Exam Prep - Agency PDF

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AGENCYWhat is an Agent? One who acts for another (the principal) with the authority of that principal - whether that authority is actual (express or implied) or ostensible (apparent). - In so acting, the agent is said “to stand in the principal’s shoes”. 1. “que facit per allium facit per se” - he/h...

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AGENCY

What is an Agent? One who acts for another (the principal) with the authority of that principal - whether that authority is actual (express or implied) or ostensible (apparent). - In so acting, the agent is said “to stand in the principal’s shoes”. 1. “que facit per allium facit per se” - he/he who acts through another acts himself/herself Agency Descriptionable An exception to the doctrine of privity of contract, under which a stranger to the contract is not able to enforce it. 1. In agency, the principal is a party to the contract because the agent has acted in a way to create a state of privity between the principal and the other party. The Fiduciary Dimension of Agency An important feature of the agent’s relationship with a principal is that it is fiduciary. 1. Fiduciary is where a person holds a position of trust with another, such that he/she is obligated not to abuse that trust by making unauthorised profits by his/her position or by allowing self-interest to conflict with duty. Agent’s Authority a. Actual authority - Express; or - implied b. Apparent or ostensible authority Considering Affecting Whether a Valid Agency Exists 1. Legal capacity to act as agent or to incur the liabilities of a principal. 2. The creation of a principal - agent relationship by consensual appointment. 3. The creation of that relationship by estoppel or by operation of law. 4. The creation of that relationship by subsequent ratification. Types of Agent The difference is the extent of their authority. 1. Special agents; 2. General agents; 3. Universal agents. Creation of Agency - Normally a. By agreement; b. By operation of law; - Agency may also arise a. by holding out or by estoppel; b. By ratification

Agency by Operation of Law - Types: 1. Agency of necessity 2. Agency from cohabitation. Agency by Estoppel Arises where one person gives another person power to act on his or her behalf in circumstances such that third parties are justified in treating that other person as having authority to do even unauthorised acts on the principal’s behalf. - The agency will arise even though the “agent” did not have actual authority. 1. The Third Party may successfully claim against the “apparent” principal. The Requirements for Agency by Estoppel 1. A representation (express or implied). 2. A reliance on that representation. 3. An alteration of the third party’s position as a result of such reliance. Agency by Ratification Where the agent acts without the principal’s authority but the principal subsequently “adopts” those acts. - In such cases: a. The principal is bound; and b. The principal can also enforce the contract (provided ratification occurs before the third part acts to terminate it). Conditions for an Effective Ratification - The agent must have been acting for the principal. - The principal must be in existence at the time of the contract - The principal must have capacity to make the contract at the date it is made and also at the date of ratification. - Ratification must be of the whole contract not part of it. - Ratification must be with full knowledge of what has been done so that the inference may properly be drawn that the principal intended to be responsible for the contract entered into by the agent. The Agent’s Duties 1. To obey instructions. 2. To exercise due care and skill 3. To act personally 4. To account to the principal for all property received on the principal’s behalf. 5. To act as a good fiduciary a. To avoid conflicts of interest between the agent and the principal; b. Not to accept bribes or secret profits; c. To maintain confidentiality.

The Principal’s Duties 1. To pay the agent the remuneration to which he/she is entitled. (To this end, an agent also has a lien on the principal’s property in his/her possession). 2. To Indemnify the agent against liabilities and expenses properly incurred in carrying out the agency. Liabilities of Agents a. To the principal b. To third parties - Principal disclosed; - Fact of agency disclosed; - Fact of agency kept secret. Torts Committed by Agents - a. Liability of the agent; - b. Liability of the principal (Vicarious Liability). Termination of Agency a. By performance; b. By agreement; c. By revocation; d. By renunciation; e. By death, insanity or bankruptcy; f. By impossibility (frustration) or illegality. Rights of Agents The Rights against P include: - Right to remuneration 1. Depends upon the terms of the agreement; and 2. Whether A was the effective means of bringing the contracting parties together into a legally binding contract: a. L J Hooker Ltd v W J Adams Estate Pty Ltd (1997): the purchasing company had not been introduced by the agent. b. Rasmussen & Russo Pty Ltd v Gaviglio (1982): as the second agent was able to arrange finance, the first agent was not the effective cause of sale. - Right to indemnity and reimbursement - Right of lien Liability of Agent to Principal Generally no liability to the principal - Unless 1. The agent disobeys the principal’s instructions. 2. The agent is negligent; or 3. The agent makes confidential information available to third parties.

Liability of Agent to third parties - This will depend on whether: 1. The agent disclosed the name of the principal; 2. The agent does not disclose the name of the principal, but does disclose the existence of the principal; and 3. The agent does not disclose the existence of any agency. - Name of principal disclosed a. Agent is not liable except: 1. Where the agent contracts outside the scope of his actual or apparent authority; 2. Agent agrees to be liable; 3. Usage or custom makes the agent liable 4. Agent contracts by deed in his own name; and 5. Where the principal is in fact non-existent. - Existence but not name of principal disclosed 1. Provided he contracts as an agent, then generally not liable like when name is disclosed. - Existence of principal not disclosed. - If there is a principal then he or agent can sue or be sued. - If there is no principal then: 1. The agent will be liable if he contracts in his own name, although third party will be able to hold principal liable if he becomes aware of him; and 2. The agent will be liable where the agent warrants that he has authority to enter into a particular transaction when he does not and a third party relies on that representation of authority. Liability of Principal and Agent for Misrepresentations - Where the agent makes a negligent misrepresentation which was relied on by the purchased, the agent will be liable in the damages to the purchaser for the loss suffered. - A principal is vicariously liable for a tort committed by an agent where the agent has acted within the scope of their actual or apparent authority. Liability of Principal and Agent for Wrongful Acts - Same as for misrepresentation. - An agent is liable for his tortious acts. - The principal will also be liable when the agent has acted within the scope of his actual or apparent authority. Types of Business agencies a. Partnerships; b. Corporate Structures; c. Trust Relationships. Partnership A statutory agency based on a fiduciary relationship. - The statutory agency can continue after dissolution - at least for the purpose of winding up the partnership’s affairs.

Company Arrangements Corporate officers must, of necessity, act as the company’s agents. - Such agency may be: 1. Actual; or 2. Ostensible Trusts The trustee has a fiduciary relationship with the beneficiaries and must act for their benefit. - The relationship is not one of principal and agent but there are some similarities because of its fiduciary nature. Mutual Agency The right of all partners to represent the company's normal business operations and the authority to bind it to mutual contracts and agreements. In layman's terms, it is the authority given to a person doing business on behalf of the company, usually a business owner or partner

Sections Agents Act 2003 Section 127 What records must be kept 1. A licensed agent must record the material details of every transaction the agent conducts 2. A regulation may prescribe other records that a licensed agent must make. 3. A licensed agent must make the prescribed records 4. A licensed agents commits an offense if the agent fails to comply with subsection (1) or (3) 5. A person commits an offence if the person: a. Is a licensed agent or a former licensed agent; and b. Has made a record under subsection (1) on the regulations; and c. Does not keep the record for 5 years....