L3309 – LAW OF SPECIAL CONTRACTS

LESSON 3
Different Types of Agents

In lesson 2 you learned about the authority of the agent and that an agent
cannot act on behalf of the principal unless the principal grants
authorization to the agent to do so. While a popular authority is an express
one, you have seen that an authority can be in several forms which are
justifiable by law.

In this lesson you will learn about the different types of agents and their
different characteristics thereof. After this lesson you will be able to define
the different types of agents, describe their differences, and be able to
distinguish which type of agent is most suitable for any kind of scenario.

1. AUCTIONEER

This is an agent employed or authorized by the seller to sell property on

his or her behalf through an auction. The auctioneer is required to act in
the best interests of the principal (seller) and sell the property to the
highest bidder. An auction is a form of sale. In an auction, property is
publicly put up for sale. An auction has a seller and a varying number of
prospective buyers. Thus, an auction can be defined as “the public sale
of a property to the highest bidder.” See Pitchfork Ranch Co. v. Bar TL,
615 P.2d 541, 546-547 (Wyo. 1980). The auctioneer is authorized to
 sign a memorandum of sale on behalf of both parties, but this authority
is limited and expires shortly after the sale has been concluded. Both the
buyer and the seller are bound by the announcement of the auctioneer
concerning the identity of the property and the terms and conditions of
the sale.

The auctioneer as a special agent, is required to conduct the sale in

accordance with the instructions (authority) of his principal. An auctioneer
cannot bind his principal beyond his actually granted authority. Moreover,
an agreement or a contract, which is beyond an auctioneer’s authority will
not be binding on the principal. An auctioneer’s authority ends when a
sale is completed and the purchase price is collected. After an auction, an
auctioneer cannot vary the contract of sale or the terms on which title is
to be given, without any special authorization.

2. BROKERS
A broker is an agent appointed by either the buyer or seller to negotiate
a contract of sale on his behalf. The main function of an agent is to
negotiate a contract of sale on the seller’s behalf. The broker’s power only
goes as far as only negotiating and has no plenary power to bind the
parties.

In Benoni Produce & Coal Co Ltd v Gudelfinger 1918 at 458

The court said;

 ‘ A broker, according to our law, is a middleman or intermediary whose
office is to negotiate between two parties until they are ad idem as regards
the terms upon which they are prepared to buy and sell. He is, as it were,
agent for both one and the other to negotiate the commerce and affair in
which he concerns himself…The true contract entered into between the
buyer and the seller where a broker is employed, is the result of the
agreement between the broker and the seller, and in order to ascertain
what this contract is we require the evidence of broker, seller and buyer.
If broker draws up the contract in writing and the parties sign it, then the
document will embody the contract. If, however, the parties do not affix
their signatures to any document, the true contract must depend upon
the evidence of the three parties mentioned’

The broker merely brings the two parties together and if the transaction
materializes he becomes entitled to the commission. The commission paid
to him is called brokerage.

3. ESTATE AGENTS

An estate agent is person authorized to act on behalf of an owner of

immovable property for its sale, purchase or in some instances renting. The
authority is ordinarily expressed or implied, but a court will not be astute
to find the existence of implied authority where an estate agent approaches
and solicits business from a principal unless and until it is clear that the
principal deliberately employed the agent to act on his behalf. In field of
immovable property, an estate agent fulfils the same function as a broker,
who normally negotiates sale of movables. The estate agent neither has an
implied authority to conclude a contract of sale, nor does he any obligation
imposed on him to do anything. The contract between the principal and
estate agent is a mere promise binding on the principal to pay commission
upon the happening of a specified event, viz the conclusion of a contract
of sale by the principal with a third party who is in a position to carry out
the terms of the contract.

The court in Glukaman v Landau & Co 1944 TPD 261 at 267 said;

“Normally the services of an estate agent are invoked whent the principal
desires to dispose of his property and receive the proceeds thereof. He
has in contemplation an actual sale as the event upon which his promise
to pay commission must be fulfilled, and the agent realizes this…is under
no obligation to conduct the actual negotiations or to see the completion
of the ultimate contract of sale, much less to its subsequent performance.
The service expected of him is the introduction of a person who is able,
both legally and financially, to purchase, and who is willing to purchase,
such willingness being shown by the making of a binding offer of purchase
at not less than the price originally fixed, or subsequently reduced, by the
principal…the necessary negotiations required to fix the various conditions
of the contract and the execution of the written contract of sale, if any, are
matters for the principal’

Read cases:
 a) Stewart v Zagreb Properties 1971(2) SA 346
b) Bird v Summerville & Another 1961 (3) SA 194 @ 202
c) Mackenzie v Flight 1922 TPD 407, 410

4. FACTORS
A factor is an English law term used to define an agent authorised to sell
goods of his principal for compensation. The principal allows the factor
to be in possession of and control over the goods. The factor is
authorised to sell the goods and receive payments in his own name. He
has a general lien on any goods that fall into his possession as a factor
and also on their purchase for the amount due to him as remuneration
from the principal.

The factor has the following powers:

i) To sell goods in his own name;

ii) To sell goods on credit at a place and at such time which he
thinks best;
iii) To receive payment for the goods;
iv) To maintain a lien on goods for charges due to him.
 5. DEL CREDERE AGENT

A del credere agent is someone who sells the goods of his principal
who guarantees payment of the purchase price by the buyer. If the
purchase fails and the deal does not go through, the agent
undertakes to pay for them and for this additional service he
receives a higher commission than an ordinary sales agent. The
agent may be an auctioneer, a factor or a broker authorized to sell
the principal’s goods and not simply to negotiate the sale. The
additional commission he receives for this guarantee is known as a
del credere commission.
In summary, the different important points related to the del credere
agency are as follows1:

 In Del Credere agency, the agent becomes liable for the payment to
the principal only in case the buyer defaults in respect to making the
payment and the same is not liable in case of any other issues which
might arise between the buyer and the seller. The issues where the
agent will not be liable includes, dispute arising between the buyer
and the seller.
 For undertaking the extra risk by the agent in form of the insurance
services, the seller has to make extra to the agent i.e., the agent will
receive the normal commission for the sales as well as the extra

1
Madhuri Thakur, “Del Credere Agency” WallStreetMojo < https://www.wallstreetmojo.com/del-credere-
agency/> (accessed 07/03/2021)
 commission for undertaking the insurance services. This extra
payment is generally in the form of the additional sales commission
which is known as the Del Credere commission.
 The nature of the Del Credere agency is such that it puts the agent
in the agency in the situation wherein he has the responsibility in
connection with the seller as well as the buyer and of product or
service under consideration.