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BUSINESS LAW – LAW OF AGENCY (lecture 5)
Agency is the fiduciary relationship which exists between two persons, one of whom expressly or impliedly consents that the other should act on his behalf so
as to affect his relations with third parties, and the other of whom similarly consents so to act or so acts
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Agency and other relationships distinguished: common agent (where P
authorizes A to enter into the contract with C in A’s own name); direct selling (internet); distributor (distributor buys goods form business and get title to
them, which does not happen with agency); licensing (owner of a design of goods or owner of an industrial process can grant a licence to sell or manufacture
the products in question)
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e
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An agent who acts within the
scope of authority conferred by
his principal binds the principal
in the obligations s/he creates
against third parties
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HOW DOES AN AGENCY
AGREEMENT ARISE?
*Necessity – Great Northern
Railway v Swafffield; cf Sachs
v Miklos (has to be some type
of emergency)
*Ratification – principal
confirms the agency after the
contract has been entered into Borvigilant (owners) v owners
of the romina; kelner v baxter
ACTUAL AUTHORITY:
*Express agreement –an agent
has been expressly told s/he
may act on behalf of a principal
(Ireland v Livingstone)
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Depends
on the express words used by P
– a matter of evidence
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This type of authority can
either expand scope of A’s
actual or apparent authority or
be seen as an independent head
of authority
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Agency by Estoppel – If a principal
creates the impression that an agent is
authorized but there is no actual
authority, third parties are protected so
long as they have acted reasonably
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* Rama Corporation Ltd v Proved Tin
and General Investments Ltd - cannot
call in aid an estoppel unless you have
three ingredients:
(i) there must be a representation that
the agent has authority – express or
implied eg from dealings or from
conduct
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It was the board of directors
which made the representation, by
allowing the director to act as de facto
managing director
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Entering into a contract with the agent
will be sufficient
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Constructive notice is
insufficient
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BUT it may be determined that C
ought to be aware of A’s lack of
authority – Overbrooke Estates Ltd v
Glencombe Properties Ltd
*NB Watteau v Fenwick - Even if the
agent does act without authority, the
principal may ratify the transaction and
accept liability on the transactions as
negotiated
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g
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DUTIES OF AGENTS
*The agent has a duty to perform
agreed tasks and follow instructions –
even where A believes that P’s interests
could be better served by doing
something else
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– The standard of duty of A
acting without payment is not
necessarily any lower than that for a
paid agent
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*Fiduciary duties – duty to account; to
avoid conflict of interests (that is, the
agent cannot engage in conduct where
stands to gain a benefit for himself to
the detriment of the principal Armstrong v Jackson); not to make a
secret profit (Boardman v Phipps); not
to take a bribe (Boston Deep Sea
Fishing and Ice Co v Ansell); to
maintain confidentiality
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An agent must
not usurp an opportunity from the
principal by taking it for himself or
passing it on to a third party
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RIGHTS OF THE AGENT
*A is entitled to payment from P for his
services and expenses if there is an
agency contract – and express (or
implied) term that A will be paid –
Luxor (Eastbourne) v Cooper
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The right to use such lien may be
excluded by the terms of the agency
contract – Wolstenholm v Sheffield
Banking Co
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*P can revoke A’s
authority as long as A has
not fulfilled his
obligations and/or
properly incurred
personal liability, since he
is then entitled to be
reimbursed by P
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Other ways:
*A’s task comes to an
end
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*Agreement between A &
P to terminate the
relationship
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*Frustration of agency
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Effects of termination
on pre-existing claims
*Although an agent’s
authority may be
terminated, this deals with
the future situation
between the parties
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*If an agency is for fixed
period, it is a matter of
construction of the
contract as to whether A
has a claim if P goes out
of business before the end
of the period

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