Agency

Express and implied actual authority

"Actual authority (...) is express when it is given by words, such as when a board of directors pass a resolution which authorizes two of their number to sign cheques. It is implied when it is inferred from the conduct of the parties and the circumstances of the case, such as when the board of directors appoint one of their number to be the managing director. They impliedly authorize him to do all such things as fall within the usual scope of that office." Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 • Scope of agent's authority: The extent of an agent's actual authority depends on the construction of the terms of the agreement. The agent can do anything detailed within the agreement. • Whilst the agreement will commonly be a formal contract there is no requirement under common law for it necessarily to be so • Ambiguity in instructions: Many cases deal with ambiguous instructions of the principal. The courts generally held that the principal was bound by the acts of his agent where the agent had honestly interpreted those instructions in a manner not intended by the principal. >> agent will be protected bec not fair to disregard the ambiguous instructions Ireland v Livingston (1872) HL The instructions were ambiguous and capable of more than one interpretation. The court held that as the agent acted reasonably and in good faith on one of the possible interpretations of the instructions, the principal was bound. This approach might however change in modern times of speedy communication, where A can easily confirm the meaning of the instructions with P. So if the agent had an opportunity to confirm with the principle the meaning of the instructions, the principal is less likely to be bound.

Requirements for apparent authority

1) A representation by P to T that A has authority (satisfied by express or implied representation e.g. principal placing agent in such a position that would usually carry certain powers, or through conduct of principal, or through course of prior dealing between principal and the third party) Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2) Reliance on the part of T and an alteration of his position [third party must rely on the representation] • Requirement means that where the third party is unaware of the representation made by the principal the third party cannot seek to bind the principal into the contract through apparent authority. Similarly, the third party will not be able to demonstrate reliance where it can be shown that he knew the representation to be untrue. • T need not act upon representation to his detriment Rama Corporation Ltd v Proved Tin and General Investments Ltd [1952] QB 3) Unawareness on the part of T [third party must not be aware that the agent is acting without authority] Summers v Saloman (1857) • An agent had managed his principal's shop for a number of years. In the course of managing the shop, the agent did, on many occasions, buy goods on behalf of his principle from the third party for which the principal paid. The agent absconded, however, but still purchased goods purporting to do so on behalf of his [old] principal. After absconding, the agent was clearly not acting with any actual authority but the principal was liable on the contract since the previous course of dealing constituted a representation sufficient to clothe the agent with the necessary authority.

2. Implied actual authority

A has the implied authority to do everything necessary to follow the principal's instructions unless such acts are expressly forbidden to A. >> if principal hires MD and doesn't say to MD what his duties are >> principal needs to give clear instructions on the limitations of MD's role Hely-Hutchinson v Brayhead (supra) • A was the chairman of a company whose directors allowed him to act as if he was the managing director, and entered into various contracts on behalf of the company. Without the authority, he entered into a contract on behalf of the company to act as a guarantor for T's [third party] debts. The company sought to avoid honouring the guarantee arguing that A had no authority to enter into the contracts. The CA decided that the company was bound by the contract, as it had by conduct granted A the implied authority of a managing director. • If principal acts in a way that implies or shows to TP that agent is in a position to do certain transactions >> principal has to bear the risk if agent does something against his good because he has given implied authority to agent to act in full freedom • Even where there is a formal contractual doc detailing scope and extent of the agent's authority, this will generally not be so detailed as to cover every possible situation the agent might face. The nature of implied actual authority is to confer upon the agent such authority as is necessary to comply with the instructions given by the principle. • Implied actual authority cannot be employed contrary to the express actual authority granted by the principal, so even if act is reasonable in following instructions it cannot be done if expressly prohibited. • Implied actual authority cannot exist in isolation, so requires some express actual authority.

Effect of ratification

A is treated as if he had the necessary authority at the time he acted. This validates the act retrospectively. What happens if the ratification of the principle happens after the third party has withdrawn his offer? Bolton Partners v Lambert (1889) P's ratification of A's unauthorised acceptance of T's offer was made after T had withdrawn the offer. Did the ratification come too late? Held: If T makes an offer to A, which A accepts on behalf of P without authority, T is bound by the contract even if he purports to withdraw the offer before P ratifies. Facts: Bolton and Partners (P) were the lessees of a factory. Their lease had 10 years still to run. Lambert (T) was interested in buying P's leasehold interest. 8 December 1886 - T writes to one of P's directors (A) offering to buy P's leasehold interest. 13 December 1886 - A committee of P decided to accept T's offer, but that committee had no power to bind P. [as not approved by board of directors as well] 13 December 1886 - A writes to T, telling him that P had accepted T's offer. 13 January 1887 - T writes to P purporting to withdraw his offer. [before P ratified] 28 January 1887 - P's board of directors approve the acceptance of T's offer by the committee on 13 December 1886. • Court held that T was obliged to uphold the contract

Requirements for ratification to be valid: [5 requirements] 1. P must be disclosed

A must inform T that he is acting on behalf of P at the time of the contract [agent must profess to act as an agent for the principal] • Prevents a principal from ratifying a contract which his agent entered into in the agent's own name Keighley Maxted & Co v Durant [1901] AC • An agent was appointed to buy wheat at a specified price. When he could not find any wheat to buy at the specified price he entered into a contract to buy wheat at a higher price. The contract was made between the seller and the agent in his own name and did not refer to the principal whatsoever. The agent contacted his principal who confirmed that he was happy that the wheat was worth the higher price. When the agent failed to pay for the wheat and take delivery, the seller claimed that principal had ratified the contract and was therefore liable under it. The HL, unanimously held that ratification was impossible since the contract of sale made no mention of the fact that the agent was acting on behalf of another party. The contract was in the agent's name and thus no other party could be liable under it.

Legal Agency: Who are agents?

Agents who are not called agents - legal agents create legally • Company Directors (board of directors, managing directors) • Partners • Employees • Solicitors/Accountants So-called agents (not agents at law) • Distribution agent (who acts on his own behalf) - markets certain products BUT not representing the interests of the principal >> not legal agent (the contract exists only between distributor and costumer and does not bind the producer)

2. P must have been in existence at the time of A's act

An agent cannot act for a principle who does not exist, even though A knows that P will subsequently come into existence (e.g. an act signed by a company promoter on behalf of a company that has not been formed cannot be ratified by the company). Thus, the promoter may be personally liable on the contract. Kelner v Baxter (1866) • In the case there was a contract of sale of some wine. The contract purported to be made on behalf of the Gravesend Royal Alexandra Hotel Company. The problem was that at the time of contracting the company did not exist. When the company had been incorporated, it attempted to ratify the contract of sale. The court held that the newly formed company could not ratify since it had not been in existence at the time the contract was made. The question of liability on the contract was considered by Erle C.J. who stated that 'as there was no company in existence at the time, the agreement would be wholly inoperative unless it were held to be binding on the defendants personally'.

The relationship between the agent's actual and apparent authority.

An agent's apparent authority may: 1. Coincide with his actual authority 2. Exceed his actual authority 3. Exist independently of his actual authority

Models of understanding the creation and operation of agency law [authority]

Authority • Authority refers to the scope of the agent's ability to affect the legal position of the principal. • The agent's authority may be defined in terms and instructions, which would be the express actual authority. [e.g. sell my Vauxhall car for no less than £10,000] • In addition, an implied actual authority gives the agent the ability to do any associated tasks which are required to ensure that the instructions are met. [Tasks that are reasonably expected and necessary for the fulfilment of the principles instructions](e.g. e-ee is a manager for a brand, the manager has all the tasks linked to a manager's job - he can hire staff and it doesn't mean to be explicitly mentioned in his employment contract, but implied from the position or e.g. showing the car customers, and take them on test drives, actions which are not expressly permitted but are impliedly as they are reasonable and necessary actions to carry out the instructions]

Models of understanding the creation and operation of agency law [consent]

Consent • The crucial element in the relationship is the voluntary grant of authority from the principal to the agent and the voluntary acceptance of such authority by the agent • (majority of agency relationship are created by agreement) • Problem: describes only consensual method of agency BUT it fails to describe the non-consensual methods of creating an agency relationship [implied agreements, in which parties don't realise they have entered into an agency relationship] •A courier of valuable goods encounters difficulty en route to his destination here the agency relationship between the courier and his employer will be created by agreement and the authority of the agent defined by the agreement. What if however the goods are in danger of being destroyed by virtue of the courier having encounter difficulties. There will be no agreement between the courier and the owner of the goods as to what action the agent may take in that scenario. Therefore a consensual agency relationship will not have been created. Despite this the courts have been able to find that the courier is an agent of necessity for the owner of the goods and that consequently the owner will be liable to reimburse the agents cost associated with the necessary emergency action.

Examples of the relationship between the agent's actual and apparent authority.

Example 1 If A is appointed MD of a company and no restrictions are imposed on his authority, he will have implied actual (usual) authority to do all the acts that a MD would normally have the power to do. A will also have apparent authority to do those acts. Here A's actual and apparent authority coincide. See Hely-Hutchinson v Brayhead (supra) Example 2 A is appointed MD of a company but the board imposes a financial limit on the contracts which A is authorised to conclude without board approval. If the MD makes a contract in excess of that limit without board approval, he will not have actual authority to do so, but he may well have apparent authority to do so, by virtue of his position of MD, unless T is aware of the financial limit, which is unlikely. Here, A's apparent authority exceeds his actual authority. Example 3 A has acted as P's agent for a number of years. P then terminates the agency. A's actual authority to act on P's behalf ceases. But A's apparent authority may well continue until P is able to notify third parties who have dealt with A in his capacity as P's agent that the agency has been terminated. Here A's apparent authority exists independently of his actual authority. See Summers v Saloman (1857)

How can an Agency relationship arise? 1. By Agreement between P and A (the majority of agency relationships are determined by contracts (written or oral) - most important agency for exam

For exam: what agency is created and between who? Example • P wishes to sell his car for £10,000. He instructs A to sell the car for £10,000, and A agrees to do so. A sells the car to a third party (T), for £10,000. • An agency relationship exists between P (the principal) and A (the agent). This is based on the mutual agreement of P and A that A will act as P's agent for the purposes of the sale. • P has given A authority to sell the car for £10,000. • The sale of the car by A to T for £10,000 is within the scope of A's authority. • A contract now exists between P and T for the sale of the car for £10,000.

1. The representation must be that A has authority to act as P's agent either generally or in relation to particular transactions

Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] QB The directors of a company allowed X to act as if he was the managing director, but he has never been formally appointed to this position. X agreed a contract with a firm of architects on behalf of the company, whom the company refused to pay.The company was liable, as the directors had given the impression that X had authority (apparent authority) to act on their behalf.

Actual Authority (authority with consent)

Lord Diplock: "Actual authority is the legal relationship between principal and agent created by a consensual agreement to which they alone are parties. Its scope is to be determined by applying the ordinary principles of construction of contracts." Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964]

What acts can be ratified?

P cannot validly ratify a contract which is illegal, but P can ratify a voidable act (e.g. an act without A's authority can be voidable for misrepresentation) Bedford Insurance Co Ltd v Institutio Resseguros de Brasil [1985]

3. By estoppel:

P represents to T that A has authority to enter into a particular contract, although A does not in fact has such an authority. T can enforce the contract against P. Example • P appoints A as his agent for the sale for his car, which T is interested in buying. P instructs A not to sell the car for less than £10,000. • P tells T that A is acting as his agent for the sale, but does not tell T of the restriction on A's authority. • In breach of his instructions, A sells the car to T for £9000. • A does not have P's authority to sell the car for £9,000. P has represented to T that A has authority to sell the car, and T is unaware of the restriction on A's authority. T has entered into the contract with A in reliance on P's representation. to sell the car for £9000. P is estopped from denying A's authority T can enforce the contract against P. TP believed in the contract bec there was apparent authority by the statement >> Apparent/ostensible authority

The concept of agency

Principal ------ Agent ------ Third Party P ------ A ------ T Definitions of Agency Fridman: Law of Agency : "Agency is the relationship which exists between two persons when one, called the agent, is considered in law to represent the other, called the principal, in such a way as to affect the principal's legal position in respect of strangers to the relationship (i.e. third parties) by the making of contracts and the disposition of property." >> ask the agent to represent principal, to negotiate contract etc and if accepted >> he becomes agent. And if agent follows incrustations of principal, the agent falls out of the picture and the final contract is b/n TP and Principal • Agent will fulfil the intentions of principal and act on his behalf generally through the creation, modification or termination of contracts with a third party.

Methods of ratification

Ratification can be express or implied (e.g. acceptance by P of goods purchased by A without authority) Suncorp Insurance supra The failure by P to dispute A's authority within a reasonable time could amount to ratification. P cannot ratify only part of the act.

5. P must be aware of all the material facts at the time he ratifies

Suncorp Insurance & Finance v Milano Assicurazioni SpA [1993] Marsh v Joseph [1897]

Armagas case for apparent authority

T (Armagas) owned a ship which it wished to charter to P (Mundogas) for 3 years. P only wanted to charter the ship for one year. T's shipping broker and P's chartering manager (A) were both rogues. Pursuant to a fraudulent scheme, and without P's permission, A purported to sign a three-year charter on behalf of P. A did not tell P that he had done this. P then signed a charter for one year. A told T that the one-year charter was a sham required for P's internal purposes, which did not affect the validity of the three-year charter. T knew that, as a chartering manager, A would not normally have the authority to sign the charter on behalf of P. However, A also told T that he had been given specific authority by P to sign the three-year charter on behalf of P. This was untrue. P believed it had a one-year charter. T believed it had a three-year charter. On the expiry of the one-year charter, P declined to renew it. T, believing that P was wrongfully repudiating its obligations under the three-year charter, sued P for damages. Agency issue • The question of whether A had authority to sign the charter depended on whether A had authority to make representations about his own authority. • T argued that A had apparent authority to sign the charter, so that P should be liable. • T's difficulty was that apparent authority requires a representation by P and the only representation had been made by A himself, nor could T argue that by appointing A as a chartering manager P had impliedly represented that A had such authority, because chartering managers do not normally have such authority and T was aware of this. Signing charters was outside the scope of A's usual authority as a chartering manager. • Finally, the mere appointment of A as a manager did not amount as a representation by P that A had authority to make representations about his own authority. This would fall outside of his role. • Therefore, A did not have apparent authority.

First Energy case for apparent authority

T (First Energy), approached A, P's branch manager in Manchester, seeking credit facilities. A sent T a letter which T understood to mean that A had obtained P's head office's approval of the credit facility, and that the letter amounted to an offer by P to T to make the facility available. T knew that A himself did not have the authority to make the facility available. It transpired that at the time when A wrote to T, P's head office had not approved the facility, and it subsequently refused to approve it. Agency issue Did A have apparent authority to represent that P's head office had approved the facility? If so, the letter would amount to an offer which was binding on P, and which had been accepted by T. A had such an apparent authority. HELD: A had apparent autho • The CA found that, a company, by appointing a man to the role of senior manager within the business of a bank, had given him a position which carried usual authority and consequently the company had clothed him with apparent authority. Ct applied reasonable test: Reasonableness of T's reliance on A's representation • Per Nourse L.J. in First Energy " A reasonable person having (T's) knowledge that (A) had no authority to sanction any facility himself ...would, on reading the letter of Aug. 2, have understood that HIB's head office had approved the facility offered in that letter. Moreover such a person, knowing that (A) was the senior manager in charge of HIB's Manchester office....would have assumed that (A) had been given authority by head office to communicate their approval and convey the offer accordingly." >> apperant autho applied and P was liable for the act of his agent • Per Lord Keith in Armagas v Mundogas "It must be a most unusual and peculiar case where an agent who is known to have no general authority to enter into transactions of a certain type can by reason of circumstances created by the principal reasonably be believed to have specific authority to enter into a particular transaction of that type"

2. By P's ratification of A's unauthorised act

The law allows P to adopt A's act retrospectively, but initially it was not done in authoritative way Example • P allows A to have possession of his car with a view to A's obtaining offers, but does not give A authority to sell it. • In breach of P's instructions, A sells the car to T for a good price. A tells T that he has P's authority to sell the car. • A does not have P's authority to sell the car. However, P decides to adopt A's unauthorised transaction. • In agency terms, P has ratified A's transaction. • If P validly ratifies, A is treated as if he had the necessary authority to make the contract at the time he made it, and P and T are both bound by it. >> has retroactive effect!

3. P must have been capable of being ascertained at the time of A's act

The principle must be named or be able to be identified Watson v Swann (1862)

3. The representation must be made to TP

The representation must have been made to T or to the public; apparent authority applies only where T is not aware, it must be in good faith Farquharson Bros & Co v C King & Co [1902] AC T must have relied on the representation If T knows that A does not have authority, then he cannot rely on a an apparent authority Overbrooke Estates v Glencombe Properties [1974] HELD: couldn't rely on representation. T bought a property at an auction in reliance on an incorrect statement by the auctioneer. The auction catalogue stated that P has not given A any authority to make representations on the property. T argued that P was liable for A's misrepresentation on the ground of an apparent authority. It was held that T knew or should have known of the terms of the catalogue.

Exceptions to the rule in Bolton Partners [4 expcetions]

The rule will not be applied in the following circumstances 1. If A's lack of authority is made known to T [if third party knews of lack of ratification] (e.g. if the agreement is made subject to ratification, so agreement was conditional) Watson v Davies [1931] 2. If T and A agree to rescind their agreement before P ratifies Walter v James (1871) 3. Where ratification would adversely affect T's property rights Bird v Brown (1850) [if agent realises that they sold the good to a T who was bankrupt and tired to stop the shipping of the good without the authority of the P, then this act would not be ratified, as it would harm the property rights of T and the rights of his creditors] A acting without the authority of P (seller) tried to stop goods for transit to T, who had been bankrupt 4. Where ratification takes place after more than a reasonable time or outside a contractual time limit e.g.: a reasonable time should not extend beyond the time at which the contract is to commence [e.g. not longer than the time the contract is bound to start] Metropolitan Asylum Board v Kingham (1890)

4. By operation of law - agency of necessity -

This may arise in an emergency, if there is a risk of damages of goods (goods being destroyed etc). Agent could decide to sell the goods without consent of principal and it would be a valid sale between principal and TP ⇒ Examples: tomatoes that will get rotten within the next 24 hours >> agent can act without authority of principal due to urgency of situation

usual authority case

Watteau v Fenwick [1893] ⎝The owner of a beerhouse sold it to a firm of brewers who retained the former owner as the manager of the business. Under the agreement made between the manager and the brewers, the manager had no authority to buy an goods for the business except bottled ales and mineral waters. Despite the terms of the agreement, the manager entered into contracts with a third party to supply the beerhouse with, amongst other things, cigars and Bovril. ⎝The Court held that the principal was liable under the contracts made by their agent even though i] they were a type expressly prohibited in the agreement between the parties and ii] since the principal was undisclosed there was no apparent authority extended to the agent. ⎝Close attention to the fact that the principal, was undisclosed, had it been disclosed the standard ambit of usual authority would have applied and the principal would gave been liable. In order to prevent a 'secret limitation' on liability of all undisclosed principals Wills J was happy to the extend the application of usual authority, it was justifiable on the grounds of public policy but has been criticised subsequently. It is likely that the case will not be followed in the future and that its application will be narrowly construed. -Key paragraph: "All that the pl had to do, in order to charge the principals is to show that the goods supplied were such as were ordinarily used in the business, that is to say, that they were within the reasonable scope of agent's authority." -e.g. if it was a video game bought - principal not liable. Here important that the goods are ordinarily supplied in the bar business. -Key question is: does the Agent have authroty to sell >> if he has authority, then the principal is liable. Here it is usual authority >> creates authority. The law can create agency even without the consent of the parties. -Case is very special and applies only in very narrow situations, see below for conditions: For Problem Qs Watteau v Fenwick will apply when the 3 conditions are fulfilled: 1) applies ONLY if the agent did not have actual authority >> exceeding autho (he had the authority to work as a manager but exceeded his autho by buying products he wasn't supposed to) 2) The cigar sellers didn't know about this, he thought the agent was the owner of the public house >> this created a wrong impression that the agent was the owner, principal allowed agent to keep the name of the public house and previously had acted as an owner. >> there should be an undisclosed principal 3) In exceeding his authority, agent must have done this under the contract/tasks he usually operates. TP must be acting in good faith

4. P must have had the legal capacity to make the contract both at the time A made it and at the time P ratified

[A must have capacity to act as a principal at the time of the agents act and at the time of ratification] Boston Deep Sea Fishing & Ice Co v Farnham [1957] • An English company (Agent) took control of a French fishing boat (Principle). As a result of the occupation by the Germans of France P was becoming an enemy alien and therefore lacked the contractual capacity to enter into the contract. It was held that ratification of acts by the French principal was not possible, since at the time of the acts, the principal was an alien enemy and therefore was 'not a competent principal because it could not have done the act itself'

The Agent's authority to bind his Principal

lecture 2 [see below]

3. Usual authority

subtype of consensual and non-consensual authority = Where an agent belongs to a particular trade or profession he will have the usual authority to do whatever is necessary to fulfil his authority as agent. • Agent will have the authority someone in his position will 'usually' have e.g. store manager has the authority to hire staff and order stock even if agreement does not expressly authorise such actions • It is also possible for trade usage to give rise to usual authority whereby the agent will have the usual authority to act in accordance with the lawful usages of that trade or place. This is so even where the principal is unaware of the particular trade usage in question provided that the usage is reasonable. A trade usage will be regarded as reasonable where it is not inconsistent with the principle's express instructions. • Usual authority is primarily a sub-division of actual, implied authority and it thus emanates from and enlarges the scope of the actual authority which exists between the agent and the principal. • Can the agent bind his principal to a contract where the act is outside both express and implied actual authority [ e.g. where the act is specifically prohibited by the agency agreement] and the principal has not held out to have the authority to act and so apparent authority is not applicable?

Power/liability model

• "The essential characteristic of an agent is that he is invested with a legal power to alter his principal's relations with third persons: the principal is under a correlative duty to have his legal relations altered" Dowrick: "The Relationship of Principal and Agent" (1954) 17 MLR pp36-38 • "Authority is a matter of fact: it connotes that one party has given instructions or permission to another to act on his behalf. The legal attribute of the agent, his power, may be called into being by the fact that he has his principal's authority to act..." >> authority is the most important issue in relation to agency per Wright J in Montgomerie v United Kingdom Mutual Steamship Association [1891] 1 Q B • "Where a person contracts as agent for a principal, the contract is the contract of the principal, and not that of the agent, and prima facie the only person who may sue (the third party) is the principal and the only person who may be sued (by the third party) is the principal.... to that rule there are, of course, many exceptions" agent falls out of the picture, and the person who may sue the TP is the principal

2. The representation must be made by P or on his behalf

• A representation will only bind P if it is made by P himself or by someone authorized to make representation on his behalf (someone with actual authority to make the representation) • Generally, the representation by A as of his own authority would not suffice to create actual authority • In the case of a limited company, the representation must be made by persons with the actual authority to manage the business of the company, such as the board of directors. • Although A will not normally have authority to make representation as to his own authority, he may by virtue of his position have apparent authority to make representations of fact, such as: the board of directors of a company have approved a contract with T >> this is allowed and is regarded to create apparent authority

Agency arising through operation of law

• Authority of necessity/emergency In urgent circumstances the law will impose an agency relationship or extend an existing relationship Conditions: 1. A is in control of P's good [must have possession] 2. Obtaining P's instructions would be impossible [so cannot contact principle] 3. Emergency situation [must be imminent harm or loss that would occur to goods] 4. A must act in good faith Springer v. Great Western Railway Co [1921] • A strike delayed the delivery of tomatoes • Delay meant tomatoes were starting to deteriorate. • A sold the tomatoes without the instructions of P [so no permission], as they started to perish, and sought to rely on his position of agent of necessity in order to effect the sale before the goods became unmerchantable • Court of Appeal: this could not be regarded as an agency of necessity, because A could have contacted P for instructions [but agreed that the doctrine of necessity could potentially apply to these facts]

Authority and Consent

• Authority refers to the scope of the agent's ability to affect the legal position of the principal. • An agent can only act on behalf of a principal if he has the authority in law to do so. • How that authority is acquired will determine the extent to which an agent's act will bind a principal. • Two methods of creating an agency relationship which in turn give rise to two broad categorizes of authority, those with consent and those without. • The consent models described those agency relationships created by agreement and explains the nature of actual authority (both express and implied). • However the court can find that an agency relationship has been created through necessity. E.g. courier encountering difficulties so has to take emergency action which is not expressly authorised.

Ratification

• Important for exams • Normally, an agent's authority is given to him before he acts for the principal. With ratification the position is reversed and the principal agrees to ratify the agent's conduct subsequently If A has acted on P's behalf without the necessary authority, P might wish to ratify the act. Under specific conditions P is allowed to adopt the unauthorized act by ratifying it. This then validates the act from the time it took place (retrospective effect). • E.g. Agent goes into shop and buys painting for principle, he didn't have the authority to do this , but principle can ratify this act

Apparent Authority

• Per Lord Denning MR in Hely-Hutchinson v Brayhead (supra): "Ostensible or apparent authority is the authority of the agent as it appears to others" >> depends on how the agent appears • By virtue of this concept an agent who acts outside his actual authority, will still be able to bind his principle where the principle has made a representation to the third party that the agent is acting within his authority. In such a situation the court is able to use estoppel to bind the principal to the action of agent even where the agent knew that he was acting outside his authority. • Agency relationship can be formed despite there being no express agreement to that effect, where estoppel is established. Where the principal leads a third party to believe that another person is acting as his agent, the courts can find that there is an agent principal third party relationship in effect and enforce the contract between the principal and third party accordingly. • Distinct features separating it from agency created through agreement: 1. It applies through conduct of the principal towards the third party and is not defined by the conduct between the principal and his agent. 2. Estoppel in this context has two abilities, i] it can be employed by the courts to discover the existence of an agency relationship, ii] it can also be used in order to expand on the nature of the agent's authority where for example, the agent's actual authority does not extend to encompass the particular agreement with the third party. Per Toulson J in ING Re (UK) Ltd v R&V Versicherung AG [2006]: "Where a principal (P) represents... to a third party (T) that an agent (A) has authority to act on his behalf, and T deals with A as P's agent on the faith of that representation, P is bound by A's acts to the same extent as if A had the authority which he was represented as possessing." Apparent Authority: Per Diplock LJ in Freeman & Lockyer v Buckhurst Park Properties (supra) : "Apparent or ostensible authority is a legal relationship between the principal and the third party, created by a representation made by the principal to the third party, intended to be and in fact acted upon by the third party. the representation when acted upon by the third party entering into the 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."

Types of authority

•Consensual - Actual authority: legal relationship between P & A created by a consensual agreement. Express actual authority, implied actual authority and usual. Ratification •Non-consensual - Not the result of an agreement. Apparent authority necessity and usual authority. Ratification •In between - usual authority (created by case ....) and ratification (agreement done without autho and then ratified >> becomes consensual autho) • In between - usual authority (created by case ....) and ratification (agreement done without authority and then ratified >> becomes consensual authority)