Summary of Topic 7-10 Commercial Law PDF

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TOPIC 7 TYPES OF AGENTSWHO IS AN AGENT?An agent is a person who acts in the name of or on behalf of another and having been given and assumed some degree of authority to do so. WHAT IS AN AGENCY? An agency is the legal relationship that exists between two persons – one who is the agent who represent...

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TOPIC 7 TYPES OF AGENTS WHO IS AN AGENT? An agent is a person who acts in the name of or on behalf of another and having been given and assumed some degree of authority to do so. WHAT IS AN AGENCY? An agency is the legal relationship that exists between two persons – one who is the agent who represents another called the principal. An agent represents the principal in such as way that he/she is able to affect the principal’s legal position by making of the contracts or the disposition of property.

HOW IS AN AGENCY CREATED? An agency is created in four ways: 1. 2. 3. 4.

Through Contract From Ratification By Estoppel and By Necessity

Agency created by Contract      

An ageny results from stipulations of the parties either orally or in writing. The principal appoints the agent to act on his/her behalf The agent is expected to deal with third parties under the contract The agent can bind the principal to the third party by his acts To the extent he is delegated with. An agency can also arise as a result of parties conduct – pole v leask

Agency created by Ratification  

This is the confirmation by the principal, of unauthorised (but legal) acts done by the agent. The principal later endorses the acts of the agent so as to confer authority on the agent to proceed with the action.

Agency by Estoppel  

Where representations have been made by an agent inducing a third to enter into a contract, A supposed principal will be denied the liberty to walk out of such an agency if he/she knew of the representations but did not take steps to avoid the transaction.

Basic elements of establishing estoppel are: 1. Agent is ‘held out’ as having authority, even though he may not have been appointed; 2. The agent is appointed but is ‘held out’ as having more powers than he was given; and 3. The principal continues to ‘hold out’ a person as his agent when in fact the agency has been terminated - he ceases to be an agent. Held out – the authority of the agent is described as only apparent / supposedly but not actual. Agency by Necessity When an agency is created by necessity e.g. X sends Y horses through a railway company but Y doesn’t pick up horses so the railway company has to feed the horses and take care of it. Therefore, the railway company is an agent by necessity. PRINCIPAL- AGENT RELATIONSHIP  

The relationship of the principal to an agent – defined in terms of the scope of authority that underlines the relationship. Two types of authority : Actual and Implied authority.

Actual Authority Authority is defined by the express terms of the agency contract between principal and agent.

Implied Authority Authority is not expressly provided for but implied as being incidental to the execution of actual authority. – Authority is not manifest but arises from certain circumstances.

SIX TYPES OF AGENTS – Distinguished by their authority 

1) General Agent

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2) Special Agent

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3) Agent of Necessity

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4) Del Credere Agent

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5) Factor

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6) Broker

General Agent

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An agent who has been appointed by the Principal Has unlimited authority to carry out contracts on behalf of the principal without recourse to the principal i.e. all actions of agent would be binding on the principal. Such an agent continues to act for the principal until such time that the principal may end his appointment as agent.

Special Agent   

is an agent who is especially appointed to carry out a specific or designated task. Once this task is completed the agency ends or is terminated. E.g. An agent to oversee production of copra for an export consignment to Europe. Once the consignment is sent the agency ends.

Agent of Necessity   

Not appointed by the principal Agent of necessity is appointed by necessity - meaning as a result of circumstances. That is, an agent created by the automatic operation of the law.

Conditions that the Agent of Necessity must fulfill are: 1. The agent of necessity must have not been able to contact the owner of the goods. 2. Must have taken all reasonable steps to reach the owner of the goods but couldn’t do so. 3. The agent must have acted in good faith in the interests of the principal and other parties concerned.

Del Credere Agent 

‘Del Credere’ - meaning belief or trust

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Agent has a special position -the special position is that this type of agent is appointed by the principal but with additional obligations and liabilities.

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Undertakes to compensate the principal should there be any loss in the transaction.

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So the agent undertakes the principal’s product/goods to sell and guarantees that should any problems arise in relation to the sale then he the ‘Del Credere’ Agent will refund the full price.

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That is, if problem from sale or no sale - Del Credere agent will reimburse the principal the value of the good from his own pocket.

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For this reason Del Credere agent receives an extra remuneration(payment) from the principal in return for the assurance of sale or indemnity to the principal.

Factor

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is an agent that has possession of the goods before sale

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In this case, such an agent can sell in his/her own name and may even pledge the goods as security to raise money in the name of the principal

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Stevens v Biller (1883) 25 Ch D 31

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is an agent who does not have possession of the goods at the time of sale

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The transaction concluded by such an agent on behalf of the principal, nevertheless binds the principal.

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Barring v Corrie (1818) 2 B & Ald 137

Broker

TOPIC 8 DUTIES OF AN AGENT 1. EXECUTION OF INSTRUCTIONS

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One of the primary duties of an agent is to execute the instructions of the principal. This duty is the basis of any agency.

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scope of the instructions to be executed depends on the terms of the agency agreement.

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An agent should only execute lawful instructions.

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If the instruction is not lawful the agent is not duty bound to execute them.

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See Bonsor v Musicians Union

2. ACT IN GOOD FAITH   

An agent must in all respects, and within the bounds of reasonableness, act in good faith in the discharge of the agency responsibilities. This means, in the performance of the obligations, the interest of the principal is of paramount consideration. The agent should therefore avoid conflict of interests between his/her personal business with that of the principal.

3. EXERCISE SKILL AND CARE 

Skill and care = prerequisites to the efficient exercise of duties by agents.

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Cardinal requirement of law = Agents must exercise reasonable degree of skill and care in executing principal’s instructions.

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Where there is apparent lapses in executing the agent’s responsibilities, agent is considered to have breached the terms of the agency.

TOPIC 9 DUTIES OF PRINCIPAL 1. PAYMENT OF AGENTS 

After discharging agency obligation (requirements of agency as well as instruction from principal) = the agent needs to be fully and promptly remunerated for services rendered.

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Duty of principal to pay agent.

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Principal not just obliged to pay remuneration of agent but also all incidental expenses and costs that were lawfully incurred/arising from transaction of agency.

2. INDEMNIFICATION OF THE AGENT 

After carrying out assigned duties= agent is to be compensated or indemnified for any extra expenses incurred in the lawful discharge of the terms of the agency.

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If required = agent needs to submit evidence to justify expenses.

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Indemnification – based on compensatory rules = that is the agent may have done certain things or extra things while in the course of carrying out normal duties.

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Additional responsibilities must be vital to the fulfillment of the objective of the agency if not authorized by principal.

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Can be personal sacrifice of time or expense, long hours of work etc.

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However, this requires prove for it to be indemnified – receipts etc.

Rhodes v Fielder

TOPIC 10 TERMINATION OF AGENCY

HOW IS AN AGENCY TERMINATED? An agency is terminated four ways : 1. 2. 3. 4.

Express Agreement Revocation Cessation of Business Repudiation

EXPRESS AGREEMENT   

Parties to any agency state arrangement can be terminated by their express stipulation Method usually useful in fixed agency e.g. express clause in agency agreement stipulates when agency ends.

REVOCATION    

Means cancellation of the agency. In this instance – principal if permitted by agreement – may cancel agency. Once cancelled- agency dissolved ( cannot be unilateral) Has to be permitted by agreement that agency can be cancelled my principal

CESSATION OF BUSINESS 

Business agency ceases to operate as an ongoing concern – agency could be said to be terminated.

REPUDIATION  

Unilateral Act to terminate agency. The affected party may have consented to the termination....