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LAW OF AGENCY - LECTURE NOTES I. INTRODUCTION 1.

Definition An agent is a person who is authorised to act for another (the principal) in the making of legal relations with third parties. If the agent acts within the scope of his actual authority, the contract will be valid and binding on the principal. "Agency" - a bilateral, onerous, consensual contract whereby one party, the principal, authorises another, the agent, to execute business on his behalf. Agency involves three parties: (a) Principal - person who employs agent to act for him. (b) Agent - person who acts for the principal in the transaction. (c) Third Party - person with whom agent transacts. and two contracts: (a) Contract between agent and principal, governing terms of their relationship. (b) Contract made by agent with third party, which results in a contract between the principal and the third party. 2. Capacity Same rules regarding capacity as with any other contract. The principal must have capacity to enter the contract in question - he cannot increase his own capacity to contract by employing an agent with the necessary capacity. e.g. (a) Young People - person whose contractual capacity is limited by the Age of Legal Capacity (Scotland) Act 1991 cannot make a binding contract by employing an agent of full age. (b) Enemy Aliens - an alien enemy cannot make a valid contract by employing a British national to make it on his behalf. (c) Companies - a company has no legal capacity until incorporated. A company cannot be bound by a preincorporation contract made by someone acting on its behalf. Case: Tinnevelly Sugar Refining Co Ltd v Mirrlees, Watson & Yaryan Co Ltd Two men bought machinery from the defenders, claiming to be acting on behalf of the plaintiff company. The company was not in fact registered until two weeks later. Machinery supplied was defective and the company tried to sue. Held: The pursuer had no rights under the contract because not a party to it. A company has no capacity before it is is registered. Case: Kelner v Baxter Three purported directors bought goods on behalf of a company yet to be formed. The company was later registered but became insolvent before the goods were paid for. Held: It was held that the directors had acted without a principal, as no company had existed at the time of the contract. The directors were therefore personally liable on the contract.

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THE WIFE AS AGENT OF THE HUSBAND At a time when the equality of sexes was not quite clearly defined as in modern times, the common law developed the following law and principle : THE WIFE WAS THE AGENT OF THE HUSBAND In modern times the courts may hold that the intention of the wife and the contracting party was that the wife has not acted as agent of the husband and has made herself binding or liable to a third party as PRINCIPAL. At common law when the husband and the wife are living together, the wife is presumed to have her husbands authority to pledge the credit of the husband for necessaries judged by their style and standard of living. This presumption can, however, be rebutted by the husband proving the following points and facts :1. he expressly forbade his wife to pledge his credit; or 2. he expressly warned the supplier not to supply his wife with goods on credit ; or 3. his wife was already sufficiently supplied with goods of the kind in question; or 4. his wife was supplied with a sufficient allowance or sufficient means for the purpose of buying such goods without pledging the husbands credit; or 5. the order, though for necessaries, was excessive in extent, or, having regard to the husbands income, extravagant. [ Miss Gray ltd v Cathcart ] If he has the habit of paying his wifes bills with a particular supplier, his wifes agency will be implied by his conduct ( his paying the bills ). He can only escape liability in such case by expressly informing the supplier that his wifes authority has been revoked. If the wife gets credit from the supplier on her own and not as her husbands agent, then the husband is not liable. II. CONSTITUTION OF AGENCY Agency relationship may arise in one of five ways: 1. Express Agreement - Where a principal specifically appoints a person as an agent. No specific formalities are required. Express agreement may detail scope of agents powers or may leave some to be implied. 2. Implied Agreement (a) Implied by Conduct Where no express contract, but it is apparent from actions of parties that agency relationship has been formed.

(b) Implied by Law Agency relationship is implied by law in some circumstances - e.g. partners in a firm and directors of companies.
3. Holding Out - Where one person has allowed another to appear to outsiders to be his agent, he will be personally barred from denying the relationship. Arises in two situations: (a) Where there is no agency relationship but it appears that there is. (b) Where there is an agency relationship, but agent is held out as having more authority than he actually has. Creation of agency by holding out requires: (a) Representation - principal must have represented person as his agent, either by express statement or by his conduct. (b) Reliance - the third party must have relied on the representation. (c) Altered Position - the third partys position must have been altered because he relied on the representation, so that he would be adversely affected if no agency relationship existed. Case: Freeman & Lockyer v Buckhurst Park Properties Buckhurst Park Properties articles provided for the appointment of a managing director with authority to bind the company by himself. No managing director was ever appointed, but one director in fact carried out this role with the approval of the other directors. He employed the plaintiffs as architects. The company refused to pay their fees, claiming that the director had no authority to employ the architects without the consent of the other directors. Held: The director had been held out by the company as having authority to act - the company was therefore personally barred (estopped in England) from denying that he had authority to bind the company.

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4. Ratification - Where person acts for a principal without having authority to act, but the principal accepts and adopts (i.e. ratifies) the agents actions. Ratification may be express or implied. Ratification makes the agents act valid from the time he did it, not just from the time of ratification. Requirements for ratification: (a) Principal in Existence - principal must have been in existence at the time the act was done by the agent, not just at the time of ratification. Kelner v Baxter (Case 2) (b) Principal with Capacity - principal must have had the necessary capacity at the time the act was done by the agent. (c) Ratification must be Timeous - if validity of act depends on it being done within a certain time, it must be ratified within that time. Case: Goodall v Bilsland A wine merchant applied to licensing court to have his wine and spirits licence renewed. Opponents to the renewal employed a solicitor to act for them in opposing the application. The renewal was granted. The law allowed 10 days for an appeal against this and the solicitor, without consulting his principals, lodged an appeal, which was successful. Held: The wine merchant appealed against this and was successful. The solicitor had no authority to bring the appeal and his doing so could not be ratified after the ten days allowed for lodging the appeal had lapsed. (d) Agent Acting as Agent - agent must have told third party he was acting on behalf of identified or identifiable principal. An undisclosed principal cannot ratify. Case: Keighley Maxted & Co v Durant K & Co authorised a man called Roberts to buy wheat for them and himself with a limit as to the price he could pay. He failed to buy at this price and entered into a contract with D to buy at a higher price. He did not disclose to D that he was acting for someone else as well as himself. K & Co then agreed with Roberts to take the wheat at the higher price. Both K & Co and Roberts eventually failed to take delivery and D sued for damages. Held: It was held that K & Co could not be made liable as D had not known at the time the contract was made that R was acting for anyone other than himself. (e) Principal Aware of Material Facts - at the time of ratification, principal must have been made aware of all facts material to his decision to ratify. 5. Agency of Necessity -Where agent acts without authority to protect principals interests in an emergency. Requirements: (a) The actions must be necessary for the benefit of the principal - must be real necessity, objectively judged. (b) It must have been impossible for the agent to communicate with the principal to get his instructions. (c) Agent must have acted bona-fide in the interests of the principal and not wholly or partly in his own interests Case: Great Northern Co v Swaffield A railway was delivering a horse on behalf of S. Because of delays which were not the railways fault, the horse could not be delivered on time and the railway company, which did not know Swaffields name and address, put the horse in livery stables. Held: S was liable to pay the livery costs - putting the horse in stables was acting out of necessity.

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Case: Springer v Great Western Railway Co GWR contracted to carry a consignment of tomatoes from Jersey to London. The ship was late arriving, and when it did, GWR's employees were on strike. When the cargo was unloaded, some of the omatoes had gone bad. GWR's agent decided to sell the whole consignment locally. Held: GWR was not acting out of necessity in selling the tomatoes - communication with the owner was not impossible. III. CATEGORIES OF AGENT Traditional distinction is between general agents and special agents. 1. General Agents General agent has authority to act for principal in the ordinary course of his trade or profession - either in all matters, or in all matters of a particular nature. Third parties dealing with a general agent are entitled to assume he has authority to do anything that would be usual for an agent in the same position to be able to do. 2. Special Agents Special agent only has authority to act in a particular transaction on express instructions of principal. Will not bind principal to contract if he exceeds instructions - third party must satisfy himself as to extent of agents authority. Case: Morrison v Statter A shepherd who was sometimes given express authority to buy and sell sheep for the farmer was held not to bind the farmer to a contract entered into without express instructions. Nothing about his position which gave him general authority to act this way. Other Kinds of Agent 3. Mercantile Agents - People employed to buy and sell things (usually goods). Divided into: (a) Factor: has possession of principals goods and authority to buy and sell in his own name. e.g. auctioneer. (b) Broker: no possession of goods and cannot buy and sell in his own name. Employed to negotiate a contract. e.g. stockbroker, insurance broker. Case: Glendinning v Hope & Co A stockbroker bought one hundred shares on a clients instructions and were then instructed to buy a further two hundred shares. The client then changed his mind and instructed another stockbroker to buy the two hundred shares. Original brokers claimed they were entitled to retain the original one hundred shares until they were paid for work done in the second transaction. Held: The broker was entitled to retain the shares until paid, his position was that of a factor. 4. Del Credere Agents - Mercantile agents who undertake to indemnify the principal if the third party fails to pay the contract price. More common now are Confirming Agents who undertake liability for any failure in performance by the third party. 5. Estate Agents - Find buyers for property which clients wish to sell. No authority to make binding contract of sale unless expressly instructed by client. Regulated by: Estate Agents Act 1979 and Property Misdescriptions Act 1991 6. Shipmasters - Captain or similar officer of ship. Very wide authority in respect of navigation, crew and cargo - even wider powers in emergency situations.

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7. Solicitors - Solicitors were formerly called "Law Agents". Employed to conduct legal business - extent of authority to act varies with different kinds of legal work. 8. Commercial Agents - Commercial Agents (Council Directive) Regulations 1993. A commercial agent is a self-employed intermediary who has continuing authority to negotiate and/or conclude the sale and purchase of goods on behalf of a particular principal. (Partners in a firm and directors of companies are excluded from the definition.) IV. AUTHORITY OF AN AGENT Agent can only bind principal in contract with third party if he has the necessary authority. Authority may be: - express - implied - ostensible or apparent - presumed Express and implied authority is called actual authority and is regarded as arising from contract between agent and principal. Ostensible and presumed authority is deemed by law to exist, regardless of terms of contract. 1. Express Authority - Where contract between agent and principal specifically defines the extent of what the agent is allowed to do. In this instance, when the principal/agency relationship is established, the agent is instructed as to what particular tasks are required to be performed and is informed of the precise powers given in order to fulfil those tasks. If the agent subsequently contracts outside of the ambit of their express authority then they will be liable to the principal and to the third party for breach of warrant of authority (see below). The consequences for the relationship between the principal and third party depends on whether the third party knew that the agent was acting outside the scope of their authority. For example an individual director of a company may be given the express power by the board of directors to enter into a specific contract on behalf of the company. In such circumstances the company would be bound by the subsequent contract but the director would have no power to bind the company in other contracts. 2. Implied Authority - Agents authority is defined by the nature of his employment. Agent appointed for single transaction has implied authority to do what is necessary to complete the transaction. Agent appointed to particular job has implied authority normally expected of someone in same position. In addition, this refers to the way in which the scope of express authority may be increased. Third parties are entitled to assume that agents holding a particular position have all the powers that are usually provided to such an agent. Without actual knowledge to the contrary they may safely assume that the agent has the usual authority that goes with their position. In Watteau v Fenwick (1893) the new owners of a hotel continued to employ the previous owner as its manager. They expressly forbade him to buy certain articles including cigars. The manager, however, bought cigars from a third party who later sued the owners for payment as the managers principal. It was held that the purchase of cigars was within the usual authority of a manager of such an establishment and that for a limitation on such usual authority to be effective it must be communicated to any third party. Directors of companies can also bind their companies on the basis of implied authority. In Hely-Hutchinson v Brayhead Ltd (1968) although the chairman and chief executive of a company acted as its de facto managing director he had never been formally appointed to that position. Nevertheless, he purported to bind the company to a particular transaction. When the other party to the agreement sought to enforce it, the company claimed that the chairman had no authority to bind it. It was held that although the director derived no authority from his position as chairman of the board he did acquire such authority from his position as chief executive and thus the company was bound by the contract he had entered into on its behalf as it was within the implied authority of a person holding such a position.

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3. Ostensible Authority - Authority which has not been actually been given to the agent, but which he has been held out as having. Arises where: (a) Agent has had express authority which has been withdrawn, but third party has not been notified of this. (b) Agent is in position where certain authority would be implied, but principal has limited this and third party is unaware of the limitation. This type of authority, which is an aspect of agency by estoppel, can arise in two distinct ways: (i) Where a person makes a representation to third parties that a particular person has the authority to act as their agent without actually appointing them as their agent. In such a case the person making the representation is bound by the actions of the ostensible/apparent agent. The principal is also liable for the actions of the agent where they are aware that the agent claims to be their agent and yet does nothing to correct that impression. In Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd (1964), although a particular director had never been appointed as managing director, he acted as such with the clear knowledge of the other directors and entered into a contract with the plaintiffs on behalf of the company. When the plaintiffs sought to recover fees due to them under that contract it was held that the company was liable: a properly appointed managing director would have been able to enter into such a contract and the third party was entitled to rely on the representation of the other directors that the person in question had been properly appointed to that position. (ii) Where a principal has previously represented to a third party that an agent has the authority to act on their behalf. Even if the principal has subsequently revoked the agents authority they may still be liable for the actions of the former agent unless they have informed third parties who had previously dealt with the agent about the new situation. If an agent contracts with a third party on behalf of a principal, the agent impliedly guarantees that the principal exists and has contractual capacity. The agent also implies that he or she has the authority to make contracts on behalf of that principal. If any of these implied warranties prove to be untrue then the third party may sue the agent in quasi-contract for breach of warrant of authority. Such an action may arise even though the agent was genuinely unaware of any lack of authority. Case; International Sponge Importers v Watt A travelling salesman for the sponge importers sold sponges which he carried with him. He had no authority to receive payment except by means of crossed cheques made out to the company. Watt & Sons had bought sponges from the salesman and paid by cheques made out to the salesman. The sponge company knew of this but had not objected. On one occasion Watt paid the salesman 120 in cash. It transpired that the salesman had been taking the money for himself. The sponge company tried to sue Watt for the amount that they should have received for the sponges, but which the salesman had taken. Held: Watt & Sons were not liable to pay - in the circumstances, they had no reason to believe that the salesman was not authorised to receive payment by this method, especially as the sponge company had not objected in the past.

Case: Watteau v Fenwick The manager of a public house was prohibited from buying goods for the business all goods were to be supplied by the principal, his employer. The manager ordered certain articles from a supplier, which the principal refused to pay for because the manager had no authority. Held: The principal had to pay. Ordering the goods was within the usual authority of a pub manager and the supplier did not know of any limitations. 4. Presumed Authority - Authority which has not actually been given to the agent, but which the law presumes principal would have given if he had been consulted in advance. Arises in cases of agency of necessity.

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V. DUTIES OWED BY AGENT TO PRINCIPAL These duties are implied into every contract of agency unless expressly altered by the parties. 1. Duty to Obey Instructions - Agent is in breach of contract if he fails to obey express instructions or exceeds his actual authority. Case: Gilmour v Clark Gilmour gave instructions to Clark, a carrier, to take goods to the docks and put them on a ship called the Earl of Zetland. Clark put them on a ship called The Magnet instead - this ship sank and the goods were lost. Held that Clark was liable to Gilmour for the value of the goods. Agent loses right to claim fees or commission for period he is in breach of contract: Case: Graham & Co v United Turkey Red Co It was a term of the contract that the agent was not to sell goods supplied by anyone other than the principal. The agent sold other goods and was dismissed. Held that he was not entitled to commission for the period when he sold other supplier's goods. 2. Duty not to Delegate - Delegatus non potest delegare - an agent must not delegate. An agent must always act personally, unless: (a) The agent is expressly allowed to delegate: Case: De Bussche v Alt The principal, De Bussche, appointed an agent to sell a ship in China at a certain price. The agent also had authority to appoint a sub-agent and he appointed Alt to try to sell the ship in Japan. Held: It was held this was not a breach of the agent's duty, and, as Alt had been appointed as a substitute for the original agents, there was a contract between De Bussche and Alt. (b) Right to delegate is implied by what is usual in a trade or profession. 3. Duty of Care and Skill Agent who fails to exercise reasonable care and skill in carrying out his duties may be liable to his principal for negligence. Applies even when agent is acting without payment. 4. Duty to Account Agent must keep accounts and hand over all money received on behalf of his principal. He will be liable for any shortfall even if no evidence that he was dishonest. Case: Tyler v Logan Logan was the manager of a branch of a shoe shop. During a stocktaking, there was a shortfall of 62. Held: Logan was held to be obliged to pay this amount to Tyler, even though there was no evidence of dishonesty or negligence (but also no explanation of how the loss occurred). 5. Duty of Relief Agent must indemnify principal against any liability principal incurs because agent acted outside his authority.

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Case: Milne v Ritchie Milne was an architect - he had authority to negotiate and contract for mason work up to a value of 1465. Milne accepted Ritchie's offer to do the work for 1646. Ritchie brought a successful action to make Milne's principal pay the 1646. Held: The principal was then held entitled to be relieved of his loss by M. 6. Fiduciary Duty - Agent owes principal a duty of loyalty and good faith. He must not let his own interests conflict with those of his principal. Fiduciary duty is restricted to what is done in the course of the agency. Case: Lothian v Jenolite Ltd L agreed with J Ltd to sell some of J's products in Scotland in exchange for commission. the agreement was for a four year period but J Ltd ended it after a little over a year. L brought a claim for damages for breach of contract. J Ltd counterclaimed by saying that L had bought and sold a competitors products, and that he was therefore himself in breach of contract. Held: It was held that, as the contract had not stated that L should only sell J's products, he was entitled to also sell those of a competitor. (a) Agent must not transact with the principal on his own behalf unless principal is aware of all the facts and consents. The principal could have the contract set aside. Case: McPhersons Trustees v Watt Watt was a lawyer who bought four houses from the trustees for his brother. Watt was also the law agent for the trustees. Before the sale was made, Watt had arranged with his brother that he would pay him half the price and take two of the houses for himself. Held: Watt had made the contract without disclosing to the trustees that he was partly buying for himself - the transaction was set aside by the court. The court also pointed out that it did not matter of the bargain was a good one or not - the sale could be set aside even if Watt had paid a fair price. (b) Agent must not receive any profit, commission or benefit from the third party, unless the principal consents. If he does: (i) He will be liable to pay any amount received over to the principal: Case: Ronaldson v Drummond & Reid A solicitor, acting for a client, employed an auctioneer to sell furniture. The auctioneer paid the solicitor a percentage of the commission he took for the sale. Held that the solicitor was bound to pay this over to the client. Case: De Bussche v Alt Alt, employed as sub agent to sell a ship in Japan, told the original agents that he did not think he could sell it but offered to buy it himself for the sum of $90,000. The ship was sold to him at that price, but he had in fact negotiated a sale to a Japanese prince for $160,000. Held: Alt was in breach of his fiduciary duty and was obliged to account to the principal for the profit he had made. (ii) Agent will lose his right to any commission and may be dismissed for breach of contract. (iii) Principal may be able to claim damages from third party for bribing the agent. (iv) Principal may be able to rescind the contract with the third party. (v) Both agent and third party may be liable to criminal penalties under the Prevention of Corruption Acts 1906 and 1916. It is an offence for an agent to accept or agree to accept a bribe, and for a person to offer a bribe. (c) An agent owes a duty of confidence in respect of information relating to his principal which he has gained through the agency. He will be liable to his principal for breach of confidence if he discloses this:

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Case: Liverpool Victoria Friendly Society v Houston Houston was an agent of Liverpool Victoria for 4 years, during which time he saw lists of people insured by them. He was dismissed and then offered the lists to a rival society, which canvassed the people on them. Held: Houston had a duty to treat the information in the lists as confidential and could not use them against his principal. He was liable in damages for loss of business suffered by Liverpool Victoria as a result. VI AGENTS LIABILITY TO THIRD PARTIES A person will be liable in an action for breach of warranty of authority at the suit of the party with whom he proposed to make a contract, if he professes to act as agent, but has no authority from the alleged principal or has exceeded his authority. The action is normally based, not on the original contract, but on the implied representation by the agent that he had authority to make the original contract Points to note are : 1. the action can only be brought by the third party, not by the principal 2. the agent is liable whether he has acted fraudulently or innocently, and even if his authority has been terminated, without his knowledge , by death or mental disorder of the principal ( Younge v Toynbee ) 3. the agent is not liable if his lack of authority was known to the third party, or if it was known that he did not warrant his authority or if the contract excludes liability ( Lilly v Smales ) 4. if the principal gives ambiguous instructions and the agent acts on them bona fide and in a reasonable manner, he will not be liable in an action for breach of warranty of authority even if hes has interpreted them wrongly 5. the agent warrants his authority not only when he purports to contract on behalf of another but also when purporting to act as an agent, he induces a third party to enter into any transaction with him on the faith of such agency. 6. the measure of damages for breach of warranty of authority is the actual lost sustained. VI. RIGHTS OF AGENT AGAINST PRINCIPAL 1. Right to Remuneration Agent has the right to be paid the agreed fee or commission for the work done. Where amount of payment not agreed, agent is entitled to customary rate for trade or profession. If no usual rate, payment is calculated quantum meruit ("as much as it is worth") Case: Kennedy v Glass Glass was a dealer in old machinery. Kennedy was an architect who had often introduced Glass to people who had old machinery for sale and had been paid for this. On one occasion, Kennedy introduced Glass to a company which had machinery and plant for sale. Glass entered into a contract with the company to buy it - but failed to carry out the contract. Kennedy said there had been an arrangement that he would get 250.00 commission. Glass said it was 50, and only if the contract was carried out. Held that Kennedy was entitled to 50 on a quantum meruit basis - he had taken considerable time and trouble on Glass's behalf. 2. Reimbursement of Expenses - Agent has the right to be repaid for any expenses incurred in performing his duties as agent. Case: Drummond v Cairns Cairns was a stockbroker who was instructed by Drummond to buy certain shares. He bought them and told Drummond he had done so, but when the time came to pay the price, Drummond refused to pay. Cairns then sold the shares, but the price had fallen. Held: Drummond was liable to repay Cairns the difference in the two prices.

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Case: Tomlinson v Scottish Amalgamated Silks T was a director of S Ltd. The articles of association of S Ltd allowed for a director to be indemnified by the company against all losses and expenses incurred in performance of his duties as director. S Ltd went into liquidation and T was tried for fraudulently using the funds of the company. He was acquitted, and lodged a claim in the liquidation for the costs of defending the case. Held: He was not entitled to reclaim this - the expenses were not incurred in the performance of his duties as director. 3. Relief From Liability - Principal must indemnify agent against any legal liability legitimately incurred in performing duties as agent. Case: Stevenson v Duncan T was a director of S Ltd. The articles of association of S Ltd allowed for a director to be indemnified by the company against all losses and expenses incurred in performance of his duties as director. S Ltd went into liquidation and T was tried for fraudulently using the funds of the company. He was acquitted, and lodged a claim in the liquidation for the costs of defending the case. Held: He was not entitled to reclaim this - the expenses were not incurred in the performance of his duties as director. Case: Marshall Wilson Dean & Turnbull v Feymac Properties The pursuers were solicitors instructed by the defenders to act in the sale of property belonging to the defenders. Before the sale could be completed, certain planning documents had to be produced. The defenders told the solicitors that these were about to be issued and the solicitors granted a letter of obligation to the purchasers on the strength of this assertion. The documents were not forthcoming and the solicitors had to pay for work to be carried out before they would be granted. Held: The defenders were liable to compensate the pursuers for the expense of having the work done and for their costs in defending the action brought against them by the purchasers of the property. But not where liability was incurred when agent was exceeding his authority. Case: Robinson v Middleton M instructed R to sell some wood for him. R sold the wood to Perry, the agent of an Australian firm. P and R made an arrangement that Perry would incur no liability on the transaction, but this arrangement was not told to M. The price for the wood was paid by bill of exchange drawn by Perry on the Australian firm, but this firm became insolvent by the time the wood was delivered. The bank which had discounted the bill sold the wood, but only got a price 1000 less than the amount of the bill. Normally Perry, as drawer of the bill, would have been liable to make up the amount, but he had been released from liability by R, so R paid the 1000 and tried to claim it from M. Held M did not have to pay - he had not consented to Perry being released from any liability on the bill. 4. Lien Lien = the right to hold on to possession of goods until the owner of them has paid a debt or fulfilled an obligation.

(a) General Lien Right to retain any of principals property in agents possession until any debt owed to agent is paid. e.g. A sells consignment of jeans for P. P fails to pay agreed commission for this. P then gives A consignment of shirts to sell for him. If A has right of general lien, he can retain possession of shirts until commission for sale of jeans is paid. Factors, auctioneers, solicitors and stockbrokers have general lien.

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(b) Special Lien Right to retain principals property only in respect of debts/obligations connected with that particular property.

VII. RIGHTS AND LIABILITIES OF THIRD PARTIES Depend on way in which agent contracts with third party. 1. Agent Transacting as Agent for Named Principal Principal and third party are bound to the contract. Agent has no rights or liabilities under the contract. Case: Stone & Rolfe Ltd v Kimber Coal Co The Coal Co acted as agents to charter a ship for a Scandinavian company. The contract was signed by a representative of the Coal Co, the signature was preceded by the words "For the Atlantic Baltic Co (the Scandinavian Co). S & R brought an action against the Coal Co for certain expenses incurred. Held: The Coal Co were not liable, they had clearly signed as agents only. Case: Armour v Duff & Co An argument that the agent was acting for an undisclosed principal failed where the principals were known to be the owners of a certain ship, and their identity could easily be ascertained by looking at the Register of Shipping Exceptions: (a) Agent may expressly or impliedly undertake personal liability on the contract - e.g. del credere agents. (b) Agent may incur personal liability through custom of trade - e.g. solicitors. Case: Livesey v Purdom & Sons It was the custom in England that a solicitor who employed another solicitor to act for a client could be made personally liable for the costs. A Scottish solicitor had employed an English one to bring an action in England for a client. Held: When the English solicitor sued the Scottish one for his costs, it was held that he had failed to prove this was the custom in Scotland. (c) Agent may have a right to sue the third party on the contract if he has a personal interest in enforcing it. Case: Mackenzie v Cormack An auctioneer, acting for a disclosed seller, was held entitled to sue a successful bidder for the price, because he had a lien over the price for his commission. (d) Agent will be personally liable to third party if principal turns out not to be a legal person. 2. Agent Transacting as Agent for Unnamed Principal Normally creates a binding contract between principal and third party on which agent has no personal rights or liabilities. Agent will be personally liable if he refuses to name his principal when asked to do so. Case: Gibb v Cunningham & Robertson

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C&R were solicitors who acted for a client in the purchase of shares in business and a house belonging to G. The papers showed that they were acting for a client, but not who the client was. The price was not paid and G asked for the name of the client. C&R did not reply. Held that G was entitled to sue C&R for the price. 3. Agent Contracts as Principal Where agent acts within his authority, but does not reveal to third party that he is only acting as an agent. Principal can disclose his existence and enforce the contract against the third party. Third party can sue the agent on the contract. If third party has become aware that he has contracted with an agent, he can elect to sue either the agent or the principal. Election is final once made: Case: Ferrier v Dods Dods was an auctioneer. He advertised a sale of horses, warranted as good workers. Ferrier bought a horse, but later informed Dods that it was unfit for work. Dods told Ferrier that he had the right to return the horse, and suggested he return her to her former owner. F did this but did not get his money back - he then tried to sue Dods. Held: by returning the horse to the owner, Ferrier had effectively elected to take action against him. The action against Dods, the auctioneer, was dismissed 4. Agent Contracts as Agent, but Exceeds Actual and Ostensible Authority Principal is not bound to the contract - so third party has no rights against the principal. Agent is not personally liable on the contract, because third party knows he is only an agent. Third party cannot sue agent under the contract. Third party can sue agent for damages on basis that he misrepresented his authority. (Either fraud, or breach of warranty of authority). Case: Collen v Wright A person professed to act as agent for the owner of a farm and made a lease of the farm to Collen. He later died and then Collen discovered that he had no authority to make the lease. Held: His personal representatives were liable to Collen because he had impliedly warranted that he had the authority of the farm owner to make the lease. Case: Yonge v Toynbee A solicitor was appearing in a court action for a client. Unknown to the solicitor, the client had become of unsound mind and therefore had no capacity - the solicitor's authority had therefore been terminated. Held: He was liable to the plaintiffs for all their costs. Case: Anderson v Croall & Sons Ltd A horse was accidentally auctioned by Croall. A was the bidder. He paid the price but the owner refused to deliver the horse - the sale had not been authorised by him. Held: that A was entitled to return of the price he had paid, plus damages, from Croall & Sons. Measure of damages is the amount that the third party lost through not having a binding contract with the principal. Case: Irving v Burns

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Burns was the secretary of a company. He claimed to have the authority of the company and accepted an offer made by Irving for plumbing work to be done at a theatre. Irving did the work, then discovered that Burns had no authority. He sued Burns for breach of warranty of authority. Held: It transpired that the company had no assets, and would not have been able to pay Irving even if he had a contract with them. As Irving would have been no better off if he had successfully made a contract with the principal, no damages were payable.

VIII. TERMINATION OF AGENCY 1. Completion of Transaction or Expiry of Time If agency entered into for single transaction or set time period, it terminates when this is completed. No notice of termination is needed. 2. Mutual Agreement Agency is created by mutual agreement and can be terminated the same way. 3. Revocation by Principal Principal can terminate agency by giving notice of revocation to agent - but may be liable in damages if this is a breach of contract. Agency will not be revocable by principal where agent has a "procuratory in rem suam" (authority coupled with an interest) e.g. Factor is given goods to sell for principal and advances money to principal on security of the goods. Principal cannot revoke factors authority to sell unless he repays money first - the debt is a procuratory in rem suam. 5. Renunciation by Agent Agent can withdraw from agency by giving notice - but may be liable for breach of contract. 6. Frustration Agency is frustrated by:

(a) Death of Principal or Agent Agency is a contract where delectus personae is involved - so is frustrated by death of either party. (b) Insanity of Principal or Agent Agents insanity terminates the agency. Law Reform (Miscellaneous Provisions) (Scotland) Act 1990, s.71 - insanity of principal will not terminate a power of attorney or deed of factory and commission granted after 1 January 1991. (c) Bankruptcy Agency is terminated if either party becomes bankrupt. (d) Cessation of Business Agency is frustrated if principal ceases to carry on the business in which the agent is employed. Agent will normally have no claim for breach of contract.
Case: Patmore & Co v Cannon & Co Patmore agreed to act as Cannon's agents for the sale of certain goods. The agency was to be for a period of five years. After only a few months, Cannon gave up manufacturing the goods.

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Held: Patmore had no claim for breach of contract Cannon had not undertaken to carry on the business for five years.

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