The Law of Agency
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Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd
- agency; grant of authority; actual authority; apparent authority
- Facts: managing director could be appointed but wasn't; Kapoor carried out managerial acts; employed people; F&L claimed payment.
- Issue: Did Kapoor have actual authority to bind the company
- in a contract with Freeman & Lockyer?
- Decision: no actual authority to bind company.
- Reason: No evidence company specifically authorised transaction.
- No evidence giving Kapoor any general power to enter such transactions.
- Issue: Did Kapoor have apparent authority?
- Decision: Board knew he was acting as managing director, company not allowed to deny liability, dealt in good faith.
Australia & New Zealand Bank Ltd v Ateliers de
Constructions Electriques de Charleroi
- agency; grant of authority; implied authority; duties of agent; duty to keep principal's funds separate
- Facts: express powers to sell equipment, ACEC no bank account in Australia; paid cheque to own account, forwarded payment - ACEC no objection. Helios liquidation.
- Issue: Did Helios have authority to pay ACEC cheques into Helio's bank account? If not, bank liable to refund amounts not yet forwarded?
- Decision: no express authority, implied from necessity to make contract commercially workable.
- Reason: practical plan from business POV, total amount of cheques exceeded sum permitted to be exported, Helios retained part of sum to pay for local expenses.
Keighley, Maxted & Co v Durant
- agency; unauthorised acts by agent; ratification; undisclosed principal
- Facts: buy wheat at certain price, agent purchased higher price in own name, principal assented, 3rd party sued principal.
- Issue: Had principal effectively ratified and become liable?
- Decision: Could not validly ratify.
- Reason: undisclosed principal stranger to contract, cannot become party by subsequent ratification
- different if time of agreement, unauthorised agent tells 3rd party acting for principal - contract entered into expectation that disclosed principal is party to contract.
Bertram, Armstrong & Co v Godfray
- agency;duties of agent; duty to follow instructions
- Facts: sell stock when market price reached 85 percent above price, didn't and price dropped, sued to recover consequent loss.
- Decision: instruction specif, agent had no discretion to wait for higher price. -> liable.
Lintrose Nominees Pty Ltd and Others v King
- agency; duties of agent; good faith; conflict of interest
- Facts: without disclosing it was also acting for another principal, advised person to buy the property.
- Issue: Was King entitled to avoid contract?
- Reason: Yes - agent had breached duty to avoid an undisclosed conflict of interest.
- - if agent sells his own property to principal without disclosure, conflict of interest.
- - agent selling property of one principal to another - agent cannot conscientiously serve two principals - temptation for agent to favour one at the expense of the other.
Special circumstances requiring written authority
- 1. agent appoint for period exceeding one year. OR
- 2. act will not be completed within a year.
- - Generally - buy/sell land, interest in land/business.
- Power of attorney - written document appointing, empowering agent to represent principal.
- Common law - contracted in deed binds only signatories.
- Statute - agent appointed by power of attorney in deed can execute contract by deed on behalf of principal.
Implied authority arises when:
- agent already granted express authority
- 1. necessarily/normally incidental to expressly authorised acts.
- 2. agents employed in particular capacity - e.g. managers of business.
- 3. customarily granted to agents employed in particular market/type of business.
Apparent authority established when:
- 1. representation made to 3rd party that agent had authority
- 2. representation made by person with actual authority to manage relevant aspects of company's business.
- 3. 3rd party induced to enter by representation, relied on it.
- 4. company had power to enter into type of transaction in question.
Agent's duties to principal:
- duty to perform tasks in accordance with instructions
- duty to exercise discretion appropriately
- duty to seek clarification of ambiguous instructions
- duty to act personally
- duty to exercise care and skill
- duty to act in accordance with good faith
- duty to keep accounts
- duty to keep money separate
Principal's duties to agent:
- duty to reimburse agent for expenses
- duty to pay agreed fees
- duty to indemnify agent for losses and liabilities
Agent's contractual liabilities to 3rd parties
- agent not normally liable when principal is disclosed
- agent not liable with agent and 3rd party do not know, when contracting, that principal does not exist
- principal not disclosed, 3rd party can choose to enforce contract against agent or principal - if principal, lose right to sue agent.
- **right for undisclosed principal to enforce transaction: 1. agent acted within actual authority 2. agent intended to act on behalf of principal. e.g. insurance.
- agent's warranty of authority
- agent's liability for Negligence or deceit
- agent's liability for misleading conduct - s18 ACL
- agent's authority to perform principal's obligations - does not have authority to represent principal in performance and discharge of contract.
Acquisitions/Dispositions of property by agent
- without authority - principal may be able to recover.
- BUT not: apparent authority, 3rd party relied on and given value in exchange.
Mercantile agent: generally authorised to buy/sell goods on behalf of principal/raise loans using principal's goods as collateral.
- 3rd party to obtain ownership:
- 1. agent in open market disposal
- 2. acquired in good faith (open and honestly)
- 3. without notice of agent's lack of authority.
Principal's liability for harm caused by agent
- liability of agent in tort law - agent personally liable
- liability of principal for acts of agent - 1. degree of control over agent's work 2. agent caused harm doing something authorised to do or incidental.
- liability of principal and agent for misleading conduct - s18 ACL
Agency of necessity, situations of emergency - requirements:
- 1. principal and agent have some recognised relationship
- 2. principal will suffer harm unless action taken
- 3. principal is absent, cannot act for themselves, cannot contact
- 4. agent acts for benefit, in best interest of principal
- agent entitled to be reimbursed
- principal bound to 3rd parties
Termination of agency
- completion of mandate
- expiry of fixed term - can be implied
- revocation of authority (principal)
- renunciation of authority (by agent)
- irrevocable agency power - grant of authority to agent made for purpose of securing some itnerest of agent, e.g. debt owed
- mental incapacity - "enduring power of attorney" - remains valid
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