LAW OF AGENCY

Sometimes it is not possible for a person to act for himself and require the help of others (an agent). The person for whom or on whose behalf he acts is called the Principal. Agency is the relationship which exists between the principal and the agent. An agent is authorized to act for him or represent him in dealings with others.

LAW OF AGENCY
Generally, in an agency relationship there are two contracts. 1. between the principal and agent from which the agent drives his authority to act on the principals behalf 2. between the principal and the third party through the medium of the agent. Generally, the agent has no rights and liabilities under the contract. An agent does not need full contractual capacity in dealings between the principal and third party.

LAW OF AGENCY
An agent could be a minor. Any loss cause by a minor agent cannot be recovered by the principal. A principal must have full capacity to make such contract. A sole agent or sole distributor is not necessarily an agent in the legal sense. He does not bring the manufacturer to a legal relationship with the third party. Unless specifically agreed, an estate agent has no authority to sign a contract binding the principal.

LAW OF AGENCY
He is an intermediary bringing together a seller and a buyer. The contract is concluded by the buyer and the seller. Therefore, an estate agent is not an agent given that he lacks the capacity to make a binding contract.

LAW OF AGENCY
A contract of agency can be expressed or implied depending on the facts and circumstances and the conduct of the parties. Consideration is not necessary to create an agency. By other words, it should not be any rewards or compensation for agent to accept the agency.

LAW OF AGENCY
An agency is may be created by way of the following:
Express appointment by the principal; Implied appointment by the principal; Ratification by the principal; By necessity-i.e. by operation of law; By the doctrine of estoppel or holding out. (the law considers the agency relationship exist)

LAW OF AGENCY
By Express Appointment
No specific or special form is required; The authorization can be writing or oral; If an agent is authorized to enter into contracts under seal, the appointment must be made under a Power of Attorney, that is under seal.

LAW OF AGENCY
By Implied Appointment
The law, in certain circumstances, will infer the creation of an agency by implication.
By the word of a person who holds out another person as having authority to act for him. For example, if a person allows another to order goods on his behalf and habitually pays for them, an agency may be implied.

LAW OF AGENCY
The relationship of principal and agency may exist between a husband and a wife. When a married couple live together, there is a presumption that the wife has the authority to pledge her husbands credit for necessaries suited for their life style.
1. 2. 3. 4. This presumption can be rebutted: He expressly forbade to pledge his credit; He expressly warned the tradesman not to supply; His wife was sufficiently provided for (rich); His wife was given an allowance (specific amount) for buying goods; 5. The order was unreasonable, taking into husbands income.

LAW OF AGENCY
By the Partnership Act 1961- section 7 says partners are each others agents when contracting in the course of the partnership business.

LAW OF AGENCY
Agency by Ratification
-two things must be present-there was no authority or the agent exceeded his authority. - The principal could reject the contract or accept it. - When the principal accepts and confirms the contract, it is said to be ratified. The ratification could be expressed on implied. - Ratification sets forth the contract binding on the principal as if the agent had been properly authorized beforehand and it dates back to the time when the original contract was signed by the agent.

LAW OF AGENCY
Ratification of contracts can be done only under the following conditions:
1. The act or contract must be unauthorized; 2. The unathorized act must be one which is recognized by law.

A contract that is void cannot be ratified and neither can a criminal act.
3. The agent must at the time of the contract expressly act as an agent for the principal. He must not let the other party believe that he is the principal.

LAW OF AGENCY
There is a problem with ratification when a newly formed corporation (no existence of a principal) as to its promoters contracting on behalf of the corporation before the registration process is completed. Section 35 of the Companies Act 1965 a contract entered into by a company or its agent prior to its formation may be ratified by the company after its formation.

LAW OF AGENCY
Upon ratification, the company is bound by the contract from the inception (beginning) of the contract. The company will be liable unless there is an agreement to the contrary.

LAW OF AGENCY
The principal must ratify the whole act or the contract. No partial ratification is allowed. Any partial ratification is considered the ratification of the whole contract. The ratification must be done within a reasonable time. The ratification must not injure a third party- his rights or interest.

LAW OF AGENCY
Agency by Necessity In certain circumstances, a person could become an agent without being appointed. 1. A wife, who is deserted or who is justified in leaving her husband and has no means of support (does not have any other source of support), can pledge her husbands credit or necessaries depending on the life style and his income.

LAW OF AGENCY
2. A commercial agency of necessity occurs when one is entrusted with a property and one must act to preserve that property without having an express authority. This may be applied only where there are some existing contractual relationship exists.

LAW OF AGENCY
There are three conditions:
It is impossible to get the principals instructions. The agents actions are necessary in the circumstances to prevent loss to the principal as to the goods committed to his charge and the agent sells the goods before them being rotten. If there is no urgency, no agency of necessity exists. The agent of necessity acted in good faith.

LAW OF AGENCY
Agency by Estoppels
Generally, a person is not bound by a contract that is being made on his behalf without his authority. When a person by his words or actions allows a third party to believe that A is his agent, when in fact he is not, and the third party relies on it to his detriment, that person will be estopped or precluded (stopped) from denying the existence of As authority.

LAW OF AGENCY-Sub Agent

When delegation of duties is authorized, the person who is appointed by the agent to act in the business of the agency and is under the control of the agent is called a sub agent. Although a sub-agency exists, there is no contract between the principal and the sub-agent and the sub-agent is not under the control of the principal.

LAW OF AGENCY-Sub Agent

All contractual relationship as to the agency is between the agent and the subagent and the principal cannot sue the subagent and the subagent cannot get his remuneration from the principal. The agent is liable to the principal for the subagents actions. There is an exception as to fraud or willful wrong by the sub-agent and in this case the principal can sue either the sub-agent or the agent or both.

LAW OF AGENCY-Sub Agent

When the subagency is authorized and appointed, the principal is liable to the third parties as if he was the original agent of the principal. The agent is not liable. Where the delegation is unauthorized, the agent is personally liable to the principal and third parties for the acts and misconducts of the subagent. The principal is not liable unless he ratified the acts of the sub-agent.

LAW OF AGENCY-Sub Agents

A question arise whether a person appointed by an original agent is a subagent or substituted agent depends on the conduct of the parties, the nature of business and whether the person was helping the original agent or to act as an agent of the principal.

LAW OF AGENCY
A. Classification according to authority
A universal agent. A universal agent is a general agent with extensive power. He can do all acts which a principal may do. A general agent. A general agent is an agent who is employed to act on behalf of his principal, generally, in transactions relating to a particular trade or business. A special agent. A special agent is appointed to do a specific act or for a specific purpose and his authority is limited to that act or purpose.

LAW OF AGENCY
B. Classification according to function
1. Del Credere Agent. For extra consideration, takes on a responsibility (a contract on behalf of the principal) that a third party will do the principals obligations. 2. Broker. For a fee, a commercial agent who is employed to make contract between his principal and third parties. He cannot take title of goods and cannot contract on his own name. His job is to find purchasers.

LAW OF AGENCY-Sub Agents

3. Auctioneers. An auctioneer is an agent who is employed to sell goods by auction. He starts as an agent for the seller and later becomes an agent for the buyer. 4. Bankers.
Bankers as agent for Customer Bank employees as agents for the bank.

LAW OF AGENCY
Duties and responsibilities of Agent to his principal. Because the relationship between an agent and a principal is a contractual one, the rights and duties will depend on the terms of the contract of agency.

LAW OF AGENCY
The main duties of an agent are:
To obey the principals instructions. Failure to obey may be treated as breach of contract and liable for loss. Does not apply to un lawful instructions. To act according to the customs of the trade To exercise care and diligence (carefulness) in carrying out his work and to use such skill as he possesses.

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More
Duty to account for all monies and property handled by the agent and produce on demand by the principal. To pay to his principal all sums received on the principals behalf. May deduct any expenses incurred in carrying out his duty. To communicate with the principal and must use all reasonable diligence to obtain instructions from the principal.

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More
Must not have any conflict of interest. Must 100% work for the principal and must not let his personal interest conflict with the principals. Must not make any secret profit our of the performance of his duty. For example, bribe or kick back over and above his commission or fees. Not to disclose confidential information or documents.

LAW OF AGENCY
Duties and responsibilities of principal to his agent. The main duties are as follows:
Pay the agent the commission or any other agreed remuneration unless the relationship is gratuitous. Not to willfully prevent or hinder the agent from earning his commission. To indemnify and reimburse the agent for acts done in the exercise of his duties.

LAW OF AGENCY
Termination of Agency.
By the act of the parties.
Can be terminated by mutual consent or by unilateral revocation by the principal or renunciation by agent at any time by giving notice. Reasonable notice must be given. Reasonable time depends on facts and circumstances.

LAW OF AGENCY
By Operation of Law. -By performance of the contract of agency. -By the expiration of the time that is fixed or implied in the contract of agency. -By the death of either the principal or agent. Because the relationship is a personal and confidential. If the agent has an interest in the property then it is not terminated by the death of an agent.

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More
The agent must have the knowledge of the death of the principal. -By the subsequent insanity of either the principal or agent. -By the bankruptcy or insolvency of the principal. If the agent is insolvent then the agreement will dictate. -By happening of an event that renders the agency unlawful. The termination of agency also terminates sub-agency.