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CHAPTER 2

LAW OF AGENCY

One of the most important of the relations between commercial men is agency. An agent has been defined in COMYN'S DIGEST as a person "who is employed to do anything in the place of another." This is, perhaps, rather too loose as a definition, for the term " employment " is much wider in its application than the term agency." Agency may be regarded more as employment for the purpose of bringing the principal into legal relations with third parties. The person who employs the agent" is called the "principal," and all persons other than the principal and the agent are "third parties."

Except in circumstances where personal services are necessary or are contracted for, any person who has legal capacity may employ an agent to act for him, the maxim being qui facit per alium facit per se (he who acts through another acts himself); but the person acting as agent need not necessarily himself have legal capacity to contract; so that, for instance, even an infant may be appointed to act as agent.

Where one person is authorized to sign or act for another, it is called " procuration." The agent then customarily signs "per pro" or "p.p."

Classification of Agents.

There are various classifications of agents. In one the classes are divided according to the degree of authority vested in the agent, viz.,

(1) General Agents, who have authority to do anything within certain limits, e.g., to manage a particular business, and within those limits to bind the principal by their acts. Third parties may assume that such agents have power to do all that it is usual for a general agent to do; and, even where the principal has limited the agent's authority, the third party may safely do business with him unless he is aware of the limitation.

(2) Special Agents, who have authority to do some specific act only, e.g., to buy a particular thing, and this authority does not extend beyond that. If a special agent does anything outside his authority, the principal is not bound by it; and a third party must not assume that the agent has powers, but should make due enquiry as to what is his authority.

(3) Universal Agents, who have unrestricted authority and who are very rarely met with in commercial life. They may do anything on behalf of the principal and the principal is bound by their acts.

Another classification is

(1) Agents who are not, as a rule, personally liable on their contracts to their principal.

(2) Agents who are personally liable, i.e., del credere agents (one who guarantees the credit), who are personally liable if the third party does not carry out the terms of the contract. They are not liable, however, in the case of disputes, which must be settled in the usual manner; but they are liable for an ascertained sum, in other words, they guarantee the solvency of the buyer. Such an arrangement does not fall under Section 4 of the Statute of Frauds, and it need not necessarily, therefore, be in writing.

Yet another classification is by kind, e.g.,

(1) Factors.

(2) Brokers.

(3) Insurance Brokers.

(4) Commission Agents.
(5) Shipbrokers.

(6) Stockbrokers.

(7) Auctioneers.

(8) Bankers.

(9) Partners.

(10) Servants. (11) Wife.

(12) Ships' Masters and Managing Owners. (13) Counsel.

(14) Patent Agents.

CREATION OF AGENCY

No special form is necessary, as a rule, for the appointment of an agent, providing the ordinary rules of contract are observed; but it is, of course, advisable where possible to reduce the terms

to writing. In commercial life it would not be possible, however, to do this in all cases; and, in fact, in large numbers of cases the appointment is verbal and no express agreement is made. There are four ways, therefore, in which an agency may be created

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There are certain purposes, however, for which an agent must be appointed in a special form

(1) Power of Attorney.-If the agent is to contract under seal, he must be appointed by deed, called a "power of attorney." But, if the agent were not so appointed and he, in the presence of the principal, and with his consent executed a deed on his behalf, the principal would be estopped from denying in such case that the appointment was not under seal.

(2) Agent for a Corporation.-If he is to act as agent for a corporation, and his authority is to include the power of making contracts which if made by the corporation would need to be under seal, then the agent must be appointed by deed.

(3) Signing the Prospectus of a Company or a Director's Consent to act as such.-An agent appointed for these purposes must be authorized in writing.

(4) Agency not to be performed within a Year.—If the agency is one not capable of being or not intended to be performed within a year, writing is necessary as evidence (Statute of Frauds); but contracts which are unenforceable unless in writing can, nevertheless, be so made by an agent authorized verbally.

(5) Grant or surrender of certain Leases.-If an agent is appointed to grant or surrender leases of over three years he must be authorized in writing, and, as a deed is now necessary for this, it follows that a deed will be necessary for the creation of such an agency.

Apart from the above express methods of appointing an agent, there may be an implied appointment arising from the relation or conduct of the parties; thus a wife has implied authority from her husband to pledge his credit for necessaries. Again, if a servant has made purchases on his employer's behalf and the goods have been paid for by the employer, there will be an implied agency for future transactions with the same trades

people; for, if a person has so acted as to lead others to suppose that a certain person is his agent, he will be estopped from denying the agency-this is known as "agency by estoppel." A somewhat allied form of agency is established of necessity, e.g., the general authority of a ship's master to do anything and everything necessary to bring the voyage to a successful issue.

Ratification.—If an agent exceeds his authority in such a manner that the principal is not necessarily bound by the contract made he may, nevertheless, ratify, or adopt, the unauthorized act; and the ratification is retrospective, that is, it dates back to the original transaction, and the position is the same as if the agent had been authorized beforehand; the rule being Omnis ratihabitio retrotrahitur et mandato priori æquiparatur: (every ratification relates back and is equivalent to a previous command,) even if, as in the case of Bolton Partners v. Lambert (1889), in the meantime the other party has repudiated the transaction. This only applies, however, where the agent has purported to act as agent and not as principal; not if he has had the intention of acting as agent, as in Keighley Maxted and Co. v. Durant (1901), but has not disclosed his intention of doing so. The transaction cannot be ratified by a third person so as to bind the other party without his consent. If a person without authority from a principal purports to act as agent, the acts of the agent may be ratified and the same result will ensue as in the case of an agent's exceeding his authority. The principal must adopt the whole transaction: he cannot ratify a part of it alone. An important point to bear in mind is that the principal must have been in existence at the time the contract was made, otherwise he cannot ratify it; so that, for instance, a company cannot ratify a contract made before it came into existence by a person professing to act as its agent, and that person is personally bound by the contract unless he expressly excludes his own liability. Similarly, an agent is personally liable where he has acted in excess of his authority, or, without authority, has professed to act as agent, and his acts are not ratified; he can be sued for damages for breach of implied warranty of authority. Where, as in the case of Re Tiedemann and Ledermann Frères (1899), an agent contracts in the name of the principal but fraudulently intends to take the benefit thereof for himself, the principal may ratify the contract and enforce it against the third party; and, on the other hand, if an agent is guilty of fraud, the third party can sue either the principal or the agent.

RIGHTS AND DUTIES OF PRINCIPAL AND AGENT

Principal as against Agent.

The duties of agent to principal are—

(1) He must carry out with ordinary skill and diligence
the work undertaken, in accordance with the terms
agreed.

(2) He must acquaint the principal with all matters in con-
nection with the agency as and when they come to
his notice.

(3) He must keep proper accounts to render to the principal
on demand.

(4) He must not use his position as agent for his own personal
benefit, nor make use, on behalf of any other person,
of any information which comes to his knowledge in
his capacity of agent.

(5) He must hand to his principal all profits made, whether
directly or indirectly, in the course of the agency.
(6) He must, as a rule, do the work himself, and not entrust
it to another person, except where-

(a) The principal assents, expressly or impliedly.

(b) It is sanctioned by the usage of the trade.

(c) It is necessary for the proper carrying out of the work.

(d) It is rendered necessary by sudden emergency. Agent expected to give his best service.-An agent is bound by the terms of his agreement with his principal, whether it be verbal or in writing, and he must carry out the work with ordinary skill and diligence; but the amount of skill and diligence required will depend on whether the agent is to be paid or whether it is a gratuitous agency. He must not show less diligence than he would have exercised in his own affairs; and, if he has undertaken to show special skill, he must exercise that skill to the agreed standard. Any loss incurred by the principal through the lack of skill or the neglect of the agent must be made good by the agent; and, if he gives credit to a third party without the consent of the principal, the agent must himself make good any loss incurred through failure of the third party to pay. The agent also is liable to his principal if he has represented himself as possessing qualifications or skill which he does not possess.

There is, as mentioned above, a difference in the degree of skill demanded from a gratuitous agent and a paid agent. The former is, obviously, not liable for non-feasance, as he is not bound to enter on the agency; but he is liable for mis-feasance

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