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Law For New Zealand Business Week 9

AGENCY

(Readings)

Hubbard, Thomas & Varnham Ch 18:

pp 504-518

pp 525-533

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SESSION OBJECTIVES

Meaning of Agency

Types of Agents

Actual v Apparent authority of agents

Agency by Estoppel

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Agent

Foot & Tomsen

Third party (House Buyer)

MEANING OF AGENCY

Principal

(House owner)

A relationship that arises where one party (AGENT) acts on behalf another (PRINCIPAL); and

has the legal capacity to create binding contractual relationships between the principal and a THIRD PARTY.

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MEANING OF AGENCY

The agency enables a principal to enter into contracts with third parties through an appointed agent.

The agent acts on behalf of the principal.

The agent is not personally liable under the contract formed.

However, an agent can be liable in tort to the third party for negligence or under the Fair Trading Act for any misleading representation .

See HTV pp 504-505

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TYPES OF AGENTS

  • Universal agents
  • General agents
  • Special agents

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UNIVERSAL AGENT

  • Have unrestricted authority
  • Appointed by general power of attorney (deed)

Example:

An agent appointed to look after affairs of an elderly or disabled person

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GENERAL AGENT

  • Have the power to do whatever the principal can do (i.e. whatever that is incidental to a particular trade, profession or business).

Involves areas of implied authority

Example:

Auctioneers are authorised to receive payments from buyers on behalf of their principals

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SPECIAL AGENT

  • Appointed for a special purpose or function

Example:

A real estate agent appointed to sell a particular house.

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EXAMPLES OF AGENCY

  • Real estate agent (Real Estate Agents Act 2008)
  • Power of attorney (deed)
  • Travel agent
  • Broker
  • Insurance agent
  • Company directors
  • Partners (Partnership Act 1908)

Agent is not a trust, employee etc . See Miller p 248-249

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DUTIES

Act in principal’s interest

Follow instructions

Use skill and care

Act personally (i.e. should not delegate the authority)

Not to disclose confidential information.

Keep proper accounts

Agent

Principal

Pay fees/commission

Indemnify agent for costs and expenses

Act in principal’s interest - no secret profits, conflict of interest etc)

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Two real estate agents who left the company

Set up competing business

Photocopied records, list of clients, diaries, contact books and buyer response forms

Peninsular Real Estate Ltd v Harris
[1992] 2 NZLR 216

Injunction granted

agents restrained from approaching the ex-employer’s clients with use of information to profit themselves.

Agent : Not to disclose or use confidential information

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CREATION OF AGENCY

Express appointment;

Ratification - arises when the principal adopts the agent’s unauthorised acts;

Necessity;

Estoppel;

Implication of law (implied agency).

Requirements for ratification (From Pearson’s ppt)

The act of the agent cannot be ratified by

the ‘principal’

if the agent contracted in his/her own name as principal;

if the principal did not have the capacity to contract when the agent purported to act on his/her behalf.

Who can be agents of necessity:

Ships’ captains.

Carriers of goods by land.

Other persons.

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AGENCY

Express Agreement:

A principal may expressly appoint an agent orally, in writing or by deed. EG - Appointment of a universal agent (power of attorney) has to be done in the form of a deed.

  • Implied Agreement:
  • An agency relationship may arise from the conduct or situation created (implied) by the parties.
  • EG: Partnership (Partners are each other’s agents in buying goods for the firm’s business)

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  • An agency may also arise without an agreement between the principal and agent via:
  • Estoppel - the principal’s conduct creates the impression to a third party that the agent has been authorised by him.

AGENCY BY ESTOPPEL

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  • Three requirements for an agency by estoppel:

i) Representation by the principal (word or conduct) that the agent has authority to act on his behalf;

ii) Reliance by third party on the representation;

iii) Loss suffered by third party due to his reliance on the representation made.

AGENCY BY ESTOPPEL

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  • i) The agent (A) tells a third party (T) in the presence of the
  • principal (P) that he is the agent.
  • P allows T to believe it.
  • (By his conduct, P has “held out” A to be his authorised agent).

  • ii) T then contracts with A for the delivery of some goods.
  • iii) A defaults on the contract and T suffers loss.
  • T can sue P for loss suffered.

  • P cannot deny that A is his agent

AGENCY BY ESTOPPEL

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AUTHORITY OF AGENT

Agents act on behalf or their principals in contractual negotiations that bind a third party and the principal.

The principal is bound if the agent acts within the authority granted.

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ACTUAL v APPARENT AUTHORITY

Two main categories of authority

Apparent /ostensible authority

Where a principal has created a belief in the mind of a third party that the agent may act on his behalf.

Actual authority

(Express or Implied)

Authorised under the agency agreement.

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ACTUAL AUTHORITY

Express authority

Expressly given by the principal to the agent in writing or orally

Implied authority

Agent has implied authority to do the necessary to carry out the principal’s express instructions;

includes what is ordinarily incidental in a particular trade.

EG: Travel agent has implied authority to book a holiday for the customer (third party). The agent may incur telephone and other charges without needing further authority from the principal to do so.

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ACTUAL AUTHORITY

Actual authority

(Express)

Authorised under the agency agreement

i.e. Patricia works for a dealer in a shop selling antiques

Her agreement states that she is employed to price items and engage with customers in selling the items as priced.

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ACTUAL AUTHORITY

Actual authority

(Implied)

Patricia has also bought antique items from people in the community and repriced them for sale in the shop.

Invoices for these bought items have been paid by the employer.

While Patricia’s agreement with the employer does not expressly

state she can buy items, it would appear she has implied authority to do so based on the conduct of the employer ( as they have not stopped her or refused to pay for the items). The third party need not be aware of what is happening “behind the scenes”.

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APPARENT AUTHORITY

Apparent or ostensible authority: (authority which the agent appears to have because the principal’s conduct has created the impression).

The third party can rely on the appearance of authority in order to bind the principal (doctrine of estoppel discussed in earlier slide).

The apparent authority is based on the doctrine of estoppel. Leigh Miller 8th ed Ch 5 p 257.

F Sayles (Q&A Comm Law, 2nd ed 2014) p 169.

Estoppel agency confers apparent auth on agent.

Simi to imlied agency BUT DIFFERS in that:

Implied auth - principal’s action create in the mind of the agent that she can act

EG - Pat buying from garage sales and they kept paying). P BOUND

Apparent auth = principal creating in the mind of Tp that agent has authority!

P BOUND also

BUT if agent exceed auth - P NOT bound

Tp go after agent through BoWOA

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An agency arises in such a situation by estoppel i.e. the principal is estopped (prevented) from denying there is a binding agreement.

Where the third party is misled by the words or action of the principal allowing him/her to rely on the impression created.

APPARENT AUTHORITY

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  • Assume that while Patricia is working in the shop selling antiques, the employer has allowed a customer to believe that Patricia is the agent acting on her behalf for the sale of the company’s car.
  • The customer buys the car through Patricia.
  • The employer is bound by the contract as Patricia has the apparent authority to carry out the transaction.
  • The employer is estopped from saying otherwise.

AGENCY: ESTOPPEL

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EXCEEDING AUTHORITY

  • Where agent acts beyond the authority given
  • Action is unauthorised
  • Principal is not bound (unless he ratifies)
  • Principal may sue agent for breach of contract
  • Agent may be personally liable to third party
  • (i.e. third party can sue for breach of warranty of authority)

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LIABILITY FOR ACTIONS OF AGENT

  • A principal can be estopped from denying the existence of a relationship

  • A principal can be vicariously liable for actions of an agent.

  • Third party can sue the principal separately or jointly with the agent. Remedies include:

Damages under a breach of contract

Damages under the tort of negligence.

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Principal

Agent

Third party

FEATURES OF AGENCY

Agent has authority

Agent has no authority

(or exceeds authority given)

Third party can sue agent for breach of warranty of authority

Actual authority

(Express/implied)

Apparent authority

Principal created impression to third party of agent’s authority

Agency by estoppel arises

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ENDING AN AGENCY

An agency is terminated:

  • on completion of purpose under the agency;
  • by the death of agent or principal;
  • by contractual incapacity of principal;
  • where principal is bankrupt, in liquidation or receivership;
  • when it is withdrawn.

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