Authorities as an essential element in Agency Relationship

Introduction

In general agency refers to the relationship between agent and principal and it is important

as agent can enter into binding contract on behalf of the principal which is called “privity

of contract”.

Literature review is concerned with how the common law deals with agency relationship

and the legal consequences of unauthorized acts in terms of the resulting liability of the

agent to the third party.

The author of this literature recognized the applicable authority of the agent and the extent

to which an agent could use his authority towards the third party and thereby the literature

review is codified.

Even though this relationship exists the agent need to have authority to enter into such

contracts on behalf of principal and agent should act within his scope of authority given

by the principal.

Common law identified mainly five types of authorities and according to these authorities

agent may act in a different ways. Those are identified as apparent authority, actual

authority, usual authority, agency of necessity and ratification.

Actual authority can be either in the form of express or implied to the agent given by

principal. Apparent authority exists in the absence of actual authority. While actual

authority requires a written permission to act on behalf of the principal apparent authority

is not required such written permission.

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When considering the authorities of an agent there are number of cases in common law

which can be argued as there are legal consequences between each case.

Content

Sealey L. S & Hooley critically discussed in their ‘Commercial Law’ 3rd Edn, 2003 book

the case of Freeman & Lockyer V Buckhurst Park Properties1 as Diplock LJ has not stated

distinction between actual and apparent authority clearly as well as the delegation of

authority to an agent was not clear too. But Lord Denning stated totally different opinion

compared to Diplock and he considered apparent authority as power of agent as

represented to the others. He treated that actual and apparent authority has close

similarity and they may either exit without the other. In align with Robert Bradgate” in his

book of commercial law2 he has given a clear cut definition on apparent authority and

actual authority.

As stated by Sealey L. S. & Hooley R.J.A there are often incidents where apparent

authority may coincide the actual authority. In the case of Hely-Hutchinson v Brayhead

Ltd3 Roskill J justified the case on the ground that Managing Director of Brayhead had

apparent authority to bind Brayhead but case was disregarded on the ground that MD

had implied actual authority to bind Brayhead4. Robert Bradgate stated the same opinion

in his book as similar to Sealy L. S. & Hooley R.J.A for the case of Hely-Hutchinson v

Brayhead Ltd5

1
[1964] 2 480 CA
2
Robert Bradgate, ‘Commercial Law’ (3rd Edn, Oxford University Press 2000
3
[1967] 1 QB 549
4
Sealey, L. S.& Hooley R.J.A, ‘Commercial Law’ (3rd Edn, OUP Oxford 2003 pg 116
5
[1967] 1 QB 549
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Sometimes apparent authority exceeds actual authority. Also there situations where

apparent authority exists outside the actual authority such as in the case of Watteau v

Fenwick6, third party claimed that the principal is liable for their loss as they did not know

the limitations of an agent even though an agent was acting outside of its authority. Wills

J held that this case is an evidence of a separate category of usual authority but not

apparent authority. Robert Bradgate stated that that this decision held by Wills J was

heavily criticized by others as it was referred to as "usual authority" even though agent

totally ignored his scope of authority and acted against the contract. Hence other writers

suggested that this case can be explained on the basis of apparent authority.

The overall idea brought up in the case of Rama Corpn Limited V Proved Tin and General

Investment limited7 is described as uncertain as mentioned by Slade J that the principal

may stop executing the authority as an apparent authority which was also mentioned as

a form of estoppel. The distinction between apparent authority and estoppel stated afore

is confirmed by Sealey L. S. & Hooley R.J.A in their ‘Commercial Law text, cases and

materials book8.

Agency of necessity refers to the work done by agent without the principal’s authority. It

may happen when agent’s act is really needed in that situation or it must be an impossible

situation where agent could not get principal’s instruction or situation where agent acts in

a good faith to the principal.

6
[1893] 1 QB 346
7
[1952] 2 QB 147
8
Commercial Law text, cases and materials 2009
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Agency of ratification is may happen instances where an principal accept and confirm

unauthorized transaction of an agent in good faith. This can be either expressed or implied

form.

Conclusion

This literature review mainly discussed on the relationship between principal and agent

and how this fiduciary relationship works upon the various types of authorities. However

this literature explains ultimately this relationship depends on the agreement made

between the principal and the agent. If agent acts outside his scope of authority given by

principal then the principal is not liable and agent is liable for the breach of contract.

In general any person who is capable of agreeing can act as an agent even though he

has no contractual capacity. But my opinion is that there should be an agreement or any

written document between agent and principal including the terms agreed by both parties

at the time creating the agency contract as it protects both parties and one party can act

on the negligence of the other party.

When defining the authority of an agent, I would state that the outcome of the case of

Hely-hutchinson9 is much more preferred that the case of Freeman10 and Lockyer.

Word Count excluding Foot note and Bibliography - 980

9
[1967] 1 QB 549
10
[1964] 2 480 CA
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 Bibliography

Cases

1) Freeman & Lockyer V Buckhurst Park Properties Ltd [1964] 2 480 CA

2) Hely-Hutchinson v Brayhead Ltd [1967] 1 QB 549

3) Watteau v Fenwick [1893] 1 QB 346

4) Rama Corpn Limited V Proved Tin and General Investment Ltd [1952] 2 QB 147

Books

1) Sealey, L. S.& Hooley R.J.A, ‘Commercial Law’ (3rd Edn, OUP Oxford 2003

2) Robert Bradgate, ‘Commercial Law’ (3rd Edn, Oxford University Press 2000

3) Roy Goode ‘Commercial Law’ Mckendrick Ewan (Ed), 5th Edn LexisNexis UK &

Penguin Books, 1982 pg 184

4) Commercial Law text, cases and materials 2009

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