This document discusses the law of agency in Malawi. It begins with an introduction to agency law and defines the principal-agent relationship. It then covers the different types of agents, how agency is created through express appointment, implication, ratification, necessity and estoppel. The document also discusses the authority of agents, the implied warranty of an agent's authority, an agent's duties and rights, and how the agency relationship can be terminated by agreement between the parties or by operation of law such as death, insanity or bankruptcy. It concludes by listing references used in creating the presentation.

1. The Malawi University of Business and Applied Sciences
(MUBAS)
‘Legal Environment’
CREATION OF AGENCY
FEBRUARY 2023
Presented by:
GROUP 3

2. GROUP MEMBERS
 Chiyembekezo Mussa
 Bright Mlotha
 Anthony Mapeta
 Johnstone Chipwaila
 Felix Zagwazatha Sato

3. TABLES OF CONTENTS
 Introduction to the Law of Agency
 Types of Agent
 Creation of Agency
 The Authority of an Agent
 Warranty of authority for an agent
 Duties and Rights of Agency
 Termination of Agency

4. INTRODUCTION
 Law of agency first emerged as a largely unitary body of common law-customs
 Agency is a consensual and fiduciary relationship between a principal and an agent
 The relationship is created when one personal, a principal, grants authority to another person to
act on his or her behalf thereby appointing the person as his or her agent
 For example: An employee who makes contracts on behalf of his employer is acting as an agent.
 Directors are agents of the company
 An agent may also be an independent contractor engaged for his or her specialist skills and
knowledge
 Other examples of agents include: Stockbrokers, travel agents, estate agents, auctioneers,
Accountants, Lawyers, Auditors, Tax consultants, friends etc. (Kelly. D. et al 2002)

5. TYPES OF AGENT…CONT.….
 General agent: has the power to act for his principal in relation to particular kinds of transaction.
E.g. Estate agent
 Special agent: has limited powers to act for his principal in respect of one specific transaction. E.g. a
real estate broker
 Mercantile agent or factor: An agent entrusted with possession of goods for the purpose of sale, or
to buy goods, or to raise money on the security of goods. In the case of Stevens v Biller (1883),
‘Where an agent has been entrusted with possession of goods consigned for the purpose of sale,
he is not less a factor because, as between him and his principal, he is under restriction as to the
price at which the goods are to be sold, or is bound to sell in the principal's name’.

6. TYPES OF AGENT…..CONT.…..
 Del Credere agent: this is the one who in return for an additional commission by way of payment,
guarantees to the principal that in the event of a third party’s failure to pay for goods received, the
agent will make good the loss i.e. will indemnify the principal in case of Clyde Marine Insurance Co.
v Renwick & Co. (1924) concerning a marine insurance policy that ‘a broker may charge his client a
del credere commission and guarantee that the underwriter will pay the loss. Questions having
arisen as to whether the company was legally bound to issue policies to the holders of initialed
slips, and as to the liquidator's duty in that respect,
It was Held, in a petition by the liquidator, under section 193 of the Companies (Consolidation) Act,
1908, for the determination of these questions
(1) that the company was under no legal obligation to issue a policy to the holder of an initialed slip;

7. CONTINUATION OF THE CASE….
(2) that, although the company might have been under an honorable obligation to issue a policy to
such a holder, the Court had no power to order the liquidator to do so;
(3) that, whether or not it appeared to him to be in the company's interest to do so, the liquidator wa.s
not entitled to issue a policy to a slip holder;
(4) that the liquidator was under no duty to admit to proof any claim for loss which would have been
covered by a policy had it been issued, or for damages in respect of the non-issue of a policy; and
(5) that the policies which had been signed by the liquidator (whether issued or not issued) were ultra
vires, and fell to be cancelled and the premiums refunded

8. 8
Source: https://www.bing.com/images/search?q=pictures+of+the+law+of+agency+theory&id

9. CREATION OF AGENCY…CONT.….
 None can an act as an agent without the consent of the principal,
although consent need not be expressly stated (Riches S. et al 2011)
 In case of White v Lucas (1887), a firm of estate agents claimed to act on
behalf of the owner of a particular property, though that person had
denied them permission to act on his behalf. When the owner sold the
property to the third party, who was introduced through the estate
agents, they claimed their commission.
 It was held that the estate agents had no entitlement to commission, as
the property owner had not agreed to their acting as his agent.

10. CREATION OF AGENCY… CONT.…..
The principal/ agency relationship is created under the following categories
 Express appointment; this is where the agent is specifically appointed by the principal to carry out
a particular task or to undertake some general function
 By implication; this is when there is a pre-existing agency relationship and it is assumed by a third
party that the principal has given the agent authority to act as an agent in matters not covered by
the express appointment. In the case of Panorama Development v. Fidelis Furnishing Fabrics Ltd
(1971), it was held that the company secretary had the implied authority to make contracts in the
company’s name relating to the day to day running of the company.
 Therefore, it is impliedly from the particular position held by individuals that they have the
authority to enter into contractual relations on behalf of their principal

11. CREATION OF AGENCY… CONT.…..
 By Ratification; when a person who has no authority purports to contract with a third party on
behalf of a principal. In this case, ratification is the express acceptance of the contract by the
principal. i.e. it arises where a principal retrospectively adopts a contract made on his behalf by an
agent who has either no authority or acted outside his or her authority. In case of Bolton Partners v.
Lambert (1889), Lord Kekewich J stated that ‘ the doctrine of ratification is this, that when a
principal on whose behalf a contract has been made, through it may be made in the first instance
without his authority, adopts it and ratifies it, then whether the contract is one which is for his
benefit and which he is enforcing, or which is sought to be enforced against him, the ratification is
referred to the date of the original contract, and the contract becomes as from its inception as
binding on him as if he had been originally a party’.

12. For the ratification to be effective, the following strict conditions must be met:
i. The agent must have disclosed that he was acting for a principal
ii. The principal must have been in existence when the agent entered into the contract. In the case
of Kelner v. Baxter (1866), promotors attempted to enter into a contract on behalf of the as yet
unformed company. It was held that the company could not ratify the contract after it was
created and that promoters as agents were personally liable to the contract.
iii. The principal must have had the legal capacity to enter into the contract
iv. The principal must ratify the whole contract
v. Ratification must take place within a reasonable time,

13.  By necessity; this occurs where although there is no agreement between the parties, an emergency
requires that an agent take particular action in order to protect the interests of the principal. There
will normally be some kind of pre-existing contractual relationship between the parties. E.g. a
contract to transport perishable goods.
 For necessity to be effective, the following conditions must be met
i. There must be a genuine emergency (Great Northern Rly Co v. Swaffield (1874)
ii. There was no any other means of obtaining further instructions from the principal (Springer v.
Great Western Rly Co (1921)
iii. The agent must have acted bonafide in the interests of the principal (Sachs v. Miklos (1948)

14. CREATION OF AGENCY… CONT.…..
 By Estoppel; this is also known as ‘agency by holding out’ it arises where the principal has led other
parties to believe that a person has the authority to represent him or her. The principal will be
prevented (estopped) from later denying that the person had authority to act as his agent and will
be bound by the action of his or her purported agent as regards to any third party.
 The estoppel is effective under the following conditions
i. The principal must have made a representation as to the authority of the agent. In a case of
Freeman and Lockyer v. Buckhurst Park Properties Ltd (1964), the company had four directors, but
one director effectively controlled the company and made contracts as if he was the managing
director, even though he had never been appointed to that position.

15. CREATION OF AGENCY… CONT.…..
And therefore, as an individual, had no authority to bind the company. The other three directors
however, were aware of this activity and acquiesced in it. When the company was sued in relation to
one of the contracts entered into by the unauthorised director, It was therefore, held that the company
was liable, as the board which had the actual authority to bind the company had held out the
individual director as having necessary authority to enter into such contracts.
ii. The party seeking to use estoppel must have relied on the representation. i.e. the contractor was
induced by such representation to inter into a contract.
iii. The representation that agent had authority was to the contractor
iv. The memorandum or articles of association does not deprive of the company a capacity to enter
into a contract or delegate authority to enter into a contract.

17. THE AUTHORITY OF AN AGENT…CONT.….
The authority of an agent can be either actual or apparent
 Actual authority: actual authority of an agent can rise in two ways. These
include
i. Express actual authority: this is explicitly granted by the principal to the
agent. The agent is instructed as to what particular tasks are required to
perform and is informed of the precise powers given in order to fulfil
those tasks.
ii. Implied actual authority: this refers to the way in which the scope of
express authority may be increased. It is where third parties assume that
agents holding a particular position have all powers that are usually
provided to such an agent. In case of Watteau v. Fenwick (1893),

18. THE AUTHORITY OF AN AGENT.. CONT.……
The new owners of a hotel continued to employ the previous
owner as its manager. They expressly forbade him to buy certain
articles including cigars. The manager however, bought cigars
from a third party, who later sued the owners of the hotel for
payment as the manager’s principal.
it was held that the purchase of cigars was within the usual
authority of a manager of such an establishment and that for a
limitation on such usual authority to be effective, it must be
communicated to third parties.

19. THE AUTHORITY OF AN AGENT.. CONT.……
 The apparent authority: this authority can rise either in
i. Where a person makes a representation to third parties that a particular person
has the authority to act as their agent without actually appointing the agent.
The person making the representation is bound by the actions of the apparent
agent. And the principal is also liable where is known that the agent claims to
be his or her agent and yet does nothing to correct the impression. OR
ii. Where a principal had previously represented to a third party that an agent has
the authority to act on their behalf. Unless he or she (the principal) has
informed third parties who had previously dealt with the agent about the
situation, he or she will be liable for the actions of the former agent.

20. WARRANT OF AUTHORITY
 If a person claims to act as agent without any authority to do so, the supposed principal will not be
bound by any agreement entered into.
 If an agent contracts with third party on behalf of a principal, the agent impliedly guarantees that
the principal exists and has contractual capacity.
 The agent also implies that he or she has the authority to make contracts on behalf of that
principal.
 However, if any of these implied warranties prove to be false, then the third party may sue the
agent in quasi-contract for breach of warrant of authority and such an action may arise even
though the agent was genuinely unaware of any lack of authority.

21. WARRANT OF AUTHORITY… CONT.…..
In Yonge v. Toynbee (1910), a firm of solicitors was instructed to
institute proceedings against a third party. Without their
knowledge, their client was certified insane and although this
automatically ended the agency relationship, they continued
with the proceedings.
In this case, the third party successfully recovered damages for
a breach of warrant of authority, since the solicitors were no
longer acting for their former client,

22. DUTIES AND RIGHTS OF AGENT

23. Duties of an agent
The agent owes a number of duties to his or her principal. However, an
agent has also rights in the course of discharging his or her duties (Riches S.
et al 2011)
Rights of an agent
To perform the agreed undertakings according to
the instructions of the principal
To exercise reasonable care and skill
To carry out his duties personally unless there is
express or implied authority for him to delegate his
duties
To account for all money and property received on
behalf of the principal and to keep proper accounts
To avoid a conflict of interest
Not to take bribes or make a secret profit or misuse
of confidential information
To be paid the agreed amount or, if no fee is
agreed, to be paid a reasonable amount
To be indemnified for any expenses incurred
in performing his or her duties. In a case of
PSA Transport Ltd v. Newton, Landsdowne &
Co Ltd
To exercise a lien over the principal’s goods
and to stop them in transit where payment is
outstanding. The lien of an agent only
permits the agent to retain possession of
goods until the principal has settled the debts.
DUTIES AND RIGHTS OF AGENT..CONT... ……

24. 24
F.H.Chitseko
VIDEO SLIDE

25. Termination by the
parties
The principal /agent relationship can come to an end in two distinct ways. These include either
by the Acts of the parties (jointly or unilaterally) or by the operation of Law (Kelly. D. et al 2002)
Termination by operation of
law
By mutual agreement; where the agency agreement
is a continuing, parties may simply agree to end it on
such terms as they wish or where it was created for a
particular purpose, then it automatically end when the
purpose has been achieved.
By unilateral action of one of the parties; one party
can simply give notice of termination and where there
was a contractual relationship, the other party has a
right to claim damages for the breach of the contract
Irrevocable agreements; this is where the principal
owes money to the agent and the payment of the
debt was the reason for the formation of agency
relationship
Frustration; when one party to an agreement is failing to
comply with terms of the agreement can result into
discharging the contract
Death of either party; when the principal dies, and the
agent is not aware and continues to act in the capacity of
agent, the agent will be in breach of his or her warrant of
authority and will be personally liable to third parties
Insanity of either party; insanity of either party will
bring the agency to an end, but Agents have to be careful
not to breach their warrant of authority by continuing to
act after the principal has become insane
Bankruptcy ; If the principal has been declared
bankruptcy, the contract immediately comes to an end,
but bankruptcy of the agent will only bring it to an end
where it renders him or her unfit to continue to act as an
agent
TERMINATION OF AGENCY

26. REFERENCES
 Kelly. D. et al (2002) Business Law
 Riches S. et al (2011) Business Law
 https://www.bing.com/images/search?q=pictures+of+the+law+of+aagency+theory&id