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Agency notes

Commercial law 1 (University of Ghana)

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AGENCY
An agency relationship involves three persons
 The owner of the goods(principal)
 Representative of the owner(agent)
 The buyer of the goods(third party)
Definition of agency
 American restatement on the law of agency second edition 1958-
agency is the fiduciary relation which results from the manifestation of
assent by one person to another that the other shall act on his behalf and
subject to his control and consent by the other so to act.
 FMB Reynolds; Bowstead and Reynolds on agency- agency is the
fiduciary relationship which exists between two persons one of who
expressly or implied lay consent that the other should act on his behalf so
as to affect his relations to third parties and the other on who similarly
consents so to act or acts.
 GHL Friedman- agency is the relationship which exists between two
persons when one called an agent is considered in law to represent the
other called a principal in such a way such as to be able to affect the
principal’s legal position in respect of strangers to the relationship by the
making of contracts or the disposition of property.
 Robert Bradgate; ‘Commercial law’- a person who is recognized by
law as having a legal rights, liabilities and relationships of another called a
principal.
Key notes
 The agent must affect the legal relationship between the principal in the
principal’s dealings with the third party
 The agent must negotiate the terms of the contract but may or may not
conclude the contract
 The principal is bound by the acts of the agent
 In domestic or family setting there is no intention to create legal
obligations
 It is possible to have two agents and two principals
 The agency relationship is a question of law
 Agency relationship can be inferred from the contractual agreement or the
conduct of the parties involved

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 The power of an agent to bind his principal is limited to the power of the
principal to bind himself
 If the powers of the principal to alter his own legal relations are ended by
his death, insanity or bankruptcy, the agents powers are terminated
automatically
 Person who are sui juris may nevertheless have the power to act as agent
for the person who are
 An agent creates rights and liabilities for his principal
 There is no privity of contract between the agent and the third party but
between the principal and the third party
Power is a legal concept which connotes the ability of a person to
alter legal relations by doing some act. Authority is a matter of fact
that connotes that one person has given instructions or permission to
another to act on his behalf.
Agency can be implied from a person’s conduct-BUAMA V OPPONG,
ADA CO-OPERATIVE FOOD FARMERS V ABODEI
The plf is an agricultural company. It bought all the tractors with a loan from
ADB. The officers of the plf union saw the defs in possession of the tractors and
equipment but failed to retrieve it. The defs asserted a claim of right on the
basis that they bought the tractors and equipment from one Azakpoe, officer of
the department of co-operatives which had guaranteed the loan from ADB. The
issue was whether ADB or the union was a party to the sale. Held- ADB and the
union as joint owners can effectively pass title in the tractors and equipment as
they would be the proper person to sell. However, they may authorize any
other person as their agent to sell on their behalf. There is no credible evidence
in support of the alleged agency.
BAAH V SALEH BROTHERS
The plfs were importers of manufactured electrical goods. They ordered goods
for the defs, usually on the def’s instructions. The plfs by their specially
endorsed writ claimed for the value of goods sold to or bought for the defs. The
defs averred that they were wrongly and unlawfully debited and have rather
overpaid the plfs. Held- it is clear that the plfs were utilizing their import
licenses in ordering goods when there specifically instructed to do so by the
defs and charged the defs commission. The defs were aware that in carrying
out the defs instructions the plfs had to open letters of credit on the defs behalf
and to pay bank charges connected thereon. There was therefore an implied
agency between the parties.

Categories of agency relationship

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 Special agent- he has authority limited to the performance of a specific

act- E SFEIR & CO V NATIONAL INSURANCE COMPANY OF NEW
ZEALAND
The plfs are insured with the def company. They claimed loss suffered on
cargo they insured with the def company under a marine insurance policy.
The def company sued per Glyndova as their agents. The plf claimed
Glyndova are local agents by whom claims made on the def company are
payable. Glyndova denied they were agents of the def company and
therefore cannot sue or be sued on behalf of the insurance company.
Held- as between the agent and his principal the authority may be limited
by an agreement or special instruction yet as regards third persons, the
authority which the agent has is that which he is reasonably believed to
have, having regard to all the circumstances and which is reasonably to
be gathered from the nature of his employment and duties in relation to
the third person. On proper construction of the terms of agency,
Glyndova’s agency is a special or limited agency as it was limited to
paying claims accepted by their principals. It does not extend to authority
to defend suits on behalf of their principal.
 General agent-he has authority to perform duties which are normally
within the scope of his business entrusted in him-EBOE V EBOE
 Universal agent-he has unlimited authority to perform any act which the
principal would have performed including the execution of a deed on the
principal’s behalf. This type of agent is appointed by a deed or power of
attorney.
Agency relationship compared to others
 Agency and vicarious liability
o In vicarious liability the wrong of the servant for which the master
is liable it one committed by the servant in the course of his
employment. In agency, the wrong of the agent for which the
principal is liable is one committed in the course of his authority.
Thus, vicarious liability gives rise to liability only, whereas an agency
may create rights and liabilities to the principal.
o An agent may also be an employee but often is an independent
contractor. Vicarious liability is only imposed where the employee
was acting in the course of his employment. For an agent when the
agent was acting within the scope of the actual, apparent or deemed
authority. ARMAGAS LTD V MUNDOGAS SA, THE OCEAN FROST

 Agency and sale. The relationship between agency and sale is mutually
exclusive as in a particular transaction, a person cannot be acting as
agent if he is a buyer or seller to his principal and vice versa. Sale is a
commercially adverse relationship; agency involves a fiduciary
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relationship of trust and confidence. A car dealer may call himself an

agent of a particular manufacturer but in actual fact he purchases vehicles
and resells them to his own customers. He is strictly liable for any defects
in the goods as the seller of the goods. Things that need to be considered
in other to determine whether one is an agent or sole distributor:
o Whether the agent intends to act on his own behalf or on the
manufacturer’s behalf
o Whether the agent is accountable to the principal for monies
received by him
o Whether the resale price is set by the agent or the principal
Agents of the manufacturer
o Do not make profits for themselves from the sale but receive
commission for every sale they make
o They render accounts to the manufacturer for profits
o They are not strictly liable for any defects found existing in the
goods they sell
Where third party rights in the goods are an issue the courts are likely to
favour the interpretation of the situation that best protects the third party.
In an agency relationship, where the agent becomes insolvent any monies
owed and paid to the agent belongs to the principal and cannot be
touched by the liquidators. However where it is a sale the principal is seen
as a creditor of the seller and will need to wait his turn to be paid back his
monies owed to him.
 Distributorship. When a manufacturer supplies goods to a franchisee, that
person may be described as a selling agent. He promotes the manufacturer’s
goods and agrees not to sell rival products. This relationship is one of sale
not agency. The dealer buys from the manufacturer and resells to his own
clients, fixes the price himself and seeks to make profits. There is no privity
of contract between the ultimate buyer and the manufacturer and so the
manufacturer bears no contractual liability. The manufacturer only looks to
the distributor for payment unlike the agency where the agent only arranges
the contract and the principal collects from the third party. A principal would
have more control over an agent than a manufacturer over a dealer.
 Advertising agent. They do not act as agents when they place
advertisements on behalf of their clients. ** They are liable for the price of
the advert and will seek reimbursement from its clients along with payment
of its fees.
 Franchising. An entrepreneur with the product or service may instead of
selling directly to the public authorize other business to supply the service.
In return for paying a franchise fee, they are often allowed to use the trade

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name, logo, and may benefit from the good name of the franchisor. However
each franchise is a separate business regardless of similar appearances. The
franchisor usually agrees to provide goods for the franchisee to sell and the
franchisee deals with the public as a seller.
 Subsidiaries. A company may create a network of subsidiary companies to
market their services or products. Each subsidiary has a separate legal entity
from its holding company. The subsidiary may act as an agent or principal for
the holding company, but their relationship is more of a buyer and a seller.
All these are spelt out in elaborate agreement between the various
subsidiaries.
 Agency and trusts. They both affect the legal position of those persons
with whose affairs they are dealing and are accountable to their principals
for profits derived from their position. The agent however acts for the
principal while the trustee hold property for another. A trustee holds money
or property for another, to which he has the legal title but which belongs in
equity to the beneficiary. As such a trustee does not have agency functions
at all. His duty is to carry out the terms of the trust. An agent on the other
hand may often hold no money or property for his principal at all; if he does
receive money from or for his principal he may merely be in a position of
debtor to his principal in respect of it; and if he receives goods he may hold
them as a bailee only. The principal can there enforce his rights against the
agent on a personal basis but for the beneficiary he can only enforce his
right when a fiduciary duty is breached. For a trust relationship to arise in an
agent-principal relationship, the parties must have intended it to be so.
 Agency and bailment. Bailment is the delivery or transfer of goods or
chattel by the bailor to the bailee with an option to buy or be delivered up to
the bailor. The bailee does not represent the bailor and cannot enter into
contracts on behalf of the bailor. He may however have the power to do
things which are reasonably incidental to his use of the goods which he
holds.
Agents by operation of law
 Companies’ directors and other officers. The authority to act on
behalf of the company is vested primarily in the board of directors as a
whole. MORKOR V KUMA. The regulations can give the board of directors
certain powers that a director by himself does not have. The board can
also appoint a managing director as CEO who can act on behalf of the
board. This person has a dual capacity of being an agent of the company
by his position as a director and also an agent of the board through his
position as managing director. Sometimes this relationship is apparent as
the person is represented as having such authority to third parties. The
third party should not be aware of the lack of authority of the agent. If the
third party knew then he cannot rely on the agency relationship. A person
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who holds himself out as a director even though he is not will be deemed
to be.

FREEMAN & LOCKYER V BUCKHURST PARK PROPERTIES

The plfs, a firm carrying on business as architects and surveyors claimed
an amount due from the defs as fees in relation to Buckhurst park estate,
the property of the def company. The plfs had received instruction from
the second def, a director of the def company. The second def to the
knowledge of the board had acted as if he were a managing director of
the company although he was never appointed as such. Without express
authority of the board, he had employed the plf to undertake certain work
on the Buckhurst park estate. The issue was whether the liability to pay
the amount due was that of the def company or the second def who was
not served with proceedings because his whereabouts were unknown.
Held- the second def’s act in engaging the plaintiffs was within the
ordinary ambit of the authority of a managing director and the plaintiffs
did not have to inquire whether he was properly appointed; it was
sufficient for them that under the articles of association there was in fact
power to appoint him as such and accordingly the defendant company
were liable for the plaintiffs' fees.
BOUSIAKO V COCOA MARKETING BOARD,

The def board entered into contracts with the plf for the construction of
various roads. The contracts contained a clause permitting the plfs to
claim for fluctuation increment payments due to the ever-rising cost of
construction due to inflation. The plfs demanded for an increment due to
fluctuation and one Dr Erbynn, a member of the interim management
committee and chairman of the central tender board of the CMB replied
approving fluctuation payments to the plfs which were to be forthcoming.
In reliance of those letters the plfs negotiated overdraft facilities with their
bankers. The official of the def board purported to deny liability to pay
claiming Dr Erbynn acted ultra vires. Held- Erbynn as the chairman of the
CTB and also a member of the IMC, had the fullest authority to announce
the awards. Thus on the principle that Erbynn was one of the officers
representing the other two directing minds of the CMB, his act would fully
be the act of the CMB. Therefore the question of absence of authority in
Erbynn to write the letter of award did not arise. Even if it did, the onus
was on the defendants to prove that the plaintiffs had actual knowledge
that Erbynn had no authority to write, or that having regard to their
position with, or relationship to the company, they ought to have known of
such absence of authority

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COMMODORE V FRUIT SUPPLY. The powers of management may also be

delegated to other officers such as the company’s secretary.
 Partnership. By operation of the incorporated private partnership act
(act 152), every partner is an agent of the firm. Every partner who does
an act or carries on the usual business of the firm binds the firm and the
other partners. However an outsider cannot hold one member of a
partnership liable on a contract made by another partner if he knew the
other party had no authority to make such contracts or did not believe he
was a partner. A person who is not a partner holds himself as a partner or
allows another to believe him as one and on that basis enters into a
transaction with him is liable as a partner or agent of the firm. UNITED
BANK OF KUWAIT V HAMMOUD
 Employees- the employer is only vicariously liable for the torts of his
employees. An independent contractor maybe the agent of the employer,
having authority to bind the employer in accordance with the employment
contract between them. An employee is often an agent of the employer.
He has authority to make statements about the goods which will be
binding on the employer. This power is derived from his status as an agent
and not that of an employee.
 Hire purchase and credit transactions- where goods are bought on
hire purchase, the dealer is deemed to be the agent of the finance
company and not of the hirer.
FINANCINGS V STIMSON
The defendant saw a motor car at the premises of a dealer and signed a
hire-purchase form provided by the plaintiff finance company and produced
by the dealer. The form contained, amongst others, clauses that the
agreement should be binding on the finance company only on acceptance
by their signature. The defendant paid the first instalment due and was
allowed to take possession of the motor car, after driving it for some time,
he became dissatisfied with it and as such, he returned it to the dealer,
saying that he did not want it and offering to forfeit the instalment which he
had paid. Neither the defendant nor the dealer informed the finance
company of the return of the car. The car was later stolen from the dealer's
premises and when it was recovered, it was severely damaged. The finance
company signed the agreement and later it sold the damaged car at an
auction. The company sued the defendant and claimed damages for breach
of the hire-purchase agreement or as bailee on the terms of the agreement.
Over here the issue was whether the there was a valid acceptance of the
revocation by the dealer and this is determined if they were working under
authority from the plaintiff. Held- per Lord Denning MR, for the purposes of
this case, the dealer was an agent of the finance company as he did most of
the transaction on behalf of the company. He further held that the dealer
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was authorized to receive communications on behalf of the finance

company and as he was authorized to deliver the car to the defendant in
the first place, so he was ostensibly authorized to receive it back when it
was returned. Just as he was authorized to receive the offer for the plaintiffs,
so, also, he was ostensibly authorized to receive the revocation: and to
receive the communication that the defendant had no further use for it.
 Professionals- professionals acting on behalf of clients may be the agents
of those clients for limited purposes. For example a lawyer conducting
litigation on behalf of the client is the client’s agent and may have authority
in the settlement of the case which will be binding on the client. WAUGH V H
B CLIFFORD
Types of agency relationships
 Factors and brokers- factors are agents whose business is to dispose of
goods on behalf of the principal and who are given possession of the goods
for that purpose. A broker on the other hand contracts for the purchase and
sale of goods but does not have possession of goods. The distinction
between them is very important as the law gives factors extensive powers to
dispose of the principal’s properties in order to protect third parties who deal
with them
 Del credere agents- He is an agent who in consideration of extra
remuneration called a del creder commission guarantees to his principal that
third parties with whom he enters into contracts on behalf of the principal
will duly pay sums becoming due under those contracts. They negotiate
contracts on behalf of the principal and guarantees to the principal that the
third party will pay any sum due under the contract. This is often used when
the third part is not known to the principal. He also charges the principal
extra commission for providing the guarantee.
 Commission agency- this agent deals with the principal on the agreement
that in dealing with the third party, the agent would deal in his own name.
This type of agency involves indirect representation. The result is that the
agent is liable to the third party for the price if he buys the goods or for the
quantity if he sells the goods. As against the principal, the agent is not
answerable for the quality of the goods but is only required to take
reasonable care in the performance of his duties. The title refers to a
function or task with which this type of agent is entrusted and not his
remuneration. The third party contracts with this agent without notice of an
agency relationship. This type of agency is more common in civil law
countries. Common law developed the doctrine of undisclosed agency to
enable the principal to sue and be sued on a contract made on his behalf,
even when the agent had been instructed not to reveal the agency. BAAH V
SALEH BROTHERS MASPONS Y HERMANO V MILDRED,

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 Confirming houses- they are mainly used in international trade. They

normally act on behalf of an overseas client who wants to import goods and
serve as experts and provide local expertise. The agent may act in different
ways depending on the instructions of the principal. A confirming house may
buy goods in the domestic market and resell them abroad-two contracts. He
may also simply act as an agent negotiating a purchase on behalf of its
client and revealing its capacity as an agent- one contract. In some
instances the domestic suppliers may be unwell to deal with a foreign buyer
because the credit worthiness of the buyer may not be known. The
confirming house may make a contract of sale on behalf of the foreign buyer
but enter into a separate contract with the supplier to guarantee that the
buyer will perform his obligations under the contract of sale. The domestic
seller thus has the security of being able to claim the price from the
confirming house which is both within the jurisdiction or domestic courts and
known to be creditworthy. SACKEY V FATTAL

Authority of the agent

The relationship (external) between the principal and the third party depends
on the scope the agent’s powers. The relationship (internal) between the
principal and the agent depends on consent.

CONSENT

PRINCIPAL AGENT THIRD

PARTY

SCOPE OF AGENT’S POWERS

The principal is bound to the third party by acts which he authorizes or
appears to have authorized through the agent. The agent is entitled to
remuneration from the principal for the performance of his authority granted

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to him. The agent may also incur personal liability if he claims authority he
does not have.

The law recognizes the agent as having the power to bind the principal in
four ways.
 Where the principal gives power to the agents actions, he has
actual authority
 Where the agent acts without the principals authority but the
principal gives retroactive authority-ratification of the contract
 Where the agent acts without the principal’s consent but the law
deems the principal to have consent. As in agency of necessity
 Where the agent acts without the principals consent but the
principal is estopped from denying the agent’s authority, the
agent is said to have apparent authority
The difference between actual and apparent authority is that an actual
authority is a legal relationship between the principal and the agent created
by a consensus to which they alone are parties. To this agreement, the third
party is a stranger and he may be totally ignorant of the existence of any
authority on the part of the agent. The agent however still create rights and
liabilities for the principal when the agent contracts with the third party.
An apparent authority is a legal relationship between the principal and the
third party created by a representation made by the principal to the third
party to the fact that the agent has authority. To this relationship, the agent
is a stranger.
Types of authority
 Actual authority-this is where the principal gives his prior consent to
the actions of the agent. The agent’s authority is derived from the
agreement between the principal and the agent. The agreement
between the agent and the principal has to be consensual but it need
not be contractual or reduced into writing. The relationship can only be
established by the consent of the principal and the agent, they will be
taken to have consented if they have agreed to what amounts in law as
such relationship, even if they do not recognize it themselves and even
if they have professed to disclaim it. In a commercial context, it can be
reduced into a formal contract between the principal and the agent. In
this case the agent is entitle to be paid for his service. The agent can
also perform for free. There is no need for formalities in the
appointment of an agent. Actual authority may be express or implied.
o Express actual authority- this can be made orally or in writing
or by a deed. In Ghana, it can be made through the execution of
the power of attorney. The power of attorney must be in writing,
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must be signed, witnessed and state the duration and scope of the
power of attorney. An adult principal can appoint a minor to act on
his behalf because the actions of the agent are deemed to be that
of the principal and will be fully binding on him. However the
contract between the principal and the agent minor may not be
binding on the agent. SHEPHARD V CARTWRIGHT, G V G
o Implied actual authority- here the principal is deemed to have
given implied consent to the action of the agent. HELY-
HUTCHINSON V BAYHEAD. Authority is implied where it is inferred
from conduct of parties and circumstances of the case. Implied
actual authority, also called "usual authority", is authority an
agent has by virtue of being reasonably necessary to carry out his
express authority. As such, it can be inferred by virtue of a position
held by an agent. An agent who is expressly appointed may have
his authority defined or expanded by implication. He may be
deemed to have additional authorities that are reasonably
incidental to and necessary for him to carry out his authorized act.

MANU V KUMA
The plaintiff’s husband died and the defendant was appointed his customary
successor. The deceased’s widow, maintained and educated her children
from the proceeds of three of the deceased’s farms to which she laid claim.
The plaintiff subsequently lost the farms to the defendant who refused to
make any contribution towards the maintenance of her children. This was so
despite an arbitration award, confirmed by the West African Court of Appeal
whereby the defendant became responsible to look after his predecessor’s
children. The plaintiff assumed full responsibility for the education of her
children and later when her task was completed and the children had left
school she instituted proceedings against the defendant for £G2, 500 being
the amount she had spent on the four children during the period. She relied
upon the arbitration award and the defendant’s general responsibility as a
successor at customary law. The defendant admitted the arbitration but
contended that it did not create an enforceable obligation upon him. Held- A
mother is, in the absence of the father or the father’s successor, the natural
guardian of her infant child and she is entitled to sue on their behalf for their
maintenance or any other relief. Where the claim is for expenses incurred by
the mother in discharging a legal obligation to the children which the
successor had neglected to discharge, the mother is an agent of necessity of
the successor and is entitled to be reimbursed at common law.

ADA CO-OPERATIVE FOOD FARMERS V ABODEI

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The plf is an agricultural company. It bought all the tractors with a loan from
ADB. The officers of the plf union saw the defs in possession of the tractors
and equipment but failed to retrieve it. The defs asserted a claim of right
they had brought the tractors on the basis that they bought the tractors and
equipment from one Azakpoe, officer of the department of co-operatives
which had guaranteed the loan from ADB. The issue was whether ADB or the
union was a party to the sale. Held- ADB and the union as joint owners can
effectively pass title in the tractors and equipment as they would be the
proper person to sell. However, they may authorize any other person as their
agent to sell on their behalf. There is no credible evidence in support of the
alleged agency.

SPRINGER V GREAT WESTERN RAILWAY COMPANY

ROSENBAUM V BELSON
Instructions were given by the owner of a real estate agent to sell property
for him. The agent entered into a contract with the plf who agreed to buy the
house. The def refused to sell the house to the plf and argued that the agent
had no authority to conclude and sign the contract. Held- in the absence of
anything narrowing the meaning of the word ‘sell’ not only to negotiate for
but to sign an agreement for sale, the def is bound by the contract as the
agent had authority to sign an agreement for sale as that would give to the
word ‘sell’ its full meaning.

HAMER V SHARP
The def gave an estate agent instructions to procure a purchaser for it and
advertise it at a certain price. He entered into a contract with the plf and
signed the memorandum as the agent of the def. The def argued that he did
not appoint the estate agent to sell the property for him nor authorized him
to enter into any contract on his behalf and had instructed him to
discontinue the advertisement of his property at the time he signed the
contract. Held- when instructions are given to an agent to find a purchaser
or landed property he, not being instructed ass to the condition to be
inserted in the contract as title, is not authorized to sign a contract on the
part of the vendor. The estate agent therefore had no authority to enter into
a contract for sale with the plf.

PANORAMA DEVELOPMENTS V FEDELIS FURNISHING FABRICS

UNITED BANK OF KUWAIT V HAMMOUD

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Hammoud, a client of the firm requested a loan from the plf bank. He stated
that the def firm had control of the money and gave the name of the second
def as reference. The second def is a partner of the def firm. The second def
gave the undertaking on behalf of the firm without the knowledge of the
other partners and when signing it that it was not backed by funds or any
form of security. Hammoud disappeared with the money and the bank
brought an action against the def firm to recover the amount of the loan. The
issue was which of two innocent parties, the plaintiff or the third and fourth
defendants should bear the loss caused by Mr. Hammoud and Mr. Emmanuel.
Held- Where a solicitor who had actual authority to represent himself as
being a practicing solicitor with an established firm gave an undertaking
which the receiver of the undertaking was entitled to assume was given in
the context of an underlying transaction which was part of the usual
business of a solicitor, the undertaking would be enforced against the firm as
having been given with ostensible authority and therefore binding on the
firm. On the facts as represented to the banks, a reasonably careful and
competent bank would have concluded that the undertaking was given in
the context of an underlying transaction which was part of the usual
business of a solicitor. Therefore, the lender had discharged the burden of
proving that Emmanuel had had ostensible authority to bind the firm of
solicitors which employed him.

BAAH V SALEH BROTHERS

The plfs were importers of manufactured electrical goods. They ordered
goods for the defs, usually on the def’s instructions. The plfs by their
specially endorsed writ claim from the value of goods sold to or bought for
the defs. The defs averred that they were wrongly and unlawfully debited
and have rather overpaid the plfs. Held- it is clear that the plfs were utilizing
their import licenses in ordering goods when there specifically instructed to
do so by the defs and charged the defs commission. The defs were aware
that in carrying out the defs instructions the plfs had to open letters of credit
on the defs behalf and to pay bank charges connected thereon. There was
therefore an implied agency between the parties.

APPARENT AUTHORITY
 Apparent authority- the principal may be bound by the acts done by the
agent without his consent or even in breach of the principal’s express
prohibition if his words or actions give the impression that he
authorised the acts done by the agent. Apparent authority is the
authority which a person appears to have to act on another’s authority.
SPIRO V LINTERN.
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 Apparent authority may exceed or expand an actual authority or even

exist independently of apparent authority. The distinction between
implied actual authority and apparent authority is that in the former the
agent is entitled to commission and in the latter he is not.
The agent is deemed to have apparent authority in these cases
 The principal appoint the agent to act as a managing director. The
principal imposes a limitation on the agent as to the amount involved
when entering into contracts. He exceeds the limitation. The third party
entered into the contract without knowledge that the agent had express
limitations. The agent has apparent authority and therefore the principal
would be bound
 The principal terminates the authority of the agent. The agent continues
to act as an agent and enters into a contract with a third party who has no
knowledge of his termination. The agent has apparent authority and
therefore the principal is bound. SUMMERS V SOLOMON DREW V NUNN
 The principal never appoints the agent as such. However the principal
look on as the agent holds himself out as the principal’s agent. If the third
party is lead to believe that the agent is an agent and on that basis enters
into a contract with the agent, the principal is bound by the contract.
FREEMAN & LOCKYER V BUCKHURST PARK PROPERTIES (MANGAL)
LTD.

Held-
To entitle a contractor to enforce against a company a contract entered
into on behalf of the company by an agent who had no authority to do so
four conditions must be fulfilled-
 representation that an agent had authority to enter on behalf of the
company into a contact of the kind sought to be enforce must have
been made to the contractor
 The representation must have been made by a person who had actual
authority to manage the business of the company either generally or in
respect of those matters to which the contract related.
 The contractor must have been induced by the representation to enter
into the contract
The company must not have been deprived, under it memorandum of
articles of association, of the capacity either to enter into a contract of
the kind sought to be enforced or to delegate authority to the agent to
enter into a contact of that kind.

The basis of apparent authority

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The basis of apparent authority is estoppel. Three important ingredients must

exist to give rise to estoppel.
 There must be a representation that the agent has authority. The
representation could be by words or conduct and must be one of fact not
law. An estoppel by silence can only arise where there is a duty on the
party against whom the estoppel is asserted to speak.
 The representation must be made by the principal or someone acting on
his behalf
 The third party must believe the representation and change his position
on the basis of that representation. It must be relied by the third party
who is alleging apparent authority. OVERBROOKE ESTATES LTD V
GLENCOMBE PROPERTIES LTD
 The third party does not know of the agent's lack of authority
Estoppel after the act
This is where by the principal’s conduct after the agent has exercised authority
he did not have, the principal is said to be bound by the actions of the agent.
SPIRO V LINTERN
The first def was the beneficial owner of the house which he was anxious to
sell. He asked his wife to put it into the hands of estate agents. The asking
price was £25,000. The plf made an offer for the house and the wife instructed
the estate agents to accept it. The first def did not give his authority to the
second def to enter into a binding contract. The old instructed an architect to
undertake certain functions on his behalf in connection with the house. The
plf's also visited the house and was introduced to the first def the new owner.
The first def went abroad but before he appointed. A power of attorney
empowering her to complete the sale of the house. However the house was
never handed over to the plf, it was sold to the third def. Held- the first def was
under the duty to inform the old that the second def acted without his authority
and that his failure to do so amounted to a representation by conduct that she
had authority. To found an estoppel it is not necessary that the representation
relied on should be false to the knowledge of the represent or provided that the
representor acted in such a way that's reasonable man would take the
representation to be true and believe that he was intended to act on it. In the
circumstances the plf had been induced but the efforts def’s representation to
a to his detriment in that he had been put to expense in employing the
architect and the builder as well as continuing the employment of his solicitor
in the conveyancing work I connection with the purchase. The first def's was
therefore stopped from asserting that the contracted entered into without his
authority and the plf was entitled to specific performance.

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The decision in WATTEAUV V FENWICK

This appears to be apparent authority as the contact made by the agent was
within the scope of his usual authority of an agent in his position and the third
party was unaware of the limitation. However, the essential requirement that
the third party should believe that the agent had the authority of the principal
was missing as the third party believed the agent was the principal. Some
writers have argued that the case is evidence of a separate legal category of
‘usual authority’. What is clear is that the third party cannot rely on the
decision in WATTEAU V FENWICK if he knows of the limit placed on the agent’s
authority or if he should know of it or if the facts show that the agent
contracted for his own benefit. In that case, the agent would be personally
liable to the exclusion of the principal.
Agency of necessity
A person who acts in an emergency to preserve the property or interest of
another maybe treated as an agent of necessity. Agency of necessity can arise
where there is no existing agency relationship between the principal and the
agent. In this situation, the actions of the agent would be deemed to be
authorized even though no actual authority was given. Like cases of apparent
authority, agency of necessity can arise in spite of the fact that there is lack of
authority from the principal. However, unlike cases of apparent authority,
agency of necessity can give the agent rights against the principal so that the
agent can sue the principal for the payment of commission. Where there is an
existing agency relationship between the principal and the agent, an agency of
necessity may also be explained on the basis of implied authority.
The agency of necessity may operate in these situations
 The agent creates privity of contract between the principal and the agent.
For instance by arranging for the third party to store goods belonging to
the principal. Here the effect of the authority is to create an agency where
there is none. It may also operate to expand the authority of an existing
agent.
 The agent can rely on the necessity as a defence to the claim by the
principal of wrongful interference or as a basis for a claim to reimburse
expenses incurred.
The agent and the principal need not known each other. What brings them
together is the emergency of the situation. For an action by an agent to give
rise to him being an agent of necessity,
 The emergency must be a commercial one

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 There is no means of communicating to the principal of the emergency,

impractical of obtain instruction from the principal
 The agent must have acted reasonably in all circumstances
 The agent must act in good faith and in the principal's interest and not his
own interest
For an agent of necessity to arise there must be an actual and definite
commercial necessity for the agent's actions. The classes of people who may
claim to be agents of necessity are kept deliberately narrow and restricted by
the courts. SPRINGER V GWR.
Agency relationship arising out of cohabitation
It is usually said the wife has the authority to pledge the husband's credit for
necessaries. Cohabitation of marriage does not necessarily give rise to
authority but the rebuttable presumption. This applies to cohabiting couples
too. The presumption can be rebutted by the husband showing that the wife
had adequate supply of necessaries or that his wife had adequate allowance or
that he expressly told his wife not to pledge his credit. PHILLIPSON V HAYTER
Ratification
There are situations where the agent would not have actual or apparent
authority but the principal would be bound by his actions. This happens where
the actions of the agent have been ratified by the principal. In the absence of
actual or apparent authority, the principal can adopt the actions of the agent
which are done in his name without his authority through ratification. If the
principal choose to ratify the unauthorised act of the agent then the agent
would be deemed to have had the authority of the principal at all material
times. If a contract was entered into with a third party, then the ratification
would operate to establish a privity of contract between the principal and the
third party and the principal would be bound to the third party and the agent
can claim against the principal his rights as an agent.
This is important because:
 The agent would be able to claim that he has a right to be reimbursed
 It entitles the principal to enforce the contract because the third party
cannot claim that the agent did not have the authority of the principal
because the ratification take retrospective effect.

Requirement for ratification

 The act should have been done in the name of the principal. The agent
must have claimed directly or through his actions that he had authority.

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The agent should not have acted in his own name. KEIGHLEY MAXSTED V
DURANT
 The principal must have been in existence at the time of the agent's
action on his behalf.
 The principal can ratify the contract if he was competent to make it at the
time of the agent's actions and at the time of ratification. Therefore a
minor cannot ratify a contract after attaining majority.
 The principal can ratify voidable acts but not void acts. For example,
where the agent claims authority he does not have any resulting contract
would be voidable for misrepresentation. BROOK V HOOK. GREENWOOD V
MARTINS BANK

The effect of ratification BOLTON

Ratification of the agent's unauthorised act by the principal operates as if at
the time of the agent's action he had the authority of the principal. &
PARTNERS V LAMBERT,
The plf owned a factory, which the def offered to buy. This offer was accepted
by the managing director, though in fact he had no authority to do this. There
was a disagreement, and the def withdrew his offer. The plf started proceedings
for breach of contract. The Board of Directors of Bolton Partners later ratified
the actions of the managing director. The def argued that this ratification came
too late. Held- the ratification by the company related back to the date of the
contract, and the repudiation by the def was of no avail, notwithstanding that
the company itself was not bound by the contract until the ratification thereof
took place.
It also has a retroactive effect on the third party.
PRESENTACIONES MUSICALES SA V SECUNDA
A writ was issued on the instructions of a director of the plf company. The writ
claimed relief against the first def for alleged infringements of copyright in
certain sound recordings. It was found that the plf company had been dissolved
under Panamanian company law and although it issued the writ within the
three year limit, the three directors appointed as liquidators purported to ratify
the instructions to the English solicitors to initiate proceedings after the three
year limit had expired. Held- where a solicitor commenced proceedings in the
name of a plf without authority, the plf could ratify the act of the solicitor and
adopt the proceedings and thereby cure the original defect in the proceedings,
but only if the act of ratification was done at a time and in circumstances when
the ratifying party could himself have lawfully done the act which was ratified.
If a time was fixed for doing a particular act the doctrine of ratification did not
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apply if it had the effect of extending that time. The writ issued without
authority was not a nullity and accordingly the plf notwithstanding the
expiration of the limitation period was entitled to adopt the action.

Method of ratification
 The principal may expressly ratify the actions of the agent
 The principal may impliedly ratify the actions of the agent through his
conduct.
 The principal's inaction can also be interpreted to mean ratification. Here
the inactivity creates a rebuttable presumption.

The principal would not be taken to have ratified the action of the agent unless
the principal had a real choice to ratify and had a full knowledge of all the
circumstances.

Disclosed and undisclosed agency

In spite of the general rule, the liabilities of the principal and the agent may
differ depending on whether the agency is disclosed or undisclosed.
A disclosed agency is where the fact of the agency is known to the third party.
In a disclosed agency involving the payment of money, whether the principal
has discharged this obligation to the third party or the third party has
discharged his obligations to the principal would depend on the authority of the
agent. In the absence of actual or apparent authority the third party may still
acquire property rights as a result of provisions to protect third parties. Section
30 of the sale of goods act. Merely giving possession of the goods does not
make the principal liable but the principal must create in the mind of the
mercantile agent that he owns the goods.

Exceptions where the agent would be liable

 An agent would become a party to a contract it is appears on the proper
construction of the contract it appears the parties intended for the agent
to become a party.
 If the agent signs in his own name, the agent would be liable. SIKA
CONTRACT V BL GILL AND CLOSE GATES COMPANY LTD.

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 An agent would be liable where he personally executes a deed. Here, an

agent would be excused if the deed was executed in pursuance to a power
of attorney.
 If he personally signs a bill of exchange unless it is clear he signs in a
representative capacity. APPIAH V NGUANOH
The plaintiff sued to recover £450 on a promissory note signed by the
twelve defendants, whom the plaintiff claimed to be jointly and severally
liable. The promissory note was in the following terms:" We, the
undersigned Elders, Stool holders, Supis and Councilors of the Edina State,
do hereby faithfully promise to pay to Mr. T. E. W. Appiah, at the expiration
of one year's time from today's date the sum of (£450) Four hundred and
fifty pounds being amount borrowed to meet the legal expenses incurred
in connection with the Buranta dispute. To this were subscribed the
signatures of the defendants, who signed not in their personal names but
by their traditional styles or titles as office¬holders in the state. Held- In
view of the following the promise, " We, the Elders, Stool holders, Supis
and Councilors of the Edina State do hereby faithfully promise ... "; the
styles of the various signatures; and, applying the Bills of Exchange
Ordinance, s. 26, the signatories must be regarded as agents, acting for
and on behalf of the Edina State as principal and without incurring
personal liability.
Breach of warranty of authority
When the agent deals with the third party, he does so on the basis that he had
warrant of authority from the principle. If this warrant is breached (the agent
had no authority), the agent would be liable to the third party. This is a strict
liability. Unlike the tort of deceit or negligence, the third party would only have
to prove that the agent had no authority.

Where the agent claims authority he does not have the third party can sue the
agent for the breach of warranty of authority. All that the third authority has to
prove is that the agent did not have the principal's authority. COLLEN V
WRIGHT
The plf was desirous in obtaining a lease for a farm. He enlisted the help of the
deceased who was previously the agent of the def. At the time of the
transaction, the deceased was no longer the agent. The plf signed an
agreement and took possession of the farm to which he started making
expenses on. The def refused to sign arguing that the deceased did not have
the authority to let the farm on the terms set forth in the agreement. The plf
brought an action for specific performance. Held- A person who professes to

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contract as agent for another impliedly undertakes with the person who enters
into the contract on the faith of the agent's being duly authorized that the
authority which he professes to have does in fact exist. Should the principal
repudiate the contract the agent is liable to the person whom he has induced
to enter into the contract for any damage which that person sustains through
the assertion of authority being untrue.
The fact that the agent honestly believed that he had the authority does not
affect the question of his liability. YONGE V TOYNBEE.
Section 35 of the Auction Sales Law PNDCL ,
ARHIN V KISSIWAA

The rule is mitigated by some factors

 If the agent is unsure about his position he may warn the third party that
he is not sure he had the authority. HALBOT V LENS
 If the principal authorizes the agent's unauthorized actions, the agent's
lack of authority is retroactively cured by the ratification.
 If the agent had no notice of the bankruptcy of the principal and the agent
acted in good faith. Bankruptcy and insanity operates to terminate the
agency contract.
 If the agent is the donee of the power of attorney, he is not liable to the
third party if unknown to him the power of attorney is revoked.
SAID V BUTT
The plaintiff was a Russian gentleman of independent means. The defendant
was the chairman and managing director of the Palace Theatre, Ltd. a light
opera was produced at the Palace Theatre by the company under an
agreement with the plaintiff. During the run of the opera differences arose
between the plaintiff and the defendant, and the plaintiff made serious charges
against the defendant and other officials of the theatre with regard to the sale
of tickets for the performances of the opera. These charges were in fact without
foundation, though the plaintiff believed them to be true, and they were deeply
resented by the defendant and other officials of the theatre. The opera was
withdrawn a new day was fixed as the date of the first performance of a new
play at the Palace Theatre. The plaintiff desired to be present at the
performance. He twice applied to the company in his own name for a ticket, but
his application was refused. The plaintiff, therefore, knowing that any
application in his own name would be rejected asked a friend of his, a Mr.
Pollock, to buy a ticket for him. Mr. Pollock accordingly bought, in his own
name, a ticket from the company for a seat at the performance without
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disclosing, and the company and its staff did not know, that the ticket was
bought for the plaintiff. If they had known they would have refused to supply
the ticket. The plaintiff paid Mr. Pollock for the ticket, and on the evening of the
performance the plaintiff went to the theatre in order to occupy during the
performance of the new play the seat for which the ticket had been bought by
Mr. Pollock. The defendant happened to see the plaintiff in the vestibule of the
theatre, and he thereupon gave orders to the attendants that if the plaintiff had
a ticket he was not to be allowed to occupy his seat and his money was to be
returned to him. In consequence of these orders the plaintiff was refused
admission to the performance, and he left the theatre. The money paid for the
ticket was offered to him but he declined to take it. The plaintiff claimed in this
action damages against the defendant on the ground that he wrongfully and
maliciously procured the company to break a contract made by the company
with the plaintiff by selling to the plaintiff a ticket for a seat entitling him to
witness the performance at the theatre. Held- The plaintiff knew that the
Palace Theatre would not contract with him for the sale of a seat for December
23. They had expressly refused to do so. He was well aware of their reasons. I
hold that by the mere device of utilizing the name and services of Mr. Pollock,
the plaintiff could not constitute himself a contractor with the Palace Theatre
against their knowledge, and contrary to their express refusal. He is disabled
from asserting that he was the undisclosed principal of Mr. Pollock. The non-
disclosure of the fact that the ticket was bought for the plaintiff prevented the
sale of the ticket from constituting a contract as alleged, the identity of the
plaintiff being in the circumstances a material element in the formation of the
contract.
HUMBLE V HUNTER
A charterparty was executed by the plaintiff's son who described himself as
"owner" of the ship. In an assumpsit on the charterparty the plaintiff sought to
claim as principal. Held- the son by describing himself as "owner" had
contracted as principal, and evidence was not admissible to show that he
contracted merely as the plaintiff's agent.
SUI YIN KWAN V EASTERN INSURANCE
A company called Axelson (P) owned the ship Osprey. They asked their shipping
agents, Richstone (A), to insure the ship, including personal injury to the crew.
Richstone did this in their own name. The Osprey, while moored in Repulse Bay,
Hong Kong, was hit by typhoon Ellen. Many of the crew were lost and relatives
of two of them sued Axelson for negligence and got judgment. They were
awarded $HK1 million. However, Axelson had already gone into liquidation, so
the relatives stepped into the shoes of Axelson and sued the insurance
company (T). The insurance company argued that they had only dealt with
Richstone, and knew nothing of Axelson, the undisclosed principal. Held- the

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doctrine of undisclosed principal applied: where an agent acts within his actual
authority the undisclosed principal may intervene and acquire the
rights/liabilities of the agent. Here, the agents acted within their actual
authority and so the relatives could recover from the insurance company. Also,
there was nothing in the terms of the proposal form or the policy effected by
the shipping agents which expressly or by implication excluded the employers'
right to sue; that an employer's liability policy.

UNDISCLOSED AGENCY
Apparent authority has no place in an undisclosed agency. This is because the
third party is not aware of an agency relationship in the first place. In an
undisclosed agency since the contract is between the agent and the third party
it means that the third party and the agent can enforce the contract as against
each other. Generally, the principal would not have a right to enforce a contract
as against the third party, however, there are certain exceptions:

 Where the agent is a factor, if the factor becomes insolvent. SUI TIN KWAN
V EASTERN COMPANY LTD.

 The undisclosed principal can intervene if he was in existence and had

capacity to enter into the contract at the time it was made
 If he had given actual authority for making the contract prior to its
completion

 The undisclosed principal cannot intervene if there is an express or

implied term in the contract stipulating that he cannot intervene. HUMBLE
V HUNTER
 He cannot intervene if personal element is strikingly present. SAID V BUTT

Relationship between principal and agent

It is a fiduciary one. It can be contractual or gratuitous.

Rights of the agent under common

law
 The agent is entitled to indemnity- whether acting in pursuance of a
contract or not agents are entitled to be reimbursed in the course of their
duties. Where the agency is contractual, the indemnity will be an express or
implied term. A contractual agent may not be entitled to be indemnified if
by the custom of the trade, the agent is not entitled to be indemnified. So
that a del credere agent who guarantees for third parties will not be
entitled to be reimbursed for any money paid on the basis of the
guarantee. Where the agency is not contractual then the basis of the

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indemnity will be restitution. The non-contractual agent is only entitled to

be indemnified against expenditure incurred on the principal's behalf. The
indemnity covers expenses of liabilities while the agent is acting within the
scope of his authority. Once the requirements are fulfilled, an agent of
necessity may be entitled to be indemnified for reasonable expenses
incurred in the course of his duties.
 Exercise a lien- An agent may be able to exercise a right of lien over the
property of the principal in his care so as to protect the right to be paid
commission or to be indemnified. An agent may exercise a lien over
property belonging to his principal which comes to his possession in his
capacity as an agent and by lawful means. In general, the right to a lien is
based on possession. So that the right is lost if the agent voluntarily gives
up possession. If the principal uses trickery to obtain the goods it will not
affect the right of the agent to exercise a lien. This is because the
possession would have be lost by fraudulent means. With respect to
possession, constructive possession would suffice. Example a bill of lading
is deemed to be in possession of the goods. An agent would lose his lien if
his conduct shows he intends to waive his right to a lien. This right can be
expressly excluded in the contract. Where the agent has to the right to a
lien the agent takes the property subject to any existing interest in it. The
right of the lien over the agent and all or any person who claims his rights
through the principal. The lien gives an immediate right to possession so
that the agent can sue the principal or anyone else for wrongfully removing
the property.
 Right to be paid- if the agency contract requires for the discretionary
power of the principal to pay the agent, the court will not intervene-KOFI
OBU V STRAUSS, RE RICHMOND GATE PROPERTIES. Where an agent is
employed to bring out a certain outcome, the agent will only be entitled to
his pay where he has discharged his obligation effectively unless the
contract says otherwise-COLES V ENOCH.
The def was the owner of an empty store. He authorized the plf in an
agency relationship on terms that he would be paid commission if he
succeeded in getting a hirer for the shop. The plf spoke to some of his
business friend for which one Wilkes overheard the conversation, which he
later asked for information. Wilkes went to look for shop and rented it. The
plf sued the def for payment of his commission. Held- it was not the plf’s
action which was the primary cause of Wilkes becoming the tenant of the
shop. Thus, he was not entitles to his commission.

Generally the agent may be entitled to damages against the principal is

there is an express or implies term of the contract that the principal may
not hinder or prevent the agent’s earnings. Typically, the court will not
imply the term if it is deemed to be inferring with the right of the principal
to deal with his own property. If the court can imply, the court would imply
as such and the agent will be deemed his commission. This can be seen as
a breach of contract. RHODES V FARWOOD, LUXOR V COOPER,
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ALPHA TRADING LTD V DUNNSHAW PATTEN.

An agent negotiated a contract for the sale of cement between the seller
and the third party. The contract was made but the seller breached the
contract in that he failed to deliver. The price of the sale was consequently
not paid and as such the agent received no commission for his service.
Held- it was right to imply a term into a contract of agency to the effect
that the defs could not fail to perform their contract with the buyer so as to
deprive the agent of his commission. This is because the agent had done
his end of the bargain by effecting the contract and as such the act of the
defs breaching the contract cannot affect the commission of the plf’s.

Where a person is appointed a sole agent, he is entitled to be paid if a sale

is effected by another agent. It is immaterial that the agent did not affect
the outcome. When a person is appointed a sole agent with the exclusive
right to deal, it even affects the right of the principal to deal with his own
goods. An agent who performs his task will lose his right to commission if
he commits a serious breach of the agency contract.

AGBEMASHIOR V STATE INSURANCE

The plfs got involved in a car accident and were injured. The third def on
insurance claims agent approached the plfs and asked them to be his
principals to act on their behalf to collect the insurance claims. The third
def subsequently succeed in getting the claims but however did not give
the plfs the money, upon discovery of the fraud the plfs sued for payment.
Held- the plfs after accepting the third
def offer entitled him to be their agent. He stood in a fiduciary relationship
to his principal and the duty here was to account alimonies to the plfs. This
he breached. Also, the court held that despite the fraud, he will be entitled
to his commission.

WAY V LATILLA
The plf (agent) was an employee with a company engaged in mining operation
in West Africa. He was approached by the def (principal) when it was agreed
that the agent will supply the principal with information concerning gold mines
in West Africa. No express terms were agreed as to remuneration, but the
principal led the agent to believe that a commission would be paid. The plf
sued for his commission. Held- although there was no concluded contract
between the parties, there was an implied term in the contract of agency that
the agent was entitled to a reasonable commission on a quantum merit basis.
That is payment for what the service was worth.
These are not the only rights an agent may have. By a contract
additional rights may be created. The same applies to duties.

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Duties of the agent at common law

 Duty to obey instructions- a contractual agent is duty bound to
perform the duties undertaken under the contract and will be liable for
breach of the contract if he fails. A gratuitous agent is not under any
obligation to obey the instructions of the principal. Although the
contractual agent must obey the instructions, the professional agent is
under a duty to warn the principal of any risk or inherent dangers in the
instructions. The professional agent maybe subject to certain professional
conduct. The agent whether under contract or not is not under any
obligation to obey instructions which are illegal. The instructions of the
principal cannot be used as a defence in a criminal trial. TURNIP V
BILTON
An agent agreed to insure his principal’s ship. He failed to do so, which
meant that when the ship was lost, the principal was uninsured. It was
held that the agent was liable for breach of contract
 Duty to exercise reasonable care- all agents owe a duty of care to
their principal which requires them to exercise reasonable care in the
exercise of their authority. This duty is distinguished from the one as it
exists in the law of torts. A gratuitous agent is not bound to obey the
instructions of the principal but when he decides to obey, he is bound in
that time to exercise a duty of care. The question of care vary according
to the facts. So that if an agent holds himself out as a member of a
profession, he would be expected to show the standard of skill and care of
competence reasonably expected by the members of the profession.
CHAUDRHY V PRABHAKAR
The plaintiff, an accountant had recently passed her driving test and knew
nothing about cars. She asked the first defendant, a friend, to find a
suitable second hand car for her to buy, although he was not a mechanic.
She stipulated to the defendant that the car shouldn’t have been involved
in an accident and he was doing this for free. The first defendant found a
one year old car which was being offered for sale by the second
defendant. The car had been engaged in an accident before but had been
fixed and repaired, although it was not road worthy. The first defendant
recommended the car to the plaintiff buy for which she did. She found out
later that the car had serious problems and she sued the defendants for
the price of the car and damages. Held- the court held that a gratuitous
agent owes a duty of care to the principal to exercise the degree of care
and skill which could be reasonably be expected of him in all the
circumstances, that degree of care and skill being measured objectively

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and not subjectively. The first defendant knew that the plaintiff was relying
on him and as such, he was in breach of his duty.
 Duty of personal performance- deligatus non potest delegare. An
agent is not permitted to delegate the performance of his duties unless
delegation is authorised by the principal. Unless the agent had apparent
authority, he principal would not be bound by the actions of the sub
agent. ANDOH V FRIMPONG AND CO. In the absence to the contrary the
court would presume that there is no privity of contract between the sub
agent and the principal. CALICO PRINTERS ASSOCIATION V BARCLAYS
BANK LTD, HENDERSON V. MERRETT SYNDICATES, the principal may not
recover from the sub agent but can sue him in the tort of negligence-
HEDLEY BYRNE
The plaintiff wanted to check the creditworthiness of a customer and so
asked their bank to check it from the bank of the customer. The bank sent
a report stating that they were creditworthy but would not take
responsibility for the report. The plaintiff acted on it and resulted in his
detriment as it was found out that the customer Easipower was not credit
worthy. Held- in the absence of a special relationship between the
inquirer and a person giving reference, the latter did not owe a duty
towards the former to exercise reasonable care in making statements in
answer to the enquiry. However, economic loss not arising from a contract
was recoverable.
 The agent's fiduciary duties
The law places on the agent certain fiduciary duties to protect the interest of
the principal. The agent fiduciary duties are strict so that the agent maybe
liable for breach of that duty although he acted in good faith and produced
benefits for the principal. BOARDMAN V PHIPPS
 Avoid conflict of interest-MCPHERSON V WATT,
KELLY V COOPER
Kelly instructed Coopers, a firm of estate agents, to sell his house. Brant,
who was a neighbor of Kelly also instructed Coopers to sell his house.
Cooper found a single buyer for both houses and he first made an offer for
Brant’s house which he accepted. Coopers did not inform Kelly about this
offer and the buyer went ahead and concluded the sale with Kelly for his
house. Kelly brought an action against Coopers claiming that they were in
breach of their duties in failing to disclose material information to him and
placing themselves in a conflict of interest in the sale of the houses. Held-
the court held that the scope of the fiduciary relationship owed by the
defendants to the plaintiff (and in particular the alleged duty not to put
themselves in a position where their duty and their interest conflicted) are
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to be defined by the terms of the contract of agency. From the evidence,

the contract of agency between Cooper and Kelly did not include a term
(express or implied) preventing the estate agents from seeking to earn a
commission from rival vendors.
 Duty not to make secret profit-BOARDMAN V PHIPPS, The Phipps
Trust (P) owned a small holding of shares in a company. Boardman, a
solicitor and another, acting as agents for the trustees of an estate
attended the annual general meeting of a company in which the estate
had a minority holding of shares. Later, they obtained information about
share prices from the company. The Phipps Trust could not have raised the
money to buy a controlling interest in the company; neither did the
trustees desire to do so. They formed the opinion that the company could
be made more profitable and acting honestly and without concealment
(but not having first obtained the ‘informed consent’ of all the trustees),
used their own money to bid for and eventually to acquire a controlling
interest in it. Ultimately they succeeded in making considerable profits for
themselves and the estate from capital distributions on their respective
holdings of shares. One of the beneficiaries under the Phipps Trust brought
an action calling for the agents to account to the Trust for the profits
made. Held- the court held that they must account to the trust for the
profit that they had made from their own investments: the profits were
made by reason of their fiduciary position as agents and by reason of the
opportunity and the knowledge which had come to them whilst acting in
that capacity. However, as they acted in good faith they were entitled to
generous payment for their work and skill

HIPPISLEY V KNEEBROTHERS
The plaintiffs (principals) appointed the defendants as agents to sell goods
on commission. The plaintiffs also agreed to pay the agent’s expenses.
The defendant sold the goods and charged the plaintiff with the cost of
printing and advertising. The defendant also claimed the full cost even
though they had received a discount from those who had provided these
services. At all times, the agent acted honestly and in accordance with
trade custom of which the plaintiff had no knowledge about. Held- The
court held that, Knee Brothers were in breach of their duty and should
account for the discount as a secret profit. However, because Knee
Brothers acted in good faith and their breach was only incidental to the
sale itself, they were entitled to keep their commission.
 Duty to not take a bribe- REID V AG OF HONG KONG

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The defendant (A) was once the assistant Director of Public Prosecutions
for Hong Kong. He took bribes and favoured certain criminals. With that
money, he purchased properties in New Zealand. Held- The court held
that where a fiduciary accepted a bribe as an inducement to betray his
trust he held the bribe in trust for the person to whom he owed the duty
as a fiduciary. The defendant held these properties (as far as they
represented the bribes) on constructive trust for the Crown as beneficiary.
Should the value of that property increase, the Crown, and not the
defendant, could claim the profit. This was because the defendant could
not be allowed to profit from an investment with a bribe

 Duty to account

TERMINATION

At common law an agency may be terminated by mutual consent, by operation

of law or by the unilateral act of either party.
Termination by parties
Where an agent is appointed for a fixed period to perform a specific task, the
agency relationship would come to an end when the time elapse or the task
has been completed.
Unilateral termination may end the relationship but may open up the party at
fault to claim for breach of contract. Where the agent is appointed for a fixed
term, the principal may terminate the agency at time before the expiry if the
agent commits a breach of the agency contract. The principal may rely on the
breach even though he was unaware of the breach at the time that the
principal dismissed the agent. BOSTON DEEP SEA FISHING COMPANY AND ICE V
ANSELL. Where the agent is appointed for an indefinite term the right to
terminate depends on the terms of the contract. In the absence of a
termination clause, the court may imply a term allowing a termination by giving
reasonable notice. Reasonable notice if a question of fact. MB AIRCRAFT
COMPANY V CANADIAN FLIGHT EQUIPMENT
Termination by operation of law
 Frustration-
 Death- GORDON V ESSIEN

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The deceased, a Nigerian national while residing in Ghana acquired a

house here. When she left Ghana, she left the house in the care of the
plaintiff’s father who collected rents on her behalf. When the father
became ill. He assigned that responsibility to the plaintiff who continued
to perform that duty until the death of the deceased. The personal reps of
the deceased executed a Power of Attorney in favour of the defendant to
collect rents from the house. Following a dispute between the parties as to
who is entitled to collect rents on the properties, both issued a writ in the
courts for determination. Held- the court held, inter alia that, death was
one of the events which automatically determined an agency as the
conception of authority demanded a continuing consent of the principal to
the agent’s act on his behalf and with the death, the agency had ceased
to be in operation. Thus, after the death of the deceased, the plaintiff had
no authority to collect rents on the property.
 Insanity- YONGE V TONYBEE
 Bankruptcy-

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