LAW OF AGENCY 1.

INTRODUCTION

The Law of Agency deals with relationships that arise when one person is used by another to perform tasks on his behalf. Instead of there being two persons directly connected in law with each other by the unilateral act of one or the mutual acts of both the employment of an agent introduces another person whose conduct can affect in a variety of ways the legal position of the one on whose behalf he acts and the one with whom he deals. The special rules of Law to regulate the complications produced by the introduction of a third party are the subject of the Law of Agency. Definition Friedman defines agency as the relationships that exist between two persons when one called the agent, is considered in law to represent the other, called the principal, in such a way as to be able to affect the principals legal position in respect of strangers to the relationship by the making of contracts or the disposition of property. Consequences of Definition 1. The Law of Agency only applies when a representation or an action on anothers behalf affects the latters legal position, that is to say his rights against, and liabilities towards other people. The law of agency has no relevance to social or other non-legal obligations. 2. It is the law that decides whether an agency relationship has been created. Thus, the consent of the parties is not necessarily required to create an agency relationship. On the case of Boardman v Phipps [1966] 3 AER 721 the House of Lords held that the parties to whose acting as

agents no consent had ever been given could be treated as selfappointed agents. II. 1. TYPES OF AGENTS General Agent

A general agent is an agent who has authority to act for his principal in all matters concerning a particular trade or business, or of a particular nature; or to do some act in the ordinary course of his trade, profession or business as an agent on behalf of his principal. 2. Special Agent

A special agent is an agent who has only authority to do some particular, or to represent his principal in some particular, such act or transaction not being in the trade or profession or business as an agent. 3. Factor

A factor is an agent whose ordinary course of business is to sell or dispose of goods, of which he is entrusted with the possession or control by his principal. He may sell in his own name. 4. Broker

A broker is an agent whose ordinary course of business is to negotiate and make contracts for the sale and purchase of goods and other property of which he is not entrusted with the possession or control. He may not sell in his own name. It should be noted that the broker has been applied to many more types of activity than the commodity broker referred to above. The term is often applied to intermediaries whom the definition given does not fit at all. E.g. Insurance brokers, Stockbrokers, Ship brokers etc. Some of these different types of brokers have given rise to special legal problems and may be regulated by particular legislation.

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5.

Del Credere Agents

A del credere agent is one who in return for extra commission, called a del credere commission, promises that they will indemnify the principal, if the third party with whom they contract respect of goods fails to pay what is due under the contract.

III.

CREATION OF AGENCY

No one can act as an agent without the consent of the principal, although consent need not be expressly stated. In White v. Lucas (1887), a firm of real estate agents claimed to act on behalf of the owner of a particular property although that person had denied them permission to act on his behalf. When the owner sold the property to a third party 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. 1. Agency Created By Agreement

The basic way in which the agency relationship arises is by agreements. The agreement needs not to be contractual. The agency may be gratuitous. The agreement may be express or implied. Agreement between principal and agent may be implied in a case where each has conducted himself towards the other in such a way that it is reasonable for that to infer from that conduct consent to the agency relationship. The purposes of the contract of agency must be lawful and possible. Co-Agents Where an authority is given to two or more persons, it is presumed to be given to them jointly, unless a contrary intention appears from the nature or terms of the authority, or from the circumstances of the particular case. Where an

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authority is given to two or more persons severally, or jointly and severally, any one or more of them may execute it without the concurrence of the others. All co-agents must concur in the execution of a joint authority in order to bind the principal, unless there is a provision that a certain number shall form a quorum. However, where the authority is of a public nature, and the matter to be determined is of public concern, and the persons in whom it is invested meet for the purpose of executing it, the act of the majority is for this purpose deemed to be the act of the whole body, unless a contrary intention is to be collected from the nature of the power and the duty to be performed under it. Co- Principals Where two or more persons give authority to an agent, it is presumed that the authority is to act for their joint account only, unless a contrary intention appears from the nature of the terms of the authority, or from the circumstances of the particular case. Thus, an agent acting for joint principals is not bound to account to one alone. 2. Agency Created By Ratification

Where an act is done professedly in the name or on behalf of another by a person who has no authority to do that act, the person in whose name or on whose behalf the act is done may, by ratifying the act, make it as valid and effectual; as if it had been originally done by his authority, whether the person doing the act was an agent exceeding his authority, or was a person having no authority to act for him at all. Ratification only creates agency in respect of the transaction ratified. However, ratification may sometimes be used as evidence of already existing authority. Further, a series of ratifications may be held to confer authority for the future. What Acts May Be Ratified

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Every act, whether lawful or unlawful, which is capable of being done by means of an agent is capable of ratification by the person in whose name or on whose behalf it is done. However, an act that is in its inception void for some reason other than that it is unauthorised, is not capable of ratification. Who may Ratify? The only person who has power to ratify an act is the person in whose name or on whose behalf the acts purported to be done. The principal have been in existence at the time when the act was done. This means that the principal must be a live human being or a juristic person. At common law, where a company is not yet in existence in contemplation of the law, but is in the pangs of birth, such a company cannot ratify a contract purported to be made on its behalf once the company has achieved legal existence. However, in Ghana, by virtue of Section 13 of the Companies Code, 1963 (Act 179), a pre-incorporation contract purported to be entered into on behalf of a company may be ratified after the formation of the company. See: Kelner v Baxter (1866) L.R. 2.C.P. 174 The principal must be competent to do the act at the time such act was done. Thus, a person cannot ratify an act he was not competent to do at the time it was done. See: Boston Deep Sea Fishing & Ice C.V. Farnham [1957] I.W.L.R 1051 The principal must be competent at the time of ratification. Thus, an infant cannot ratify when he is still underage. Knowledge Necessary for Ratification In order that a person may be held to have ratified an act done without his authority, it is necessary that, at the time of the ratification, he should have full knowledge of all the material circumstances in which the act was done, unless he intended to ratify the act and take the risk whatever the circumstances may have been.

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What Constitutes Ratification? 1. 2. Ratification may be express or implied. An express ratification is an articulate manifestation by one on whose behalf an unauthorised act has been done, that he treats the acts as authorised and becomes a party to the transaction in question. 3. Ratification will be implied whenever the conduct of the person in whose name or on whose behalf the act or transaction is done or entered into is such a to show that he adopts or recognises such act or transaction in whole or in part. Ratification may also be implied from the mere acquiescence or inactivity of the principal. 4. The adoption of part of a transaction operates as a ratification of the whole. The principal cannot adopt the favourable parts of a transaction and disaffirm the rest, that is he cannot approbate and reprobate. 5. It is not necessary that the ratification of a written contract should be in writing, but the execution of a deed can only be ratified by deed. Effect of Ratification 1. The effect of ratification is to invest the person on whose behalf the act ratified was done, the person who did the act, and third parties with the same rights, duties, immunities and liabilities in all respects as if the act had been done with the previous authority of the person on whose behalf it was done.

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2. However, the doctrine of ratification may not be invoked to divest or affect prejudicially any proprietary or quasi-propriety right vested into any third party at the time of the ratification. 3. Ratification does not of itself give any new authority to the person whose act is ratified. 3. Agency By Operation of Law

Agency of Necessity Agency of necessity arises by operation of law in certain cases where a person is faced with an emergency in which the property o interests of another are in imminent jeopardy and it becomes necessary in order to preserve the property or interest, to act for that person without authority. The shipmaster in is fact the leading example in agency of necessity. He has wide powers in cases of necessity. Thus, he can sell the ship, enter into a salvage agreement regarding the ship, and contract on behalf of the ship owner for the cargo to be transhipped. He can also sell the cargo and enter into a salvage agreement regarding it. The following rules s of necessity clearly derives from the shipmaster cases. 1. It must be impossible, or at any rate impracticable, for the agent to communicate with the principal. 2. The action must be necessary for the benefit of the principal. Here, the test of necessity is an objective one.

Other Cases of Agency by Operation of Law There are various other situations where it can be said that agency has arisen by operation of law. Thus a person appointed by the court to manage the affairs of a person of unsound mind is his agent.

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The first directors of a formed company, not being appointed by the company, can be said to be its agents by operation of law. Agency By Estoppel Where a person, by words or conduct, represents or permits it to be represented that another person is his agent, he will not be permitted to deny the agency with respect to anyone dealing, on the faith of such representation, with the person so held out as agent. In order to establish the existence of an agency by estoppel, the following must exist. a. A Representation

There must be some statement or conduct on the part of the principal that can amount to a representation that the agent has authority to act on his behalf in the way he is acting. The representation must come from the principal; it cannot come from the agent himself. See: Armagas Ltd. V. Mundogas SA ([1985] 3 All ER 795 at 804; on appeal [1986] 2 All ER 385 at 389. Such statement or conduct must be clear and unequivocal. Hence if the conduct by the principal is capable of being interpreted in a way that does not accord with the granting of authority to an agent, no estoppel can rise. See: Colonial Bank v. (1980) 15 App.Cas. 267 Sometimes the fact that an agent is entrusted with certain duties in the normal course of his work may amount to an implied representation of an authority to act in a certain way. See: Armagas Ltd. Case. b. Reliance on the Representation

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The representation must be made to the person who relies upon it. This means that it must be made either to a particular individual who transacts business with the agent, or to the public at large in circumstances in which it is to be expected that the general public would likely to transact business with the agent. c. Alteration of Third Partys Position

The third party must have altered his position to his sentiment as a Result of the reliance on the representation. The representation must be the proximate cause of the third party being mistaken. Notice of such want of authority, whether actual of constructive, will mean that the third party cannot rely upon Estoppel. IV. 1. DUTIES OF AGENTS TO PRINCIPAL A contractual agent has a duty to perform according to the terms of the contract and not to exceed his authority. 2. A contractual agent has a duty to all lawful and reasonable instructions of his principal in relation to the manner in which the agent carries out his duties. In determining what is reasonable the court will have regard to all the circumstances of the case, including the nature of the agency and the customs and ethics of the business to be undertaken by the agent. The instructions must not go beyond the ambit of the original contract. Instructions that involve the performance of an illegal act need not be obeyed, or in the case of a professional person, he could not be required to perform an act that is contrary to those rules or standards. 3. Where the principals instructions are ambiguous, i.e. capable of bearing two or more interpretations, if the agent fairly assumes them to bear one of those interpretations and acts accordingly, he will not be in breach of contract by so acting. But if the agent realised or ought to have realised that the instructions were ambiguous, it would seem that he ought if the

Duties of Performance

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circumstances so permit to seek clarification from his principal before starting to act. 4. Terms may be implied into a contract of agency from the customs or usage of the particular trade or profession in which the agent is employed. 5. The contractual agent has a duty implied into the contract to carry out his part of the contract with reasonable dispatch. depend on all the circumstances of the case. 6. Every agent acting for reward is under a duty to exercise such skill, care and diligence in the performance of his undertaking as is usual or necessary for the ordinary or proper conduct of the profession or business in which he is employed, or is reasonably necessary for the proper performance of the duties undertaken by him. If the agent has discretion to exercise, he must use proper care and skill in doing so. An agent is in general, under a duty to keep his principal informed about matters which are of his concern. 7. A gratuitous agent will be liable to his principal if in carrying out the work he fails to exercise the required degree of skill and care. The degree of care and skill owed by a gratuitous agent to his principal is such skill and care as persons ordinarily exercise in their own affairs. However, where the gratuitous agent has impliedly held himself out to his principal as possession skill adequate to the performance of a particular undertaking, the degree of care and skill required of the gratuitous agent will be such care and skill as would normally be shown by one possessing that skill. Fiduciary Duties An agent owes to his principal fiduciary duties (duties of loyalty). This is a result of the recognition by the law of the unequal standing of the contracting parties. The duties may in general be expressed as requiring the agent not to What is reasonable will

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allow himself to remain in a position in which his own personal interests and his duty to his principal conflict without full disclosure to his principal. Once a breach of fiduciary duty has been detected, there arises the task of determining the remedies available. Here again there is extreme uncertainty and the answer must depend on the nature of the relationship, the nature of the breach and the facts of the case. For example, the court may where appropriate set aside the transaction in question. It may grant an injunction. It may award damages for breach of contract, in tort, in money had and received. An agent has a duty to make a full disclosure of any personal interest. Thus, no agent may not enter into any transaction in which his personal interest might conflict with his duty to his principal, unless the principal with full knowledge of all material circumstances and of the exact nature and extent of the agents interest, consents. Thus, an agent may not without full disclosure buy his principals property nor sell his own property to his principal. He may not make secret profits by exploiting the property, confidential information or special knowledge of his principal. Where an agent enters into any contract or transaction with his principal or his principals representation, he must act with perfect good faith and make full disclosure of all material circumstances which would be likely to influence the conduct of the principal or his representative. The agent has a duty to keep the property of his principal separate and preserve correct account. Estoppel Where an agent is in possession of property in his capacity as agent, he is estopped from asserting that he has a better title to it than his principal. An Agent is estopped from asserting that a 3rd party has a better title than his Principal to relieve money held by him as Agent for or on account of his Principal or owed by him as Agent to him. V. REMEDIES

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A. 1.

To Principal Dismissal Upon discovery of agents misconduct Without notice Without liability to pay compensation to agent Agent misconduct, e.g. fraud, complete defence to claim for damages, compensation or indemnity.

2.

Actions Depends on wrongs committed by agent Damages for breach of contract Tort for appropriate wrong. Conversion of goods. Money had and received. To Agent Action breach of obligations Lien lawful possession of goods in capacity as agent Set off

B. 1. 2. 3. VI.

TERMINATION OF AGENCY 1. Agreement, Revocation; Renunciation Agreement - by parties Revocation - by principal Renunciation by agent

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2. 3. 4. 5. 6. 7. 8. 9. VII. 1.

Closure of Business Repudiation Performance Death of Principal or Agent Destruction of Subject Matter of Agency Bankruptcy of Principal and/or Agent Subsequent illegality or impossibility of performance Agent of necessity terminated when necessity disappears

AGENTS REMUNERATION An agent is only entitled to remuneration for his services as agent if either the express or implied terms of the agency contract, if any, so provide or he has a right in restitution to claim remuneration on a quantum meruit.

2.

Where the contract contains express terms providing for remuneration to be paid, the agent cannot normally claim remuneration other than in accordance with those terms. In the absence of such express terms the right to claim any remuneration, and the amount and terms of payment of such remuneration, are determined by such terms as may be implied into the contract.

3.

In deciding what terms are to be implied the court will have regard to all the circumstance of the case, including the nature and length of the services, the express terms of contract and the customs and usages of the particular trade. In the absence of any factors to the contrary, a term will implied that the agent is entitled to reasonable remuneration.

4.

Where an agent is entitled to his remuneration upon the happening of a future event, his entitlement does not arise until that event has occurred. The event upon which the agents entitlement to remuneration arises is to be ascertained from the terms of the agency contract.

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5.

Where the event upon which the agents entitlement to remuneration arises does not occur, the agent will not be entitled to receive remuneration on a quantum meruit unless provision for this is expressly made in the agency contract in order to give it business efficacy or otherwise to effect the intentions of the parties.

6.

No agent is entitled to remuneration in respect of any unauthorised transaction which is not ratified by the principal.

7.

An agent may be debarred from recovering remuneration for his services if at the time when the services were rendered he was not legally qualified to act in the capacity in which he claims the remuneration.

VIII.

REIMBURSEMENT AND INDEMNITY

Every agent has a right against his principal to be reimbursed all expenses and to be indemnified against all losses and liabilities incurred by him in the execution of his authority and where the agent is sued for money due to his principal, he ahs a right to set off the amount of any such expenses, losses or liabilities, unless the money due to the principal is held on trust. No agent is entitled to reimbursement of expenses incurred by him, or to indemnity against losses or liabilities in the following cases: a) In respect of any unauthorised act or transaction not ratified by the principal, except where the agent has a right of action in restitution. b) In consequence of his own negligence, default, insolvency or breach of duty in respect of any act or transaction which is obviously, or to his knowledge, unlawful, or unlawful by virtue of legislation imposing strict liability, except where he is entitled to contribution towards damages for which he is liable in tort.

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