Agency

Question 1

Define Agency

Answer 1

A relationship whereby P authorises A to act on his behalf in bringing about, multiplying or terminating legal relationships between P and a 3rd party.

Question 2

Types of authority of an agent?

Answer 2

1. Actual authority (express or implied- Helly Hutchinson); 2. Apparent authority; 3. Authority by operation of law; 4. Authority by necessity; 5. Authority through ratification of an unauthorised act.

Question 3

Helly Hutchinson (1968)- Express/implied

Answer 3

Denning: Actual authority is where the principal has given his consent for the agent to act on his behalf.

There are 2 species of actual authority:

1. Express actual authority- i.e. express consent;
2. Implied actual authority- i.e. where consent is implied from the circumstances.

Question 4

Ireland v Livingston (1872) HOL

Answer 4

Express actual authority. The agent must act within the scope of his authority in order to avoid personal liability.

BUT if a P gives an A an order in such terms that are susceptible to 2 interpretations and A accepts one of them and acts on it P cannot repudiate it as unauthorised because he meant it the other way. They were in different parts of the world, and P has a duty to act promptly.

Question 5

Woodhouse- Salmon

Answer 5

Salmon said it is doubtful that Ireland v Livingston would still apply today because we have technology that allows for instantaneous communications. Unlikely that it would today be acceptance to accept one meaning over another when the instructions are ambiguous because A could inquire as to the correct interpretation and still carry out his duty promptly.

Question 6

Implied actual authority can arise from the circumstances of?

Answer 6

A. The relationship between the principle and agent;

B. The role/job occupied by the agent;

C. More generally from the conduct of the parties

Question 7

Helly Hutchinson v Brayhead CoA- Implied Actual Authority

Answer 7

Case: R acted as de-facto managing director of B. Board know and acquiese this.

• B held shares in another co, PE, who are in financial difficulties.
• The chairman of PE (HH) had personally guaranteed a loan of £50,000 to the bank for PE.

With a view of eventually taking over PE, R convices HH to put more money into PE. HH agrees on the condition that B would indemnify both his previous guarantee to the bank the new money he would put into PE.

• Acting for B, R indemnifies HH for both of these- £50,000 and £45,000.

PE went into liquidation and HH sought to recover his money on the indemnity. B argues R had no authority to grant it. At FI judge found R had apparent authority to act.

Decision: Denning

1. Apparent and actual authority often conincide.

• When a person is treated as managing director by the board he has the implied actual authority carried by that specific role granted by the co’s arts.
• He also has apparent authority to do all things as an individual in that role would ordinarily be authorised to do. Persons who know he is the managing director are entitled to assume he has all the authority of a usual managing director, unless otherwise informed.

2. Apparent authority may exceed actual authority- if a limit is placed on the actual authority of an invidual his apparent authority is not subject to this limit unless the 3rd party is made aware of it.
3. Through the knowledge and acquisance of the board over many months of R having entered into transactions like this without their approval in the past, it had, by their conduct, become an implied part of his actual authority to enter transactions without approval.

Question 8

Freeman and Lockyyer v Buckhurst Bark (1964)

Answer 8

Conditions for Apparent Authority

Case: K was the director of BP. It has the power to appoint a managing director but has not. K acts and transacts in a way which suggests that he is the managing director and the co have allowed this.

K contracted with F and L to do work for BP. Authorising this type of contract would be within the usual authority of a managing director. BUT since K is not actually a managing director, he would have required board approval for it to be within his actual authority.

Decision: K had apparent authority to enter the contracts. The board had represented that he had the authority of a managing director and F and L had entered the contract based on this representation, because in the ordinary course of business a managing director could enter such contracts without board authorisation.

Diplock: apparent authority is merely a form of estoppel by representation.

1. A representation was made that A had authority to act on P’s behalf to enter contracts of the kind in question.
2. The representation was made by a person with actual authority to manage the business of the co, i.e. the board (orthdox- must be the P, non-orthdox- questionable).
3. The representation must have induced the 3rd party to enter the contract.
4. The P must not, under its memorandum or arts, be deprived from entering or delegating authority to enter contracts of the type in question.

Question 9

Representation in estoppel cases- Freeman first requirement

Answer 9

Barrat v Dee- by conduct

Summers v Solomon- by previous dealings between the parties

Todd v Robinson- by previous dealings between the parties

Question 10

Barret v Deere (1828)

Answer 10

P represents to the 3rd party that A is his agent by conduct.

Case: 3rd party had gone to settle his debt with P at his counting house. He pays the person behind the desk, assuming he is P’s agent authorised to take payment on P’s behalf. The person was not P’s agent and made off with the money.

Decision: By allowing the person to sit in the counting house P had represented that he had authority to collect the money on his behalf.

In the course of ordinary dealing a 3rd party has a right to assume a P has control of his own premises.

Question 11

Summers v Solomon (1857)

Answer 11

P represents to the 3rd party that A is his agent by previous dealings. In the course of ordinary dealings a 3rd party has a right to assume an agent still has the authority that was previously represented.

Case: P’s nephew worked as a manager in his jewellry store. As part of his role he would order supplies from summers regularly.

After N’s employment ended he ordered more jewellry from S on the pretence that he was acting for P and absconded.

Decision: P was liable to pay S for the jewellry because of the previous representation entitling S to assume A still had authority to act on P’s behalf.

Question 12

Todd v Robinson (1825)

Answer 12

P represents to the 3rd party that A is his agent by previous dealings. In the course of ordinary dealings a 3rd party has a right to assume an agent still has the authority that was previously represented.

Case: A bought goods on P’s behalf 6 times. On the 7th time he spend £45. P had between the 6th and 7th purchases limited A’s authority to a limit of £31, but had never represented the new limit to the 3rd party.

Decision: P was liable to pay the £45 so he had actual apparent authority after his actual authority was exceeded.

NB: Denning in Helly Hutchinson on this- apparent authority exceeds implied actual authority when a limit is placed on the actual authority.

Question 13

Freeman requirement 2- Representation made by a co/p with actual authority to manage P’s business for matters of the type in question (i.e. the board)- cases?

Answer 13

Orthdox Doctrine

Freeman v Lockeyyer

Armagas Mundogas (The Ocean Frost) (1986)

Egyptian Foreign Trade (1985) (mostly unorthdox)

Unorthdox Doctrine

First Energ v Hungarian International Bank (1993)

Kelly v Fraser (2012)

Question 14

Orthdox Doctrine on who can make the representation

Answer 14

The representation can only be made by the P or by an agent with actual authority to make it.

P must hold A out as having the authority to transact for the particular purpose as their agent.

Question 15

Freeman v Lockyyer (1964)- Orthdox doctrine

Answer 15

By allowing K to act and transact as a managing director the board had held him out as being a managing director with all of the ordinary powers that are conferred by this role.

The representation was derived from the board, not from K entering the transaction.

Question 16

Armgas Mundogas (The Ocean Frost) (1986) HOL

Answer 16

Case: C co formed to purchase a ship from P but would only purchase if P agreed to a 3 year charterparty.

M, who was P’s VP and Charter Manager falsely represented that he had P’s authority to enter into a 3 year CP. In reality he only had actual authority to agree to the sale.

M told C that he had no general authority to enter into the CP but that P had granted him specific authority in this case. CP agreed for 3 years.

M drew up a 12 month CP and sent it to P. After 12 months P delivered the ship back to C, thinking the agreement was for 12 months and C. C sued for breach of contract, but P argued M had no authority to enter into the CP on their behalf.

NB: Case failed because no reliance on the representation, but Keith considered whether P had held out M for the purposes of the representation.

1. It is not sufficient for estoppel if the representation is not made by the principal.

2. M had no general apparent authority by his job and C knew this because he told them expressly.
3. C could not reasonably believe, in the absence of a representation by P, that M had been granted specific authority for this transaction. Such cases of specific ostensible authority cases will be rare and unusual.
4. A successful case of specific obstensible authority may be where P had informed C that, in relation to a transaction which required specific approval, C could only rely on A if it was granted. If A then informed C that he had been granted the specific approval this could potentially be a representation by P.

5. C did not have a right to rely on the apparent authority of C to notify approval of transactions by P by virtue of his job role.

6. It would be a perculiar case where an A who is known to C to have no general auth to enter that type of transaction can by reason of his job role be assumed by C to have authority to notify acceptance of the transaction so that the transaction must be upheld.

Question 17

Egyptian Foreign Trade v Soplex CoA

Answer 17

Judgement made between Armgas in CoA and HOL.

The court should also consider whether P confered power on A to make representations on its behalf, though without authority to enter into transactions. If they did, why should a representation by A as to his authority to enter transactions not be relied on as P holding A out?

Question 18

unorthdox Doctrine

Answer 18

Seems to be the case that in certain cases it is A who gives the representation- BUT there cases insist they find this on orthdox principles and it is not A who is making the representation.

First Energy, Kelly v Fraser

Question 19

First Energy v Hungarian International Bank (1993) CoA

Answer 19

Unorthdox who may make representation.

Case: FE negotiated credit facilities with J, the senior manager in charge of the bank’s Manchester office, its main base being in London.J expressly told FE that he had no authority alone to grant facilities and the bank never held him out as having this authority.

At the bank some employees, many less senior than J and including him, had authority to sign and send facility offer letters, but did not have authority to grant the facilities. FE did not know about the internal hierarchy of the bank.

The issue of facilities was time pressured. J reached out to director of London office who said he had no objection to facilities but did not authorise them. J then sent facility offer letter to FE. In the meantime London office decided not to offer FE facilities.

Decision: Steyn

1. J, in his position of senior manager of Machester office, was ‘clothed with the apparent authority to communicate head office approval’.
2. Orthdox principles do not compell a finding of no apparent authority.

The general ratio of Armgas was that P must hold A out through the representation. BUT P can hold A out in more than one way.

Keith’s said that it will be a rare case where A is authorised to communicate to P whether he has authority. This is useful guidance, but it is not a general principle of law.

3. So… ‘There is no requirement that the authority to communicate decisions should be commensurate with the authority to enter a transaction of the kind in question of the P’s behalf’

4. General commercial practice- general understanding that a managing director of a bank has apparent authority to convey approval of transactions. J was not a managing director but his position was considerable. To say that the 3rd party should seek info about J’s authority to communicate approval would ‘fly in the face of way banks conduct negotiations with customers’ and thus frustate 3rd parties reasonable expectations.
5. The commercial practice of banks is not decisive, but it is relevant.

Question 20

Kelly v Fraser (2012) PC

Answer 20

Case: F moves cos and wants value of his old pension plan transfered to his new co’s plan. The authority to accept F into the scheme is with the scheme’s trustees but M, a senior HR director of the co, gets the unsalaried pension scheme trustees to sign it so the tranfser was never approved.

M had confirmed in writing that F had been accepted to the fund and F had been receiving periodic statements.

Decision:

1. When the scheme was wound up its trustees were estopped from deying F access to the surplus because, by authorising M to send letters of acceptance, they had held him out as having apparent authority to send letters of approval (though not to approve.
2. If a co/trust organises itself in such a way that an employee without authority to approve a transaction is held out as a person who may communicate approval to outsiders then he has apparent authority to do so.
3. Amrgas is not authority for the general proposition that a person without authority to enter the transaction on P’s behalf cannot have authority to tell the 3rd party that proper authorisation had been made. It is common for authority to aprove to be confined to senior offices but authority to communicate be conveyed on many more people, i.e. co secretaries.
4. This is an orthdox finding, just like in First Energy, because it is P who holds A out as having the authority to communicate acceptance.

NB: Questionable whether it is really P who holds A out or whether A makes the representation himself in these situations.

Question 21

Freeman 3rd point- induced by the representation to enter the contract- cases?

Answer 21

Reliance will usually be presumed if there is no irrationality or dishonesty.

Thanakharn Thai v Akai Holdings

Controversy over whether alteration of position to detriment in reliance is necessary:

Norfolk CC v SOS for Environment (1973)

The Tatra (1990)

Kelly v Fraser and Armgas

Question 22

Thankharn Thai v Akai Holdings (2010) HK CoA

Answer 22

Neuberger- Once it is established that the A had apparent authority to enter the contract with the 3rd on P’s behalf it would be an unusual case if reliance on the representation was not presumed.

BUT in a case (like this) where there is dishonesty or irrationality, reliance will not be presumed.

Case: A and S are 2 cos in the same group. S was indebtted to the bank and in financial trouble. Acting as S’s agent, A agreed to borrow money from the bank to repay the bank S’s loans (i.e borrowing the money with S as a principle), in return for granting the bank a charge over shares in ove of A’s subsidiaries. The bank did ask to see the director’s approval, which he fabricated BUT reliance could still not be presumed because:

1. The transaction confered significant benefit on the bank but no benefit on the principal (S)- it would get more debt, so likely they turned a blind eye to the director’s lack of authority.
2. The bank had departed from its usual procedure of requiring a board resolution and seeking legal advice before entering such a contract. So again it is likely they knew director not acting within his authority.

Question 23

Newcastle Airport v Eversheds LLP (2012)

Answer 23

UK Court approve Neuberger’s approach to presuming reliance if an apparent authority of A has been established unless on the facts it should not be presumed.

Question 24

Is detrimental reliance required?

Answer 24

Requiring detriment would be consistent with the usual strict requirements of estoppel.

Question 25

Norfolk CC v SOS for the Environment (1973)

Answer 25

Reliance was not detrimental so the requirements of estoppel were not made out. ## Footnote Planning officer mistakenly informed co that they planning permission had been approved when it had not. In reliance they purchased machinery and started digging a foundation trench. Shortly after they are informed of the mistake, but the machinery co were happy to take the machinery back and refund the price, so there had been no detrimental reliance.

Question 26

The Tatra (1990)

Answer 26

'The only detriment that needs to be shown is the entering into the contract'.

Question 27

Overbrook Estates v Globcombe Properties

Answer 27

Auctioneer was aware that purchaser had no actual authority to give authority in relation to property, so no reliance. Cannot rely on the authority if he knew or ought to have known the authority was not good.

Question 28

What is ratification?

Answer 28

An act performed by the agent on behalf of P without authority. If it is then ratified by the P (the persons with authority to act for the co) then the effect is as though A's acts were authorised. **Only the principal in whose name the agent purports to act can ratify the contract. An contract where agent does not purport to act for a P cannot be ratified by him.** If after going through authority none can be found, look for a ratification.

Question 29

Kayleigh Maxted (1901) HOL

Answer 29

**If the A at the time of making the contract did not profess to be acting on behalf of the P then the P cannot ratify the contract** Case: R, acting outside the scope of his authority as agent, purchased wheat from Durrant in his own name. He had intended to make the purchase as agent for KM in the joint names of both he and KM but had not done so. KM's manager later agreed with R to take the wheat on the joint account (attempted ratification). BUT both KM and R subsequently failed to take delivery of the wheat and D was forced to resell it at a loss to himself. Decision: D could not sue KM for the loss because KM was not a party to the contract because R did not profess to be acting on his behalf and so he was not entitled to ratify the agreement.

Question 30

Teaderman v Leaderman Frarers

Answer 30

**P entitled to ratify.** Case: V, acting as A for P within his scope of authority sold wheat on P's behalf. V then saw the wheat price rising so immediately repurchased it from the buyer and sold it on the same day for a profit. When he bought it back and resold it he had represented that he was acting for the buyer, but this was beyond the scope of his authority so acting on his own behalf. When the price of wheat fell again the 3rd party with whom A had contracted tried to have the contract repudiated for lack of authority of A. Decision: P was entitled to ratify the contract so that the 3rd party could not repudiate because A had purported to be acting on his behalf.

Question 31

Hogan v London Irish RFC (1999)

Answer 31

**Ratification of authority by conduct.** Case: A was the chief coach at the rugby club. He had no authority to enter contracts on the club's behalf without approval. He made oral agreements with 4 plays concerning the terms of their contracts. Decision: contract valid for 2 reasons: 1. He was found to have apparent authority; and 2. By subsequently allowing the players to train at the club, represent them in matches and paying them the rate agreed between them and A the club had by its conduct ratified the unauthorised act.

Question 32

Consequences of Ratification?

Answer 32

1. A's liability to P for acting outside of his authority will usually cease. 2. P may become liable to indemnify A. 3. A may still be liable to the 3rd as a joint contractor with P, 4. **If P does not ratify may be laible to the 3rd party by:** (a) In the tort of deceit (if A acted fradulently) (b) In negligence (Hedley Bryne) (c) In personal contractual liability, or (d) for **breach of warranty of authority** (**strict liability)**- occurs where A lacks authority and P declines to ratify the contract. A warranted the truth of his assertion so he is personally liable for any loss incurred by the 3rd P as a result of his misrepresentation.

Question 33

Yonge v Toynbee (1910)

Answer 33

**Liability for breach of warranty of authority where P does not ratify is strict.** ## Footnote Case: Solicitors warrated that they had authority to act on P's behalf in representing him. He had, unknown to them, been declared of unsound mind. The authority of the agent terminates on unsound mind. Decision: because it could not be ratified the breach of warranty of authority meant the solicitors were liable to pay the 3rd party's costs in the case. Damages should be calculated contractually, with reference to the difference between the position that the 3rd party would have been in if the agent had not acted beyond the scope of his authority and the position he is in due to it.

Question 34

Habton Farms v Nimo [2004]

Answer 34

**Damages for breach of warranty of authority are awarded on a contractual basis.** Case: A claimed to be acting on behalf of P for the purchse of a racehorse from 3rd party, but he did not have his authority to do so. Purchase agreed in October so 3rd would not sell to another buyer. Horse fell ill in Nov and died in Dec. Decision: A would be liable due to his breach of waranty of authority for the purchase price to 3rd. Market value of the horse at the time of the contract is not deducted from damages- it is just the difference between position would have been if auth was real and position in now.

Question 35

Mahesan Thambia v Malaysia Government (1979)

Answer 35

Case: T pays a bribe to A for purchase of land from a housing society and the society consequentially suffers a loss. P wanted to claim for both: 1. The the amount of the bribe; and 2. The loss it suffereed. **Rule: for breach of warranty of authority could only recover either:** **1. Amount of bribe, or** **2. Damages for tort of deceit. NOT BOTH.**

Question 36

Undisclosed Agency

Answer 36

Try to prove if cannot find any authority. Where 3rd P is unaware that the agent is acting on behalf of a principal. Potential reasons? * P doesn't want to be identified; * A wants to keep his employment- he is afraid that he will be unecessary if 3rd P is aware he is an A. ISSUE IN THESE CASES: **Can the 3rd P sue P on the contract, and vice versa?**

Question 37

Sin Yin Kwan v Eastern Insurance [1994] PC

Answer 37

**Lloyd: 5 principales of UA:** **1. An undisclosed P may sue or be sued on a contract made by A acting within the scope of his authority.** **2. A must intend to act on P's behalf when entering the contract.** **3. The agent of an undisclosed P may also sue and be sued on the contract.** **4. Any defence the 3rd P has against A is also available against P.** **5. The contract itself (expressly or impliedly), or the circumstances surrounding it, may show that A is the true and only principle.** A P may not intervene in an A's contract if: **1. An express or implied term in the contract between A and 3rd P indicates that it was not intended that an undisclosed P might intervene on the contract.** **2. If A's identity is of special importance to the extent that it shows the 3rd P wished specifically to contract with A, to the exclusion of other parties.**

Question 38

Said v Butt [1920]

Answer 38

**P could not intervene as an undisclosed agent because A's personalty mattered to the third.** Case: S wanted to attend theatre but not allowed due to falling out with manager. Had applied for ticket twice and was rejected both times. A purchased a ticket on his behalf and P attended and was removed from the event. Decision: **P could not sue 3rd P because he could not be an undisclosed P because A's personalty mattered to the 3rd, so the contract was between 3rd P and A.**

Question 39

Greer v Downs Supply Co [1927] CoA

Answer 39

Case: GW owed money to Greer. GW acts as A for D, but didn't disclose this to Greer. Greer agrees to buy timber from GW, who claims he is running his own business. Since GW already owed Greer money they contracted to set off the cost of the timber minus the debt. D was unhappy with this and claimed full payment from Greer. The invoices Greer had received had the name, address and description of D on. Decision: **Greer had no more than constructive notice that D was an undisclosed P. In the circumstances constructive notice was not equivalent to actual notice, because the identity of the P mattered. Greer would not have entered the contract with D because he did not owe him money.**

Question 40

The effect of undisclosed agency?

Answer 40

* Unless/until P's identity is revealed, A is liable to 3rd P on the contract (and vice versa). * If P chooses to intervene on the contract he assumes the position occupied by A in the contract. * Once 3rd P is aware of P's existence he his the 'right of election' to make either A or P liable on the contract.

Question 41

Agency of Necessity

Answer 41

Where there has been no prior consent from P for A to act as his agent. Routed in early merchantile and shipping practices where it was sometimes necessary to make decisions quickly in the interests of a P. A is confronted with an emergancy posing imminent threat to the property or interests of P. Insufficient time for A to seek P's authority/instructions before acting. A acts for the benefit of P.

Question 42

The Choko Star [1990]

Answer 42

Requirements of Agency of Necessity: 1. The A's intervention must be **necessary;** 2. It must not be reasonably practicable for A to communicate with P to seek his instructions; 3. A must act in the interests of P; and 4. Action taken by A must be reasonable and prudent in the circumstances.

Question 43

Chaudry v Palmer [1989]

Answer 43

**Though an agency relationship is generally contractual, in certain circumstances it can also be gratuitious.** Where an agency is gratuitous there is no contract so cannot sue in contract but can have remedies in tort for failure to exericse duty of care, skill and dilligence. Friend asked friend to find her a car that had not been involved in a crash. Friend didn't inquire and it had been and not roadworthy. He was not paid for his agency. Releavant for determing extent of duty are: 1. His actual expertise 2. The expertise he held himself out as having.