Agency law
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AGENCY LAW. Saturday 10 th February 2012. AGENCY LAW. Agency is a relationship which exists between two legal persons; i.e. the principal and the agent

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Agency law


Saturday 10th February 2012

Lecturer: Rowin Gurusami

Agency law1


Agency is a relationship which exists between two legal persons; i.e. the principal and the agent

Area of commercial law dealing with a contractual or quasi-contractual tripartite, or non-contractual set of relationships when an agent is authorised to act on behalf of another (called the principal) to create a legal relationship with a Third Party

Lecturer: Rowin Gurusami

The agent


Contract always between principal and the third party

Types of agent:


Company Directors



Commercial agents

Lecturer: Rowin Gurusami

Formation of agency


Relation created by mutual consent

No requirement to be formal or written

Can be through express agreement (written or oral)

Or through an implied agreement, due to relationship or conduct of the parties

Agent by estoppel (when principal holds out a person to be his agent & third party relies on it)

Lecturer: Rowin Gurusami

Formation of agency1


Agent by necessity

happens when no contact can be made with principal

there must be a pressing need for action (usually an emergency)

action taken in good faith in the best interests of the principal

action was reasonable and prudent in the circumstances

Lecturer: Rowin Gurusami

Formation of agency2


Principal can subsequently ratify an act of an agent retrospectively


Principal must have existed at time of contract creation

Principal must have had legal capacity at the time

Ratification must take place within reasonable time

Must ratify contract in its entirety

Communication of ratification to 3rd party sufficiently clear

Once ratified, agency relationship has same effect as if expressly formed before contract made by agent

Lecturer: RowinGurusami

Fiduciary duty


Must not allow personal interests to conflict with those of principal

Always act in best interest of principal

Must not make secret profit

Duty to account to principal for all money & property received

Remedies for breach of fiduciary duty:

Repudiate contract

Dismissed without notice

Refuse to pay any money or recover money already paid

Recover any secret profit made or any bribe

Lecturer: RowinGurusami

Authority of agent


If acting within limit of his authority, any contract agent makes is binding on both principal and 3rd party

Express authority:

Authority explicitly given by principal to agent to perform particular tasks, along with powers required to perform them

Extent of express authority depends on construction of words use on appointment

If agent contracts outside scope of express authority, he is liable to principle and 3rd party for breach of warrant of authority

Lecturer: RowinGurusami

Authority of agent1


Implied Authority:

Can be implied from nature of agent’s activities or from what is usual or customary in circumstances

Expressed authority always override any implied one

3rd parties are to assume that agent has implied authority unless they know to contrary (Watteau v Fenwick 1893 and Hely-Hutchison v Brayhead Ltd 1968)

For limitation of authority to be effective, it must be communicated to 3rd party before contract created

Lecturer: RowinGurusami

Authority of agent2


Apparent/Ostensible Authority:

What a principal represents to others that he has given to the agent

Arises when either:

principal represented agent as having authority even though he has not actually been appointed, or

Principal has revoked the agent’s authority but 3rd party has not been notified of this(Willis Faber & Co Ltd v Joyce 1911)

Lecturer: RowinGurusami

Ostensible authority


Principal may expressly or by inference from conduct confer on agent any amount of ostensible authority




Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd 1964 held that company bound by contracts made by director who was not officially appointed as Managing Director as company had by acquiescence led claimants to believe the director was an authorised agent and claimants relied on it and altered its position as a result

Lecturer: RowinGurusami

Liability towards 3 rd party


Agent contracting for principal within actual and/or apparent authority generally has no liability on contract and not entitled to enforce it

Will be personally liable if:

Intended to undertake personal liability

Usual business practice or trade custom for agent to be liable

Acting on his own behalf even though he purports to act for a principal

Joint liability of agent and principal if agent did not disclose he acted for a principal

Lecturer: RowinGurusami

Principal s liability


Agent has right :

To have full disclosure of all information relating to the transactions he is entertaining on behalf of the principal

To claim remuneration or commission for services performed

To claim indemnity for all expenses reasonably incurred

To exercise lien over principal’s property

Lecturer: RowinGurusami

Termination of agency


Agency is terminated by agreement or operation of the law

Terminated when parties agree that relationship should end

Terminated by operation of law if:

Principal or agent dies

Principal or agent becomes insane

Principal goes bankrupt or agent becomes bankrupt and this interferes with his position as an agent

Lecturer: RowinGurusami

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