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Commercial Law, Lecture Notes - Law - Prof Hellen Chirry 3

Commercial Law, Lecture Notes - Law - Prof Hellen Chirry 3

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Published by: Anshu Saurabh on Sep 13, 2011
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page 0 University of London External Programme
In this chapter the rights and liabilities o the principal, agent and third party on a contractmade by the agent are discussed in two situations:where the existence o the agency is disclosed to the third party (disclosed principal/agent: 3.1)where the existence o the agency is not disclosed to the third party (undisclosed principal/agent: 3.2).The nal section discusses the relationship between the principal and agent.
Learning outcomes
By the end o this chapter and the relevant readings you should be able to:explain the rights and obligations owed by the principal and by the agent to the thirdpartyexplain the rights and obligations owed by the third party to the principal and to theagentexplain the rights and obligations arising between the principal and the agent.
Commercial law
Agency page 1
Essential reading
Sealy and Hooley, Chapter 5: ‘Relations with third parties’, pp.147–57.
The disclosed principal (or disclosed agency) is where the existence o the principalis disclosed. The disclosed principal may be named (that is, identied) or unnamed(unidentied).As has been seen, the general rule is:
United Kingdom Mutual Steamship Association
Lord Scarman preerred a rather dierent emphasis. His view was that everyone is liableor their contracts, even where they act or another, unless they can show that this liabilityis removed by the law o agency (
Yeung Kai Yung 
Hong Kong and Shanghai Banking Corpn
[1981] AC 787 at 795; Hooley and Sealy, p.158).The principal may sue or be sued on the contract with the third party i the agent disclosesthe agency and:acts within actual authorityacts without actual authority and the principal raties.It should be pointed out that the principal may be sued on the contract i the agent actswithin apparent authority, but cannot sue the third party without ratication.In response to a claim by the disclosed principal, the third party can use:any deence or claim arising rom the contractany deence or claim available against the principal.A deence or claim available against the agent and unconnected with the contract cannotbe used against the principal.
In general, payment by the third party to the agent does not constitute payment to theprincipal. A third party can only discharge a debt owed to the principal by paying the agentin a limited number o circumstances (
Irvine & Co
Watson & Sons
[1880] 5 QBD 414. SeeSealy and Hooley, pp.150–53):i an express or implied term o the contract species this method o paymenti the principal is estopped rom denying the right o the third party to pay the agentbecause such payment was induced by a representation by the principali the agent has actual authority rom the principal to receive paymenti this method o payment was ratied by the principal: or example, the third party will bedischarged i payment is made to the agent, who had no authority to receive payment, andthe agent passes that payment to the principal, who accepts it.These situations may be reversed. For example, in
Marquis of Hertford
[1802] 3 East147, the third party gave the agent a receipt or payment and the principal, thereore, paidthe agent. In act, the agent had made no payment, but it was held that the principal wasnot liable to the third party.

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