Agency 1

Basics
A person who acts on behalf of another is referred to as an Agent (A) (The
Queen v. Kane). Because he or she establishes a connection between the
Principal (P) and the Third Party, he or she has the ability to influence the
legal relations of the Principal (P) (T).

In the case of Kennedy v. De Trafford, Lord Herschell expressed his

opinion that “No word is more commonly and constantly abused than the
word ‘agent’. A person may be spoken of as an "agent," and no doubt in
the popular sense of the word may properly be said to be an "agent," but
when it is attempted to suggest that he is an "agent" under such
circumstances as to create the legal obligations attaching to the agency,
that use of the word is only misleading.” Since, as Professor Goode puts
it, "the concept of agency is notoriously slippery and difficult to define”.

Agency is "the fiduciary relationship that develops when one person (a

principle) manifests assent to another person (an agent) that the agent
shall act on the principal's behalf," according to the Restatement of the
Law published by the American Law Institute.

Professor Nicole Busby defines an agency as a legal connection in which

one party has the legal authority to bind another party to a contract with a
third party.

ADD MONTGOMERIE V UK MUTUAL STEAPMSHIP

ASSPCIATION

An agency can form in one of four ways: Express/implied agreement

between P and A- Actual Authority, By apparent authority, By ratification
or By the operation of law; agency of necessity.
General Principle
The most common sources of agency relationships are commercial
agreements, partnerships, and employment. The Latin phrase "Qui facit via
alium, facit per se" (whoever acts through another does so for his or her
own benefit) is the basis for the concept of "agency" in commercial law. An
agent is someone who has been given the authority to enter into
contractual relations with third parties on behalf of someone else, known as
a principal. The term "vested with authority" encompasses both pre- and
post-representative act authority, whether it was granted by the principal's
will or by operation of law (Elements of the law of Agency). The concept
of agency encompasses two distinct kinds of authority: actual authority and
implied authority.

Consensual v Contractual
The agreement between the agent and the principal must be mutually
agreed upon, but it doesn't have to be contractual like in Yasuda Fire v.
Orion Marine.

The following are two key distinctions that may be drawn between a
consensual agreement and a contractual one: The existence or
nonexistence of consideration, and In the case of a contractual agency, the
A has the obligation to fulfill his responsibilities, and the P has the equal
obligation to compensate him for those responsibilities. Indemnity is a right
that can exist apart from any agreement between the parties since it is
created automatically by the operation of the law when certain
circumstances are met.

Express v Implied
The contract can be verbally agreed upon, written down, or demonstrated
by deed. The usual lack of formalities means that an A maybe someone
who helps out a friend for no cost (Chaudhry v. Prabhakar). In some
cases, such as the acquisition of real estate, a verbal appointment of an A
by P is sufficient to initiate a transaction that otherwise requires writing or
written documentation (Heard v. Piley).
In most cases, the written agency agreement between P and A will be
binding and conclusive as to the parties' intents (AMB Plastic v. Pacflex).
To the extent that P or A requests it, the other party must provide a written
description of the conditions of the agency contract in accordance with the
Commercial Agents (Council Directive) Regulations 1993. This does
not imply that the agency contract must be written.

Garnac Grain v. Fairclough says that the agency agreement can also be
inferred from the way the parties act. If the P hires someone for a job where
that person would normally act as an A for the P, this could be taken as
evidence that the P agrees (Pole v. Leask). Silence alone wouldn't usually
mean consent unless it was combined with other signs that the P agreed to
the agency (Burnside v. Dayrell). Consent of the A can be inferred from
the fact that he wanted to act for the P or says he is doing so (Roberts v.
Ogilby).

ADD -WHAT IS AUTHORITY?

Actual Authority
When P gives A consent ahead of time, it usually means that A has actual
authority. Actual authority is the power that the P gives to the A according
to the terms of their agreement or contract.

Diplock LJ said in Freeman and Lockyer v. Buckhurst Park Properties

that the actual authority comes from the legal relationship between the P
and A, to which they are the only parties. The scope of this authority must
be figured out by using normal rules for figuring out how contracts work,
such as any implications that come from the words used or the way
business is done between the parties.

The scope of A's actual authority is significant since P is only bound by acts
within that limit (Jacobs v. Morris). A may be accountable to P for violation
of contract and T for breach of implicit warranty of authority if they exceed
their actual authority. However, the circumstance may change if P ratifies
the unauthorized transaction.

Express Actual Authorization

This is the authority granted to A by P. The extent of such power can be
determined via papers and/or conversations between parties (Aviva Life
and Pensions Ltd v. Strand Street Properties). Normal contract
construction principles will apply when interpreting the relevant documents
(SMC Electronics v. Akhter Computers).

Ambiguous Instructions
It was decided in the cases of Ireland v. Livingston and Midland Bank v.
Seymour that an A that adopted a fair interpretation of the terms of the
agency agreement would not be in violation of its mandate when there was
ambiguity over the terms of the agency agreement. However, in the case of
the European Asian Bank AG v. Punjab and Sindh Bank, Lord Justice
Robert Goff stated that this concept ought to be applied only in limited
circumstances.

In Patel v. Standard Chartered Bank, Toulson J. noted that if an

agreement is ambiguous, A should seek clarification from P if time allowed.
Cooper v National Westminster Bank

Implied Actual Authority

The content of the test for implied actual authority will often correspond with
the content of the test for actual authority, as stated in the case of Smith v.
Butler. In other words, this is the implied authority that comes along with
the agency agreement. Because it is merely a way to fill in the blanks and
make sense of the agency agreement, it is impossible for it to ever
contradict the express actual authority. There are several different
scenarios that could result in implied actual authority, including the
following:

● MUST BE NECESSARY OR NECESSARILY INCIDENTAL

 Implied actual authority may exist for actions that have to be done in
order to do the task that was expressly given permission to do. For
example, if you have explicit permission to buy land, you also have
permission to sign the documents that the law requires (Rosenbaum
v. Belson). In the case of Bryant, Powis, and Bryant v. Law
Banque, an A who was allowed to buy and sell goods, charter ships,
and hire agents and servants was not allowed to borrow money
because it wasn't needed to do the job they were given. In Earner v.
Sharp, the power to "find" a buyer did not mean that the person also
had the power to "sell." But in SMC Electronics v. Akhter
Computers, it was decided that the power to "promote sales" of the
goods could also include the power to "sell."

● There is also the possibility that authority could be inferred based on

the specific nature of the connection that exists between P and
A, such as a pattern of dealings that has been stable in the past.

● It is possible for A to have the kind of power that would be

expected of someone in A's position, business, or
profession. The question that needs to be answered is what kind of
authority a reasonable person in the position of T would believe
someone who was in A's position circumstances would have. In the
case of Hely-Hutchinson v. Brayhead, A was given the position of
managing director of the firm, and it was determined that he had the
typical authority that any MD of the company would have in order to
carry out the responsibilities associated with that company.

● A may have the kind of power that is usually respected in that market.
In order for something to be considered a custom, it needs to be
consistent, definite, well-known, acknowledged as binding, and
reasonable (Robinson v. Mollet). It is important that such a tradition
not be inferred because it goes against the very essence of the P-A
connection. In the Robinson transaction, an A who was required to
 purchase goods for a P was unable to sell his own goods to the P
because the A was prohibited from acting in the capacity of the P.

Apparent Authority
This is the authority of the A as it seems to others, as stated by the LJ
Denning in the case of Hely-Hutchinson v. Brayhead. In the case of
Rama Corporation v. General Investments, judge Slade summed up the
idea of apparent authority by stating that it requires three components:
representation, reliance, and a changing of T's position by relying on the
representation. Freeman and Lockyer v. Buckhurst Park Properties
provided the current factors required by law to make a valid claim of
apparent authority:

● P represents to T that A is authorized to carry out the transaction

● A does not act on behalf of P when carrying out the transaction
● T is tricked into engaging in the transaction by placing their reliance in
representation
● T is disadvantaged as a result of the transaction

1. Representation
Mr. Booth had apparent authority in The Rafaella due to his job as a credit
manager and the bank's earlier permission to do the acts.

P or a P-authorized agent must represent A's authority, not A's. (AG for
Ceylon v. Silva).

Armagas v. Mundogas illustrates this point: T knew A's authority was

limited, thus he couldn't depend on A's representation to claim apparent
authority.

In the case of First Energy v. Hungarian International Bank, on the other

hand, the representation was based on the fact that A had been appointed
to the designation of the senior manager, which gave him the ability to
convey the decisions of the bank. It is not plausible to suggest that T was
obligated to validate the A's authority given that the A's designation already
provided representation of his authority.

In the case of British Bank of Middle East v. Sun Life Assurance, the
Branch manager did not have the typical authority to represent to T that a
junior employee had the authority to execute undertakings to pay money to
the bank. This is in contrast to the case of British Bank of Middle East v.
Sun Life Assurance, in which the Branch manager did have the typical
authority. The fact that such undertakings were granted at the head office
of the insurance company, which is a procedure that is well-known to the
general public, provided evidence that this was the case.

Representation can be either express or implied depending on how the

parties have previously dealt with one another (Summers v. Soloman), the
fact that the P has entrusted A with the signs of ownership of the property,
or A's behavior in relation to the property.

The representation must either be made specifically to T who intends to

deal with A, or it may be made to the general public (Farquharson
Brothers v. King and Co).

2. Reliance
It is necessary for there to be some kind of causal link between the P's
representation and the T's interaction with the A. In the event that T was
aware of the limitations placed on A's authority, it is highly unlikely that this
requirement will be met.

According to the decision in Heinl v. Jyske Bank, it has been established

that having knowledge of T will reveal A's true nature. Since the auctioneer
had no power to make or issue any claims or warranties related to the
property, it was determined in Overbrook Estates v. Glencombe
Properties that the buyer knew or ought to have understood this.

Also, T should exercise caution if the contract/transaction goes against P's

commercial interests. Hopkins v TS Dallas lacked authority because A
was working against P's interests and, T knew that the transaction was
against P's commercial interests.

3. Detriment
Simply the fact that T entered into the contract can be considered a
sufficient act of damage; additionally, the payment of fees related to the
property in question may also be adequate (Spiro v. Lintern).

Usual Authority - Watteau v Fenwick

GHL Fridman believes the judgment of Wills J to be extremely
controversial.

Facts: F, who was the owner of a hotel, selected H to serve as the

manager. It was strictly banned for H to purchase anything other than beer
and mineral water. H had been the hotel's owner in the past, and his name
was still listed on the front door as the licensee. W, under the impression
that H was the proprietor of the hotel, fulfilled H's request for cigars. It was
determined that F was responsible for the cost of the cigars. Wills J based
his judgment on customary authority, which refers to the authority that is
presumed to be held by an individual who is appointed to a certain role by
the P or is represented by the P as filling that role.

● In this particular case, the liability of a person who shall remain

undisclosed for the unauthorized transactions carried out by A
was the central question.
● A person who is not shown to be an A can be seen as having been
given seeming authority by the P. This is the primary difficulty with
this scenario, and it stems from the logical saying that describes the
situation.
● The only way to get at such a judgment in a rational manner is to
state that whenever an unknown P appoints an agent, they accept
liability for each and every activity conducted by an undisclosed A in
connection with P's business. This is the only way that such a
 decision can be made. The difficulty with this line of reasoning from a
pragmatic point of view is that it puts the P in a disadvantageous
position by exposing them to a potentially extremely wide and
extended scope of liability, while at the same time leaving them
without any cause of action against T.
● As a result, it should not come as a surprise that subsequent judges
have not followed Watteau's lead. According to their point of view, an
undisclosed P cannot be held liable for every conduct that an A
commits, even if those acts are related to their company's operations
● Furthermore, the constraints on the scope of the concealed A's power
will be binding on T even when T is unaware that they are dealing
with A. This is because the restrictions are on the scope of the
authority of the undisclosed A.
● Even though Watteau has not been expressly overruled, the judge
who presided over the case of Sign-o-Lite Plastics v. Metropolitan
Insurance stated in his judgment that the research that he conducted
did not give even the slightest hint that Watteau was good law
● This was despite the fact that Watteau has not been explicitly
overruled. Despite this, Watteau is still the law, and it is likely that the
best way to interpret it is as a product of the circumstances that
existed during its period.
● Another theory that has been proposed to account for this decision is
that rather than appointing Humble to the position of A, Fenwick
considered Humble and the owner of the hotel as being one and the
same, resulting in the formation of a single entity.
● H went beyond the limits of his actual authority, and the
unauthorized act of purchasing cigars cannot be seen as being
necessary for the fulfillment of the duty that was expressly approved.
Therefore, it is impossible to explain this instance using the concept
of implied actual authority. In addition, this cannot be considered an
instance of apparent authority due to the fact that the A does not
disclose the fact that he is acting for another party.

Therefore, it is quite apparent what the boundaries of the ruling in Watteau

are:
1. There must already be an established agency relationship, and the
nature of the A should be such that it hints at the 'usual' authority that he
possesses.
2. The A may not represent himself in legal proceedings (Kinahan and Co
v. Parry).
3. Watteau will not apply in situations in which T is aware or ought to have
been aware of the limitations placed on A's authority (Dawn v. Cummins).

Ratification
P has the ability to either accept or ratify transactions that were entered into
by someone who is not their A or by someone who exceeds the scope of
their authority as A.

This isn't apparent authority because P doesn't represent anything, and it's
not Watteau because the agency's existence is made clear.

It doesn't matter why someone ratifies.

Requirements of Ratification
1. The A must have intended to act on behalf of the P at the time of the
relevant act. The terms of a contract and the circumstances around it
(National Oilwell Ltd. v. Davy Offshore) show that this is what was
intended.
2. Before the transaction may be finalized, it is imperative that T be
informed of the actual agency. When party A pretends to be party P,
there can be no ratification of the agreement (Keighly, Maxted, and
Co v. Durant). According to Watson v. Swann, the identity of the P
may not be disclosed as long as A provides sufficient information to
constitute a reasonable designation of the person meant to be bound
by the contract. It is sufficient for the A to state that they are acting on
behalf of a group of people to which the P belongs if the P is a
member of that group (National Oilwell v. Davy Offshore).
Nevertheless, the P must already exist at the time that the act of A
takes place (Kelner v. Baxter).
 3. T is required to have reasonable grounds for believing that they are
interacting with a person who is duly authorized to act on behalf of
another (Watson v. Davies).
4. According to the decision in Boston Deep Sea Fishing v. Farnham,
in order for P to be competent to enter into the contract at the time of
the relevant act of A, P must have been of legal age. In order for the
ratification to go through, P also needs to be competent.
5. According to the decision in The Managers of the Metropolitan
Asylums Board v. Kingham, the ratification process must take place
within a reasonable amount of time. It will be determined by the
specifics of the situation what constitutes a fair amount of time;
nonetheless, it is possible to ratify a contract after it has already
begun, and an insurance policy can be ratified after a loss has
occurred (Williams v. North China Insurance).

● In most cases, there are no formal requirements to be met; however,

it is imperative that the P have the intention to ratify. Whether the P
ratifies the transaction with complete awareness of all the pertinent
information or whether the P wishes to adopt the transaction,
regardless of the facts, such an intention will be detected in either of
these two scenarios (Marsh v. Joseph).
● It is possible for ratification to be either expressly stated or implied
based on behavior. When the actions taken are unmistakable and
unambiguous; for instance, when party P sues party T for breach of
contract (Aviva Life and Pensions Ltd. v. Strand Street
Properties).

Requirements for Implied Ratification

1. P is aware of the actions taken by A
2. A does not act as P
3. P must show that he or she has made a choice
4. Silence or inactivity won't count as ratification unless it's paired with
one or more of the following:
○ P knows all the important facts
○ P knows that they are seen as being in the position of P.
 ○ P doesn't do anything to get rid of that character
○ P does not immediately demand their legal entitlements

Effect of Ratification
What ratification does is put the parties in the same situation as if A's initial
act had been allowed from the start (Keighley, Maxted, and Co v.
Durant). P has approved even though T has withdrawn their offer to A after
A has accepted it and after T has withdrawn it. Despite T's withdrawal of
their offer, such ratification will remain in effect (Bolton Partners v.
Lambert).

Limitations on ratification
The doctrine of ratification is subject to the following limitations, and so may
not be applicable:
● If the rights of someone other than T or P are being infringed upon
(Brown v. Bird)
● For cases when A and T decide to withdraw from the agreement
before it's ratified (Walter v James)

Agency of Necessity
This is something that happens as a result of the functioning of the law, and
it is arguable that it does not fit into any of the theories that have been put
out to explain the law of agency. It is not necessary for there to be any form
of authority that P has bestowed on A, regardless of whether or not that
authority is actual or apparent, and certain conditions must be met in order
for an agency to emerge as a result of the operation of the law:

1. It is necessary for there to be a preexisting legal relationship between

P and A in order for P's property to be in A's possession.
2. It is required that A is unable to receive instructions from P.
3. There must be a genuine crisis that endangers the property. It is not
enough for A to have merely been in possession of P's goods for her
to have experienced difficulty or an inconvenience (Sachs v. Miklos)
4. The choice that A makes must be rational from a business
perspective, appropriate given the circumstances, and in P's best
interests. (Prager v Blatspeil)