Classified Questions and answers on Agency law By M Benee

LESSON 9 Agency
Lessons J02 D02 J03 D03 J04 D04 J0 D05 J06 D0 J0 pil De
5 7 ot c
07
Agency 4

D03q4 Explain how an agency relationship can be established in the following

ways:
(a) by agreement;
(b) by ratification;
(c) by estoppel;
(d) by necessity.
Ans This question requires candidates to explain the various ways in which the relationship of
principal and agent can be created. No
one can act as an agent without the consent of the principal, although consent need not be
expressly stated (WhiteLucas
(1887)). The principal/agent relationship can be created in a number of ways.
(a) Express appointment
This is the most common manner in which a principal/agent relationship comes into
existence. In this situation, the agent is
specifically appointed by the principal to carry out a particular task or to undertake
some general function. In most situations,
the appointment of the agent will itself involve the establishment of a contractual
relationship between the principal and the
agent but need not necessarily depend upon a contract between the parties. For the
most part, there are no formal
requirements for the appointment of an agent, although, where the agent is to be given
the power to execute deeds in the
principal’s name, they must themselves be appointed by way of a deed (that is, they
are given power of attorney).
(b) Ratification
An agency is created by ratification when a person who has no actual authority
purports to contract with a third party on
behalf of a principal and the principal subsequently accepts the contract. Where the
principal elects to ratify the contract, it
gives retrospective validity to the action of the purported agent. In order for
ratification to be effective the principal must have
been in existence at the time when the agent entered into the contract (Kelner v Baxter
(1866)) and the principal must have
had legal capacity to enter into the contract when it was made. An undisclosed
principal cannot ratify a contract, so if the
agent appears to be acting their own account, then the principal cannot later adopt the
contact (see Keighley, Maxsted and
Co v Durant (1901)). The principal must adopt the whole of the contract and cannot
pick and choose which parts of the
contract to adopt. Finally ratification must take place within a reasonable time
(c) Necessity
Agency by necessity occurs under circumstances where, although there is no
agreement between the parties, an emergency
requires that an agent take particular action in order to protect the interests of the

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Classified Questions and answers on Agency law By M Benee

principal. The usual situation which gives

rise to agency by necessity occurs where the agent is in possession of the principal’s
property and, due to some unforeseen
emergency, the agent has to take action to safeguard that property. In order for agency
by necessity to arise, there needs to
be a genuine emergency (Great Northern Railway Co v Swaffield (1874)) and there
must also be no practical way of obtaining
further instructions from the principal (Springer v Great Western Railway Co
(1921). Also the person seeking to establish
the agency by necessity must have acted bona fide in the interests of the principal
(Sachs v Miklos (1948)).
(d) Estoppel
This form of agency is also known as ‘agency by holding out’ and arises where the
principal has led other parties to believe
that a person has the authority to represent him. In such circumstances, even though
no principal/agency relationship actually
exists in fact, the principal is prevented (estopped) from denying the existence of the
agency relationship and is bound by the
action of his or her purported agent as regards any third party who acted in the belief
of its existence. To rely on agency by
estoppel, there must have been a representation by the principal as to the authority of
the agent (Freeman and Lockyer v
Buckhurst Park Properties Ltd (1964)) and the party seeking to rely on it must have
relied on the representation.

M Benee 2 Tel: 417 5906/752 813