Copy of CHAPTER 4: AGENCY

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Copy of CHAPTER 4: AGENCY by Mind Map: Copy of CHAPTER 4: AGENCY

1. DEFINITION OF AGENCY

1.1. WHAT IS ' AGENCY'?

1.1.1. GHL FRIDMAN

1.1.1.1. the relationship that exists between two persons when one, called the agent, is considered in law to represent the other, called the principal, in such a way as to be able to affect the principal's legal position in respect of strangers to the relationship by the making of contracts or the disposition of property

1.1.2. Part X of the Contracts Act 1950

1.1.2.1. Section 135 - Section 191

1.1.2.2. Section 135 -> AGENT = a person employed to do any act for another or to represent another in dealings with third perons'

1.1.2.3. Section 135 -> PRINCIPAL = The person for whom such an act is done, or who is so represented

1.1.3. Agency relationship

1.1.3.1. Agency is the relationship which subsists between the principal and the agent, who has been authorized to act for him or represent him in dealings with others.

1.1.3.2. 1) Principal-agent = agent derives his authority to act for and on behalf of the principal (internal relationship)

1.1.3.3. 2) Principal-3rd party = when the agents purport to deal on their behalf

1.1.3.4. 3) Agent-3rd party = with whom they deal on their principal's behalf (external relationship)

1.1.4. Principal

1.1.4.1. Any person who is 18 y/0 and above & who is of sound mind

1.1.4.2. between principal & 3rd party, any person may become an agent; but persons of unsound mind and persons who are below 18y/o are NOT liable towards their principals for acts done by them as agents.

2. CREATION OF AGENCY

2.1. TYPES OF AGENCY BY FUNCTION

2.1.1. BROKER

2.1.1.1. An agent who is hired to make contracts between two principals engaged in some aspect of trade, commerce or navigation

2.1.2. FACTOR ('MERCANTILE AGENT')

2.1.2.1. An agent who has more extensive powers to act for a principal than a broker possesses

2.1.3. AUCTIONEER

2.1.3.1. An agent authorized by law to sell the goods of others at public sale and is the agent of both parties - the seller and the buyer

2.1.4. BANKER

2.1.4.1. An agent for its customers arising from the banker-customer relationship which is based on agency.

2.1.5. COMMISSION AGENT

2.1.5.1. An agent appointed by a principal to sell goods or to buy goods on behalf of the principal

2.1.6. DEL CREDERE AGENT

2.1.6.1. An agent who assumes a super-added duty to ensure the principal is paid by the third party

2.1.7. POWERS OF ATTORNEY

2.1.7.1. Legal instruments under which principals ('donors') confer authority on agents ("attorneys" or "donees") to perform certain acts for the principal.

2.2. CREATION OF AGENCY

2.2.1. EXPRESS APPOINTMENT

2.2.1.1. The principal may expressly appoint the agent (actual express authority). Express appointment may be in a written or oral form.

2.2.2. IMPLIED APPOINTMENT

2.2.2.1. Creation of agency by implication when a person by his words or conduct holds out another person as having authority to act for him - Sec140 CA 1950

2.2.3. RATIFICATION

2.2.3.1. Principal may adopt the act of an agent via the process of ratification when the agent acted without the authority of the principal

2.2.3.2. Sec149 CA 1950 - The principal can either reject the contract or accept the contract so made

2.2.4. NECESSITY

2.2.4.1. Requirement for the creation of agency by necessity:

2.2.4.1.1. Sec142 CA 1950 - It is impossible for the agent to get the principal's instruction

2.2.4.1.2. The agent's action is necessary, in the circumstances, in order to prevent loss to the principal with respect to the interest committed to his charge

2.2.4.1.3. The agent of necessity must have acted in good faith

2.2.4.2. Sec142 CA 1950 - In emergency, an agent has authority to do all such acts for the purpose of protecting his principal from loss as would be dine by a person of ordinary prudence, in his own case, under similar circumstances.

2.2.4.3. Elements of agency of necessity

2.2.4.3.1. There must be a situation of necessity

2.2.4.3.2. The agent cannot obtain instructions from the principal

2.2.4.3.3. The agent must act in good faith and in the interests of the principal; and

2.2.4.3.4. The agent's acts must be reasonable and prudent

2.2.5. ESTOPPEL

2.2.5.1. A form agency which is created constructively, that is, by imposition of law

2.2.5.2. Main purpose is to provide protection against the detriment which would flow from a party's change of position if the assumption that led to the change of position were deserted or resiled from by the other party.

2.2.5.3. Elements to constitute estoppel

2.2.5.3.1. A representation made by or on behalf of the principal to the third party concerning the authority of the agent

2.2.5.3.2. Reliance by the third party on the representation made by the principal to the third party

2.2.5.3.3. The third party must rely on the principal's representation and alter his or her legal position on the strength of the representation

3. RIGHTS & OBLIGATIONS BETWEEN THE PRINCIPAL & AGENT

3.1. Sec164 CA 1950 - Agent's duty in conducting principal's business

3.2. Sec165 CA 1950 - Skill and dilignece required from agent

3.3. Sec166 CA 1950 - Agent's duty to render proper accounts to his principal on demand

3.4. Sec167 CA 1950 - Agent's duty to communicate with the principal

3.5. Sec168 CA 1950 - Right of principal when agent deals on his own account, in business of agency without the principal's consent

3.6. Sec169 CA 1950 - Principal's right to benefit gained by agent dealing on his own account in business of agency

3.7. Sec170 CA 1950 - Agent's right of retainer out of sums received on principal's account

3.8. Sec171 CA 1950 - Agent's duty to pay sums received on behalf of principal

3.9. Sec172 CA 1950 - Whe agent's remuneration becomes due

3.10. Sec173 CA 1950 - Agent not entitled to remuneration for business misconducted

3.11. Sec174 CA 1950 - Agent's lien on principal's property

3.12. Sec175 CA 1950 - Agent to be indemnified against consequences of lawful acts

3.13. Sec176 CA 1950 - Agent to be indemnified against consequences of acts done in good faith

3.14. Sec177 CA 1950 - Non-liability of employer of agent employed to do a criminal act

3.15. Sec178 CA 1950 - Compensation to agent for injury caused by principal's neglect

4. DUTIES/OBLIGATIONS OF PRINCIPAL

4.1. To pay commission to the agent - Dolphin v Harrison, San Miguel Pty Ltd (1911) 13 CLR 271

4.1.1. The principal is only obliged to pay the agent if the agent complied with the terms of the agency agreement and when the agent has earned the payment.

4.2. To reimburse agent

4.2.1. Principal has to indemnify the agent for acts done in the exercise of his authority

4.2.2. The agent only has a right to be indemnified for authorized transactions within the express, implied or usual authority of the agent and this right is not available where the loss is due to the agent's own negligence, default or insolvency.

4.2.3. The agent loses his right to be indemnified if he acts beyond his duty or if he has performed his duty negligently

4.3. Not to prevent the agent from earning commission

4.3.1. The principal cannot wilfully prevent the agent from earning his commission

4.3.2. The agent's right to commission is not affected even if the transaction has not been beneficial to the principal or if the transaction has subsequently fallen through no fault of the agent.

5. DUTIES/OBLIGATIONS OF AGENT

5.1. To obey the principal

5.1.1. Sec164 CA 1950 - The agent has the duty to obey the principal's instructions

5.1.2. Failure to obey will result in breach of contract and the agent will be liable for any loss suffered by the principal.

5.1.3. Turpin v Bilton [1843] 5 Man & G 455 - the agent was held liable when he failed to insure a ship when instructed to do so and the ship was lost.

5.2. To act according to custom

5.2.1. In the absence of instructions from the principal, the agent has to act according to the customs which prevail, in doing business of the same kind, at the place where he carries on his work.

5.2.2. Otherwise, he has to make good any loss sustained by the principal.

5.3. To exercise due care and diligence

5.3.1. Sec165 CA 1950 - The agent has to exercise care and diligence in carrying out his work and to use such skill as he possesses - Chaudhry v Prabhakar [1989] 1 WLR 29

5.4. To keep proper account

5.4.1. Sec166 CA 1950 - Agent is under a duty to account for all monies and property handled by him as agent for the principal and to produce such accounts when demanded by the principal

5.4.2. Foley v Hill [1848] 9 ER 1002 - the agent is under a general duty to account to the principal. The agent is under duty to keep accounts of all transactions and to produce them to the principal on demand.

5.5. Other duties owed by the agent

5.5.1. The agent has to pay his principal all sums received on his behalf.

5.5.2. Sec174 CA 1950 - The agent has the right to retain his principal's property in his possession until his remuneration is paid, unless the contract provides to the contrary.

5.5.3. The agent owes a duty to communicate with the principal. an agent must use all reasonable diligence in communicating with and in seeking to obtain instructions from theprincipal.

5.5.4. The agent should not let his own personal interest conflict with his duty. The duty of an agent is to act solely for the benefit of the principal and he cannot allow his own personal interest to conflict with this duty - Sec16 CA 1950

5.5.5. The agent should not make any secret profit out of the performance of his duty. If the principal knows about the secret profit and consents to it, the agent is entitled to keep the profit he makes since the profit is no longer secret - Sec168 CA 1950

5.5.6. IF, however, the profits are secret, then the principal may do the following:-

5.5.6.1. Repudiate the contract if it is advantageous to him

5.5.6.2. Sec169 CA 1950 - Recover the amount of secret profit from the agent

5.5.6.3. Refuse to pay the agent his commission or other remuneration

5.5.6.4. Dismiss the agent for breach of duty

5.5.7. Agent should not disclose confidential information or documents entrusted to him by his principal nor delegate his authority

6. AUTHORITIES OF AN AGENT

6.1. Actual / Apparent authority

6.1.1. Authority expressly given by the principal (orally or in writing), or implied from the express authority given, from the circumstances of the case, custom or usage of trade, and the conduct of parties.

6.2. Ostensible authority

6.2.1. Not expressly given by the principal but which the law regards the agent as possessing, although the principal has not consented to his exercising such authority.

7. TERMINATION OF AN AGENT

7.1. Sec154 CA 1950 - Where an agency is terminated by the principal revoking his authority; or by the agent renouncing the business of the agency; or by the business of the agency being completed; or by either the principal or agent dying or becoming of unsound mind; or by the principal being adjudicated or declared bankrupt or an insolvent

7.2. Sec155 CA 1950 - Termination of agency, where the agent has an interest in the subject matter

7.3. Sec156 CA 1950 - When a principal revokes the agent's authority

7.4. Sec157 CA 1950 - Revocation where authority has been partly exercised

7.5. Sec158 CA 1950 - Compensation for revocation by principal or renunciation by agent

7.6. Sec159 CA 1950 - Notice of revocation or renunciation

7.7. Sec160 CA 1950 - Revocation and renunciation may be expressed or implied

7.8. Sec161 CA 1950 - When termination of agent's authority takes effect as to agent, and as to third persons

7.9. Sec162 CA 1950 - Agent's duty on termination of agency by principal's death or insanity

7.10. Sec163 CA 1950 - Termination of sub-agent's authority