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The Law of Agency and the Agent

Info: 1204 words (5 pages) Essay
Published: 6th Aug 2019

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Jurisdiction / Tag(s): UK Law

A person who has been employed to carry out task or act for another or as a representative for third party in dealings is known as an agent whereas the person who employed an agent to perform any act is known as the principal. Under the Law of Agency, there are a variety of forms of authority that an agent endowed with. These authorities include actual authority which consists of express authority and implied authority, and apparent authority. Actual authority is important for an agent if the agent acts within actual authority, they will be able to claim compensation from the principal for any remuneration or expenditure incurred under the agency contract with the principal. Other than that, agents who act beyond their actual authority probably be legally responsible to the third person for break of the implied warranty of authority. There are express and implied authorities under actual authority.

Express authority usually derived from contract between principal and agent. It can be in writing form or orally form unless agent authorized to execute deed on behalf of principal which must be granted by deed, no particular form is required. It is crucial to know that the agency agreement can arise orally hence institutions should exercise caution when negotiating with potential agents to ensure that an agreement has not been reached if one is not at that stage intended. The extent to the agent’s express authority will rely on the construction of the agreement between the parties and in the case of an oral agreement, evidence of the existence of the agreement and its terms and the interpretation of what was said. Where there is an ambiguity, the court will apply various rules of construction including construing the agreement against the maker of the agreement, which in most of the cases would be the principal in favour of the agent. The court may also imply terms into the agreement in appropriate cases.

Implied authority is where an agent is employed and authorizes to conduct all collateral and incidental acts in order to carry out his duties under the agency agreement. Implied authority can divide into usual authority which refers to such authority as is normal for the particular type of agents, and customary authority which is derived from business usage or the local market. For an example of implied authority would be where the recruitment agent has only been authorized to assist the student in applying for a

place at a institution in the agreement, the agent would have the implied authority to assist the student with the application for accommodation. Another example is in WATTEAU V FENWICK (1983) the manager of a public house was instructed by D, the owner, not to purchase tobacco on credit. P, who was not aware of this restriction sold tobacco to the manager, and the manager was unable to pay for it. P then successfully sued D. It was held that the purchase of tobacco was within the usual authority of a manager of a public house, and it was this authority upon which the seller was entitled to rely.

Apparent authority occurs where the principal or someone acting with the actual authority of the particular principal represents to the third party that the agent is authorized to undertake the transaction which the agent and the third party subsequently conclude. If the agent did not purport to make the agreement as principal will also causes apparent authority to arise. Moreover, if the third party was induced to enter into the transaction in reliance upon that representation and the third party altered their position to their detriment will also causes apparent authority to arise. For example, it is the practice in some markets for agents to send applications from students to institutions with which they have no agreement. If the institution accepts the application and makes an offer to the student that is accepted, this could give rise to the agent having apparent authority to act on behalf of the institution. There is an exposure to liability in this instance as the agent may not have adequate knowledge about the institution, its policy and procedures. By accepting the application, the institution may be bound by representations made by the agents whom the student has relied on.

As an agent, they have their own duties as well. An agent must carry out his principal’s lawful instruction, unless principal is acting pointlessly or they are unlawful. If the instruction given is uncertainty, then the agent has the choice of choosing one interpretation over another. As a result, the principal will have to withstand with the consequences of his imprecision. Other than that, an agent must exercise reasonable care and skill in the performance of his duties. The degree of skill expected of a professional person than of a layman who merely advises a friend. If a payment is made this will also be taken into account in assessing the care and skill expected but even an unpaid agent may be liable in tort for negligence if he gives bad advice.

Moreover, an agent must act in good faith and for the advantages of his principal. First, an agent must not let his own interest conflict with his duty to his principal. It does not matter that the contract is made without intent to defraud. For example, if an agent chosen to purchase or sell his own property to the principal at a appropriate market price. With this rule, agent is prevented from being tempted not to perform the best for his principal. In ARMSTRONG V JACKSON (1917) P employed D, a stockbroker, to buy some shares for him. The fact is that D actually sold his own shares to P and it was held that P could terminate the contract. It obviously shows the conflict between duty and interest as the agent’s interest as a seller was to sell at the highest possible price but his duty as an agent was actually to buy at the lowest possible price.

Secondly, he must not create any extra or secret profit which means he as an agent must not utilize his position to secure a benefit for himself. For an example in LUCIFERO V CASTEL (1887) an agent appointed to purchase a yacht for his principal. However he bought the yacht for himself and then sold it to his principal at a profit, the principal being unaware that he was buying the agent’s own property. An agent’s duty is to pay his profit back to the principal and it is a must even if the principal could not have earned the profit himself.

Thirdly, an agent must not misuse confidential information regarding his principal’s affairs. The principal may apply for an Anton Piller injunction if they fears that the agent will demolish or dispose of confidential information or distribute it to other party. The Anton Piller injunction function is to authorizing the principal’s representative to enter the agent’s premises to get rid of the confidential information. It is an ex parte injunction, which means it is granted on the application of the principal without the agent being represented. The name derives from the case ANTON PILLER KG V MANUFACTURING PROCESSES (1976) where it was first granted.

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