Law of agency by Maxwell Ranasinghe


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Law of agency by Maxwell Ranasinghe

  1. 1. Law of Agency By Maxwell
  2. 2. <ul><li>Agency is a relationship between two parties. </li></ul><ul><li>They are named as agent and principal </li></ul><ul><li>An agent is the person who is authorised by his principal to contract on behalf of him with other parties ( third parties) </li></ul><ul><li>Appointment of agents occur when the principal does not have time to attend or not in Sri Lanka or does not have the expertise to attend to the matter. </li></ul>
  3. 3. <ul><li>When an agent contracts on behalf of the principal, the principal becomes binding on the contract made by the agent. </li></ul><ul><li>Therefore, the principal should have the contractual capacity not the agent. </li></ul><ul><li>Agent’s contractual capacity will come to play when there is a dispute between the agent and the principal or the third party intends taking action against the agent for breach of warranty or authority </li></ul>
  4. 4. <ul><li>Creation of agency </li></ul><ul><ul><li>Actual Authority </li></ul></ul><ul><ul><li>Apparent Authority </li></ul></ul><ul><ul><li>Necessary Authority </li></ul></ul><ul><ul><li>Subsequent Authority </li></ul></ul><ul><ul><li>By Deed </li></ul></ul>
  5. 5. <ul><li>Actual authority </li></ul><ul><ul><li>By an express agreement </li></ul></ul><ul><ul><ul><li>Express agreement means an agreement made orally or in writing. </li></ul></ul></ul><ul><ul><ul><li>In certain circumstances appointment has to be made in writing. E.g.. Appointment of an agent to attend a company meetings must be in writing, Appointing a lawyer to attend for a civil case case etc </li></ul></ul></ul>
  6. 6. <ul><ul><ul><li>- By implication </li></ul></ul></ul><ul><ul><ul><li>By implication means by operation of law. It happens form a relationship that already existed between parties. </li></ul></ul></ul><ul><ul><ul><ul><li>Wife is presumed to be an agent of her husband to purchase household necessaries. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>In a partnership business, every partner is an agent of other partners for partnership business matters </li></ul></ul></ul></ul>
  7. 7. <ul><ul><ul><ul><li>Agent has implied authority to carry out things incidental to carrying out the express instructions ( a real estate agent may clear the land, survey, advertise etc) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>When a person is employed by the principal for a certain business, the agent is impliedly given the authority to the usages and customs of that business. ( eg. Buy or sell on credit unless probhibited) </li></ul></ul></ul></ul>
  8. 8. <ul><li>Apparent authority ( agency by estoppel/ holding out) </li></ul><ul><li>This happens when the principal allows another person to be believed as his agent for third parties. </li></ul><ul><li>When third parties act upon it and contracts with that person, the principal is estopped ( no allowed) from denying the other as his agent. </li></ul>
  9. 9. <ul><li>E.g.. If Wimal makes Ranil believe that Basil is Wimal’s agent, Wimal will be bound by the contract made by Basil on Wimal’s behalf. </li></ul><ul><li>Wimal will be barred/ estopped from denying that Basil is not his agent </li></ul><ul><li>E.g. Wimal was the money collector of Somawansa’s business. Wimal’s services was terminated but was not informed to creditors. Wimal goes and collect money from creditors as agent. Somawansa is estopped from denying that Wimal was his agent. </li></ul>
  10. 10. <ul><li>E.g.. Wimal permits his wife Kamani to forge his signature and draw money from his bank account for a long period. </li></ul><ul><li>Wimal divorces kamani. She draws a cheque with forged signature after the divorce and get money out of wimal’s Account. </li></ul><ul><li>What is Wimal’s status </li></ul>
  11. 11. <ul><li>To create agency by estoppel/apparent authority following elements should be proved </li></ul><ul><ul><li>There should be a representation by a person </li></ul></ul><ul><ul><li>The 3 rd party should rely on the representation </li></ul></ul><ul><ul><li>The 3 rd party should alter his position relying on the representation. </li></ul></ul>
  12. 12. <ul><li>Necessary Authority </li></ul><ul><li>This happens as a result of operation of law. </li></ul><ul><li>When there is an emergency a person may have to act as if he is the agent, he may have to do certain things even without the permission of the principal. </li></ul><ul><li>He is called the agent of necessity </li></ul><ul><li>Under such circumstances, principal will be bound by the contracts made by agent even without his permission. </li></ul>
  13. 13. <ul><li>Following conditions must be fulfilled to make a agency of necessity </li></ul><ul><ul><li>The agent must have acted in good faith and in the interest of all parties </li></ul></ul><ul><ul><li>The situation would have been impossible to get instructions from the principal </li></ul></ul><ul><ul><li>There must be a genuine emergency making it necessary for the agent to act as he did </li></ul></ul><ul><ul><li>( Great Northern Railway Vs. Swaffield – transporting a horse and the owner does not collect, railway had to feed and keep the horse in a stable) </li></ul></ul>
  14. 14. <ul><li>Subsequent Authority – (Agency by ratification) </li></ul><ul><li>Generally a person who has not been appointed as an agent of another cannot act as an agent. </li></ul><ul><li>Even if he acts as an agent, no responsibility will pass on to the other </li></ul><ul><li>Similarly when a properly appointed agent exceeds his authority, principal will not be bound </li></ul><ul><li>However, a principal can later approve what is done by the agent. Then the principal become liable on the contracts made by the agent. </li></ul><ul><li>This is called agency created by ratification . </li></ul>
  15. 15. <ul><li>To create an agency by ratification following should be fulfilled .( Sinhala term: apara anumethiya ) </li></ul><ul><li>1. The agent must disclose the name of the principal and specifically inform the third party that he is contracting as an agent </li></ul><ul><li>2. The principal must be in existence with the contractual capacity at the time of making the contract as well as at the time of ratification </li></ul>
  16. 16. <ul><li>3. The principal must know all the materials regarding the contract made by the agent before he ratifies </li></ul><ul><li>4. A void contract cannot be ratified </li></ul><ul><li>5. The whole contract must be ratified not merely a part of it </li></ul><ul><li>6. Ratification must be made within a reasonable time </li></ul>
  17. 17. <ul><ul><ul><li>Agency by Deed ( some authors do not show this separately and it is included in the creation of agency by actual authority- express) </li></ul></ul></ul><ul><ul><ul><li>If agent to sign deeds on behalf of the principal the appointment should be in the form of more formal Power of Attorney. </li></ul></ul></ul><ul><ul><ul><li>E.g. To sell land or come into an agreement to sell land </li></ul></ul></ul><ul><ul><ul><li>To open and Account in a bank </li></ul></ul></ul><ul><ul><ul><li>To clear goods from Customs </li></ul></ul></ul>
  18. 18. <ul><li>Duties of an agent </li></ul><ul><ul><li>1. The agent must do what he has undertaken to do. If the agent fails in his duty, then the principal is entitled to recover damages form the agent </li></ul></ul><ul><ul><li>( gratuitous agent ( who is not charging for services) will not be held liable for failure to perform) </li></ul></ul><ul><ul><li>An agent who had undertaken to perform something unlawful is not liable </li></ul></ul>
  19. 19. <ul><li>2. An agent is obliged to obey the lawful instructions of his principal in the performance of his duties </li></ul><ul><li>3. The agent must do his work personally and not to delegate his work ( delegatus non potest delegare) </li></ul><ul><li>4. The agent must carry out his work with reasonable care and skill. More skill is expected from a professional person than a layman. Although paid and non paid agents are liable for negligence, more skill and care is expected from paid agents . </li></ul><ul><li>5. Agent must submit true accounts and information as to the agency activities </li></ul>
  20. 20. <ul><li>6. Agent has a fiduciary duty on the principal </li></ul><ul><ul><li>A. He must act in good faith and for the benefit of his principal </li></ul></ul><ul><ul><li>He must not let his own interest conflict with duty to his principal </li></ul></ul><ul><ul><li>He must not make a secret profit , he must hand over all the profits made to the principal </li></ul></ul>
  21. 21. <ul><li>The rights of an agent ( duties of a principal) </li></ul><ul><ul><li>1. Right to commission and remuneration </li></ul></ul><ul><ul><li>2. The right of i ndemnity – indemnify him against any liability may arise from the agency. </li></ul></ul><ul><ul><li>3 . Lien – entitle to retain principals goods until he is paid </li></ul></ul>
  22. 22. <ul><li>Effects of agency relationship between principal and 3 rd parties </li></ul><ul><ul><li>If the agent acts within the scope of his actual or apparent authority, principal is bound to 3 rd parties for the contracts made on behalf of him </li></ul></ul><ul><ul><li>Even if agent ahs acted on agency of necessity or the contract was later ratified by the principal, then the principal is bound on the contracts </li></ul></ul><ul><ul><li>( however, if the 3 rd party knows that the agent lacks authority, then the principal is not bound. Then the 3 rd party has to deal directly with Agent) </li></ul></ul>
  23. 23. <ul><li>The undisclosed principal </li></ul><ul><li>-If the agent discloses the principal, but does not disclose the name of the principal </li></ul><ul><li>-If the agent doe not disclose the existence of any agency </li></ul><ul><li>The principal would be undisclosed principal . </li></ul><ul><li>Then 3 rd party can sue the agent or on discovery of princip al, the 3 rd party can sue either the agent or the principal { agent also will have the right to sue the 3 rd party on his own name( agent’s name)} </li></ul>
  24. 24. <ul><li>Termination of Agency </li></ul><ul><ul><li>By the act of parties </li></ul></ul><ul><ul><li>By operation of law </li></ul></ul><ul><ul><li>By completion of the agency agreement </li></ul></ul><ul><li>By the act of parties </li></ul><ul><ul><li>a. By mutual agreement </li></ul></ul><ul><ul><li>B. By renunciation by agent ( giving up agency by agent) </li></ul></ul><ul><ul><li>By revocation of the agency by principal </li></ul></ul>
  25. 25. <ul><li>By operation of law </li></ul><ul><ul><li>Death of either party </li></ul></ul><ul><ul><li>Insanity of either party </li></ul></ul><ul><ul><li>The bankruptcy of the principal </li></ul></ul><ul><li>By completion of the agency agreement </li></ul><ul><ul><li>Either the period fixed for the agreement comes to an end </li></ul></ul><ul><ul><li>The purpose for which the agreement is created is accomplished. </li></ul></ul>
  26. 26. Good luck