Law of Agency – law notes for legal and accounting students from Holland Condon Solicitors Kilkenny

Dec 8, 2014

(this Contract Law too)

* Definition = an agent is a person (“agent”) who is “employed” by another (“principal”)  to bring that other person into contractual relations with a third party e.g. estate agent, travel agent. P (principal) enters a contract engaging A (agent) to negotiate contracts with T (third party); which creates a legal contract between P and T.

Law on agency governs relationship between agent and principal and the third party.

The authority given by principal to agent is the most important feature in an agency relationship. The extent of the authority will be a term in the contract between agent and principal. What the agent can and cannot do on behalf of the principal.

Remember, Agent has contract with principal.  Principal has contract with third party.

 

*Classification of an Agent

  • General Agent = can bind a principal in normal course of business e.g. bar manager buying drink, crisps;
  • Special Agent = for specific purpose or time e.g. auctioneer;
  • Universal Agent = bind principal in all/any contracts e.g. an agent appointed by Power of Attorney.

Solicitor as general agent e.g. doing clients legal work in all areas;

Solicitor as special agent e.g. specific area/job – debt collection .

 

*Creation of an Agency Relationship between principal + agent =

  • By Agreement i.e. both parties contract in normal contractual way.

The authority given by principal to agent is the most important feature in an agency relationship. The extent of the authority will be a term in the contract between agent and principal.  What the agent can and cannot do on behalf of the principal.

Express Authority v Implied Authority;   

Watteau v Fenwick; ALSO Hely Hutchinson

 

  • By Ractification – list 6 rules – ratification occurs after contract is entered into by the Agent with the third party;

 

  • By Estoppel – principal allows third party to believe agent has power/authority to act on its behalf. Agent has apparent (also called “ostensible”) authority. The principal is estopped (prevented) from denying that agent had not authority. A court will uphold a contract where there is apparent authority if  4 matters are present.

 

  • By Necessity – agency automatically created without consent of the parties where emergency arises provided 4 elements are there.

 

*Duties of an Agent

  • Perform the tasks required of him;
  • Act with due care and skill and if agent is an expert, then, apply appropriate standard that a reasonable person with that skill would do;
  • Don’t exceed authority;
  • Avoid conflicts of interests and make full disclosure of all material info;
  • Don’t make secret profit;
  • Don’t delegate;
  • Duty to account;
  • Duty of confidentiality;
  • Duty not to disclose/misuse info;

 

*Rights of an Agent

  • Be paid;
  • Be reimbursed expenses;
  • Indemnified by principal in respect of the contract and all losses/liabilities provided the agent acted within his authority;

 

 

*Liability of Agent to Third Parties

Agent is not personally liable for a contract, (the principal is), provided he acted within his authority.

NOTE: – may be liable to Third Party if Third Party was unaware of agency but agent would be entitled to be indemnified by principal.

If Agent acts > authority = personally liable.

 

*Termination of an Agency

 

By Action of Parties e.g. 

 

 

By Operation of Law e.g.

 

 

 

  • Performance;
  • Completion;
  • Mutual Agreement;
  • Revocation by principal;
  • Renunciation by agent;
  • On giving reasonable notice

 

 

  • Death, incapacity, bankruptcy;
  • Expiry of agency agreement;
  • Frustration;
  • Change in Law (illegality).

 

– a firm of lawyers based in Kilkenny, Ireland.

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