CREATION

• agency can be created through...

  1. express appointment
  2. implied appointment by principal
  3. ratification by principal
  4. necessity
  5. estoppel
• agency by ratification definition

  
  

  • means to accept or to confirm

  the principal confirms an act that has been done on their behalf by an agent who did not have the authority to act.
• creation of agency

  based on section 138 of contract act 1950, no consideration is necessary to create an agency
• conditions for a valid ratification

  i. The act or contract must be unauthorised

  • The agent exceeded his power
  • The person was never appointed as an agent
• conditions for valid ratifications

  ii. The agent must have acted on behalf of the principal

  • The contract was made under the principal’s name
  • The agent had informed the third party that the contract was for the principal
• conditions for a valid ratifications

  iii. The principal must exist or is capable of being ascertained at the time the act was done

  • If the principal is a company, the company must have been incorporated at the time the contract was made
• conditions for a valid ratifications

  iv. The principal must ratify the whole act

  • Partial ratification is not acceptable
  • the principal must either accept the entire contract or reject it
  • Section 152 Contracts Act 1950.
• conditions for a valid ratification

  v. The principal must have full knowledge of all material facts relating to the contract

  • based on Section 151 Contracts Act 1950
  • Relevant info such as price and quantity of goods, delivery period, identity of third party
• conditions for a valid ratification

  vi. The principal must have contractual capacity

  • The principal is not a minor or unsound
• conditions for a valid ratification

  vii. The act must not be unlawful

  • If the agent had done a criminal or illegal act, the ratification is not binding on the principal

   
• conditions for a valid ratification

  viii. The ratification must be made within a reasonable time

  • There should not be unreasonable delay to ratify
  • It depends on the facts and circumstances
  • Failure to accept goods in reasonable time signifies no ratification
  • Failure to return goods within reasonable time implies ratification
• conditions for a valid ratification

  viiii. The ratification must not injure the rights of a third party

  • For instance, the agent terminated a 6 month lease given to a third party before the 6 months are over
• what is estoppel?

  • a person can't deny something he had said or done if others have already relied on it.
• based on section 190 contracts act 1950..

  If a principal make third party believes that A is his agent (even if they're not), and A acts on this belief, the principal can't deny that A is his agent later and is bound by A's actions

  
  

  (case)

  Freeman & Lockeyer v Buckhurst Park Properties Ltd :

  A company let K act as managing director without officially appointing him. K hired workers for the company. When the company refused to pay, claiming K wasn't authorized, the court held that by allowing K to appear as managing director, the company had to honor K's actions.