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AGENCYThis is a contract where the principal instructs the agent to act on their behalf to produce legally binding effects.If the contract is gratuitous (free) then the relationship is usually known as a mandate and there is a mandant and mandator rather than a principal and agent.There is no requir...

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AGENCY This is a contract where the principal instructs the agent to act on their behalf to produce legally binding effects. If the contract is gratuitous (free) then the relationship is usually known as a mandate and there is a mandant and mandator rather than a principal and agent. There is no requirement for writing. Sec 1 Requirements of Writing (S) Act 1995. The contract can be express or implied. Although ratification is needed in instances such as an ultra vires act by an agent. If the contract is a commercial contract, then a signed document of the contract must be given if asked for by either party. Reg 13 Commercial Agent Regulations. Contractual Capacity As the agent is only an intermediary – the principal must have contractual capacity. Sec 51 CA 2006. Tinevelly Sugar Refining v Mirlees Watson and Yaryan: As the company had not yet been formed the principal did not have contractual capacity. As the agent is acting an intermediary – there is no need for them to have contractual capacity. Contractual Authority Acting with Authority:  Express Authority – outlines the extent of the authority  Implied Authority – the agent is able to do whatever is necessary to complete the transaction. Custom in the trade can help to define this. This can only apply to general agents rather than specific agents (who carry out a specific task). Acting without Authority:  Apparent/Ostensible Authority – principal acts in a manner to suggest there is authority. Bank of Scotland v Brunswick Developments: Where there is an ostensible agency the principle is personally barred from reduction. Freeman and Lockyer v Buckhurst Park: If the principal acts in a manner to suggest to a third party although the agent is authorised, then the principal cannot deny afterwards that the agent is authorised. International Sponge v Watt and Sons: Principal let the agent use an unauthorised payment method and this couldn’t be denied afterwards.

Gregor Homes v Emlick: A principal cannot deny an agent’s ostensible authority in the context of an action raised against the principal by a third party. Armagas v Mundogas: An agent can never be self-authorised; to be binding there must at least be ostensible authority. Kelly v Fraser: If the principal appoints a manager and they do something way out of their actual authority but within the appearance of authority, then the principal is bound by their actions. First Energy v Hungarian International Bank: Agents are authorised to communicate information on behalf of the principal even if they cannot represent the extent of their own authority. Ratification Acts of the agent can be ratified by a principal if they were carried out without the required authority. Two instances where this can arise:  Agent exceeds their authority but principal ratifies their action  There was no agency relationship but a party purports to act for another and this is ratified creating an agency relationship. Necessary Criteria for Ratification: (1) The principal must have been in existence at the time the agent acted on their behalf. N.B. Where a company enters into a contract prior to incorporation; the person purporting to act for the company or the agent is personally liable for it under Sec 51 Companies Act 2006. (2) The principal must have contractual capacity at the time the agent acted on their behalf. Boston Fishing v Farnham: Ratification was not possible as at the time of contracting the company was an alien enemy and therefore didn’t have contractual capacity. (3) The agent must have entered the contract as an agent on behalf of the principal. Keighley Maxted v Durant: This was an English case that held ratification was not possible as the agent carried out a joint purchase rather than solely acting for the principal. Lockhart v Moodie: This was a Scottish case that held that where there was authorisation to purchase goods at a certain price and they were bought at more there was liability up to the value agreed. (4) Time limits – uncertainty whether ratification has to be within time limits for actions.

Goodall v Bisland: A solicitor acting as an agent appeals a decision on behalf of a principal. The principal ratifies this after the time limit allowed for appeals. The court held the ratification was ineffective. Presentaciones Musicales v Secunda: A principal was able to ratify a court action that an agent had raised after a limitation period had ended. Bolton v Lambert: An English case that held ratification can happen after the contracting party has tried to withdraw from the contract. There is no Scottish authority on this. (5) Principal must make an informed choice to ratify. Forman v The Liddesdale: No ratification from simple acts; especially if the principal has no choice. (6) Ratification not possible if it would cause unfair prejudice to a third party. Smith v Henniker-Major: Prejudice to a third party can prevent ratification. An agent who does not possess authority and acts for the principal can be liable for breaching their warranty of authority. A third party can also claim against an agent for any loss resulting in a contract not happening. Frank Houlgate v Biggart Baillie: No breach of agent warranty where agent purport to act on behalf of person lending money but happen to find out that a security over property from a lender is ineffective as the lender doesn’t own the property. Cheshire Mortgage v Grandison / Blemain Finance v Balfour and Manson: No breach of agent warranty where agent lends money to fraudsters who claim they own property they don’t as the solicitors were merely an administrator and the principal had already decided that were to lend the money to the fraudsters. Agency Contracts Agent acts for a disclosed and named principal  The agent is not a party to the contract and generally does not incur any liabilities bar the fact that signing creates some contractual duties. Steward v Shannessy: There is a presumption that a signature is personally binding. Digby Brown v Lyall: An agent can sign a contract in a way to rebut the presumption that a signature is binding. This can include making sure the contract is signed on behalf of the principal.

Brebner v Henderson: Document was signed as Director and Secretary but this did not rebut the presumption of personal liability as they didn’t make it clear it was on behalf of the company and therefore this wasn’t enough to rebut the presumption. Agent acts for a disclosed but unnamed principal  The third party knows there is a principal but doesn’t know who it is. Lamont, Nisbet and Co v Hamilton: If the third party to an agency contract only looks at the agent’s financial reputation then they can only look to them to them to be paid. Ferrier v Dodds: A horse was bought via an auctioneer acting as agent for an undisclosed agent. When problems were discovered the horse could be returned to the owner. Agent acts for an undisclosed principal  From the third parties perspective; the agent appears to be the principal. In this instance when things go wrong the principal can sue the third party and the third party can either sue the agent or the principal. Rolls Royce v Ricardo Consulting Engineers: The principal may not be able to intervene if: - The terms of the contract state expressly or impliedly there is no concealed principal - If the contract was made based on the particular skill or experience of the contracting party - If concealment of the principal was for deceptive purposes Dyster v Randall: In this instance deception wasn’t held to be an issue and the agency contract was valid. Said v Butt: Deception as to who a theatre ticket was for was enough to cancel the contract. David Logan v Schmidt: A third party can elect to sue either the agent or the principal. Liability is alternative, not joint and several. Bennett v Inveresk Paper: Principal has title to sue for damaged goods even where third party didn’t know that they existed. Agent acts on behalf of a non-existent principal  Agent can become personally bound in the contract. McMeekin v Easton: A church was held not to be a legal person and therefore there was no principal and so the agent was held personally liable.

Halifax v DLA Piper: A solicitor acted on the behalf of a non-existent client and was held to be personally liable. Thomson v Victoria Eighty Club: Where the principal doesn’t have capacity, the agent impliedly agrees to be personally liable. The Principal’s Rights York Buildings v Mackenzie: An agent undertakes a duty to the principal to act in their best interests, even if this is contrary to their own interests. They owe the principal a duty of care. The Agent’s Duties Agents owe their principal’s fiduciary duties. Imageview Management v Jack: An agent’s interest must come second to the principal’s – they must act although they were the principal. Agents must:  Account to the principal for any benefits received from third parties: Neilson v Skinner  Not disclose the principal’s confidential information: Liverpool Victoria Friendly Society v Houston  Not enter a transaction that would not be in the interests of the principal and if so it will be void: McPherson’s Trustees v Watt: An agent was selling houses for the principal and sold one to their brother and this was void as there was a breach of fiduciary duties. Rosetti v Diamond Sofa: An agent cannot work for multiple principals who are competitors without their informed consent.  Not accept any secret commission or bribes: Imageview Management v Jack Parks of Hamilton Holdings v Colin Campbell: It is possible for the principal to consent to a breach of fiduciary duties by the agent if they give informed consent (making sure the agent gives all the information). Agents owe their principal a duty of good faith – this is less extensive than the fiduciary duties and does not require a party to put their interests second to that of the principal. The commercial agent failing within the definition also holds a duty of good faith under Regulation 2 and 3 of the Commercial Agents Regulations 1993. Agents have a duty to follow instructions – and if none are given they must follow the custom of the trade and their best judgement under the common law and Regulation 3 of the Commercial Agents Regulations 1993.

Agents have a duty of skill and care. Copland v Brogan: The agent must perform their role with the skill and care of a reasonably competent and careful member of the particular profession. Agents have a duty to keep accounts; these can be written or verbal. Agents have a duty not to delegate; although it can be possible where the custom of a trade allows it. Robertson v Foulds: It was acceptable for a solicitor to delegate the task which was being held in another part of the UK to local solicitors. Agents have a right of relief. Milne v Ritchie: An agent is liable for losses to the principal where they have acted in excess of their authority. The Agent’s Rights Agents have a right to remuneration. This is normally an express term of the contract. If not, then there is the common law to help. Kennedy v Glass: An agent is entitled to receive a reasonable sum for the work they have done. A commercial agent is entitled to receive the remuneration that commercial agents customarily recieve and if there is no custom then a reasonable amount taking into account the aspects of the role under Regulation 6 of the Commercial Agent Regulations 1993. Agents have a right to commission. Walker, Fraser and Steele v Fraser’s Trustees: Agent entitled to commission where the contract was bought about or materially contributed to by their actions. There are provisions about the right to commission under Regulations 6-12 of the Commercial Agent Regulations 1993. Agents have a right to reimbursement of their own expenses and may exercise a lien to secure payment.

The Principal’s Duties

Principal has a duty of good faith under the Commercial Agents Regulations Regulation 4. Principal has a duty to continue business to secure the agent’s remuneration. Del Credure Agency  When an agent contracts on behalf of a principal they will not normally guarantee that the third party will properly perform the contract. The agent may however grant such a guarantee where the agent acts del credure. This is now uncommon. Termination of an Agency Contract - Completion - Mutual agreement - Death, Bankruptcy, Incapacity - Material breach by the agent - Principal ceasing business The agent may be due to receive payment or either indemnity or compensation under the Commercial Agents Regulations 1993. Commercial Agents Regulations 1993 These only apply to commercial agents – this is a self-employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of another. Sagal v Atelier Bunz: Not every agent is a commercial agent; this is for the court to decide. Parks v Esso: It was held that a service station operator was not a commercial agent as he didn’t have the power to negotiate. P J Pipe and Valve v Audco India: Agent held to be a commercial agent even though he didn’t have the power to negotiate or set pricing; although they did affect crucial introductions and played an important role in securing the contract. The Regulations do not apply where the activities of the commercial agent are ‘secondary’ Gailey v Environmental Waste Controls: The greater the agent’s input into the principal’s business the greater the chances of the activity of the agent being considered primary. In order to be a commercial agent there has to be a direct contractual relationship between the agent and the principal. Light v Ty Europe:

If there is a principal, who appoints an agent, who appoints a sub-agent there is no relationship for the purposes of the Regulations between the principal and the sub-agent. They apply where the activities of the agent have taken place in Great Britain regardless of nationalities of the parties. Ingmar v Eaton Leonard: The principal put a choice of law clause in the contract to use Californian law; thinking this would disapply the Regulations. This was invalid as the agent was working in the UK and therefore the Regulations applied. Accentuate v Asigra: The Regulations cannot be opted out of. They provide protection for commercial agents and harmonise conditions for agents. The agent may be due to receive payment of either indemnity or compensation under Regulation 17. The parties may stipulate in the contract that either indemnity or compensation be payable – if the contract is silent then compensation automatically applies. Shearman v Hunter: It is not possible to opt the ‘lowest possible option out of indemnity or compensation’; you have to choose. Indemnity  Seeks to ensure the commercial agent obtains the benefit of their work; subject to one year’s commission. Moore v Piretta PTA: An agent is entitled to an indemnity calculated on the basis of his activities during the whole of his agency but this is capped at one year’s commission. Compensation  Seeks to ensure the commercial agents entitlement for damage suffered as a result of the termination of relations with the principal. Calculating this is very controversial and still uncertain. King v Tunnock: A benchmark of 2 years’ gross commission may be used as a guide for the courts to calculate compensation adapted from French law. This is still criticised. Lonsdale v Howard and Hallam: Compensation payable under the Regulations is calculated by reference to the value of the agency had it continued.

PARTNERSHIP This is an area with lots of research and reform papers – but none of these have been enacted. Partnership is a type of business organisation that is good for making a profit. They can range from very large to very small. The nature of the partnership is that everyone has a right to participate in business – its profits and its losses. Some regulatory bodies require members to operate via a partnership and others choose not to incorporate and remain as a partnership. Pros   

Lack of formalities Privacy – affairs do not have to be published Flexibility in determining management and organisation

Cons   

Less availiblty for securities; particularly floating charges Ownership harder to transfer as no system of shares There is unlimited joint and several liabilities for partnership debts

However, there is the Limited Liability Partnership which is another option to minimize some of the cons. Partnership Act 1890 Sec 1: Partnership is the relation which subsists between persons carrying on a business in common with a view of profit. If there is an intention to make a profit, then there is a partnership. Adam v Newbigging: There is an objective test to decide whether a partnership has been formed. All the circumstances of cases must be considered. Khan v Miah: Profit motive is all that is needed to satisfy that there is a partnership; neither success nor starting business is necessary. Christie Owen and Davies v Raobgle: The purchase of property by 3 individuals for the running of a restaurant was enough to constitute a partnership. Sec 45: Business includes every trade, occupation or profession. There is no requirement of writing to create a partnership; however, it is common. Creation can be done expressly or impliedly.

Joint Venture This is where parties come together for the purpose of running a business or doing a specific task. University Court of St Andrews v Headon Holdings: Not being told certain information is not enough to cancel a joint venture. Pine Energy v Talisman Energy: The lack of any features of a partnership such as name, premises or steps to establish this suggests that there is not a partnership, however there could be if other evidence was found. Worbey v Campbell: In order to be a partnership there must be business in common, even if this is implied; contextual factors will be considered. As the relations can often be unclear there are guidelines in Sec 2 of the Partnership Act 1890 to assist in a determination of a partnership. (1) A joint tenancy/ownership of property doesn’t in itself make a partnership whether or not there are profits from the use of the property. Sharpe v Carswell: Ownership of shares of a fishing vessel was not enough without anything else to make this a partnership. (2) The sharing of gross returns does not necessarily mean there is a partnership. Clark v Jamieson: The fact that an individual was remunerated by a share of the gross earnings of the ship rather than a salary was not enough to establish a partnership (3) The sharing of profits from a business is evidence that they are a partner unless they are paid in instalments, are an employee or an agent. Alna Press v Trends of Edinburgh: An individual may receive payments from a partnership for reasons other than being a partner, such as being a creditor. Partnership Separate Legal Personality Sec 4(2): Scottish Partnerships have separate legal personality. They are distinct from the natural persons who make up the partnership. This provision only applies in Scotland. Forsyth v Hare: A partnership is a quasi-corporation meaning it has some corporation privileges. Sadler v Whiteman: In England, there is no separate legal personality for partnerships.

Relationship between Partners and Third Parties  Liability for the partnership debts Each partner is joint and severally liable for the debts of the partnership whilst they are a partner under Sec 9. A partner that becomes a patner is not liable for the liabilities of the partnership before he became a partner under Sec 17. This is not the full story though. Heddle’s Executors v Marwick and Hourston’s Trustees: There is a rebuttable presumption that when a new partner takes on whole assets, stock and business of a partnership they also take on its old liabilities. Sim v Howat: Presumption not rebutted and therefore as all assets taken on by a new partner, so were the liabilities. Thomson and Balfour v Boag and Son: The presumption was rebutted as despite taking on all the current assets of a partnership they also contributed a lot of capital and therefore weren’t liab...