Law of Agency

Disclosed principal
Principal against the third party

 Only apparent or ostensible cannot be used

Third-Party against the principal

 Actual Authority
 Ostensible or apparent authority
 Doctrine of necessity
 Ratification
Undisclosed principal

 Only actual authority can be used

-Under the undisclosed agent, the third party can elect whether he wants to sue the
agent or principal. The principal is only liable for that action where done within the
agent’s scope of authority. Hence, the third party only can take action when the agent
acts within the actual authority of the principal. However, there is an exception where
the agent act within usual authority.
The principal also can sue the third party by acquiring the agent’s right to sue on the
contract if the agent acted within the scope of actual authority.
Where an action brought by the third parties against the principal – Curtis v
Williamson
Must be within actual authority or the exception usual authority
Usual authority
There is an exception in which the third party brought actions against UP although the agent
did not act within the actual authority. This is where when agents act within usual authority
as per Watteau v Fenwick. In this case, the limitation was cannot purchase cigars.
However, it seems that cigarettes are usually supplied to such establishments. Hence, the
third party can still enforce the contract where the agent acts within his scope of usual
authority.
There are two requirements to satisfy usual authority as per Watteau v Fenwick.

There should be an Agency relationship &

the agent should be of such character that
his usual authority can be identified.

Principle will only apply if the Agent acts for

the principal

*Although this principal is being criticized, it is still a good law in England not overruled.
The reason being criticized:
1) This is because the concept of holding out does not sit comfortably within the
doctrine of UP as a holding out can only be argued whereby the third party knows
 there is a disclosed principal and where the principal put his agent into a position
holding to the world at large the agent has the authority to act on his behalf. Here, the
supplier is never aware of the existence of the principal.
2) This will create unfairness towards UP. This is because the third party can enforce an
ultra vires action of the agent against the UP as per Watteau v Fenwick but the UP
cannot enforce an ultra vires action of its agent against the third party as per
Keighley, Maxsted & Co v Durant where UP cannot ratify an ultra vires contract of its
agent.
3) There will be an unlimited liability to the UP because the UP will be sued for actual
authority as well as usual authority.
Where an action brought by an principal against a third party – Siu Yin Kwan
There is an exception if the identity of contracting parties is sensitive as per the case of
Humble v Hunter. Hence, if the agent’s identity is vital to the contract, the court will refuse
to allow the UP to sue the third party.

Dyster v Randall In this case, the UP has a specific

relationship with the third party which want
to sell the property and the UP authorized
the agent to act on his behalf of him and UP
knows that the third party is going to
outright him if he asked on his own.
Said v Butt In this case, it was fatal to the interest of the
third party and the selling of tickets was
very sensitive and it sold only to the person
it wants to sell to.

Express or implied actual authority

Express -The term has been clearly expressed by

the principal
-As per Ireland v Livingstone, if the term is
vague or unclear or capable of giving rise to
more than two possible interpretations and
the agent is bona fide, will disentitle the
principal from disregarding the agent’s
authority to bind him.
However, today, the defence of Bona Fide
interpretation is subjected to the rule of
communication as per Woodhouse Israel
Cocoa v Nigerian Produce Marketing Co
Ltd.
 The defence was only available if
the agent had taken all reasonable
measures to attempt to
communicate with the principal
before acting upon them. Only not
able to reach the principal and then
had to act upon the ambiguous
instruction.
 The interpretation that is adopted
must fall within the possible scope of
meanings of the ambiguous term.
 Implied There exists a position of office and the
previous course of dealings between the
parties and the agent’s actual authority can
be implied based on the principal’s prior
conduct as per Hely Hutchinson.
*In a situation where there is a limitation imposed on the agent’s scope of authority, that
limitation will oust any form of actual authority. The limitation here means the principal has
told his agent what he can do or cannot do. If this situation occurs, the agent needs to revert
back to the principal to get consent.
Apparent or Ostensible authority
This is the authority that exists in the eyes of the third party where the third party believe that
the agent has authority to do so as per Hely Hutchinson v Brayhead. The apparent or
Ostensible authority has the potential of enlarging the scope of the agent(X) authority, giving
the agent (X) an authority which the agent(X) previously did not have.
Satisfy Three Requirement

Representation Express or Implied

 Express
-whether the principal did represent
to them that X is the agent.
-If the fact seems to indicate that the
representation is made by agent
himself, raise the case of AG for
Ceylon v Silva & United Bank of
Kuwait v Hammond, the
representation of authority must be
made by the principal and not the
agent. Then X may seek rely on the
exception under the case of First
Energy v Hungarian International
Bank.
Subjected to three requirements
under this case
i) we need to see the seniority
of office
-British Bank of Middle
East v Sunlife Insurance
Co of Canada, although the
breach manager position is
already a very high-ranking
position, the court held that it
is not enough to confer
authority on a junior
employee to bind its principal
ii) we need to see whether it is
reasonable for a third party
to believe the agent had the
authority associated with the
position of office.
- If the fact suggests that a
third party is suspected,
hence it is better to do an
 inspection.
iii) Unreasonable to expect the
third party to verify the
agent’s authority to sign off
on the loan transaction.

 Implied
Freeman Lockyer to see whether
there is a concept of holding out
-the principal has put it in the
position of office with all of its
authority and that act alone is a
holding up to the world at large that
xx is the principal authorised agent.

Reliance -Whether he knew there is limitation

Alteration of the legal position
X relied on the representation without the
knowledge that there is a limitation. If X has
the knowledge of the agent’s limited
authority, this will unclothe the agent of its
ostensible or apparent authority as per
Heinl v Jyske.
-Whether there is constructive notice as per
Armagas v Mundogas – this may due to
the reason that the third party is a regular
supplier. He may knew that the agent does
not have the authority.
All that is required is for the third party to
have entered into a concluded contract with
the agent on behalf of the principal as per
The Tatra

Doctrine of Necessity
The meaning of necessity is under Bowstead & Reynolds – a person may have the
authority to act on behalf of another person in certain cases where he is faced with the
emergency because the property or interest of the principal is in imminent jeopardy and
hence it is necessary to preserve the property or interest

There must have been an emergency Bowstead & Reynolds

where goods or interests are in danger of
destruction.
It must have been impossible or
impracticable for the agent to communicate
with the principal.
The action taken by the agent must have
been necessary for the benefit of the
principal
The agent acted bona fide in the interest of Prager v Blatspiel, Stamp & Heacock Ltd
This is subject to the rules of
communication under Woodhouse Israel
Cocoa v Nigerian Produce
 The defence was only available if
the agent had taken all reasonable
measures to attempt to
communicate with the principal
before acting upon them.
Prager v Blatspiel, Stamp & Heacock Ltd
 the principal
The action taken by the agent is reasonable F v West Berkshire Health Authority
and prudent
The principal must have not given the agent
express instruction to the contrary
(limitation)

Ratification
There are two types of ratification which are express ratification and implied ratification
The ratification is subject to some requirements

The principal must express intention to

ratify
This includes both express and implied The principal must have full knowledge of
the agent’s unauthorized acts
The principal has a real choice whether to
adopt the agent’s unauthorized act
As per general rule, silence cannot amount
to ratification. However, if the principal is
aware of it and takes no steps to deny
Agent’s unauthorized acts within a
reasonable time as per Suncorp Insurance
& Finance v Milano.
Principal adopts no means of asserting
rights at the earliest possible time as per
Suncorp Insurance & Finance v Milano
Ratification is only possible in a disclosed
agency as per Keighley, Maxsted & Co v
Durant
Ratification within a reasonable time
The principal must adopt the transaction in
whole and not in part
Can only ratify the act which the agent
purported to act on behalf of the principal.
Cannot ratify acts which the agent
purported to act on his own behalf as per
Keighley Maxsted & Co v Durant
Ratification cannot be unfairly prejudicial to
the third party as per Bird v Brown

Express ratification This is where the principal used to take

action against the third party
Implied ratification This is where usually third party take action
against the principal
Hogan v London Irish Rugby
The agent exceed given authority by finding
players who demanded high monthly
salaries. London Irish then terminated the
contract. It was held that London Irish was
liable for breach of contract. This is
because there is implied ratification when
London Irish allowed them to represent the
 club and continued pay their monthly
salaries.

The effect of ratification

Where the principal can ratify after the withdrawal of the third party
Bolton is subjected to some limitations:
1) must be done within a reasonable time,
2) it must not prejudice the third party,
3) The third party must not have an intimation of limitation of the agent authority

Bolton Partners v Lambert – where the agent first accepts the transaction with ultra vires, the
party withdraws from the contract and only thereafter principal seeks to ratify it, the principal
is not treated as being too late as ratification is an authority that is thrown back to the date
the agent first accepted the transaction. This is because the ratification has a retrospective
effect to vest the agent with authority and thereby render the agent’s actions intra vires.
However, this is subject to some limitations. If it unfairly prejudices the third party as per Bird
v Brown and if the third party has an intimation of limitation of the agent authority as per
Warehousing & Forwarding Co of East Africa v Jafferali & Sons, then the principal can only
ratify the transaction provided he does so before the withdrawal of third party.

Duty – the relationship between the Principal and Agents

Termination of the agent

Resolute Maritime. The principal may argue: there is no direct

contractual relation between the principal
and the third party because the agency has
been terminated upon the agent’s
resignation.
Scarf v Jardine -The third parties must have notice upon
termination
-The court held that revocation of the
agent’s actual authority by the principal
does not prevent the principal from being
bound by its agent’s apparent or ostensible
authority if the third parties do not have
notice of termination of the agent.
Curlewis v Birkbeck The notice of termination must give to the
agent and also the third parties
SEB Trygg v Manches This case held that if the specific
representation was made to the third
parties regarding the appointment of that
position, the effect of which survived the
agent’s resignation will last until there is a
notice given by the principal.
Duty of the agent
*See the notes’
Example of answers
The principal may sue its agent for breaching all of the duties that it owes as an agent to the
principal such as the duty of obedience and duties arising from the fiduciary nature of the
agency. Agent will argue that he is no longer the agent and so is no longer bound by those
duties. It is highly that this argument will fail because the fact seems to suggest that the
agency still subsists based on the agent’s apparent authority.
The principal will sue the M, duty not to make a secret profit. Applying the case of IDC v
Cooley, the court held that where there is a secret profit made by the agent by using the
principal property, the principal is allowed to claim. However, it seems that this claim will fail
because the fact suggested that Agent had consumed all of the wine without selling it.
Hence, the principal will be advised to sue the agent personally for damages for breach of its
duties as an agent.