A relationship of agency may be constituted in the following ways which will be discussed in turn:
Agency created by express appointment In common with other types of contract, an agency can be created expressly- either in writing or orally.
Agency created by implication this occurs when there has been no express or deliberate appointment of an agent by a principal, but an agency relationship arises through the actions of the parties.
Agency created by ratification A principal may retrospectively authorize the act of an agent.
Agent created by necessity This occurs where there is an emergency and an agent has to carry out vital acts for a principal without receiving instructions.
Agent created by holding out This can arise where a principal does not contradict an impression that someone is his agent or allows someone to represent him or herself as an agent without any objection.
Del credere agency this is a situation where a mercantile agent guarantees payment or performance by the third party if the third party fails to pay the principal.
3. There are four categories of authority of an agent: If an agent acts within his actual authority (normally his express or implied authority) the principal will be liable for the agent’s actions. Panorama Developments (Guildford) Ltd v Fidelis Furnishings Ltd 1971.
Express authority may be oral authority or authority in writing.
Implied authority is authority to do all that is necessary (or ordinarily incidental) to the agent’s express authority and it is presumed that the principal consents to this. Watteau v Fenwick 1893.
Ostensible authority is also known and referred to as apparent authority. This occurs where a principal allows a state of affairs, or course of dealing to continue, which gives third parties the impression that the agent has the authority to act as he has done and is doing, even if there was no authority to do so. International Sponge importers v Watt & Sons 1911.
Presumed authority would be one where there is an agency of necessity.
4. Duties of an agent
To obey instructions and adhere to the terms of the contract between him and the principal. Bertram Armstrong v Godfrey 1830
To exercise the skill and care of ‘an ordinary prudent man’ Luxmore-May v Messenger May Bostock1990. And it includes the duty to act in person, the duty to account and a fiduciary duty to act in good faith.
An agent must disclose all secret profits. Solicitors Estate Agency v Maclver1992
if an agent does not disclose any secret profit then s/he is in breach of contract with the principal who may: dismiss the agent: terminate the agency relationship: not pay the agent for that transaction: recover any secret commission from the agent: not implement the contract with the third party; sue the third party for damages if any inducement was offered to the agent.
