What is an Agency?• An agency is “a legal relationship

whereby one person acts for another.”

• The person from whom the agent gets authority is the principal

• The person who acts for another is the agent

Features of an AgencyThis relationship binds third parties

Competency is only applicable to the principal. The principal must have the contractual capacity to employ an agent

Consideration is not necessary

Agents do not need contractual capacity as they could be minors or persons of unsound mind

Agency Test Necessary authority

Every person who acts on someone’s behalf is not an Agent

Delicious is a lap-dancer at Jiggle Gentleman’s Club. She had to work a minimum number of shifts per week and was paid per shift and per private room session. The owner of Jiggle never paid taxes on the dancers’ services, so the government went after them.

Are they agents or employees?

Spearmint Rhino Ventures (UK) Ltd. v Revenue & Customs Commissioners (2007)

Creation of AgencyAgency can be created by:1.Contract (express or implied, oral or written)

– Hely Hutchinson v Brayhead (1968)

The Chairman and Chief Executive of a company acted as the de facto Managing Director although he had never been formally appointed to that position. He entered into a contract on behalf of the company which attempted to bind a third party and the company. The third party tried to enforce the contract, but the company claimed that the chairman was acting outside the scope of his authority

•Held: Though the director had no authority as chairman, he DID have implied authority as the CEO, and thus the contract was binding on the company. As such the director COULD bind his company on the basis of implied authority.

Implied v Expressed Instructions

The implied authority can exceed the expressed authority ONLY if it does not contradict an expressed limitation that is communicated to a third party

Watteau v Fenwick (1893)Facts: the new owners of a hotel continued to employ the previous owner as manager. They expressly forbade him to buy certain products including cigars. However, the manager did buy cigars from a third party, who then sued the new owners as the manager’s principal for non-payment

•Held: that the buying of cigars was WITHIN the usual authority for a manager of such an establishment, and that if that authority was limited then it MUST be communicated to the third party

Creation of Agency2. Ratification (Principal confirms and accepts

unauthorised acts by the Agent) An agent who was appointed has exceeded his

authority or

A person who has no authority to act for the principal has acted as if he has the authority.

3. Estoppel (a person allows another to act for him/her to such an extent that a third party reasonably believes that an agency relationship exists)

Barrett v Deere (1828)

4. Necessity (a person acts for another in an emergency situation without express authority to do so)

Sachs v Miklos (1948)

Requirements for necessity1. While one party has possession of another

party’s goods an emergency occurs

2. This forces that party to take action regarding the goods for the benefit of their owner

3. It is impossible to communicate with the owner first (constructive notice)

Classification of AgentsUniversal Agent – Unlimited authority

General Agent – Authorised only to act within the trade or business of the principal

Special Agent – Only authorised for a specific transaction

Examples of AgentsPower-of-AttorneyEstate AgentsInsurance BrokersSports Agents

Sales Staff?

Powers of Agents• To enter into a binding contract with a third

party

• To buy goods

• To hire

• To sell goods or property

• To agree contractual terms

Duties of AgentsUnless modified by contract, agents generally owe the following duties to their principals:•Duty to obey instructions provided by the principal

•Duty to notify and give information

•Duty to act with skill– Chaudhry v Prabhakar [1988]: Prabhakar was

trusted with choosing a car for Chaudhry that was not in an accident.

Duties of Agents (2)Duty to protect confidential information

Duty of Personal Performance – cannot delegate duties to third party

Duty to account for monies spent

Duty of loyalty and to avoid conflicts of interestBoardman v Phipps [1967]: Lawyer of family

trust and a beneficiary made a good business choice to save company left in will.

When Principal won’t be liableWhere the terms excludes agency

relationshipsSaid v Butt [1920] – Theatre owner refused his

entry

Third party wanted to contract with agent personallyGreer v Downs [1926]