CHAPTER 7: AGENCY

A. Agency relationships
1. Formation
- Agency – the authority of one person (an agent)(người đại diện) to make legally
binding commitments with third parties for someone else (the principal)( người ủy
quyền).
- The concept of agency underpins(củng cố) much of daily commercial life, for
example:
 Retail salespersons (người bán lẻ)
 Company directors
 Members of a partnership ( công ty hợp danh)
2. Examples :

Agent Principal Third party

- Shop assistant - Proprietor of shop - Customer

- Ticket seller - Transport provider - Passenger
- Waiter - Restaurant proprietor - Diner
- Company directors - Company - Debtors and creditors of company
- Partner - All partners - Debtors and creditors of partnership
B. Authority of an agent
1. Making contracts
An agent can make contracts for the principal within the scope (phạm vi) of
whatever authority the principal has given the agent.
2. Liability of Agent
- An agent usually has no liability for a contract entered into as an agent, nor any right
to enforce it.
- Exceptions to this: when an agent is intended to have liability; where it is usual
business practice to have liability; when the agent is actually acting on their own
behalf; where agent and principal have joint liability.
- A third party to a contract entered into with an agent acting outside their ostensible
authority can sue for breach (vi phạm) of warranty of authority.
3. Liabilities ( nợ phải trả) of a Principal
2.3.1 Actual Authority
The agent's authority may be actual express authority (within the appointment by the
principal) or the agent may be cloaked with the appearance of authority because of a
position in life, even though there is no real authority. Authority arising from the
individual's position is called actual implied authority.
A principal may retroactively authorise an agent by ratification.
Key point

The principal is liable for all commitments incurred by the agent within the scope of the agent's actual
authority.
Actual express authority may be granted:
 under an explicit agency agreement; or
 under a partnership agreement; or
 under an employment contract; or
 by operation of law.
An agent's authority to sign deeds for the principal must be given by deed. This document
is known as a power of attorney.
Key point
An agent has implied authority to do things which are necessary, conducive or incidental
to performing the expressly authorised acts.
The principal is bound by acts within the agent's implied authority, even if a particular
transaction contravenes the agreement with the principal. An exception to this rule is if
the other party was on notice that the agent's authority was restricted.
Key point
An agent has actual implied authority to do whatever is usual within a particular position.
Case law confirms that the Chief Executive Officer has implied authority (see Watteau v.
Fenwick (1893) below).
For example:
 a partner in a partnership has implied authority to sell partnership goods and to
receive payment of debts due to the firm; and
 a company secretary has implied authority to make contracts relating to the routine
administration of the company (see Chapter 16).
Key point
If an agent acts without authority (or exceeds it) but purportedly as an agent of the
principal, the principal can subsequently approve (ratify) the contract and assume liability
(as long as the principal would have been capable of authorising it in the first place).
2.3.3 Apparent Authority
Apparent authority is also referred to as ostensible authority or authority by "holding
out". It arises from the equitable principle that a person cannot deny something that has
previously been held to be true.
A principal who allows someone to appear to be an agent will be liable to those who
relied on the "holding-out" of the purported agent. An estoppel will be raised to prevent
the principal from denying the agency.
So, for example, the acts of a person who has not been properly appointed as a managing
director but is described as such by a company will bind the company (as long as the acts
are within the usual tasks of a properly appointed managing director).
2.3.4 Agency by Necessity
Agency arises out of necessity if a person, in possession of another's property and unable
to take the owner's instructions, is obliged to do something with the asset in order
to protect the owner's interests. The owner will be liable as principal for the bona fide
actions of the "agent of necessity".
C. Duties of the agent and the principal
1. Duties of the agent to the principal
- The duties of agents derive from case law
- An agent must exercise due care and skill when performing duties.
- An agent must act in good faith for the benefit of the principal. An agent must avoid
conflicts of interests with those of the principal
- An agent must render (báo cáo) a true account to the principal when required to do so
An agent can, however, appoint a sub-agent ( đại diện phụ) where the task:
 is one which any reasonably competent person can do equally well; or
 although involving a discretion is a merely ministerial act; or
 is one in which no personal confidence is reposed in the agent; or
 is such that the exigencies of business(tình huống cấp bách của DN) require it
2. Duties of the principal to the agent
The duties owed by a principal to the agent are as follows:
 To pay the agent the commission or other remuneration (thù lao) as agreed.
 To reimburse the agent for any expenses, losses or liabilities incurred by the agent in
the proper performance of the duties.
In certain situations, an agent has a right:
 of lien ( quyền cầm giữ) (i.e. a proprietary right to retain the principal's goods until
paid) (quyền sở hữu để giữ lại hàng hóa của bên ủy thác cho đến khi thanh toán)
or
 of stoppage of goods in transit to the principal. This allows the delivery of goods to
be interrupted pending payment.