Commercial law: Law of Agency ACM

What is a commercial agent?

"Self-employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another person (principal) or to negotiate the sale or purchase of goods on behalf of and in the name of the principal. Is it a requirement that the commercial agent have a direct contractual relationship with the principal? Yes English court of appeal case Light & ORS v TY Europe Ltd

Robert Barry and Co v Doyle

A firm of special agents raised an action for payment against Doyle. RB averred that there was a verbal contract between the parties whereby RB would be paid if they introduced the purchasers of the hotel to Doyle ans that their standard terms and conditions had been incorporated in the contract by two letters written prior to the agreement and by their letter confirming their engagement.

Mercantile agent / Factors Act 1889, s.1(1)

A mercantile agent is someone who in the customary course of business as the agent has the authority to sell goods or cosign goods for the purpose of sale or to buy goods or to raise money on the security of the third party.

A Del Credere Agents

A mercantile agent who undertakes to indemnify the principal if the third party fails to fulfil the obligation to pay the principal. The undertaking is limited to the payment and does not extend to warranting the quality or nature of the performance of the third party.

Capacity

A principal can appoint to engage in any act in which the principal himself has capacity to engage. As long as the principal has capacity, an agency relationship can be created.

Agency by Ratification

Agency by ratification is quite rare there are 4 requirements:

a) Agent acts for a principal who is disclosed and named

Agent is not a part to the contract and is not liable for it. Kimber coal co ltd v Stone & Ralf Ltd: Transport of cows was negotiated by 2 agents of principals. A in agreement said 'for the Atlantic Baltic Co' but signed own name. Clear enough so contract concluded between principals

Goodall v Bilsland

Agent launched an appeal to without approval it became too late to ratify.

Special Agent

Agents authorised by the principal to carry out only particular transactions of business for the principal.

d) To act in good faith in the principal's interest/fiduciary duty

Agents stand on a fiduciary relationship with principals and therefore they must:

b) To exercise due care and skill

Alexander Turnbull &Co Ltd v Cruikshank & Fairweather: See observation of Lord Curriehill. Fearn v Gordon and Craig:

right of lien

An Agent has the right of lien over property of the principal in his possession until the principal has paid remuneration or commission or reimbursement due to the agent or where the principal has failed to relive the agent of liability, loss or expenditure. So, the agent must have obtained possession of the property as agent and may retain possession of it-but not dispose of it or sell it. Special Liens

Liability of Agent who exceeds actual and ostensible authority

Anderson v Croall: Croall was auctioneer(agent) and innocently sold the horse. If agent has acted outside of authority there is no contract and the agent is liable for breach.

General liens

Bankers, solicitors and mercantile agents. They an retain any property of the principal, not just property relating to the debt owed. Drummond v Muirhead & Smith: A had arranged a borrowing and lending and also looking after a property. P went bankrupt. A retained title deed which was in his possession to get P to pay for service

Panorama Developments Ltd v Furnishing Ltd

Company secretary was appointed to hire cars in company name. The cars were not purchased for the company but for personal use. Secretary refused to pay. Court said agency relationship exists as contract concluded between company and the agent. The company were liable to pay for hiring.

Tinnevelly Suagr Refining Co Ltd v Mirrlees Watson & Yaryan Co Ltd

D as agent for the company entered into contract for the supply of machinery which proved to be defective causing loss to the company: held that company could not sue as D had acted for a company which did not exist at the time. The gent was personally liable as seen is the Companies Act s.51

Great northern Railway v Swaffield

Defendant contracted plaintiff railway company contracted to carry his horse to station but when the train arrived at the destination there was no one to pick up the horse. The station master did not know the address of the agent or the defendant so ordered the horse to be put in a stable. The railway company later claimed for the charger of the stables. The defendant refused to pay. It was held that the plaintiff acted as an agent of the defendant by necessity because they had no choice but to arrange for the proper care of the horse.

commercial agent

Defined in the Commercial Council Directive Regulations 1993, a commercial agent is a self employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of the principal or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of that principal.

Freeman & Locker v Buckhurst Park Properties (Mangal) Ltd

Freeman and Locker sued buckhurst park Ltd for unpaid fees for their architecture work. Originally the company planned to simply buy and resell the land but that fell through. Kapoor had acted alone (as if he were a managing director) in engaging the architects without proper authority. The company argued it was not bound by the agreement definition. It was held that the company were bound to pay for the architecture work.

Apparent or Ostensible Authority (Cases)

Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd: Mr Freeman and Mr Lockyer sued Buckhurst Park Ltd for unpaid fees for their architecture work on. Originally the company planned to simply buy and resell the land, but that fell through. Kapoor had acted alone (as if he were a managing director) in engaging the architects, without proper authority. The company argued it was not bound by the agreementDefinition. Was held that the company were bound to pay for the architecture work. International Sponge Importers Ltd v Watt and Sons: Illustrates ostensible authority FACTS: Salesman sold sponges on behalf of ISP. Payments made in past to salesman or ISP. Salesman pockets the payment, ISP raises claim for payment HELD: Customer made a reasonable assumption that could pay salesman directly given past experience. ISP could only seek to recover money from salesman. British Bata Shoe Co Ltd v Double M Shaha Ltd Armagas Ltd v Mundogas

a) To obey the instruction of the principal

Glimour v Clark: Did not comply with clear instructions. Principal instructed agent to put goods on board of ship but put it on the wrong one. The ship was lost. The agent was liable to the principle for value of goods. Graham and Co v United Turkey Red Co Ltd: Obey instructions of principal. Principal prohibited agent from selling to any other manufacturer. He did after 2 years. He was only entitled to the profit he made when he was not in breach.

Applied appointment

If the principal and the agent agree to the agency by the action of parties or by implication of sections of law, then it is an applied appointment.

Express Appointment

If the principal and the agent agree to the agency expressly through writing then it is called express appointment.

Keighley, Maxsated & Co v Durant

KM & Co authorised Roberts to buy wheat at a certain price for their joint account. Roberts purchased wheat at a higher price in his own name. This means that the principal was not identifiable so there could not be ratification.

Implied Authority (Cases)

Mackenzie v Cluny Hill Hydro: Hotel manager detained guest for 50 mins to demand an apology. he had implied authority to sort disputes so was acting within scope of employment. This meant that the principle was liable to the guest. Panorama Developments Ltd v Fidelis Furnishing Ltd: Company secretary was appointed to hire cars in company's name. The cars were not purchased for the company but for personal use. Secretary refused to pay. Court - agency relationship exists as contract concluded between company and the agent. The company were liable to pay for hiring Barneston v Peterson Brothers Watteau v Fenwick

To Act in Person? There is a Presumption against delegating to others

Notice in the case of De Bussche v Alt that Thesiger L.J. said "Exigencies of business do from time to time render necessary the carrying out of theinstructions of the principal by a person other than the agent originally instructed for the purpose..." Robertson v Foulds

b) Agent discloses that there is a principal but does not name him

Probably as in a) though in England the leading text book Bowstead on Agency, it argues that the rule should be that the agent is liable. It may depend upon who credit the third party relied upon when he entered into the contract: did the third party look to the credit of the agent, or to the credit of an unknown principal? Ferrier v Dodds: Auctioneer instructed to sell a horse. The real owner was not disclosed. Ruddy v Monte Marco & ORS

Ratification

Ratification is only effective if certain conditions are fulfilled

4.

Ratification must take place within the time fixed by the parties or if no time was fixed, within a reasonable time.

Special liens

Right only to retain property of the principal which relates to the debt owed. Scott and Neill v Smith

c)To keep accounts

Such accounts need not be written- s verbal accounting is possible.

Commercial Agents

The Commercial Agents (Council Directive) Regulations 1993 implemented the Commercial Agents Directive 1986. The Commercial Agents Regualtions came into force on 1st Jan 1994 and apply to all agency agreements in existence on that date. They apply where the activites of the agent havetaken place in GB, regardless of the nationality of the agent or of the principal (Reg1(2)). They seeks to harmonise conditions for commercial agents acting throughout the EU, and they provide commercial agents with significant protection.

i) Right to Remuneration

The agent has a right to be relived by the principal of the liabilites, losses and expenses properly incurred and arising from the agency relationship. Glendenning v Hope: Lord Kinnear However, this obligation to relieve the agent does not apply if the agent has acted outwith authority as a result of the fault of the agent, where the agent has acted illegally, negligently or in breach of fiduciary duty.

1.

The agent must have purported to act as a agent for an identifiable principal who will later ratify the act. This means that an undisclosed principal cannot ratify.

Authority of an Agent

The general rule when it comes to authority of agent is that the agent must have been acting within the scope of their authority for there to be a contract between the principal and the third party. This means they should do only what the principal has allowed them to do in the agreement between them.

The Law of Agency (cont.)

The legal element of the relationship is created between the principal and usually a third party. This relationship i subject to the standard rules of contract meaning that all parties must be natural and legal.

2.

The principal must be aware of ALL the facts, especially the material facts.

2

The principal must be aware of all of the material facts. Forman & Co Pty v The Liddesdale

3.

The principal must have had the necessary legal capacity to take the action in question.

4

The ratification must take place within the time fixed by the parties, or if no time was fixed within a reasonable time. Grover Ltd v Matthews: Upon expiration of an insurance policy the agent insured it when he had no authority to. There was a fore which meant they could not authorise the act

Relationship between Principal and Agent

The relationship between the principal and agent is independent from that of the principal and third parties: eg, for general agency, the principal is bound to a third party if the agents acts outside his or her express authority but within usual and implied authority. The principal would however be able to sue the agent for breach of agency obligations on contract. The law implies certain obligations between a principal and agent which are enforceable as long as they do not contradict any express terms in the agreement.

The Law of Agency

The relationship between two parties, the principal and the agent, where the principal allows the agent to act on their behalf.

Third Parties, Agents and Principals

The role of an agent is to put the principal into contractual relationships with the third party. Whether he does so and to what extent depends on the precise circumstances in which he acts.

Creation of an Agency

There are no formalities when it comes to creating an agency relationship. There is no need for the agreement to be written, it can be created orally, in writing, or by execution of a deed.

Implied Authority (Cont)

Therefore, implied authority can only be applied to general agents as opposed to special agents because they are appointed to carry out all of the business of the principal or all of the principals business of a particular kind whereas special agents carry out specific tasks the authority which agents of that type normally have, however this presumption cannot be made in relation to special agents.

1

They must have purported to act for identifiable principal. Kaeighly Maxsted & Co v Durrant: Keighley & co authorised Roberts to buy wheat at a certain price for their joint account. Roberts purchased wheat at a higher price in his own name. This means that the principal was not identifiable so there could be not ratification.

Agency by holding out

This is is when you do not have the authority to act in reality but the law intervenes and says you are being treated like you were an agent because you were held out as such.

Negotiorum Gestio

This is the agency of necessity. It can arise where people feel compelled to act on behalf of others as a result of some emergency as a result it is not possible to be appointed to act by the persons for whom they are acting.

c) Principal undisclosed

This is the situation where the agent does not reveal to the third party that he is acting as an agent. When the third party discovers the situation he may sue one or the other but not both. Bennett v Inveresk Paper Co: P owner of newspaper. The agent contracted with Inveresk. Inveresk knew nothing of Bennet's existence. Papers damaged. B raised action. Court held he was entitled to sue. If an agent exceeds his actual authority and if the principal does not ratify agents act, there will be NO BINDING CONTRACT between P and 3rd party

Express Authority

This is where the principal gives the express instruction to an agent on what he or she do.

General Agent

Those who are authorised to carry out all and any business of the principal.

Springer v Great Western Railway

Tomatoes arrived late at port because of a storm. The train company couldn't transport them to London immediately because of a strike. The company then decided to sell the tomatoes locally before they would rot. The court held that the railway company should pay the owner of the tomatoes the difference in the price obtained locally and the price which the tomatoes would fetch in London. The reasoning behind this is that it was possible for the company to have contacted the owner for instructions before deciding to sell the tomatoes locally.

3

When the act was done, the principal must have been a competent principal. Tinnevelly Sugar Refining Co Ltd v Mirrlees: D, as agent for the company, entered into contract for the supply of machinery which proved to be defective causing loss to the company: held that company could not sue as D had acted for a company which did not exist at the time. The agent was personally liable (s.51 Companies Act).

Ratification

Where no prior authority has been given, the acts of the age may be ratified by the principal. Ratification may operate on two different levels: i) Exceed original authority ii) No valid agency relationship, but the agent purports to act for a specific principal.

Implied Authority

i) For special agents who are given specific instruction to carry out a specific task, principals are bound only if agents act within their actual authority. ii) For general agents who carry out any business within the limits of employment, principals are bound even if agents exceed their actual authority but act within their implied or usual authority. Authority is regarded as implied and usual if it is one of the kind that a person in the agents trade or profession normally has.

Apparent or Ostensible Agency

i) Where principals have not appointed agents to act on their behalf but by words or conduct lead the third party to believe that an agency does in fact exist. ii) Where agents have had authority to act but this authority has since been terminated or limited.