The Law of Agency

• 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.

• 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.

• 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.

• 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.

• 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.

• 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.

- 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.

• 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.

• 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

• duty to reimburse agent for expenses
• duty to pay agreed fees
• duty to indemnify agent for losses and liabilities

• 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.

• 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.

• 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

• 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

• 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
• death