Agency relationship Essay

1. INTRODUCTION part is a fiduciary kind created by express or implied contr fleck or by law, in which unrivalled fellowship (the instrument) whitethorn fleck on behalf of other caller (the header) and secure that other companionship by intelligence informations and/or actions. The etymology of the word means or performance says much. The words atomic number 18 derived from the Latin verb ago, agere (the various(prenominal) noun agens, constituentis). The word de bank lines one who acts, a doer, force or top executive that accomplishes things.1 federal office is the exception to the doctrine of privity downstairs the law of narrow.2. LIABILITY OF A brain AGAINST THIRD PARTIESLord Alverstone CJ in THE QUEEN V KANE2 defined an instrument simply as both psyche who happens to act on behalf of a nonher. A confidential information is one who authorizes a nonher to act on his or her behalf as an divisor.The full general rule is that where an broker fixates a consider on behalf of his school brain, the extort is betwixt the star and the tertiary companionship and prima facie at common law, the exclusively person who lavatory accomplish and be sued on the contract is the brain. The component barbels no objurgates on a lower floor the contract, nor does he welcome whatever obligation. Having performed his undertaking by bringing about a contract among his caput and a leash ships attach to, the operator drops out of the picture theater to any outstanding presss in the midst of him and leading.3 The onus is on the person alleging that he bowed into a contract with another person through an means to take the stand that in event the performer was acting as such. Agents of the state can never be face-to-facely unresistant for the states affliction to perform a contrexisting obligation as express in STICKROSE (PTY) LIMITED V THE PERMANENT SECRETARY MINISTRY OF FINANCE4. In law, ingredients are recognized as having the power to affect the healthy rights, liabilities and descents of the point(prenominal). In CAVMONT merchant BANK v AMAKA AGRICULTURAL HOLDINGS5, the Supreme Court held that where an doer in making the contract discloses both the interest and the hangs of the principal on whose behalf he purports to make a contract, the operator as a general rule is not liable to the other contracting party. Apart from having the power to affect the legal rights, liabilities and relationships of the principal, the constituent whitethorn besides affect the legal position of his principal in other ship canal. For instance, he whitethorn jail of the principals property inorder to transfer self-command to a triplet party or he whitethorn acquire property on his principals behalf. Sometimes the actions of the factor may make the principal criminally liable as illustrated in the character reference of GARDENER v ACKEROYD6.The rights and liabilities of principal and agent agai nst ternion parties may take issue according to whether the office staff is tell or covert. The distinction between disclosed and disclosed mental representation is important as it affects the principals exponent to ratify the agents actions. Furthermore, the agents liability to terce parties may depend on whether the agency was disclosed or not. Agency is disclosed where the agent reveals that he is acting as an agent if the agency is disclosed it is of no legal significance that the principal is not charged. If an agent contracts with a third party without disclosing that he is acting as an agent the agency is covert.7 An undisclosed principal can intervene on the contracts of an agent inside his veridical dominance.Where an agent makes a contract disclosing the agency, the mean(prenominal) rule is that a direct contr literal relationship is created between the principal and the third party and either party can sue the other on the contract. It is important to note t hat only a disclosed principal can ratify an unauthorised contract. In KEIGHLEY MAXTED v DURANT8 a principal authorized an agent to buy drinking straw at a accustomed price in the joint names of the principal and the agent. Having failed to purchase wheat at that higher price, the agent bought wheat in his own name at a higher price. The principal cosmos snug with this act purportedly ratified the wheat purchase engagement at a higher price but failed to take delivery of the wheat.The vender indeed sued the principal arguing that the sale contract had been ratified. It was held that the action could not play along because the agents act was unauthorized and since the principals identicalness had not been disclosed to the addressor, the principal could not ratify and consequently was not liable on the contract. Where the principal is disclosed, he and not the agent is liable on the contract and may sue and be sued. In GADD v HOUGHTON & CO.9 Houghton & Co. sell to the buyers Gadd, a quantity of oranges under a sold note which stated, inter alia, that we receive this day sold to you onaccount of pack Morand & Co . and signed Houghton & Co. The seller having failed to deliver the oranges, the buyer sued Houghton & Co for restoration for non-delivery. The action failed, since by the words of the sold note Houghton & Co had distinctly indicated that they were not to be personally liable.They were merely brokers. Lord Mellish stated that where you run across a person in the body of the instrument treating himself as the seller or character, you can say that he intended to bind himself. In SUI YIN KWAN & ANOTHER v EASTERN INSURANCE CO. LTD10 it was held that the doctrine of undisclosed principal applied. Where an agent acts within his actual confidence the undisclosed principal may intervene and acquire the rights/liabilities of the agent. In this case, the agents acted within their actual agency and therefore, the relatives could reclaim from the in surance company.Lord Lloyd summarized the law as follows (1) an undisclosed principal may sue and be sued on a contract made by an agent on his behalf, acting within the ground of his actual authority. (2) In immersion into the contract, the agent must intend to act on the principals behalf. (3) The agent of an undisclosed principal may also sue and be sued on the contract. (4) Any defence which the third party may have against the agent is available against his principal. (5) The terms of the contract may, expressly or by implication, exclude the principals right to sue, and his liability to be sued. The contract itself, or the circumstances surrounding the contract, may show that the agent is the true and only principal.Sometimes the agent contracts with third parties after disclosing the fact, that he is an agent but without disclosing the name of his principal. In such cases, the principal is rim by the contracts made on his behalf. And thus, the principal is liable to third parties for his agents acts done on behalf of the principal. However, such acts must be within the scope of the agents authority, and the unnamed principal must be in world at the time of contract. As a matter of fact, when the agent contracts after disclosing his representative character, the contract will be the contract of the principal. For all such acts, the agent is not personally liable. However, the agent is personally liable if he declines to disclose the identity of the principal when asked by the third parties.11When there is undisclosed agency, the contract is initially between agent and the third party and each may practice the contract against the other. However, if the third party later discovers the principals existence, he may enforce the contract against either the agent or the principal. Provided that the agent acted within the scope of his actual authority, the principal can intervene and enforce the contract against the third party.123. CIRCUMSTANCES WHEN AN AGENT MAY BE HELD PERSONALLY reasonable If an agent continues to act after his authority has been terminated, he may incur personal liability for breach of implied warranty of authority. Sometimes an agent may suffer a potential risk when his authority is terminated mechanically without his knowledge. In the case of YONGE v TOYNBEE13 where solicitors were acting in litigation for a client who, unknown to them, became mentally incapacitated so that the agency was considered to be terminated. However, they keep to litigate for the client and were held liable for their breach of warrant of authority and were ordered to pay the costs of the other litigant.There are triad exceptional cases where the undisclosed principal cannot sue or be sued, by the third party. The first is where the contract between the agent and the third party expressly provides that the agent is the sole principal U.K MUTUAL STEAMSHIP sanction ASSOCIATION v NEVILL14. The second is where the terms of the contra ct are discordant with agency. In HUMBLE v HUNTER15, an agent signed a charter-party in his own name and described himself as proprietor of the ship. It was held that his undisclosed principal could not sue.The third case where an undisclosed principal cannot sue is where the identity of the principal is material to the third party. One such case is where the contract made between the agent and the third party is too personal to permit an undisclosed principal to intervene, for example, contracts for personal service. In the case of verbalize v BUTT16, a theatre critic knew the management of a contingent theatre would not sell him a ticket because of articles he had written. He obtained a ticket through an agent. It was held that the theatre could prevent the principal from launching the theatre. McCardie J said that the critic could not assert a right as an undisclosed principal since, as he knew, the theatre was not willing to contract with him.Even where the undisclosed princi pals existence is discovered, the agent remains liable on the contract and the third party may choose to enforce the contract against either principal or the agent but not both. This is known as the right of election. A third party has an elective right to sue either the agent or the principal where the agent does not disclose the principal. In BOYTER V THOMSON17 the seller instructed agents to sell on his behalf a cabin cruiser under a brokerage and agency agreement. The buyer purchased the boat thinking it was possess by the agents and he was not told that the agents were acting as such nor the name of the owner nor that the owner was not selling in the course of a business although he was aware that the boat was being sold under a brokerage arrangement.The boat proved to be unseaworthy and was high-risk for the purpose for which she was purchased. The buyer sued the seller for damages which were granted. The seller appealed to the House of Lords where goods were sold by an agen t acting in the course of business for an undisclosed principal the buyer was entitled to sue not only the agent but also the principal. Once the third party elects to sue one party, his option to sue the other is extinguished. However, not any action by the third party suggesting action against one party in election for another will be construed as the exercise of the right of election. In CURTIS v WILLIAMSON18, one Boulton appearing to act on his own behalf purchased around gunpowder from the plaintiff. Later, the plaintiff discovered that Boutlton was acting on behalf of an undisclosed principal, the defendant mine owners.Boulton then filed a petition of liquidation and the plaintiff filed an execration in those proceedings in an attempt to recover the debt owed for the gunpowder. However, the plaintiff changed their header and sued the defendant principal. It was held that once an undisclosed principal is discovered the third party may elect to sue that principal and second ly, that the filing of the affidavit against the agent did not prevent the action against the principal. The third party will not be bound by an election unless he has unequivocally indicated his determination to hold one party liable and release the other. The doctrine of the undisclosedprincipal exists for purposes of commercial message convenience, it is important to maintain protections for the third party. In the internet site where the agent has failed to pass the payment to the third party, either the principal or the third party will lose and it seems fairest to place the loss on the principal.194. HOW AGENCY MAY BE DETERMINEDAs the relationship between the agent and his principal is based on accord, actual authority is of prevalent importance. An agent is only entitled to be paid if he acts within his actual authority. If he acts outside his authority he may be liable to his principal. The relationship between the principal and a third party depends on the agents power to bind his principal. However, what is of concern to the third party is the agents unmixed authority as this is what he relies on in the ordinary course of events. There are some(prenominal) types of authority. These are a) Express Authority the agreement between a principal and agent may be express or implied. Express agreement may be made orally, in writing or by deed. In general, if an agent is appointed to execute a deed his designation is by deed called a power of attorney. b) Implied Authority swipes where, although a accompaniment action is not sanctioned by express agreement between the principal and the agent, the principal is nevertheless taken to have impliedly consented to the action or transaction in question.In GARNAC GRAIN CO. v H.M.F. FAURE AND FAIRCLOUGH20 the House of Lords stated that the relationship of principal and agent can only be set up by the consent of the principal and agent. They will be taken to have consented if they have agreed to what amount s at law as a relationship even if they do not recognize it themselves and even if they have professed to refuse it. An agent who has express authority to carry out a position task may also have additional authority to do certain acts incidental to his authorized task For instance, an agent authorized to sell the principals property has implied incidental authority to sign a contract of sale. c) Apparent Authority a person may be bound by the acts of another done on his behalf without his consent or even in breach of an express prohibition if his words or conduct create the impression that he has authorized the other person to act on his behalf.This is described at law as unvarnished agency orauthority or ostensible agency or authority. The distinction between actual and unmixed authority was explained by Diplock L.J. in FREEMAN & LOCKYER V. BUCKHURST PARK PROPERTIES21. Apparent or ostensible authority, is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted on by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the apparent authority, so as to render the principal liable to perform any obligations imposed on him by such contract.To the relationship so created the agent is a stranger. He need not be (although he broadly is) aware of the existence of the representation. The representation, when acted on by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract. It is irrelevant whether the agent had actual authority to enter into the contract.d) Agents of Necessity A person who acts in an requisite, for instance, to preserve the property or interest of another may be treated as an agent of necessity. His actions will be deemed to have been authorized even if no a ctual authority is given. Like apparent authority, an agency of necessity can arise even in the absence of consent from the principal. Agency of necessity only arises in extreme circumstances where there is actual and definite commercial necessity for the agents actions. The following must be satisfied for an agency of necessity to exist(i) There must be an emergency something unforeseen.(ii) It must be practically unrealizable to get instructions for the principal. (iii) The agent must act bona fide in the interest of the principal rather than to advance his own interests. He must not take advantage of the principal. (iv) The agent must act reasonably in the circumstances.e) Agency arising out of Co-habitation It is debated that a wife has authority to pledge the credit of her hubby for necessities (or vice versa). However, others argue that social conditions now make it old fashioned to suggest that actual or apparent authority should not arisebetween husband and wife.The law recognizes the following as agents even though they do not bear the title of agent22 (a) Company Directors and other company officials being an semisynthetic person, a company has to act through human agents. Then authority to act as company agents is vested in the board of directors. This authority may be delegated to one or more executive directors by the articles of the company to allow him to manage the day-to-day operations of the company. (b) Partnerships as a confederation has no separate legal identity from its members, every partner in a firm is an agent of the firm as easy as all other partners for the purpose of the business of the firm.Thus, a partner who performs an act for the purpose of carrying out the business of the firm, binds the firm as well as the other partners. (c) Employees may be servants working under a contract of service or an independent contractor working under a contract for services. An employee e.g. a shop assistant is the agent of the shop o wner for the purposes of making a contract of sale for the owner. He has the authority to make statements about goods that are binding on the shop owner, his employer. (d) Professionals acting on behalf of clients may be the agents of those clients. E.g. a lawyer conducting litigation is his clients agent and may have authority to settle the case and that closedown will bind the client. Thus the lawyer, not the client, normally signs a consent judgment. Similarly, an accountants agreement or statement to ZRA will bind his client in accordance with agency principles.The relationship between principal and agent depends on consent. If withdrawn, the agency will automatically end, as well as the agents actual authority to bind the principal. An agency relationship may be terminated in the following ways (a) By mutual consent between the agent and the principal.(b) By either party unilaterally withdrawing consent.(c) An agent may have been appointed for a fixed period of time or for a specific task or set of tasks. Once the time elapses or the task(s) is/are accomplished the agency will terminate. (d) By operation of law e.g. if theperformance of the agency relationship becomes illegal (e.g. one party becomes the citizen of an alien enemy) or impossible (where it will be ended by the agency contract being frustrated). Death of either party will also terminate the agency and any contract made between them. If an agent becomes insane, the relationship is automatically terminated. The bankruptcy of either the agent or the principal will also end the agency.23The Effect of Termination vis a vis Third PartiesThe agent may continue to have apparent authority even if actual authority has been terminated. If the principals conduct is such as to suggest to a third party that the agent continues to have authority. Until the principal brings the termination of the agents authority to the notice of a third party, the agent may continue to have apparent authority on the stre ngth of the principals representation. DREW v NUNN24 the principal became insane but his wife, who was his agent, continued to act in his name. When he recovered from his insanity he well-tried to disclaim liability for acts done by his wife during his insanity/incapacity. Held The agent i.e. his wife, had apparent authority and therefore he was bound. However, where an agents actual authority is terminated by the principals death or bankruptcy the agent will automatically cease to have apparent authority.