Extent and Nature of Agents Authority - Essay Example

?Q. The extent and nature of Agent’s ity is crucial. Discuss. Introduction The agency agreement is contractual in nature in so much as correct representation at the hands of the agent to the third party will bind the principle with the third party. Thus, the agreement is tripartite in nature, involving the principle, agent and the third party and since the agent acting within his authority will necessarily bind the principle with the third party, it is important to determine how the agency was created and the extent of the agent’s authority. Extent of Authority In order to determine the extent of the Agent’s authority, first resort is made to the stipulations made by the principle which constitute to Actual authority, either expressly, or impliedly. If the agent acts outside the express or implied authority granted to him by the principle, the principle will not be liable for it (Jacobs v Harris (1902) 1 Ch 816). In such a case, the agent himself will be held to be liable to the third party for a breach of an implied representation of authority. Moreover, a breach of such a kind would exempt the agent from claiming any reimbursements of expenses incurred in the line of duty or his own service associated charges. Where an agent purports to act in a way not expressly stated by the principle, his duties are considered in light of any implied authority awarded by the principle. Hence, an agent who engages in a contract for the supply of goods for the principle will be impliedly allowed to sign documents of payment and title for the principle (Rosenbaum v Belson (1900) 2 Ch 267). However, the concept of implied actual authority is applied cautiously by the courts in interpreting agreements and the act done by the agent must truly be incidental to his tasks. Thus, factors such as the course of dealings which are widely accepted in the line of business between the agent and principle (Nickalls v Merry (1875) LR 7 HL 802)), his occupation and profession, and the test of usual authority all apply to the determination of the agent’s scope of authority. However, there are cases where the extent of the authority of the agent is overridden by the third party’s reliance on his representation. The presence of this ostensible authority is what is essentially made available to the third party, as in practice the third party would rarely ever get to see the terms of the actual contract between agent and principle. Thus, given that he relies on the apparent authority of the agent (which includes knowledge of the agency, knowledge of the presence of a principle, and reliance on the representation of the principle (see The Tatra (1990)), the agency will operate by virtue of the Equity principle of estoppel, enabling the principle to be bound to the third party even if the agent acts outside the authority awarded to him by contract so long as the agent acted within the authority represented by the principle to the third party. This has the ability to negate the consent of the principle as the agent may very well be acting outside the authority granted to him by express or implied actual authority, and exists solely in favor of the third party (Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd (1964)) who has altered his position in reliance on the representation of the agent. Equity in this case creates an agency by estoppel binding the principle to the contract with the third party. Thus, it follows that to establish apparent authority all which is required is a representation by the principle of appointing the agent as his representative agent and the third party to rely on that representation to his detriment. No further allusion is required by the principle, so much so that the representation may even be made by silence (Spiro v Lintern (1973)), along with the third party knowing or possessing some knowledge of his capacity as agent of the principle. This is one case where the agency is created without strict adherence to the consideration of the actual extent of the authority. In such cases, the courts resort to the usual authority that an agent in similar circumstances would be deemed to possess. A notorious ruling in a similar regard was awarded in Watteau v Fenwick (1893), where a manager, acting outside his authority, purporting to act as principle, bought cigars on behalf of the principle, and the courts enforced the contract against the original employer. It was held that it was usual for an agent in H’s case to enter into such a contract and therefore allows him to bind the principle even though neither the third party had any knowledge of H’s true capacity nor did H made a representation himself. In matters of origin of authority, the presence of a disclosed principle would allow several legal implications between principle and third party, allowing first the agent to limit or eliminate liability altogether, and to allow the principle to enforce the contract with the third party in order to ensue performance or payment. However, even this consistency is disarrayed by the presence of the undisclosed principle. Undisclosed principle The case of the undisclosed principle exists as a niche in agency, where in, the agent purports to be acting for himself and the third party is completely unaware of an agency and takes the agent himself as the principle. In such a contract, the principle intervenes to enforce the terms himself (Siu Yin Kwan v Eastern Insurance Co Ltd (1994)). In this scenario, the principle cannot ratify the acts of the agent, since the third party is unaware of his presence at the time of the contract, and so long as the agent was acting under the realms of actual authority, with an intention to represent his principle, the principle may intervene and sue on the contract. However, in such a case, the agent is also personally liable on the contract. Of course, the third party is allowed to claim any defenses which were made available to him in the initial contract with the agent, but it also gives rise to instances where a principle intervenes to enforce specific performance with no such prior knowledge made available to him (Dyster v Randall & Sons (1926)). This is evidently unfair to the third party who may be selling to someone irrelevant only to find out that the buyer is the agent of someone he did not want to sell to. Conclusion It is thus difficult to ascertain most of the duties arising from the representations made, or lack thereof, in the course of an agency agreement. The origin of the agency agreement and the extent of the authority may be served irrelevant in some select agreements, but it merely certifies the doctrine of caveat emptor, as applying to the third party, who may incorporate exclusion clauses to avoid any undisclosed principles from intervening into the contract or exercise general caution in treading through commercial agreements in order to determine whether the agent is in fact an agent with the relevant authority to act. It would thus be very prudent of the third party to know the origin and extent of an agent’s authority. References Jacobs v Harris (1902) 1 Ch 816. Rosenbaum v Belson (1900) 2 Ch 267. Nickalls v Merry (1875) LR 7 HL 802. The Tatra (1990) 2 Lloyd’s Rep 51. Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd (1964) 2 QB 480. Spiro v Lintern (1973) 1 WLR 1002. Watteau v Fenwick (1893) 1 QB 346. Siu Yin Kwan v Eastern Insurance Co Ltd (1994) 2 AC 199. Dyster v Randall & Sons (1926) Ch 932. Read More