    • mere addition of words of description afer signature (e.g. 'agent') will not norally suffice to displace A's ability
    • necessary for A to indicate he is actin in representative capacity e.g. 'for and on behalf of P'
  • where A contracts as agent but without identifying P, who actually exists, A will not normaly be liable
    • but liability will be imposed where
      • A is in fact the principal
    • and has sometimes been imposed where
      • P was fictitious of non-existent
      • where A refused to disclose P's identity, thus preventing T from enforcing the contract against P, or
      • his evidence as to his principal is disbelieved
15 of 17

Position of TP: agency undisclosed

  • where A makes a contract as apparent principal, so that T is not aware that he is an agent, the parties to the contract are A and T
  • if T discovers the facts, he may elect to sue P instead of A, while P may intervene to enforce the contract made on his behalf
  • dotrine of undisclosed principle do not apply where
    • (a) the terms of the contract expressly or impliedly exclude P's right to sue and liability to be sued
    • (b) A does not intend to contract on P's behalf
    • (c) T makes it clear he does not wish to contract with anyone other than A
    • (d) P stipulates that A is not to commit P to a contract with TP but is to undertake all transactions on his own behalf 
16 of 17

Dispositions by and to A

Dispositions by A

  • disposition of P's property by A to T will bind P where effected pursuant to A's actual or apparenty authority, in accordance with ordinary agency principles
  • A's power of disposal is not confined to true agency situations in which P is brought into contractual relatinos with T --> also applies where A idsposes of P's goods as a commission agent or agent of necessity 

Dispositions to A

  • where A pruchases goods from T at request of P...
    • A may pruchase as agent for P as disclosed rpincipal or as an undislcosed principal or as a cmmision agent who buys on his account and immediately resells to P 
    • may also antiicpate by confirming an order placed by P with T
  • title may pass direct from T to P without going through A, or may pas through A to P without any interval between A's acquisition and that of P, or may be held by A on trust for P or as beneficial owner until A has appropriated the goods to his contract with P 
17 of 17


No comments have yet been made

Similar Law resources:

See all Law resources »See all Contract resources »