Agency

• what is agency 


  agency is a relationship which exists between two legal persons (the principle and the agent) in which the funtion of the agent is to negociate contracts with third parties on behalf of the principle
• who is the principle


  principle is person who has appointed another person (the agent) to work on his behalf
• who is the agent

  the agent is the person who has agreed to work for someone else (the principle)
• what does the agent get in return for work

  expect a reward usually in the form of commission or a salary
• what it gratuitous agency


  when someone agrees to act as an agent for no reward, they are known as a mandate. although they will not be compensated they still owe the principle a duty of care can cannot use the fact they are unpaid as defence to negligence
• examples of agents is business

  solicitors, estate agents, accountants, architects
• what are the different types of agents

  del credere agent, general agent and special agent
• what is a del credere agent


  agents who introduce the third party to their principle and agree to compensate the principle for any loss they suffer as a result
• what is a general agent

  they act for the principle in connection with all interests in a particular line of business eg a solicitor, these agents have both actual and ostensible authroity
• what is a special agent

  they usually only act in one specific transaction eg an estate agent, they only have actual authority
• who has the capacity to appoint an agent


  any person who has the capacity to contract
• who has the capacity to become an agent


  anyone who has the capacity to work for another
• what are the two contracts in an agency relationship

  primary = agent and principle. secondary = principle and third party
• what are the five ways an agency relationship can be created

  1. express agency
  2. implied agency
  3. agency by holding out
  4. agency by ratification
  5. agency by necessity
• what is express agency

  where agent is expressly appointed by the principle by written or verbal contract
• what is implied agency

  where an agency relationship between two people may be implied by their relationship or conduct. can be implied by law and the conduct of the parties
• what is agency by holding out

  if the principles actions allow or encourage third parties to believe that a person is acting as a agent on their behalf
• what is agency by ratification

  occurs when an agent does something out with their authority and either:

  1. the principle chooses to ratify to approve the actions
  2. the principle chooses not to approve and the agent becomes personally liable
• what are the conditions for ratification

  1. agent must disclose all facts and liabilities
  2. must be ratified within a reasonable time
  3. principle must have the power and capacity to ratify
  4. agent must act with a principle in mind
  5. contract must be legal
• what is agency by necessity

  in case of an emergency a person is deemed by law to have the authority to act as an agent for another
• what are the conditions for agency by necessity

  1. the principle must be impossible to contact
  2. agent must act in the best interests of the principle
• what are the two types of authority 


  actual (express or implied) and ostensible (apparent)
• what is actual authority

  the true authority a principle gives agent it can be expressed or implied
• what is ostensible authority


  the authority a third party believes you have - it is fictitious and only exists in the mind of the third party
• what are the two conditions of warranty of authority

  1. implied that principle exists and has contractual capacity
  2. agent has authority to make contracts on principles behalf
• what does liability of an agent depend on

  whether principle is disclosed or undisclosed
• what is a disclosed principle


  the third party is aware of the principles existence but may not know who they are, the agent plays no further part after contract is completed and cannot be held liable for principles failure to honour contract
• what is an undisclosed principle


  third party is unaware agent is acting for principle therefore is principle fails to honour contract the third party will sue the agent, if the agent then reveals he is in fact an agent then the third party can choose whether to sue the agent or the principle
• what type of relationship is agency

  fiduciary (of trust)
• what are the duties of an agent

  1. obey the instructions of the principle
  2. exercise skill and care
  3. act in person
  4. keep proper accounts
  5. act in good faith by avoiding conflicts of interest and not making secret profits
• what are the rights of an agent

  1. right to receive payment
  2. right to be indemnified
  3. right of lien
• when can an agency relationship be terminated without breach

  1. mutual agreement
  2. principle withdraws agents authority
  3. agent withdraws from relationship - cannot be in the middle of a transaction
• when can an agency relationship be terminated with a breach

  1. end of principles business, bankruptcy
  2. death or insanity of a principle
  3. expiry of a fixed period
  4. impossibility - loss of required qualification or illegal