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AGENCY PART I

Definition
 Agency  When legal rights/obligations between one party (principal) and another party
(third party) can be created/modified through intermediary party (agent)
 Principal  Agent  Third party
 When agent has authority, they can create contract between third party and principal 
agent is not bound by any contract he signs  he signs on behalf of third party
 Agent = conduit (link)
 Breach of contract  principal sues third party vice versa  agent not liable for contract

Effect of Agency
a. Dealing between agent and third party creates contract (or other legal repercussions)
between principal and third party
b. Principal generally liable to third parties for improper conduct of agent  vicarious
liability
c. Agent acting within authority is not a party to any ensuing contract and the agent's
personal interest is not affected by the dealings
 Southwell v Bowditch (1876) 1 CPD 374:
 “A person known to have acted as a representative cannot be sued as if it was a party
to a contract”

Common Agent Situations


 Dealings of incorporeal entities  no physical form/body (no flesh and blood) 
creation of law rather than creation of nature
 Board of directors of corporation and authorised officers/employees are agents of
corporation  law recognises corporation as a separate legal entity, but it has no
physical body with which to act (incorporeal)
 Geographical distance  i.e. Power of Attorney (legal proof that grants rights to sell
land/shares)
 Desire for anonymity  i.e. Undisclosed principal  don’t want identity of seller/buyer
to be known
 Specialised expertise  i.e. Lawyer, auctioneer, stockbroker

Position of Real Estate Agent (Pseudo (fake) Agent)


 Real estate agents often don’t have power to sell property on behalf of owner but act as
finder to bring buyer and seller together  independent contractors
 In trade and statutory intervention, even when not acting as "true" agent, real estate agent
will owe some fiduciary duties to client relative to property being sold.
 Fiduciary duties owed  no bribe, full disclosure of every offer available
Creation of Agency
 Not as important as authority
1. Express Agency  agent expressly appointed by principal
i. By deed or by written/oral agreement
 By deed  Power of Attorney:
a) Must be in form of deed (signed and witnessed by independent person) (Property
Law Act 9)
b) Any legal transaction done by a person ("donor" of power) in their own behalf
generally done by agent endowed with that person's power of attorney ("donee")
(Property Law Act 84)
 By written/oral agreement  i.e. owner of car grants power to friend to sell car for
min of $3000
ii. Estoppel/Holding Out
 Relationship is created by the “principal” holding out or representing that the “agent”
is their agent or permitting the “latter” to do so.
2. Ratification  Retrospective Conferral of Authority
 When agent does not have authority but principal wishes to adopt contract, principal
can do so through ratification.
 Retrospective Agency:
 Doctrine whereby principal can expressly ratify ineffective action of "agent" after the
fact (retrospectively)
 Common circumstances where ratification may be necessary to make actions of agent
effective and binding on principal and third party:
a) When person claims to act on behalf of principal, before/after being appointed and
leaves position as agent
OR
b) When agent acts on behalf of principal but acts in a way beyond actual authority
granted by principal  More likely  i.e. agent sells at too low a price, or sells on
credit when instructed to only sell for cash
3. Agent of Necessity  special circumstance (emergency)
 Pre-existing voluntary relationship between the "principal" and "agent" (not a true
agency to start off) that "agent" in proximity of property belonging to "principal" (e.g.,
a contract for transport or storage of P's property, a bailment, or even some informal
arrangement that falls short of such legal classifications such as asking a neighbour to
keep an eye on your house (voluntary) while you are away)
a) Immediate resolution to preserve property of "principal" required (crisis with some
action clear, absolute need, "necessity")
b) Resolution required before communication with principal is feasible
c) Agent honestly endeavours to act in best interests of principal
 Great Northern Railway Co v Swaffield (1874) LR 9 EX 132
 Example:
 Sea captain in faraway port with deteriorating goods sells those goods and original
owner of goods sues third party and "agent" for conversion
 Emergency repairs ordered by "agent" from third party on behalf of "principal" and
third party sues principal for cost
 Money paid out by "agent" to rectify an "emergency" and agent wants
reimbursement from "principal"
Authority of Agent
 Important principle  When an agent has been appointed we need to consider authority
that agent has to bind principal to third party
 In a question talk about EAA, IAA and OA
1. Actual authority  relationship between principal and agent
a) Express Actual Authority  agent actually conferred authority to carry out
particular act on principal’s behalf  Did agent know that he/she had authority?
b) Implied Actual authority  agent told expressly to carry out an act but in order to
do that, it’s implied agent may carry out ancillary (necessary) acts  authority is
understood to be there  all the ancillary acts there to sell a car (advertising,
detailing, repairs etc.)
 Examples of IAA:
i. Business efficacy (smooth running of business, agent and principal)
 Person is appointed to position or given responsibility for job which cannot be
effectively accomplished unless that person has authority in question.
 ANZ Bank Ltd v Ateliers de Constructions Electriques de Charleroi (1966) 39
ALJR 414 (Privy Council)  true agency relationship
 Australian company, the agent, taking orders and collecting payment for foreign
machinery manufacturer, the principal - cheques made out to principal deposited
by agent into agent's own Australian bank account when principal had no
Australian bank account - agent goes bankrupt and is therefore judgment proof
{the bank account is seized by bankruptcy authorities}, principal sues bank for
conversion for allowing agent to deposit cheques made out to principal into
agent's personal bank account - bank proves agent had implied actual
authority to bank cheques in Australia because that was the only practical way
to perform its function under the given circumstances and currency controls
then in effect - principal takes the loss
 The bank is able to deposit cheques for principal into agent’s account  agent
has implied actual authority
ii. Customary authority
 Powers of representation customarily attached to particular job/position, even if not
essential (need not also prove "business efficacy")
iii. Past dealings
 If principal has previously allowed agent to do this type of conduct, and from
objective viewpoint of reasonable agent circumstances have not changed (no
reason for agent to believe authority is withheld in this instance)
 NOTE: overriding and pre-eminent rule  actual authority (express/implied)
cannot exist if it is inconsistent with expressed intent or "implied intent of
principal"
2. Ostensible/apparent authority  Authority by estoppel  relationship between principal
and third parties
 Principal "holds out" agent as having authority in question.
 “Would reasonable person in position of third party, in reliance on some conduct of
principal, have thought that agent had authority in question?”
 Freeman & Lockyer v Buckhurst Properties (Mangal) Ltd [1964] 2 QB 480 
architectural contract necessary for property development company  HOLDING
OUT EXAMPLE
 FACTS  K and H formed company to develop land. The development was left to
K who with the knowledge of the board of directors acted as Managing
Director/CEO though never formally appointed. K appointed firm of architects
which later sued for non-payment of fees
 When the board has knowledge and they don’t stop him  company is estopped 
prevented from going back
 HELD  K had ostensible authority because (criteria for ostensible authority)
a) Representation that k had authority was made  even though no words 
company didn’t stop him  with knowledge of company he called himself MD 
holding out
b) Representation by person/s who had actual authority (board of directors) was
made
c) Third party relied on representation
 Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd [1971] 2
QB 711  Ostensible authority of company secretary (hiring luxury cars within usual
authority of officer of company in this type and size of business)
 FACTS  Company secretary hired luxury car in company’s name but for personal
use
 HELD  Need to consider customary authority attach to position held by individual
in business
 Agent may possess implied and ostensible authority when agent is appointed to
position  implied authority may be taken away by principal but ostensible
authority may still be present  implied actual authority is negated by term of
employment contract, but car hire firm has no notice of restriction  company
bound to contract for car hire by secretary's ostensible authority
 Overlap Between Ostensible Authority and Implied Actual Authority (DON’T REALLY
UNDERSTAND)
 Similarities in creation/source of authority (both ostensible authority and implied actual
authority) can arise from same set of circumstances (i.e. "agent" is {publicly} appointed
to particular position such as partner, or company director).
 Distinction between implied actual authority and ostensible authority is in negation of
authority:
a) Implied Actual Authority negated by contrary intent among agent and principal
(whether or not contrary intent is disclosed/evident to third parties)
b) Ostensible Authority only negated by actual or constructive notice to third party
about special limitation on authority
 Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd [1971]
2 QB 711  overlap of implied actual authority and ostensible authority
 Implied actual authority for company secretary in size and type of business to hire
luxury cars is negated by term of employment contract but car hire firm has no
notice of that restriction  company bound to contract for care hire by secretary's
ostensible authority