Agency Notes - Summary The Law of Contract PDF

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LAWS203 The Law of Contract Outline 2018 C

Agency

An agent acts on behalf of principle as to efect the legal relations with third parties An agent can enter into a contract on behalf of principal Can still be abgent event hough yu don’t have the power to bind contractually

A person acts as an agent because they are authorised to do so

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Real Estate Agent Typically with these cunts It is an agent of the vendor or seller of land -

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Commerical generall acts on agency Basis for agency us authority

Find someone who wants to buy the car (third party) You reach an agreement with purchaser A contract is formed between me the cars owner and the third party o I am contractually bound to sell my car to that person, because I have authorised an agent to do so

Actual authority 16.2.1, 16.4.1 Hely-Hutchinson v Brayhead [1968] 1 QB 549 Lord Denning: It is there shown that actual authority may be express or implied. It is express when it is given by express words, such as when a board of directors pass a resolution which authorises 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 managing director. They thereby impliedly authorise him to do all such things as fall within the usual scope of that office. Actual authority, express or implied, is binding as between the company and the agent, and also as between the company an others, whether they are within the company or outside it. BOARD NEVER EXPRESSED ME E COULD DO IT HOWEVER IT WAS IMPLIED HE HAD AUTH AND CAME FROM BEING EFFETIVELY THE MDma

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Mr. R purported to indemnity Hutchison to any loss of injected funds on behalf of the company (different company)  Court had to determine if Mr Richards did so on authority of that company? o Richards was chairman of the board of director, court also found he was not appointe as the managing director - and acted in that way in the agreement to the Knowledge of the

board; 2 types of actual authority 

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Expressed - when it is by words, and passing a resolution and causing others to sign e.g. I want you to sell my car on my behalf, I am granting you an express actual authority  It can also be implied by circumstance, the most common when a company appoints A to a position of managing Director o That person has the implied authority to do whatever is normal for a person in that position in that type of company - Company can limit and remove that implied authority - expressly stating what the employee is limited and authorised to do It is implied when it is inferred in the circumstances of the case Both types are binding between the agent the company and the third party

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Go sell my car but not less than 10,000 You purport to enter into a contract for 99999 you are in breach of that contract

The agency relationship Duties of agents

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Summary of the duties of agents To carry out instructions

To act within authority To act with due care and skill To act in principal’s interest To account for money received Confidentiality To make no secret profit

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Rights of agents

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Summary of the rights of agents To receive a commission To be indemnified against liability Contracting with third parties 16.3 Disclosed principal Southwell v Bowditch (1876) 1 CPD 374 “I have this day sold by your order and for your account to my principals five tons of .... anthracene .... W. A Bowditch.”

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The message from agent to the third party, accepting an earlier offer. Southwell - ultimately sued bowditch in respect to thec ontract The words show that acceptance was intended to act as ana gent No inditcation that he himself inteded to be bound For that reaosn Bow WAS NOT A Party to main contract

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gENERTALLY SOPEAKING, WHEN YOU HAVE DISCLOSEDS TO THE OTHER PARTY THAT YOU ARE WORKING ON BEHALF OF SOMEONE ELSE THEY WILL NOT BE NOUND THEMSELVES TO THE MAIN CONTRACT UNLESS THEY EXPRESS TO BE BOUND BY IT Thiurd party cannot sue the agent ust the principle agent not liable Where there is a disclosed and undisclsoed principal Disclosed principal where a person discloses that they are acting on their behalf Undisclosed principal - where the agent does not disclose they are acting on b ehalf- they act as they are acting for themselves

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Undisclosed principal Siu Yin Kwan v Eastern Insurance Co [1994] 2 AC 199 Lord Lloyd: (1) An undisclosed principal may sue and be sued on a contract made by an agent on his behalf, acting with the scope of his actual authority. (2) In entering into the contract, the agent must intend to act on the principal's behalf. (3) The agent of an undisclosed principal may also sue and be sued on the contract. (4) Any defence which the third party may have against the agent is available against his principal. (5) The term of the contract may, expressly or by implication, exclude the principal's right to sue, and his liability to be sued. The contract itself, or the circumstances surrounding the contract, may show that the agent is the tru and only principal.

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If you are acting on someones behalf, yiou are still binding your principal The agent m,ust intend to bind the principal Every intention is considered obectively, and how it appears to other party

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It is different here because the other party does not know - This issubjective intention and you have to prove that you were acting on behalf or not Can only bring against rincipal not the agent

The agent does not reveal he is acting on behalf, 3rd party think agent is principal 5 rules by Lord Lloyd 4o

tHIS ATTEMPT TO BIND this undosclosed principal may be ineffective

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E.g. if some1 intending to act on thrid party and doesn’t say so Expresse desire to enter into contrac I WILL ENTER THIS CONTERACT WITH YOU, BUT NO ONE ELSE That situation is acrtive at binding the principal

Sometimes it may not be possible for an agent to bind an undiosslocsed principal Anu commerical arrangement an agenr can bind an undisclsoed principal o

Acting without actual authority Apparent authority 16.2.2, 16.4.1 Freeman v Buckhurst Park Properties [1964] 2 QB 480 Director of a company , who was not formally appointed as managing director o o o o

But acted as if he was managing director to the knowledge of the board Ultimately when he entered and purported to enter into a contract on behalf of the company The court found the company was bound because the C had held him out as managing directo Basis of actual authoirty is holding out that person has actual aiuthority Diplock LJ: An "actual" authority is a legal relationship between principal and agent created by a consensual agreemen to which they alone are parties. … To this agreement the contractor is a stranger; he may be totally ignorant of the existence of any authority on the part of the agent. Nevertheless, if the agent does enter into a contract pursuant to the "actual" authority, it does create contractual rights and liabilities between the principal and the contractor.

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Assuming you have also said they are acting on behalf and they agee - it is express authority There is a relationship of agency that has been formed - this person is my agent to sell car, tha person has authority that creates an apparent authority iF I HAVE decided you not to sell my car, there acutal authority is relenquished When I tell people I don’t want to be an agent, it ends the agency, but no one else knows and they are still acting on behalf If person sells or tries to it is legally effective, because it is apparent authrouty

An "apparent" or "ostensible" authority, on the other hand, is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the "apparent" authority, so as to render the principal liable to perform any obligations imposed upon him by such contract. Savill v Chase Holdings [1989] 1 NZLR 257 Tipping J: The result of these authorities is that in the present case the plaintiffs must be able to point to conduct on the part of Chase Corporation, at the requisite level of authority within that company, which amounts to a representation upon which it was reasonable for the Savills to rely that either Chase Holdings or Mr Savage personally had authority to bind it, Chase Corporation, to sell the Grose properties to them, the Savills. If such can be shown then even though Chase Holdings and Mr Savage had not actual authority, as I have held to bind Chase Corporation that company will be bound if the actions of Mr Savage or Chase Holdings otherwise have that effect. o o o

This concerned a comp;licatd property fdreal which apprently involed thr savills purchasing property from chase corp Chase corp os mpt mnot chase holdings, Cahse corp is the owner of chase holding mr Savage was an emplpyee of chase holdings Mr savage reportred to act and sign on behalf of chase corperations Court asking if therewa apparent authority did mr savage have the authority

Necessity 16.2.4

China Pacific SA v Food Corporation of India [1982] AC 939 Lord Diplock: The legal nature of the relationship between the master and the owner of the cargo aboard the vessel in signing the agreement on the latter's behalf is often though not invariably an agency of necessity. It arises only when salvage services by a third party are necessary for the preservation of the cargo. Whether one person is entitled to act as agent of necessity for another person is relevant to the question whether circumstances exist which in law have the effect of conferring on him authority to create contractual rights and obligations between that other person and a third party that are directly enforceable by each against th other. Carog ship stuck on reef, ship owners through the master o o o o

Made an agreement for salvage and this was omn beha;f of the owners of the ship But it was also on bheal;f of the owners of cargo on the ship MASTER HAD AUTHROITYT TO BIND SHIP OWNERS, BUT NOT BIND CARGO OWNERS THE SALVERS SALVAGED 15,000 TONS OF WHEAR, iSSUE WAS WHRTEHR OWNERS OF THE WHEAR WERE BOUND BY THE SALVAGE CONTRACT

cONTRACT BINDING BECAUSE SITUATUON THAT REQUIRED URGENCY ] This form of agency is onlylimited only to this type of situation If an agent purports to act on bhalf of a principal without actual authority 0 the principal can ratify the resulting contract

BELOOOOWWWW iF THEY DO RATIFY THEN IT IS AS IF THE PERSON HAD AITHORITY ANYWAY Ratification 16.2.3 Keighley, Maxsted & Co v Durant [1901] 1 AC 247 MR Roberts Robert was authroised to puirchase corn at a certain price He then purchased at a higher price in his own name They made a decision to ratify biut later changed their mind Question whether there ratitifcation was effective It was held that, bc the pruchase was not orignally made on their behalf, they could

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not ratifty it 

Principal must have had capacity to enter into a contract at the time of the agreemen

Boston Deep Sea Fishing v Farnham [1957] 1 WLR 1051 ss182-185 Companies Act 1993 182 Pre-incorporation contracts may be ratified (1) In this section and in sections 183 to 185 of this Act, the term pre-incorporation contract means— (a) a contract purporting to be made by a company before its incorporation; or (b) a contract made by a person on behalf of a company before and in contemplation of its incorporation.

(2) Notwithstanding any enactment or rule of law, a pre-incorporation contract may be ratified within suc period as may be specified in the contract, or if no period is specified, then within a reasonable time after the incorporation of the company in the name of which, or on behalf of which, it has been made. (3) A contract that is ratified is as valid and enforceable as if the company had been a party to the contrac when it was made. 

Warranty of authority 16.5.1 Collen v Wright (1857) 8 E&B 647 Willes J: I am of opinion that a person, who induces another to contract with him as the agent of a third party by an unqualified assertion of his being authorized to act as such agent, is answerable to the person who so contracts for any damages which he may sustain by reason of the assertion of authority being untrue. The obligation arising in such a case is well expressed by saying that a person, professing to contract as agent fo another, impliedly, if not expressly, undertakes to or promises the person who enter into such contract, upo the faith of the professed agent being duly authorized, that the authority which he professes to have does i point of fact exist. The fact of entering into the transaction with the professed agent, as such, is good consideration for the promise. A person signed a lease reporting to ber the agent of the properrty owner, but in fact had no

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Agency Thursday, 17 March 2016 11:04 a.m.

No actual or apprent authority This meant the principal could not be sued by the third party

LAWS203 The Law of Contract Outline 2016 C

Agency Involves three parties 1. The principal 2. The agent 3. The third party The whole point is that one person acts on behalf of another. In some circumstances an agent can contractually bind his or her principal.  There's a contract between the principal and the agent but this means that in some circumstances, there can be a binding contract formed between the principal and the third party.  In NZ, realtors act as agents but do not have the power to contractually bind a principal to a third party.  A stock agent who purchases stock for farmers, is an agent who can enter into a binding contract.  A café is also in one of these situations.

Actual authority 16.2.1, 16.4.1  Express or implied authority is a question but both are included in 'actual authority'. Hely-Hutchinson v Brayhead [1968] 1 QB 549  Can be expressed or implied.  e.g. "can you please go and sell my car for me?" this means that the person is now bound to sell their car to another party. Can also occur where no authority has been expressed but can be implied in certain circumstances instead. In this case, Hely was the managing director of an electronics company called Heath. The company was in financial difficulty so it issued shares to Brayhead ltd and this was executed by Mr Richards.  Richards was the chairman of the Brayhead Board of Directors. At a later time, Hely injected more money into Heath and he was indemnified for loss by Mr Richards acting on behalf of Brayhead.  This means that if Hely suffered loss (if he couldn't get his injected money back) then Brayhead would have to compensate him aka make good the loss. The company (Heath) went under and Hely tried to recover the amount he injected under the indemnification.  Brayhead responded that Richards did not have authority to sign the indemnification on their behalf. Thus because there was no authority then there was no binding agreement.  Authority agent rests on authority.  It's common knowledge that being the head of the BoD does not normally carry the authority to sign an indemnification document but it was argued by Hely that Richards acted as a defacto managing director.  Never formally appointed but instead acted as a managing director anyway.  Hely argued that even though there was no express authority given, there was an implied authority through his acting as if he was the managing director and Brayhead allowing him to do that.

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Lord Denning:

It is there shown that actual authority may be express or implied. It is express when it is given by express words, such as when a board of directors pass a resolution which authorises 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 managing director. They thereby impliedly authorise him to do all such things as fall within the usual scope of that office. Actual authority, express or implied, is binding as between the company and the agent, and also as between the company and others, whether they are within the company or outside it. The agency relationship Duties of agents Summary of the duties of agents  To carry out instructions  To act within authority  To act with due care and skill  To act in principal’s interest  To account for money received  Confidentiality  To make no secret profit Rights of agents Summary of the rights of agents  To receive a commission  To be indemnified against liability Contracting with third parties 16.3 Disclosed principal Southwell v Bowditch (1876) 1 CPD 374  Yozza. I have this day sold by your order and for your account to my principals five tons of .... anthracene .... W. A. Bowditch. Undisclosed principal Siu Yin Kwan v Eastern Insurance Co [1994] 2 AC 199  Yozza. Lord Lloyd: (1) An undisclosed principal may sue and be sued on a contract made by an agent on his behalf, acting within the scope of his actual authority. (2) In entering into the contract, the agent must intend to act on the principal's behalf. (3) The agent of an undisclosed principal may also sue and be sued on the contract. (4) Any defence which the third party may have against the agent is available against his principal. (5) The terms of the contract may, expressly or by implication, exclude the principal's right to sue, and his liability to be sued. The contract itself, or the circumstances surrounding the contract, may show that the agent is the true and only principal.  Number 5 is questionable and based on circumstances.

Acting without actual authority Apparent authority 16.2.2, 16.4.1  Apparent authority is very important if there is no actual authority present. Freeman v Buckhurst Park Properties [1964] 2 QB 480

Diplock LJ: An "apparent" or "ostensible" authority, on the other hand, is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the "apparent" authority, so as to render the principal liable to perform any obligations imposed upon him by such contract. Savill v Chase Holdings [1989] 1 NZLR 257  Deal where the Saville's attempted to buy property from Chase Corporation who owned Chase Holdings which employed Mr Savage.

 Savage purported to enter into an agreement with the Saville's on behalf of Case Corporation.  However he had no actual authority to do that.  The Saville's sued Chase Holdings for breach of contract on the grounds that their parent company (Chase Corporation) had been bound in a contract.  They claimed that Savage had apparent authority.

Tipping J: The result of these authorities is that in the present case the plaintiffs must be able to point to conduct on the part of Chase Corporation, at the requisite level of authority within that company, which amounts to a representation upon which it was reasonable for the Savills to rely that either Chase Holdings or Mr Savage personally had authority to bind it, Chase Corporation, to sell the Grose properties to them, the Savills. If such can be shown then even though Chase Holdings and Mr Savage had not actual authority, as I have h...