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What is an Agency?
• An agency is “a legal relationship whereby one
person acts for another.”
• The person from whom the agent gets authority is
the principal
• The person who acts for another is the agent
Features of an Agency
 This relationship binds third parties
 Competency is only applicable to the principal. The
principal must have the contractual capacity to employ an
agent
 Consideration is not necessary
 Agents do not need contractual capacity as they could be
minors or persons of unsound mind
Agency Test
 Necessary authority
 Every person who acts on someone’s behalf is not an Agent
 Delicious is a lap-dancer at Jiggle Gentleman’s Club. She had to work
a minimum number of shifts per week and was paid per shift and
per private room session. The owner of Jiggle never paid taxes on
the dancers’ services, so the government went after them.
 Are they agents or employees?
 Spearmint Rhino Ventures (UK) Ltd. v Revenue & Customs
Commissioners (2007)
Creation of Agency
Agency can be created by:
1.Contract (express or implied, oral or written)
– Hely Hutchinson v Brayhead (1968)
The Chairman and Chief Executive of a company acted as the de facto
Managing Director although he had never been formally appointed to
that position. He entered into a contract on behalf of the company
which attempted to bind a third party and the company. The third
party tried to enforce the contract, but the company claimed that the
chairman was acting outside the scope of his authority
•Held: Though the director had no authority as chairman, he DID
have implied authority as the CEO, and thus the contract was binding
on the company. As such the director COULD bind his company on
the basis of implied authority.
Implied v Expressed Instructions
The implied authority can exceed the expressed authority ONLY if it
does not contradict an expressed limitation that is communicated to a
third party
Watteau v Fenwick (1893)
Facts: the new owners of a hotel continued to employ the previous
owner as manager. They expressly forbade him to buy certain products
including cigars. However, the manager did buy cigars from a third
party, who then sued the new owners as the manager’s principal for
non-payment
•Held: that the buying of cigars was WITHIN the usual authority for a
manager of such an establishment, and that if that authority was
limited then it MUST be communicated to the third party
Creation of Agency
2.
3.
Ratification (Principal confirms and accepts unauthorised acts
by the Agent)

An agent who was appointed has exceeded his authority or

A person who has no authority to act for the principal has acted
as if he has the authority.
Estoppel (a person allows another to act for him/her to such an
extent that a third party reasonably believes that an agency
relationship exists)

4.
Barrett v Deere (1828)
Necessity (a person acts for another in an emergency situation
without express authority to do so)

Sachs v Miklos (1948)
Requirements for necessity
1.
While one party has possession of another party’s
goods an emergency occurs
2. This forces that party to take action regarding the
goods for the benefit of their owner
3. It is impossible to communicate with the owner first
(constructive notice)
Classification of Agents
 Universal Agent – Unlimited authority
 General Agent – Authorised only to act within the
trade or business of the principal
 Special Agent – Only authorised for a specific
transaction
Examples of Agents
 Power-of-Attorney
 Estate Agents
 Insurance Brokers
 Sports Agents
 Sales Staff?
Powers of Agents
• To enter into a binding contract with a third party
• To buy goods
• To hire
• To sell goods or property
• To agree contractual terms
Duties of Agents
Unless modified by contract, agents generally owe the
following duties to their principals:
• Duty to obey instructions provided by the principal
• Duty to notify and give information
• Duty to act with skill
– Chaudhry v Prabhakar [1988]: Prabhakar was trusted
with choosing a car for Chaudhry that was not in an
accident.
Duties of Agents (2)
 Duty to protect confidential information
 Duty of Personal Performance – cannot delegate duties
to third party
 Duty to account for monies spent
 Duty of loyalty and to avoid conflicts of interest
 Boardman v Phipps [1967]: Lawyer of family trust and a
beneficiary made a good business choice to save
company left in will.
When Principal won’t be liable
 Where the terms excludes agency relationships
 Said v Butt [1920] – Theatre owner refused his entry
 Third party wanted to contract with agent personally
 Greer v Downs [1926]