COMMERCIAL LAW

THE LAW OF AGENCY

Friday, May 4, 2018

Creation of Agency, Authority of Agents

Case Law
Liability of Undisclosed
Principal..
Watteau v Fenwick
Watteau v. Fenwick [1893] 1 QB 346

 Brief Fact Summary. Plaintiff, Watteau, sold goods

to a pub manager, Humble, under the belief that
Humble was actually the pub owner.
 Plaintiff learned that Defendant, Fenwick, was the
actual owner and sought to collect from Defendant for
the unpaid balance of goods purchased by Humble.
 Synopsis of Rule of Law. An undisclosed principal
can be held liable for the actions of an agent who is
acting with an authority that is reasonable for a person
in the agent’s position regardless of whether the agent
has the actual authority to do so.
Watteau v. Fenwick [1893] 1 QB 346

 Defendant owned a hotel-pub that employed Humble

to manage the establishment. Humble was the
exclusive face of the business; Humble’s name was on
the bar and the license of the pub. Defendant
explicitly instructed Humble not to make any
purchases outside of bottled ales and mineral waters,
but Humble still entered into an agreement with
Plaintiff for the purchase of cigars. Plaintiff
discovered that Defendant was the actual owner and
brought an action to collect from Defendant.
Watteau v. Fenwick [1893] 1 QB 346

 Issue. The issue is whether Defendant is liable for

damages resulting from an agreement between
Plaintiff and Humble, who is knowingly acting
outside his actual authority as an agent for Defendant.
 Held. Defendant is liable for damages. Humble was
acting with an authority that was inherently
reasonable for an agent in that position.
Watteau v. Fenwick [1893] 1 QB 346

 The principal is liable for acts of the agent, as long as

those are those usually confided to an agent of that
character. This is true even though the agent was
acting outside the scope of his actual authority.
 In the absence of express knowledge of the
restrictions imposed by the principal, the plaintiff
could rely on such usual authority.
Watteau v. Fenwick [1893] 1 QB 346

 Discussion.
The decision could not be based on apparent authority
because the principal is disclosed under that
doctrine.The principal is held liable for actions by an
agent that are expressly forbidden, but the case limits
a principal to actions of an agent that are reasonable
under the circumstances.
Actual v Apparent Authority
Butwick v Grant
BUTWICK v GRANT [1924] 2 KB 483

Brief Facts
 The plaintiff, Hyman Butwick, was a wholesale dealer

carrying on business in London. The defendant,

Grant, was a tradesman at Southend-on-Sea.
 In the end of March, 1923, one Chait, who had done

business with the defendant, but whom the

plaintiff had not previously met, called upon the
plaintiff and told him that the defendant was a client
of his who would probably do business with the
plaintiff.
BUTWICK v GRANT [1924] 2 KB 483

 The plaintiff made inquiries about the defendant and

was satisfied as to his financial position.
 The plaintiff then authorized Chait to sell to the
defendant sixty sports coats and gave him one of them
as a sample. Shortly afterwards Chait offered the
coats to the defendant, ,who agreed to buy them,
taking and paying for the sample oat.
BUTWICK v GRANT [1924] 2 KB 483

 A few days later the plaintiff despatched the coats to

the defendant, and sent him by post an invoice which
bore the name of the plaintiff. Then Chait again called
on the defendant, who in good faith paid him the price
of the coats and got from him a receipt for the money.
Chait failed to pay the plaintiff.
 The plaintiff then brought the present action against
the defendant in the county court for the price of the
coats thus sold and delivered.
BUTWICK v GRANT [1924] 2 KB 483

 County Court
 The county court judge found that Chait was not the plaintiff’s
traveller, and that this was the only occasion on which he sold or
was employed to sell goods of the plaintiff that when the defendant
agreed to buy the goods he knew that Chait was, at least probably,
selling them not as his own or as principal, but as agent for and on
behalf of some other person, and that the plaintiff in fact gave Chait
no authority to sell the goods as his own or as principal; and he
held that Chait had no actual authority to receive payment for the
goods as stated by him, and that the fact of his being authorized to
sell these particular goods on this occasion did not in itself confer or
raise any implication of authority to receive payment, and that he
had not in the circumstances either implied or apparent authority
in that behalf; and he gave judgment for the plaintiff.
BUTWICK v GRANT [1924] 2 KB 483

 Appeal
 In the present case the transaction in question was the
only one in which the plaintiff had employed Chait; the
plaintiff constituted Chait his agent with a bare authority
to sell and to do nothing more; the plaintiff did not put
Chait in possession of the goods or of any indicia of
title thereto; at the time when the defendant bought the
goods he knew that Chait was selling as agent, and he
was therefore put upon his inquiry as to the extent of
Chait’s authority; and before the defendant paid Chait he
had received an invoice from the plaintiff which showed
that the plaintiff was the principal in the transaction.
BUTWICK v GRANT [1924] 2 KB 483

 Appeal
 In order to entitle us to interfere with that decision of
the county court judge we must be satisfied that it
has become rule of law that where an agent has
been invested with bare authority to sell, he has
also authority to receive payment of the price.
 We must also be satisfied that in this case there were
no special circumstances preventing the
application of that general rule.
BUTWICK v GRANT [1924] 2 KB 483

Held on Appeal – Horridge, J

 In my opinion there is no hard and fast rule of law

that an agent employed to sell has power to receive

the price, and even if there were it was prevented
by the special circumstances from applying to this
case.
BUTWICK v GRANT [1924] 2 KB 483

Held on Appeal – Sankey J

 In an action by the seller of goods against the buyer for the

price it would be open to the buyer who had paid the seller’s
agent to show, and in the absence of any reason to the contrary
he would be entitled to succeed on showing, either that the
agent had actual authority to receive payment, or that he
had ostensible authority to receive payment, or that he had
a customary authority by reason of the fact that the
payment was made to him in the ordinary course of the
business of agencies of the kind in question. In the present
case the county court Judge has found that no authority of
any of these descriptions was shown to have been possessed
by the agent.
Ratification
 The principal must have been capable of
authorising the agent’s actings at the time they
were carried out.
 If the principal could not lawfully have carried out
on business themselves then they will be unable to
ratify the agent’s actions.
Boston Deepsea Fishing Co v Farnham [1957]

Facts
 A fishing vessel was managed by an English Firm

during the Second World War. The vessel in question

belonged to a French company. At this time the
French company was an enemy alien and so it could
not lawfully have carried out business themselves.
Therefore, the court held that the ratification was not
possible.
Ratification – Acting on Behalf…
Keighley Maxted & Co. v. Durant
[1901] AC 240
Keighley Maxted & Co. v. Durant [1901] AC
240
 K & Co authorized Roberts, a corn merchant, to buy
wheat on a joint account for himself and them at a
certain price.
 Roberts, on his own behalf and without authority of
anybody else, bought wheat at a higher price than the
authorized one, from Durant.
 The intention that he was acting for K& Co. as well
as himself was not disclosed by Roberts to Durant.
 K & Co, however, later agreed with Roberts to buy the
wheat at that (high) price but eventually failed to do so.
 Durant resold it at a loss and sued them for loss.
Keighley Maxted & Co. v. Durant [1901] AC
240

ISSUE:

 Whether a contract made by a man purporting and

professing to act on his own behalf alone, and not on
behalf of a principal, but having an undisclosed
intention to give the benefit of the contract to a third
party, can be ratified by that third party, so as to
render him able to sue or liable to be sued on the
contract.
Keighley Maxted & Co. v. Durant [1901] AC
240

HELD:

 A contract made by a person intending to contract on

behalf of a third party, but without his authority,
cannot be ratified by the third party so as to render
him able to sue or liable to be sued on the contract,
where the person who made the contract did not
profess at the time of making it to be acting on
behalf of a principal.
Ratification by non-existing principal,
OR Principal with no capacity
Kelner v Baxter
Kelner v Baxter (1866) LR 2 CP 174

Facts
 A group of company promoters for a new hotel business

entered into a contract, purportedly on behalf of the

company which was not yet registered, to purchase
wine.
 Once the company was registered, it ratified the contract.

 However, the wine was consumed before the money was

paid, and the company unfortunately went into liquidation.

The promoters were sued.
 They argued that their liability had passed to the

company, and were not personally accountable.

Kelner v Baxter (1866) LR 2 CP 174

Held
 It was held, however, that as the company did not

exist at the time of the agreement it would be

wholly inoperative unless it was binding on the
promoters personally and a stranger cannot by
subsequent ratification relieve them from that
responsibility.
Ratification - Time
Goodall v Bilsland 1909 SC 1152
Goodall v Bilsland 1909 SC 1152

 A solicitor had authority to lodge objections at a

licensing board. However, he had no authority
to lodge appeals.
 The solicitor lodged an appeal without consulting
the principal.
 Held, that lodging of appeal could not be ratified
after the expiry of the appeal period.
Necessity – True Necessity & Good Faith

Prager v Blatspiel. Stamp & Heacock Ltd.

[1924]
Prager v Blatspiel. Stamp & Heacock Ltd. [1924]

Facts
 The defendant, who was a fur merchant, bought and dressed skins (fur)

on behalf of the plaintiff to be delivered to Romania. The outbreak of

the First World War made it impossible for the defendant either to
send the skins to Romania or to communicate with the plaintiff.
 Towards the end of the war, defendant began to sell the furs locally

with assumption that occupation of German will be continued. When

the war ended, the plaintiff demanded delivery from defendant but the
defendant only told the plaintiff that the furs had been sold off under
agency of necessity.
 When the plaintiff eventually asked the defendant to transport the skins

to him, the defendant argued that it had been forced to sell the skins
because they were deteriorating, making it necessary that the skins were
sold forthwith.
Prager v Blatspiel. Stamp & Heacock Ltd. [1924]

Held
 On the facts of the case it was held that the defendant

was not an agent of necessity, simply because, since

the skins were dressed, they were in no danger of
deteriorating.
 But it was accepted that if the skins had been

deteriorating rapidly the defendant would have been

authorised to sell them by virtue of an agency of
necessity.
Prager v Blatspiel. Stamp & Heacock Ltd. [1924]

Held
 The court held that there was no agency of necessity

because the plaintiff was willing to wait for goods

which were appreciating in value and it is clear that
defendant acted against bona fide when defendant
sold off the furs which got higher value at that
time.
Retrospective Effect of Ratification
The doctrine of relation back
Bolton Partners v. Lambert, (1889) 41 CH D
295
Bolton Partners v. Lambert, (1889) 41 CH D 295

Facts
 An offer of purchase was made by the Defendant, A. J. Lambert,

to P. A. Scratchley, who was acting as an agent of the

Plaintiffs, Bolton Partners (Limited), but was not authorized to
make any contract for sale on 8th of December, 1886.
 The offer was accepted by Scratchley on 9th of December on

behalf of the Plaintiffs with a direction that the company’s

solicitor had been instructed to prepare the necessary documents.
 On the 13th of January, 1887, the defendant withdrew his offer on

the ground that he had been misled by the statements that had
been made to him as to the value of the property.
 After the withdrawal, the Plaintiffs, on 28th of January, ratified

the acceptance of the offer by S.

Bolton Partners v. Lambert, (1889) 41 CH D 295

Issues
 Whether there ever was a completed contract between

the parties?
 Whether the contract was obtained by

misrepresentation on the part of those seeking to

enforce it?
 Whether the ratification was ultrà vires?
Bolton Partners v. Lambert, (1889) 41 CH D 295

Held
 Mere expression of an intention to have further

documents does not prevent there being a contract.

There was a binding contract constituted by the two
letters alone. Hussey v. Horne-Payne is not applicable
as in that case it was not because the subsequent
letters raised a doubt, that it was held that the two
original letters did not form a completed agreement,
but because the two original letters of themselves
contained terms which raised the doubt.
Bolton Partners v. Lambert, (1889) 41 CH D 295

Held
 The rule of ratification is applicable as per which

ratification is thrown back to the date of the act

done, and that the agent is put in the same position
as if he had had authority to do the act at the time
the act was done by him.
 On the evidence, that there had been no

misrepresentation on the part of the Plaintiffs.

Necessity – No Communication
Springer v. Great Western Railway Company [1921] 1
KB 257

Facts
 Great Western Railway Company as defendant agreed

to carry plaintiff’s tomatoes from Channels Island to

London, by ship to Weymouth and by train to
London. The ship was stopped at Channels Island for
three days due to bad weather.
 Eventually, when the ship arrived at Weymouth,

defendant’s employees were on strike, tomatoes were

unloaded by casual laborers but it was delayed for
two days.
Springer v. Great Western Railway Company [1921] 1
KB 257

Facts
 At that time, some of the tomatoes were found to be

bad.
 So, defendant decided to sell the tomatoes as they felt

that tomatoes could not arrive in Covent Garden

market in a good and saleable condition.
 When plaintiff found out about this, plaintiff wanted

to claim damages from defendant.

Springer v. Great Western Railway Company [1921] 1
KB 257

Held
 The court held that plaintiff was entitled to damages

because defendant ought to have communicated

with the plaintiff when the ship arrived at Weymouth
to get instruction.
 As defendant has failed to communicate with plaintiff

when they could have done so, thus, there was no

agency of necessity.
Necessity – Necessary Action
Great Northern Railway Co. vs. Swaffield
(1874) LR 9 Exch 132
Great Northern Railway Co. vs. Swaffield (1874) LR
9 Exch 132

Facts
 Defendant owner sent his horse by rail from Kings

Cross to Sandy station. When the horse arrived at

Sandy station there was no one to collect it and no on
at the station knew the name or address of the owner.
 The claimant railway company arranged for the horse

to be fed and stabled. When the defendant collected

his horse, he refused to reimburse the railway
company for their expenses in having the horse
stabled.
Great Northern Railway Co. vs. Swaffield (1874) LR
9 Exch 132

Held
 The claimant had acted in the best interests of the

defendant in arranging to have the horse stabled. An

agency of necessity had arisen and the defendant
was bound to pay for the cost of stabling the horse.
 There was an agency of necessity because the

plaintiff was found to have had no choice but to

arrange for the proper care of the horse.
Necessity – Emergency v Convenience
Sachs v. Miklos [1948] 2 KB 23
Sachs v. Miklos [1948] 2 KB 23

Facts
 The defendant agreed in 1941 to store some of the

claimant’s furniture without charge. By 1944 the

defendant had lost touch with the claimant and letters
written to his previous known address were returned.
 In order to gain some space, the defendant sold the

claimant’s furniture. When the claimant later returned,

he sued and the defendant calmed an agency of
necessity had arisen.
Sachs v. Miklos [1948] 2 KB 23

Held
 There was no agency of necessity as no emergency

had arisen when the furniture had been sold. It was

not as though the house that the furniture was stored
in had been destroyed and the furniture left exposed
to thieves and the weather. The house was available
for storage of the furniture.
Agency by Estoppel…
Soanes v London and South Western Railway
Company(1919)
Soanes v London and South Western Railway
Company(1919)

Facts
 A railway company supplied a porter with a uniform,

thus holding him out as a agent. While off duty and

therefore not at the time acting as the company's
agent, the porter took charge of a passenger’s
luggage at a railway station.
 The luggage was stolen and the passenger claimed

for the loss against the railway company.

Soanes v London and South Western Railway
Company(1919)

Held
 The court held that the company was estopped

from denying that the porter was its agent.

Therefore, the company was liable for its agent’s
action.
Agent’s Relations with 3 rd

Parties
Disclosed v Undisclosed Principal
Introduction
 Under the law of agency, the principal is generally
responsible to third parties for any decision, act or
omission of his agent which was performed or
taken while executing the terms of the agency.
 This is the hallmark of the law of agency on a
disclosed principal.
Contracts by Agents
 Generally, issues in contracts by agents raise the
fundamental problem of who can sue and who can
be sued between the principal or the agent.
 In either case, the rights and liabilities attaching to
each depend on the following factors:
 1) Whether the agent acted within the scope of his
authority; express or implied.
 2) Whether the principal is disclosed or undisclosed.
 3) Whether the principal is a national as opposed to a
foreign principal.
Contracts by Agents
Disclosed Principal
 Where the agent acted within the scope of his

authority, or if without authority, it has been

subsequently ratified by the principal, and the
identity of the principal disclosed, the latter alone is
generally the true party to the contract and bound
thereby.
 The agent incurs neither right nor liability under

such a contract unless otherwise expressly made a

party thereto.
Contracts by Agents
Disclosed Principal
 Lord Erskin stated the position of the law clearly in

Ex Parte Hartrop (1806)12 Ves 349 when he said:

“No rule of law is better ascertained or stands upon
a stronger foundation than this; that, where an
agent names his principal, the principal is
responsible, not the agent; but for the application of
that rule, the agent must name his principal as the
person to be responsible.”
Contracts by Agents
Partially Disclosed Principal
 It is however, not necessary that the agent must

specifically have stated that he was acting for and

on behalf of his principal in order for the latter to be
disclosed - It is sufficient if the third party knows or
ought to have known that the person he was
dealing with was acting for another specific
person.
Contracts by Agents
UnDisclosed Principal
 However, where the principal is undisclosed, that is,

where the fact of agency as well as the identity of

the principal are not known to the third party, the
contract may, as a general rule, be enforced by or
against the principal if and when disclosed provided
that the agent’s act was authorized.
 See Watteau v. Fenwick (1893)1 Q.B.D 346.
Contracts by Agents
Disclosed Principal and Third Party
 The general rule is that where a person contracts as

agent for a principal the contract is the contract of

the principal and not that of the agent, and prima-
facie, at common law the only person who may sue
is the principal, and the only person who can be
sued is the principal.
 In other words, everyone is liable for his contract

even where he acts through another unless it can be

shown that this liability is removed by the operation
of that contract.
Contracts by Agents
Disclosed Principal and Third Party
 The relationship between the disclosed principal and

the third party will be brought to life and the principal

could take advantage there from only under the
following situations:
 1) The agent discloses, named or unnamed the existence
of a principal on whose behalf the contract was
negotiated.
 2) The agent acts within actual authority.
 3) The agent acts without authority but the principal
subsequently ratifies same.
Contracts by Agents
Disclosed Principal and Third Party
 In Barwick v. English Joint Stock Bank (1967) L.R,

2 Exch. 259. Wiles. J. stated the rationale behind this

issue thus:
“The principal put the agent in his place to do that
class of acts, and he must be answerable for the
manner in which that agent has conducted himself
in doing the business which it was the act of his
master to place him in.”
Contracts by Agents
Disclosed Principal and Third Party
 The principal is only liable for those decisions, acts

or commissions which fall within the scope of the

real (actual) or apparent (ostensible) authority of the
agent.
 The crucial test is therefore whether a particular

decision, act or omission falls within the scope of the

agent’s authority and done or taken in the course of
that agent’s employment.
Contracts by Agents
Disclosed Principal and Third Party
 Therefore, in as much as the third party dealt with the

agent in good faith, the principal does not cease to

be liable by reason only of the fact that the agent was
acting fraudulently or otherwise to the detriment of
the principal.
Contracts by Agents
Undisclosed Principal
 An undisclosed principal is one whose existence and

identity are unknown to the third party at the time of

entering into a contract with an agent.
Contracts by Agents
Undisclosed Principal
 Under the doctrine of undisclosed principal, it is

permissible, in appropriate circumstances for such

principal on whose behalf a contract has been entered
into by an agent to sue and be sued on the contract.
 Although it is a well settled principle of law, the

doctrine has been described as an anomaly in the

sense that it offends the doctrine of privity of
contract and it is in this respect that it is often
regarded as an exception to the doctrine of privity
of contract rule.
UnDisclosed Principals
Exceptions
 The rights and liabilities of the principal on contracts

negotiated by the agent on his behalf are subject to

certain general exceptions. These are:
 1. No principal can validly sue or be sued in respect of
any contract purported to have been entered into on his
behalf by the agent unless with his consent or authority.
UnDisclosed Principals
Exceptions
 2. At common law, no principal may sue or be sued on
any deed, even if it was expressed to have been executed
on his behalf unless he was described as a party thereto
and it was executed in his name.
 3. Where the contract in question is a negotiable
instrument, for example a bill of exchange, cheque or
promissory note, the principal is not liable unless his
signature appears on it. He needs to sign by
himself to be liable.
UnDisclosed Principals
Exceptions
 4. Where the principal is a foreign principal, there is a
presumption that the intention was to bind the agent
and not the foreign principal. This may, however, be
contradicted by clear terms of the contract itself or
circumstantial evidence from the surrounding
circumstances of the case.
UnDisclosed Principals
Exceptions
 5. The rights and liabilities of the principal may be
expressly excluded by a term of the contract itself or
impliedly by a custom, or usage of the particular trade,
business or profession to which the agent belongs or in
which he operates. This is subject to the provision that
these are not inconsistent with the express term of the
contract and not reasonable or unlawful.
Personal Liability of the Agent
 In situations where the principal cannot be sued on a
contract entered into on his behalf by the agent, the
question may arise as to whether the third party can sue
the agent who negotiated the contract.
 The common law rule is expressed in the maxim “QUI PER
ALIUM FACIT PER SEIPSAM FACERE VIDETUR” which
means “he who does an act through another is deemed in
law to do it himself”.
 That is why a person cannot escape liability merely
because he has done what he did through an agent.
 However, an agent may also personally liable in some
circumstances.
Personal Liability of the Agent
a. Where the Agent Contracts Personally
 In this situation, the agent will be held liable if he

enters into the contract in his name instead of in

the name of his principal, with or without
disclosing the fact of his agency or the identity of
his principal.
 It is generally presumed that he intended to contract

personally.
Personal Liability of the Agent
b. Where the Principal is Foreign
 The general rule is that where an agent contracts on

behalf of a foreign principal, there is a presumption that

the intention was to bind the agent and not the
principal.
 The practical consideration concerns the necessity to

avoid the difficulties arising from the foreign element

present in such circumstances.
 However, there would be no presumption where the

intention to bind the principal was clear from the

contract itself or from the surrounding circumstances
of the particular case.
Personal Liability of the Agent
c. Where the Principal is Fictitious or Non-Existent
 In cases where an agent professes to contract on

behalf of a fictitious or non-existent principal, he may

sometimes be presumed to have intended to be bound
by the terms of such contract.
Personal Liability of the Agent
c. Where the Principal is Fictitious or Non-Existent
 The leading judicial authority on this point is Kelner

v. Baxter & Ors where an agent purported to enter

into a written contract on behalf of a company not
yet incorporated.
 It was held that the agent was personally liable on the

contract, even if he expressed himself as contracting

for the future company.
Personal Liability of the Agent
d. Where the Contract is in Writing
 The question whether an agent, who on behalf of his

principal, purportedly enters into a written contract

other than a deed or negotiable instrument is personally
liable thereon depends on a number of factors.
 He will be personally liable if he signs his name

absolutely and without qualification.

 For such an agent to escape liability, the document

so signed must unequivocally show that he

contracted as agent and did not undertake any
personal responsibility.
Personal Liability of the Agent
d. Where the Contract is in Writing
 In Gadd v. Houghton (1876)1 Exq. D. 357, Mellish,

L.J, had this to say on the matter:

“When a man signs a document in his own name,
he is prima facie a contracting party and liable and
there must be something very strong on the face of
the instrument to show that liability does not attach
to him.”
Personal Liability of the Agent
d. Where the Contract is in Writing
 For this rule to be applicable, it will not be sufficient

that the person should have described himself in

the relevant document as an agent, director,
secretary, accountant, broker, or words of similar
nature.
 If it is stated in the document that he signs the same

“as agent for” or “on behalf of” a simply “for” a

principal or words of that kind, he escapes liability
unless it was clearly evident from the body of the
document that he intended to bind himself.
Personal Liability of the Agent
e. Where the Contract is a Deed
 In cases where an agent appends his signature to a

deed or document under seal and executes it in his

own name, he is personally liable even if he is
described in the document or deed as an agent
acting for and on behalf of a named principal.
 This rule is strict and operates even if that agent

subsequently executes the document or deed on

behalf of his principal.
Personal Liability of the Agent
e. Where the Contract is a Deed
 In Schalfk v. Anthony (1813)1 M.B. & S 573, a

shipmaster, executed by deed, a charter party in his

own name describing himself as the agent of the ship-
owner. It was held that notwithstanding that
description, the shipowner, as principal, was not
entitled to sue for the freight but only the ship-master
because the owner was not a party to the deed.
Personal Liability of the Agent
e. Where the Contract is a Deed
 This principle is premised on the rule that no one can

add to or contradict the terms of a deed. To escape

liability, however, the agent must have executed the
deed as the principle’s deed. In such instance, the
agent will not incur personal liability.
Personal Liability of the Agent
f. Where the Contract is a Negotiable Instrument
 Where an agent signs his own name on an ordinary

bill of exchange, a cheque or promissory note, or

endorses or accepts such an instrument by signing
his own name, he is personally liable on the
instrument notwithstanding that he added to his
signature words describing himself as an agent or
as filing a representative character.
Personal Liability of the Agent
g. Where the Contract is a Negotiable Instrument
 Where an agent signs his own name on an ordinary

bill of exchange, a cheque or promissory note, or

endorses or accepts such an instrument by signing
his own name, he is personally liable on the
instrument notwithstanding that he added to his
signature words describing himself as an agent or
as filing a representative character.
Personal Liability of the Agent
h. Where There is Implied Warranty of Authority
 Where an agent purports to act on behalf of a

principal, and it turns out that he was acting without

authority or in excess of his authority, the principal
cannot be held responsible in the absence of
ratification by him.
 The agent alone is responsible irrespective of

whether he knew, or ought to have known, or

inadvertently thought that he had the authority he
was supposed to have professed.
Personal Liability of the Agent
h. Where There is Implied Warranty of Authority
 For responsibility to be placed on the agent, the law

requires that the third party should have relied on

the warranty of the agent in entering into the
contract.
 Therefore, the agent will not be liable if the third

party knows or was aware of the fact that the

agent was mistaken as to his own authority.
Torts Committed by Agents
 Under this doctrine, a principal is held answerable for
torts committed by his agent in the course of
executing the terms of his agency.
 The matter does not only affect the vicarious
responsibility of the principal for such acts and
omission but also the personal responsibility of the
agent himself.
 Thus, a third party injured by the wrongful act or
omission of an agent may proceed against the
principal vicariously, and or the agent directly, as
the perpetrator of the wrongful act.
Torts Committed by Agents
Doctrine of Respondent Superior
 The liability of the principal for a wrongful act of his

agent is under the common law founded on the

doctrine of “RESPONDENT SUPERIOR” which
means “Let the Principal Be Answerable.”
Torts Committed by Agents
Rationale of the Doctrine of Respondent Superior
 Under the law, several rationale of vicarious liability

have been suggested in tort cases.

 Some of these have been imported into the principal-

agency relationship.
Torts Committed by Agents
Rationale of the Doctrine of Respondent Superior
 Some of these are:

 a) that the master (principal) has a fictitious control over the

behaviour of his servant (agent);
 b) that the master (principal) has selected his servant (agent)
and trusted him and should therefore suffer for his wrongs,
rather than an innocent stranger or third party.
 c) that it is a privilege granted by law for a person (principal) to
be allowed to employ another (agent) and that for that privilege
there should be a corresponding responsibility;
 d) those tort losses are placed upon the employer (principal)
because he is better able to prevent them through careful
hiring and better able to bear them.
Torts Committed by Agents
Liability of the Principal
 The liability of the principal under the doctrine of

respondent superior is strict and the principal is so

responsible notwithstanding his exercise of due
care and diligence in selecting the agent or
supervising him or probing the act or omission
concerned.
Torts Committed by Agents
Liability of the Principal
 The principal is only liable IN CONTRACT for

things done or actions taken within the actual

(real) or ostensible (apparent) authority of the
agent.
 In TORT, he is liable for all wrongs committed by

the agent whether within his actual or ostensible

authority or not.
Torts Committed by Agents
Liability of the Principal
 In Construction Industry Co. Ltd v. Bank of North

(1968 ) N.C.L.R. 194, a driver waiting to be served at

a petrol station, struck a match on his cigarette. This
action set a petrol station ablaze. It was held that his
employer (principal) was liable for the damage
caused thereby.
Torts Committed by Agents
Liability of the Principal
 However, to make the principal liable, the act of the

agent must have been committed in the course of

the agent’s employment.
 Thus, where it was established that the agent was on a

frolic of his own, it was held that the agent was not in
the course of his employment and therefore the
principal was not liable.
Torts Committed by Agents
Liability of the Agent
 In situations where a third party suffers a loss, damage

or injury as a result of the wrongful act or omission of

the agent, the agent remains liable to him personally.
 The agent is liable directly as the perpetrator of the

wrongful act or omission and jointly with his principal.

 His liability exists notwithstanding that he was acting

with the express authority or instruction or order of

the principal or for the benefits of the principal.
Torts Committed by Agents
Who May Be Sued
 The third party may sue either the agent or the

principal separately or both jointly since they are

both generally jointly and severally liable.
 Any judgment obtained against either of them bars

any further action against the other.

Crimes Committed by Agents
 It is pertinent to state from the onset that crimes
committed by agents in the course of executing the
terms of their agency have a dual aspect.
 In the first place, it refers to the personal responsibility
of the agents and the principal respectively.
 Secondly, it refers to the vicarious responsibility of the
principal for the crimes committed by the agents.
Crimes Committed by Agents
Personal Responsibility of Principal and Agent
 The general rule relating to crimes committed by an

agent is that as the perpetrator of any act or omission

constituting a crime, he is personally responsible
whether such crime was committed in the course
of his employed or not.
 Therefore, to be criminally responsible for such an act

or omission, the prosecution must prove as against

the agent, all the essential elements or ingredients
of criminality.
Crimes Committed by Agents
Personal Responsibility of Principal and Agent
 The agent must be proved to have:

 a) attained the age of criminal responsibility.

 b) been in possession of the relevant mens rea (i.e. the
criminal intent) of the particular crime or offence at the
time of its commission or omission and
 c) performed the actus reus i.e perpetrated the act or
omission constituting the particular offence or crime.
Crimes Committed by Agents
Vicarious Responsibility of Principal
 The general rule in common law is that the principal

is not ordinarily vicariously responsible for a crime

committed by his agent in the course of his
employment.
 This principle of law has raised the issue of when a

statute should be considered as having created a strict

liability offence.
 A principal will, however, be liable if the principal

directed, approved, or participated in the crime.

Rights & Duties btn Principal & Agent
Rights & Duties
 In modern commerce, the relationship of principal
and agent is primarily consensual.
 Consequently, the rights and duties arising from
such relationship are discernible from the express
or implied agreement between the parties.
 The relationship is often described as fiduciary in the
sense that it arises out of the trust or confidence
reposed upon the agent by the principal.
 Hence, there exist rights and obligations with
attendant duties on both parties to one another.
Agent’s Duties
 In commercial transaction it is apparent that a
principal may sometimes engage or appoint an agent
who belongs to a particular trade, business or
profession or may be required or instructed to operate
at a particular place or locality.
 In some of the cases, the principal is not always
with the agent and this requires the agent to
perform some basic duties to the satisfaction of the
said principal.
Agent’s Duties
1 Duty to Perform
 The primary duty of an agent particularly where he was

appointed under an agreement with the principal is to

execute his agency in accordance with the terms of
such agreement.
 However, where the agent fails to perform his duties or

to do so in accordance with the terms of his contract,

he is generally liable only for the breach of his agency
agreement.
 If he performs such duties carelessly or in an imperfect

manner and thereby causes loss to his principal, he may

in addition become liable in negligence.
Agent’s Duties
1 Duty to Perform
 Such liability may take the form of an action for

damages for the loss suffered by the principal, or an

indemnity or contribution from the agent in favour
of the principal.
Agent’s Duties
1 Duty to Perform
 However, his duty to perform is not absolute - If he

was unable to perform his duty, he must promptly

inform his principal or any other person having
authority to receive such information.
 Also, if the duties are illegal, he is not bound to

perform then.
 If he is also a gratuitous agent, he will not be liable

for breach of duty to perform.

Agent’s Duties
2 Duty of Obedience or Loyalty
 When an agent is executing the terms of his agency,

he is obliged to carry out such instructions as may be

given to him by the principal relating thereto.
Agent’s Duties
2 Duty of Obedience or Loyalty
Exceptions
 1. Where no definite instructions has been given to

the agent, or where such has been given, but this

leaves the agent a measure of discretion, he would
only be expected to be guided by the reasonable and
honest exercise of his own judgement and the
interest of the principal.
 If he is therefore so guided, he incurs no liability

even if the principal suffers a loss by their exercise.

Agent’s Duties
2 Duty of Obedience or Loyalty
Exceptions
 2. If the principal’s instruction is ambiguous, the

agent is put to election and provided he acted fairly

and honestly, he would not be in breach of his duty
of obedience and honesty even if the course chosen
by him is less favorable to his principal.
Agent’s Duties
2 Duty of Obedience or Loyalty
Exceptions
 3. If the agent is a professional agent the principal’s

instructions may be subject to any custom or usage

of the particular trade, business or profession to
which the agent belongs or within which he operates.
Agent’s Duties
3. Duty of Care and Skill
 In the course of executing the terms of his agency, an

agent is bound to exhibit such care, skill and

judgment as are required under the circumstances
of the particular situations.
Agent’s Duties
3. Duty of Care and Skill
 The degree of care, skill or diligence required of an

agent may sometimes depend on whether he is a

gratuitous agent or acting for reward.
 If he was acting for reward, a higher standard of care,
skill or diligence is required of him.
 If he were a professional, agent or holds himself out
as possessing a professional qualification, he must
exhibit such care, skill or diligence as is usual or
necessary or for the proper conduct of the trade,
business or profession in which he is employed.
Agent’s Duties
3. Duty of Care and Skill
 However, if he holds himself out to the principal as

possessing a special skill or knowledge, then he is

obliged to exhibit such care, skill or diligence as
would normally be shown by one possessing such
skill or knowledge.
Agent’s Duties
4 Duty of Personal Performance
 The basic principle of law in this regard is covered by

the maxim “Delegatus Non Potest Delegare” which

means a delegated power cannot be further
delegated.
 Agency relationship is one of confidentiality of

principal and the agent, and the agent is generally

expected to perform his duties as an agent,
personally.
Agent’s Duties
4 Duty of Personal Performance
 In the realm of agency, an agent cannot entrust to

another person or a sub-agent the exercise of an

authority or duty entrusted to him by his principal
without the latter’s express or implied authority to
do so.
Agent’s Duties
4 Duty of Personal Performance
Exceptions
 The recognized exceptions to this general rule include:

 Where the agent has the express or implied authority of

the principal to do so.
 Where no personal confidence is reposed on the agent by
the principal or by the terms of his agency.
 Where the function or duty of the agent does not require
any particular skill or discretion or is purely ministerial.
 Where a custom or usage of the trade, business or
profession of the agent or within which he operates allows.
Agent’s Duties
4 Duty of Personal Performance
Exceptions
 Where an emergency has arisen requiring immediate or

instantaneous action in order to preserve or protect the

interest of the principal or the agency itself.
 Where the nature of the agency itself necessitates a partial

or total delegation, without which it would be superflous or

unreliable.
 Where the principal ratifies the act of the agent in

appointing a sub-agent or an act or omission of the supposed

sub-agent either directly or otherwise.
 Where the authority to delegate is derived from a statutory

or legislative provision or enactment.

Agent’s Duties
5 Duty to Act in Good Faith
 This duty of an agent arises principally from the fiduciary

nature or character of the principal-agent relationship.

 Agency relationship, as a whole, is based essentially on

the trust reposed on the agent by the principal.

 The principal employs an agent normally because he

requires that agent’s personal service or expertise. He will

usually depend on the agent for the due performance of
those services.
 The law imposes on the agent the duty to show good

faith in his dealings on behalf the principal.

Agent’s Duties
5 Duty to Act in Good Faith
 The duty of good faith has many corollaries. These

are:
 1) The agent must avoid clash of personal interest with
that of his principal.
 2) The agent should not make any secret profit or other
benefit from his position as agent in excess of his
agreed commission or remuneration.
 3) The agent is under an obligation not to take a bribe
while executing his agency.
Agent’s Duties
5 Duty to Act in Good Faith
 In cases where the giving or receiving of bribe is

established against the agent, the principal could

exercise the following options:
 a) dismiss the agent immediately and without notice.
 b) refuse to pay the agent any salary or commission
payable or accruing.
 c) recover any salary or commission already paid on the
particular transaction.
 d) recover the amount of the bribe paid to the agent.
 e) claim damages from the agent or the third party for any
loss occasioned by the bribe.
Agent’s Duties
6 Duty to Account
 It is a fundamental obligation of every agent to keep

and to render appropriate account of his stewardship

to his principal whenever he is called upon to do so.
 Thus he must be willing and ready at all times to

render an account of all transactions undertaken by

him for and on behalf of his principal.
 This duty is more particularly important where

money or property has been received for and on

behalf of the principal.
Agent’s Duties
6 Duty to Account
 Some individual obligations of the agent to his principal relating

to the duty to account flow from the general duty to account.

These are:
 1) duty to keep proper account.
 2) duty to make books and documents in his possession relating to the
execution of the agency accessible to his principal.
 3) duty to keep his personal monies separate from his principal’s
money.
 4) he is under a duty, if he holds money or property on behalf of his
principal, to pay over or account for such money or restore such
property to his principal notwithstanding claims made by third
parties provided that the money or property was not received in respect
of a void or illegal transaction or that the agency itself is not void or
Principal’s Duties
 The major duty a principal owes his agent is premised
on the issue of money and pecuniary advantages
accruable to the agent in the event of an effective
discharge of his own duties under the contract.
 This also includes carrying out the principal’s
instructions under the terms of the agency in respect
of his dealings with third parties on behalf of the
principal.
Principal’s Duties
1 Duty to Remunerate
 The primary duty of a principal to his agent is to

remunerate him for the services rendered.

 Such duties arise whenever the agent is employed

under such circumstances as would reasonably justify

the expectations that he should be paid.
 The remuneration may take the form of an agreed

commission or wages or other benefit agreed

between the parties such as some share of the benefits
accruing to the principal from the agency.
Principal’s Duties
1 Duty to Remunerate
 However, the duty to remunerate is not absolute for

the agent’s right to receive it accrues only if he is

entitled to it in accordance with the agency
agreement which will also include the amount
payable, the conditions under which it becomes
payable and the time of payment.
Principal’s Duties
1 Duty to Remunerate
 The right to reasonable remuneration may sometimes

be implied from the express terms of an agreement,

the custom and usage of the particular trade,
business or profession of the agent , where the
parties operate and the surrounding circumstance
including any dealings between the parties may also
determine remuneration.
Principal’s Duties
1 Duty to Remunerate
 However, even when the duty to remunerate has arisen

expressly or by implication the agent’s right to it is

further subject to certain conditions.
 These include:

 a) the agent must have earned the remuneration. That is,

when the agent has done all or substantially all he was
obliged to do under the circumstances.
 b) the agent must be the effective cause of the transaction
from which the remuneration accrues.
 c) the agent must fulfill the conditions, if any, upon
which the remuneration accrues.
Principal’s Duties
2 Duty of Re-Imbursement and Indemnity
 In every agency relationship, there is by implication, a

duty on the principal to indemnify the agent of all

loses, damages or liabilities sustained by the agent
in the course of discharging his authorized duties.
 This implied duty is subject to any subsisting

agreement or declared intention of the parties.

 All reasonable expenses incurred by the agent and

any incurred by him when he engages the services

of a sub-agent or substitute with the approval of the
principal are payable.
Principal’s Duties
2 Duty of Re-Imbursement and Indemnity
Exceptions
 The agent will not be entitled to this right in any of the

following conditions:
 a) where the agent acted without express or implied
authority, unless the transaction is subsequently ratified by
the principal or any other person authorized by him to do so.
 b) where the agent incurred the expenses, loss or liability in
consequence of his own negligence, default or insolvency.
 c) where the agent has acted in breach of his duty,
including violation of any principal’s lawful or
reasonable instructions.
Principal’s Duties
2 Duty of Re-Imbursement and Indemnity
Exceptions
 The agent will not be entitled to this right in any of

the following conditions:

 d) where the agent acted in respect of a transaction that is
to his knowledge unlawful or contrary to public policy.
 e) where the agent acted in respect of any transaction
rendered null and void by any statute.