3) Agency

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Who is the principal?
The principal is the person who instructed and legally empowered the agent to enter into a contractual relations with a third party.
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Where an agency relationship exists who is privy to the contract?
Th agent by entering into the contract establishes privity of contract between the principal and the third party. The contract is thus enforceable both by and against the principle and the third party. The agent effectively drops out of the picture.
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Does the agent have any rights and obligations in respect of the contract?
No, provided they have acted within their authority.
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Who needs full contractual capacity, the agent or the principal?
The principal must have full contractual capacity but the agency does not need it as they don't form contracts with third parties on their behalf.
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What is a commercial agent?
is an independant individual or company who has a continuing authority in connection with the principals business of the sale or purchase of goods.
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How can agency be created?
By consent, estoppel, necessity and ratification.
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How is consent given to create agency?
Consent may be express or implied. Agency can be expressly created either orally or in writing.
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When does consent need to be in writing to create agency?
If the agent is to execute a deed on the principals behalf then the agency must be created by deed? Essentially in this case the agent is given power of attorney.
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When is it usual but not necessary for consent to be given in writing to create agency?
In commercial translations it is usual to appoint an agent in writing so that the terms and extent of the relationship are set down to avoid misunderstanding.
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When does agency by estoppel arise? (operation law)
When the words or conduct of the principal give the third party the impression that the person who purports the contract with the third party is the agent and the third party acts on it as a result. The third party assumes the agent has authority.
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What happens when agency by estoppel arises?
The principal is estopped or prevented from denying the existence of the agency and so is bound by the contract.
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What happens if the agent holds themselves out as the agent?
There is no creation of agency as estoppel only arises when the principal holds the agent out.
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1) Example of when agency by estoppel arises?
Occurs when an agent who has had their authority revoked continues to act for the principal and the third party is not aware of revocation.
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2) Example of when agency by estoppel arises?
Occurs when a person enters into transactions to the principals knowledge as if they were the principal's agent and the principal fails to inform the third party that the agent has no authority.
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When may agency by necessity arise?
when a person is faced with an emergency in which property or interests of another person are in immediate jeopardy and in order to preserve that property or interests it becomes necessary to act for that person without their authority.
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What elements must apply for agency by necessity to arise?
1)Already existing contractual relationship 2)Agent has no way of contacting principle 3)Agents actions arose from pressing need for action 4)Agent acted in good faith in the interests of the principal 5)Agents actions were reasonable and prudent
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When does creation of agency by ratification arise?
when an agent makes a contract on behalf of a principal at a times when they had no authority. The principal may ratify the contract which has a retrospective effect of establishing an agency. The principal may sue or be sued by the third party
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What is needed for agency by ratification to arise?
The principal must of been in existence at the time of the agents act & the agent must have sufficiently identified the principal.The principal must have had the legal capacity to make the contract themselves when the contract was made & retification
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How much the principal have communicated ratification?
The principal must communicate a sufficiently clear intention of ratifying either by express words or conduct
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What happens if you ratify part of the contract?
Ratification of part of the contract will operate as a ratification of the entire contract.
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When does an agent have an obligation to their principal?
Where an agent agrees to perform services for their principal for reward there is a contract between them. Even if the agent undertakes their duties without reward (provided there is some consideration) they have an obligation to their principal.
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What are the duties of an agent?
1) Accountability 2) Avoid conflict of interest 3) Perform contractual obligations 4) Obey the principal 5) Maintain a standard of skill & care 6) Act in person and not delegate 7) Confidentiality
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How must an an agent be accountable?
They must be accountable for all transactions. An agent must provide full information to their principal of their agency transactions and account for all money arising from them.
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What is considered as a bribe to an agent?
If they accept any commission from the third party it is considered to be a bribe and the contract is fraudulent. The agent can be dismissed and the principal can recover the bribe from the agent.
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When must an agent act strictly in accordance with their principals instructions?
In so far as these are lawful and reasonable. Even if the agent feels that disobedience will be in their best interest they must still obey.
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What are an agents rights (a principals duties)?
Remuneration (expressly agreed or inferred by circumstances - reasonable amount), repaid expenses (even if not legally bound to pay) and indemnified against losses and liabilities and to exercise lein over property owned by principal.
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How is authority given to an agent?
Actual express authority, actual implied authority and ostensible (apparent) authority
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What is actual express authority?
This is authority given by the principal to the agent in order to make a particular contract. For example 'act as my agent and buy 13 wheelbarrows for X for under £Z'
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What is actual implied authority?
Authority that is implied to do all the things that are incidental to actions expressly authorised and to do all the things that are usual by virtue of the agents office. They are not expressly stated but they are part of the agents actual authority.
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When are thirds parties allowed to assume a third party has actual implied authority?
Always unless hey know to the contray.
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Example of actual implied authority?
1) An agent appointed to sell a car will have actual implied authority to advertise the sale of the car. 2) partners will have implied authority to do the usual things partners do e.g employ people, rent office & purchase stationary.
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What is ostensible (apparent) authority?
Occurs when a principal has made representations to a third party that the agent has the power to bind, causing the third party to rely on the representation. As a result of this an agent with limited actual authority is held to have more authority.
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Is it the conduct of the principal or the agent who creates ostensible authority?
The principle's conduct. an agent cannot claim apparent authority or hold themselves out to have it. (It does not matter whether there is a pre-existing agency relationship or not)
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When will the third party be able to hold the principal liable?
The agent must make the representation to the third party and it must be shown that the third party relied on that representation and there must be a casual link between the third party's loss and their reliance on the representation.
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When may ostensible (apparent) authority occur?
When a principal has represented to a third party that an agent has authority but it is later revoked. the principal will be liable unless they have informed the third party of the revocation.
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Example of ostensible (apparent) authority?
A partner gas considerable but limited authority by virtue of being a partner. If the other partners allow them to exercise greater authority than implied, they represent that they have greater authority and they are bound by contracts they make
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When an agency relationship exists who is normally liable?
The principal and third party may sue and be sued on the contract and the agent has no rights and liabilities on the contract
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Who is liable where the agent has authority and known to be the agent?
The agent is not liable unless the parties intended otherwise. The agent might incur personal liability under rules of trade usage, where they add their name as party to a negotiable instrument and where they make a contract under seal
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Who is liable where the agent has authority (at the time of making the contract) but is not know to be the agent?
Either the agent or the principal may sue on the contract (but the agent's rights are subordinate to the principal's) and either the agent or the principal may be sued on the contract (but the third party must choose which one).
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Who is liable when the agent has no authority?
If the agent has no authority, the principal cannot sue or be sued on the contract unless they choose to ratify it.
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Who is liable when the agent has no authority and knows that they have no authority?
If the agent, knowing that they have no authority, makes a representation to the contrary and causes loss to the third party, they may be liable for the tort of deceit.
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Who is liable when the agent has no authority but believes that they authority?
The agent may be liable for breach of warranty of authority. This applies not just to contracts but to any business transaction.
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Other cards in this set

Card 2

Front

Where an agency relationship exists who is privy to the contract?

Back

Th agent by entering into the contract establishes privity of contract between the principal and the third party. The contract is thus enforceable both by and against the principle and the third party. The agent effectively drops out of the picture.

Card 3

Front

Does the agent have any rights and obligations in respect of the contract?

Back

Preview of the front of card 3

Card 4

Front

Who needs full contractual capacity, the agent or the principal?

Back

Preview of the front of card 4

Card 5

Front

What is a commercial agent?

Back

Preview of the front of card 5
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