COMMERCIAL LAW (PART 2)

Agency of necessity
The common law recognises that an emergency situation may occur which allows one
person to bind another without the authority of the other. In such a case, an
agency of necessity arises, not through agreement, but from the relationship of the
parties in the particular circumstances. However, because of the potential
consequences of an agent binding a principal in the absence of agreement, the
following four criteria must be met:
1. A person must have been entrusted with another’s property.
2. There must be some commercial necessity for the action or expense.
3. It must be impossible/extraordinarily difficult to contact the owner.
4. The agent must act bona fide in the interest of the principal.
Great Northern Railway Co v Swaffield (1874) LR 9 Exch 132.
The plaintiff company agreed to deliver the defendant’s horse to a particular
railway station. However, on arrival, there was no one to take possession of the
horse on his behalf. Accordingly, the plaintiff’s stationmaster sent the horse to a
nearby stable. Subsequently, the plaintiff paid the stableman his charges. It was
held that the plaintiff (acting as an agent) had satisfied the four criteria and
was therefore entitled to recover from the defendant (principal) its expenses.

Buama v. Oppong [1992] 2 GLR 213,

the defendant was the owner/driver of a
commercial vehicle. The plaintiff boarded the defendant's vehicle as a fare-paying
passenger at a lorry station in Accra run by the Ghana Private Road Transport Union
(G.P.R.T.U.) on a trip to Ho. After he had been obliged by the bookman who loaded
the vehicle to pay freight for a travelling bag he was carrying the bookman took
the bag from him and put it in the boot of the vehicle. However when the vehicle
reached Ho, the plaintiff's bag was not on it. After he had failed to recover the
cost of the bag and the items in it from the defendant, the plaintiff brought an
action against him for (a) the value of the bag and the items in it; (b)
consequential loss; and (c) damages. In his defence the defendant contended that
the bag was misplaced through the negligence of the plaintiff
and therefore pleaded volenti non fit injuria. Furthermore, he contended that the
bookman was not his agent and therefore he was not vicariously liable for the loss.
The court however found on the evidence that (i) the bookman gave the money he had
received from the plaintiff as freight to the defendant; and (ii) even though the
bookmen were employees of the G.P.R.T.U. they were the ones who dealt directly with
the passengers by collecting the fares and freight from them, loading them onto the
vehicles and then paying the moneys collected to the drivers.
The High Court held that the defendant was vicariously liable for the loss of the
plaintiff's bag by the bookman because if a person represented or permitted it to
be represented that another had authority to act on his behalf, he would be bound
in the same way as he would be if that other had in fact authority to act.
In the instant case, since the bookman charged for the luggage in the presence of
the defendant and gave the fee charged to him, it was clear that the defendant had
given ostensible or apparent authority
to the bookman to act on his behalf. Accordingly, there was an agent and principal
relationship between the bookman and the driver.
Benin J at pages 222 to 223 said that:
As far as the third party is concerned, he knows not the "bookman." He goes to a
lorry park to board a vehicle to his destination. He knows the vehicle he is going
to board has an owner and/or a driver who is going to take him to his destination.
He knows the fare he is
paying is meant for the owner. If there is a ticket booth at the park and he buys
his ticket from there he knows it is the vehicle owner or his agent from whom he
has purchased the ticket. If he pays money for any luggage he may have, he knows it
is the vehicle owner or his agent who has taken the money from him. He does not go
to the station with anybody as his agent nor does he intend to employ one there...
the third party knows the "bookmen" to be the agents of the vehicle owners and/or
drivers. And moreover the attitude of the vehicle owners and/or drivers in actively
co-operating with and allowing the "bookmen" to load their vehicles with goods and
passengers lends credibility to the fact that there is an agent-principal
relationship between them.
From the facts I related above it is clear the owners and/or drivers have given
ostensible or apparent authority to the "bookmen" to act on their behalf. Their
conduct and the circumstances of the case clearly justify this since the "bookmen"
charged for the luggage in the presence of the defendant and gave the fee charged
to the defendant. At these lorry parks managed and controlled by the G.P.R.T.U.
the usual practice which prevails there,
and which I take judicial notice of, is that it is the "bookman" who takes the
luggage and prefers what fee the third party should pay, and he takes the fee and
finds a convenient place on the vehicle to place the luggage for which he has
collected the fee, which fee he accounts for to the vehicle owner and/or driver
directly for a commission. So that any vehicle owner and/or driver who takes his
vehicle to any such station knows that that is the practice or usage there and is
bound by it. Thus effectively the "bookman" in loading the
vehicle with goods and/or passengers is the agent of the vehicle owner or driver
and the latter is responsible to the third party.

Keighley, Maxted v Durant (1901) HL

The defendant (P) authorised his agent to purchase wheat at a certain price in the
joint name of the defendant and his agent. The agent purchased wheat from Durant at
a higher price than authorised and in his own name. So this became a case of
undisclosed principal where the agent acted outside of his authority. Nonetheless,
the defendant, being satisfied with this act, ratified the deal. Subsequently, the
defendant changed his mind and refused to take delivery of the wheat. Durant (T)
sued for damages, arguing that the contract had been ratified. Held an undisclosed
principal cannot ratify.
Lord Macnaghten stated: As a general rule, only persons who are a party to a
contract, acting either by themselves or by an authorised agent, can sue or be sued
on the contract. A stranger cannot enforce the contract, nor cannot it be enforced
against a stranger. That is the rule; but there are exceptions. The most remarkable
exception, I think, results from the doctrine of ratification in English law. That
doctrine is thus stated by Tindal CJ in Wilson v Tumman (1843): ‘That an act done,
for another, by a person, not assuming to act for himself, but for such other
person, though without any precedent authority whatever, becomes the act of the
principal, if subsequently ratified by him, is the known and well established rule
of law. In that case the principal is bound by the act, whether it be for his
detriment or his advantage, or whether it be founded on a tort or on a contract, to
the same effect as by, and with all the consequences which follow from, the same
act done by his previous authority.’ And so, by a wholesome and convenient fiction,
a person ratifying the act of another, who, without authority, has made a contract
openly and avowedly on his behalf, is deemed to be, though in fact he was not, a
party to the contract. Does the fiction cover the case of a person who makes no
avowal at all, but assumes to act for himself and no one else? If Tindal CJ’s
statement of the law is accurate, it would seem to exclude the case of a person who
may intend to act for another, but at the same time keeps his intention locked up
in his own breast; for it cannot be said that a person who so conducts himself does
assume to act for anybody but himself. But should the doctrine of ratification be
extended to such a case? On principle, I should say certainly not. It is, I think,
a well established principle in English law that civil obligations are not to be
created by, or founded upon, undisclosed intentions.
Therefore, the contract was unenforceable against the defendant.

kelner v Baxter (1866) LR 2 CP 174, the principle was to the effect that if the
promoter signed the contract acting on behalf or for the company, the promoter will
be personally liable for the contract. Thus, at common law, the rule was that the
company cannot ratify such a contract after its formation because it was not a
principal with contractual capacity when the contract was made.
In that case, a contract was entered into by promoters for and on behalf of a
proposed
limited company, Gravesend Royal Alexander Co. Ltd for supply of wine. The wine was
delivered and consumed. On Feb. 1st, 1866 the proposed directors had a meeting and
purported to ratify the purchase. The incorporation of the Company was however
completed on Feb. 20th, 1866. But the company failed before Mr. Kelner was paid. He
successfully sued the promoters personally. The court held that where a contract
was
signed by a promoter for and on behalf of yet to be formed company, the promoter
would
be personally liable since there can be no agency without prior existence of a
principal.