Law of agency notes

Defining characteristics: section b

- A fiduciary relationship

- Has internal and external aspects

- Parties: principal, agent, third party

- Authority to act as an agent derives from the manifestation/ conferral of authority

by the principal.

- This arises in a number of ways (and which may occur contractually, but a
contract is not required)

- Authority normally provides the agent with the power to conclude contracts for the
principal (the paradigm case).

- The act of representation is the performance aspect- exercising the power as

authorised

- Some agents are unempowered and cannot conclude contracts despite fulfilling
other agency roles (the extended case).
Agency

Principal

Empowered

Agent

Unempowered

Third person

Page 14 handout.

Page 17 handout.

Lecture 2

Establishing the internal relationship: authority

- Agency authority derives from the manifestation of assent to act by the principal
(objective test)
- Fundamentally, this is a unilateral, process, it is granted, or conferred or identified to
exist (and can equally be withdrawn).
- [debate Kerr v Others!] – page 12 agency is not a contract!
- Manifestation of authority may be identified in a number of ways:
 Actual authority (actually giving authority to the agent directly).
 Ratification
 Apparent authority

Actual Authority (pg 20-23)

Actual authority can arise in 3 potential ways:

- Expressly
- Tacitly
- By operation of law

a) Express actual authority

- The most common way in which authority is conferred by the principal upon the
agent
- Can be orally or in writing (see the previous lecture)
- As indicated on pg. 11/12, a bilateral agreement between principal and agent has not
required… e.g. powers of attorney, and instructions to children.
- But commonly there is an agreement that underlies/ contains the manifestation of
express actual authority.

Contractual mechanisms of conferring express actual authority

1. Contract of mandate
2. Contract of employment
3. Contract of the independent contractor

1. Contract of mandate

- A contract in which the mandatary undertakes (is obliged to) perform a task for the
mandator.
- NB!! Agency authority must not be confused with a mandate! While cases of agency
and mandate can overlap, they do not always do so.
- Sometimes the mandate (task) has nothing to do with agency. But at other times, it
may include an authorisation to act in an unempowered or empowered agency
capacity.
Example

- A lawyer (mentioned page 17)

- Research and giving advice: mandatary, but not agent (no engagement with a third
party)
- Recover damages: mandatary, and unempowered representative agent.
- To run a person’s business: mandate and empowered agent.

2. Employment
- Often agency authority derives from an employment contract
- But not all employees have agency authority- again it depends on their role and
function! They may:
 Have no actual authority at all
 Bu authorised to represent in an unempowered capacity
 Be empowered agents

3. Independent agents [the extended form of agency see pages 13 to 16]

- Whereas mandataries and employees are obliged to do what they are instructed, some
agents have no obligation, but only an incentive to do so- usually the carrot of
commission. (IE they cannot be sued for breach if they do not act- as is the case with
mandate)
- These are independent agents and are usually unempowered
- E.g. travel agents, insurance agents, and especially estate agents (page 16)
- These are not mandataries, even though they are often described in such language!
- See the Eileen Louvet Real Estate case (page 21)

B. Actual authority

- Usual test of the hypothetical bystanders:

- No evidence of express authority, but can it be said, from the nature of the relationship, the
principal’s conduct, and the surrounding circumstances, that authority can be said to exist by
inference?
- IE the two parties, if asked would say: ‘of course- it goes without saying’
See Coetzer v Mosenthals Ltd (Who had to pay the accruing amount of money, the
partnership became his agents as the company was still using his account and the new
partners never opened new accounts, there was tacit agreement that they can use his account)
- Includes necessary, usual, or emergency powers associated with an express authority-
see Nel v Sar & H.

Actual authority by operation of law

- sometimes authority to act arises by operation of law, without the need for any express
authorisation.
 Partners in a partnership
 A board of directors and a company
 Trustees of a trust

C. Ratification
- A practical exception to the rule that one person may not act for another without
authority.
- If “A” acts without authority, it is possible for P subsequently to ratify the Act, and
clothes it with authority after the fact
- Full discussion and case law, on pages 22 and 23
- Is considered to be an ex post facto form of actual authority with retrospective effect
- So… a legal fiction: there is a “manifestation of assent” as to what happened.
- Look at the reference on page 23 handout on Story Agency

D. (section D(II)):
Apparent authority

The origin and extent of agency

- Can be actual or apparent [see characteristic 4 on p9, and top of p11]
- Actual authority is identified between principal and agent
- Apparent authority (sometimes called ostensible authority) is very different
 - It is authority as identified from the representations of a principal and the perceptions
of a third party, where no actual authority in fact existed.
- NB: LOOK AT THE PRINCIPAL AND THIRD PARTY WITH APPARENT
AUTHORITY!!

- Hely- Hutchison v Brayhead Ltd 1968

- Monzali v Smith 1929

IE: authority held against P because of P’s actions.

- Apparent authority (ostensible authority) focuses on the principal’s “representation”

in relation to the agents power, and the third party’s perception.

(actual authority inside box)

X

Is apparent authority the same thing as estoppel (agency by estoppel )

- NBS Bank ltd v Cape produce Co Ltd 2002 (1) SA 296 (SCA) PARA 25
- REAFFIRMED IN South African Eagle Insurance Co Ltd v NBS Bank Ltd 2002 (1)
SA 560 (SCA) and

Estoppel
- Traditionally- a defence to a claim by a claimant is “you are not entitled to make that
claim/assertion against me.”
- IE “estoppel is a shield, not a sword.”
Requirements:
 The other party was misled
 By a representation (including silence)
 At least negligently made (fault)
 The other party acted reasonably upon that belief
 To his/her detriment (change of position)

 United cape fisheries v Silverman 1951 (2) SA 612 (T) [Silverman had a refrigerator
and gave it to Tanner to store it there to see if anyone will buy it. There was no
authority or agency power given. This Tanner went and sold the fridge to United Cape
fisheries and pocketed the money and then became insolvent. Silverman then heard
that his fridge was with Cape Fisheries. He claimed for a rei vendicatio as he had not
entered into this. Cape fisheries refused to say they have led to believe that the fridge
was part of the stock that belonged to Tanner, and why he gave Tanner the fridge in
the first place. That was an act by Silverman who brought the fridge and left it there.
United Cape fisheries was misled]

Examples
A situation where someone has not done well in LT2 (you need certain requirements to get
into LT3). What happens is a student comes in for registration, and this person comes to
register, and they are registered for LT3 (but they are not supposed to). Then Mrs Comely
does a check and realises that there was an error at the Humanities department, and it is now
week 10, the student has been doing everything from tests, assignments, and buying books
that they are not supposed to be in the class, and the dean of humanities says they are
deregistering the student. [there was a negligent act from the part of the humanities faculty in
registering the student, an argument of estoppel- you are estopped from deregistering the
deregistered party].

Estoppel: the ‘agency exception’

Estoppel is a shield to a sword [normally it is a defence raised by a defendant]
- According to the trio of SCA cases, where the question of authority lies at the heart of
a case, this would be the one case where estoppel is a legal basis to establish a claim
to performance, often in a replication (i.e. not a defence)
 - POC “authority” … plea [either denial or confess and avoid] … replication [establish
a claim]
- E.g our ‘manager: investment division’ scenario
- But… what happens if someone claims “apparent authority” in the particulars of
claim???

Makate v Vodacom Ltd 2016 (4) SA 121 (CC)

- Makate, was an employee of Vodacom, it was found that he was the brainchild of the
Please call idea. There was a contract between him and the employers of Vodacom,
and the idea took off and made the company billions, then he asked where his portion
asked. Mr Gestlar had no authority to enter into contracts with employees and he was
the one who entered into this contract with Makate, the decision was meant for the
board and the board never heard of this. Mr Makate’s lawyers said that “we plead that
there was either apparent or actual authority.”
The CC said that you are entitled to put apparent authority in a particular of claim.

19/09/2022 lecture
Wallis AJ
- Adopted the normal traditional approach
- Sa law derived from English law
- English law firmly links apparent authority with estoppel
- Our courts have consistently followed English law on the point
- No requirement of replication: can plead apparent authority in POC.
- Just have to then prove the estoppel requirements
- In Makate, all standard 5 element of estoppel were easily proven

Jafta J
- “Although ostensible authority and estoppel have at times been treated synonymously
by our courts, they are not one and the same thing” (para 43)
 Estoppel is not a source of authority- it is a legal mechanism that prevents someone
denying the authority
  Estoppel may be used in replication to a denial of actual authority but is not the
appropriate device when the claim is based on apparent authority.
 If the original claim is based in apparent authority, the elemental requirements to
demonstrate the existence of apparent authority in our law are not the same as those of
estoppel.

Problems with authority

1. How the evidence that courts accept of a representation giving rise to ‘agency by
estoppel’ tends to be extremely weak in comparison to other forms of estoppel (any of
the three mentioned SCA cases illustrate this, but Glorifinco is a classic example).
2. That a finding of the prejudice or detriment is often contrived, or irrelevant, or
ignored
3. The debate is SA about the vexed fault requirement. Does negligence have to be
proved on the part of principal? Why relevant to an authority scenario?

Where are we?

- Academic commentary so far uniformly says the CC ‘lost the plot’
- But the outcome seems to be that if apparent authority is pleaded in the particulars of
claim, apparent authority is a form of authority to be proved by the basic requirements
of Monzali (but not the full requirements of estoppel).
1. The principal makes a representation/ allows it to be represented that the agent
had the authority to bind the principal
2. The third party upon the faith of that misleading representation entered an
agreement with the principal (with the agent’s facilitation)
- If “authority as manifested by the objective circumstances.”
- So two possibilities (see diagram on page 26)
- 1. You can plead apparent authority in the POC, which usually results in a denial, and
then you are put to the proof thereof.
- Or…
- You can plead ‘actual authority, and if the plea says no [either denial or confess and
avoid], then you can raise estoppel by replication, and say “no- you are estopped from
denying authority because it legitimately appeared to me there was authority.”
- Interestingly, US and UK commentators are agreeing:
  Professor Francis Reynolds: “it seems likely that… the use of estoppel by
representation is a transitional stage in the reason around apparent authority.”

Page 26- 27 – complementary side point

Negotiorum gestio

21/09/2022

The law of agency

Section E:

The residual obligations of an agent

 To do what he/she has been instructed to do

o personal performance (the delectus personae rule), or: [in other commercial
actions personal performance may not be necessary]
- Delegation (sub-agency)
- Substitution
- An agent ‘appointed to find another agent’

 To exercise care, skill and diligence

- General requirements are the ‘care and skill of an ordinary reasonable person’
- But… may vary in the circumstances and is trade/ profession dependant.
- To impart information [an agent has an obligation to impart information, give
whatever communication is necessary]
 To advice [agents don’t just represent, they also have the obligation to advice the
principle using their expertise and skill]
 To act in good faith
a) No secret profits
b) Robinson and Mallison cases……[the agent knew there were people interested in
buying the estate property but went to the seller and said rather they sell the estate
property to them and went to sell the property again to make a profit ]
 c) Duty and interest must not conflict
d) No misuse of information
Jones case [the managerial employee had skills as an exploration geologist and he
was asked to go and investigate whether there was coal at a particular farm and he
discovered that there was a good seam of coal but it extended into the other farm,
he did not tell the company were the seam went, and went onto buy the next farm.
The punitive effect of his breach was that he had to hand it over]
- To account
 Story Agency para 203:
“Where the business in which he is employed admits to it, or requires it, [the agent
must] keep regular accounts of all his transactions on behalf of his principal, not only
of his payments and disbursements, but also of his receipts; and to render such
accounts to his principal at all reasonable times, without any suppression,
concealment, or overcharge”

[End of test]!!

Section F
The obligations of the principal

1. To pay the agreed remuneration, if any

- Focus is on mandate and independent agency. (Not gratuitous arrangements, or
employees)
- Barnabas Plein:
- The remuneration may be:
- Fixed, expressly or tacitly
- Regulated by a trade usage (Estate agents- 5 to 7.5% of the price; rental agents 10-
12% of monthly rent)
- “What is reasonable in the circumstances”
- (Quantum Meruit)
2. To account
3. To indemnify the agent
- Applies specifically to mandate cases. See handout for details
26/09/2022 Remuneration on the commission basis – potential exam question
- A percentage of the value of the subject matter of the transaction
- Earned upon the happening of a specified event, which involves the rendering of the
agents agreed service.
- Estate agent’s commission
- (NB: estate agents usually independent, unempowered agents…)
- Service: usually the introduction of someone ready, willing and able to purchase.
- Event: the conclusion of a valid contract (successful selling of property)

Legal requirements to earn the commission

a) Complete, or substantial performance
b) Causation
- Must be the ‘effective cause’ or ‘causa causans’ or the overridingly operative cause of
the ultimate transaction.
- Clearly the decision by the principal to accept the 3P offer to buy= the true ultimate
cause of the event
- Hence the test is not: did the agent cause the contract to come into being, but…
- Was the agent the proximate or effective cause of bringing P and 3P together? So-
you focus on that service which is in the agent’s control!

Causation
- Usually the ‘finding’ and ‘introduction’ of a ‘willing and able buyer’ is key; and the
‘agents instrumentality’ in facilitating the ultimate transaction.
- Most cases- there is one agent, and either there is success (commission earned) or
failure (no commission)
- Those are easy ones!
[focus on successful cases]

Problem: multiple causal factors, or breaks in the chain

- Here… factual causation (conditio sine qua non) not enough. Must in addition apply
common sense and policy factors relating to legal causation.
- Leading statement… Aida real estate v Lipschitz AT 873H-874F.
 - If a new factor intervenes contributing to the conclusion of the sale.. did the new
factor outweigh the effect of the introduction by the agent, or is the introduction still
overridingly operative?
- The agent’s instrumentality must have been, in all phases… consistent, uninterrupted
and the major positive force working towards the successful conclusion of the
transaction

Multiple causal factors [COMES UP A LOT IN EXAMS]

- Remember that the party who claims, must prove!
a) The efforts are primarily the seller’s not the agent’s
b) Time, and agent falling away
Doyle v Gibbon 1919 TPD 220
c) The purchaser’s efforts in making the necessary financial arrangements
Aida real estate v Lipschitz [Involves other overriding factors] [As cited in Aida
Real Estate Ltd v Lipschitz 1971 (3) SA 871 (W) where Marais J said: "...
protracted negotiations about finances are often attendant on transactions brought
about by an estate agent. In that case it was the purchaser who had concluded the
deal, but it was the estate agent's 'wisdom and business acumen' that brought
together the eager seller and the purchaser who was able to overcome financial
obstacles. Marais said that 'in such a case the agent would be entitled to
remuneration, no matter whether he selected the potential purchaser by chance or
by foresight. A commission agent is paid by results and not by good intentions or
even hard work."]

d) Competing claims by different agents

- Eschini v Jones “where more than one agent is concerned with negotiating a sale
between a principal and a particular third party, the agent entitled to remuneration is
not necessarily the agent who first finds the purchaser, but the agent who is the
effective cause of the sale being completed”

e) Time, further factors, and competing claims by different agents

Basil Elk Estates v Curzon [the Curzon’s were the sellers, and they went to Basil
Elk and agreed on a commission of 380 000, a family came to Basil Elk came who
interested in the property, the family were interested in the property but real life
got in the way the wife had a miscarriage and they went in a depression and
decided that the new plans of moving were not necessarily and they were not
going to move anymore and they lost interest, no one else was interested in the
property and things lapsed for several months, and the Curzon’s went to Basil
Elks that they wanted to sell this property but nothing happened. The Curzon’s
fell pregnant and took the property off the market and decided to stay on the
property. Towards the end of 1985 the Curzon’s decide they want to sell the
property and they put it on the market and they give the instruction to a different
firm called Trapeda, and that Brases family come again and the depression is
over after the miscarriage and they get in touch and the contract is completed and
the Curzon’s pay the Trapedos and Brases Elks comes and sys no we did the work
we are entitled to the commission and not Trapedo the interlope. The Aida tests
were too much to justify as there were too many intervening factors like the
miscarriage and too much time passed and in the end that broke the chain and
Badil elks could not claim any commision]
Gordon v Slotar [An appellant judge decision, Slotar is the agent and Gordon is
the seller (principal) Slotar found an interested person and showed them the
house severally, the new family was willing to pay 62 000, but Gordon refused as
he wanted 75 000, so several months passed and nothing happened, the new
family goes to Greece for a holiday but were still interested in the house. Gordon
decided to try a different approach and decided to put the house on auction with a
company called the Curries and gave them 14 days to run an auction and put a
reserve price of 60 000. The L family came back and realised that the house was
now being publicily auctioned Slotar called the family and informed and told
them of the auction, by that time his claim had been kinda withdrawn and they
thanked him for the call, and the L family goes to the Curries, they don’t do
anything at the auction as the highest bid was below the reserve price, the Curries
offer to twist the Gordons arm and make him offer 56 000. The L family goes to
Gordons house and he refuses and said 57 000 and Gordon accepts and the L
family buys the property, Slotar wants his commission (the factor that plaintiff
introduces the L family are important considerations but the L family was not
keen to buy at the initial price, the agency broke down as they were too far apart
at the pricing and Slotar only kept in touch with the family but nothing else as
 something else had to be done, and it was the intervention by the Curries that
allowed the finalisation of the sale of the house)
There was argument against this that the family had known of the property
through Slotar, and had viewed the house many times through him and had had
been in communication with Slotar throughout the process.]

Problems: equal causal factors

No case yet in SA law which had had to face this issue squarely
Either:
A) No one can meet burden of proof
Or
B) Claim a share of the commission (seems to occur by settlement).

SECTION G AND H
Section G: relations between the principal and third persons

Types of principals that exist

- Named principals
- Unnamed (clear knowledge there is a principal, but they do not want to be named or
identified)
- Undisclosed (an internal relationship between principal and agent. There is actual
express authority between the two, but when an agent goes to deal with third parties,
they do not disclose that there is a principal or their identity. Third-party thinks they
are entering into a basic bilateral agreement)
 Our focus is on the third category, its effect on any contract concluded with a third
party and the scope and application of the doctrine of the undisclosed principal.

The doctrine of the undisclosed principal

- If no action has yet been taken on the contract,
The third-party:
- May treat the contract as binding upon the agent or the undisclosed principal
- Natal Trading and Milling Co v Inglis at 727:
- “The rights and obligations of agent and undisclosed principal are co-relative…
- When the undisclosed principal is discovered, the [third] party has the right either to
sue the agent with whom he contracted, believing him to be the principal, or the actual
principal, and if he… elects to sue either one, he is debarred from subsequently
proceeding against the other.”
- Analogy with piercing the veil.
- But… If the third person has commenced performance/ taken action against the
‘agent,’ the 3P is locked in, even if the 3P was at that point unaware of the existence
of the undisclosed principal.
- Likewise, the undisclosed principal: may choose to adopt the contract, or not.
- Note the principal has the preferential right of the intervention/stepping in, even if the
performance has commenced
- [RELATES TO SAMPLE PROBLEM QUESTION TWO AND FIVE!!]

Ratification only happens when there is no authority but with this there is authority
and principal is aware…

Confirmed in:
Avis v Highland supply stores [two brothers JC Avis and MC Avis, the younger
brother JC Avis gets into financial trouble and went to his older brother for help. The
older brother bails the younger brother and gives him 1500 pounds as a loan to sort
out of the problems. To protect himself he wanted security and said he would be
taking some of the younger brothers property as a pledge as security for his money
(backstory). MCA goes off overseas and he appoints African shipping company as his
general agent under power of attorney to run his business enterprise. MC Avis would
be the principal whilst ASC is the agent. JC Avis is not paying back his money, and
ASC sees a problem and sees that the younger brother is getting in default with the
money. The business agent says they are going to allow JC Avis to take one of the
pledged items and sell it to pay off the loan to the older brother which ASC was
facilitating. Express authority is given to JC Avis to sell the pledged property. JC Avis
enters into a contract with HSS to sell the wagon, in that transaction JC Avis did not
disclose that his was an agent of ASC in turn working for his brother. HSS was
entering into a contract to buy the wagon and was under the impression that JC Avis
 was the owner they did not know of anything was happening in the background. MC
Avis arrives back from overseas and asks for the wagon and speaks to his business
agent and tells him what they did to sell the wagon and MC Avis where the money is
and trace it to HSS and HSS states that they were not aware of the whole authorisation
needed in the background. MC Avis revealed himself to HSS as the principal and was
stepping in and wanted the money for the wagon himself]

05/10/2022
Continuation of section G

Confirmed in
- Avis v Highveld supply stores 1925
- Cullinan v Noordkaaplandse aartappel – kernmoerkwekers kooperasie BPK 1972 (1)
SA 761 (1) AT 771
- [note: Cullinan listed on SAAFLII AS [1971] Zaengtr 1…]
- See too (discussion of the fact that it is an anomalous doctrine of commercial
convenience) Karstein v Moribe 1982 (2) SA 282 (T)

Limitations
- On the basis of equity, the doctrine will not apply…
- … Where the identity of the person with whom the third party contracted was critical
to the third party. (Delectus personae)
- Where the contract is one to perform a service of a personal nature
- Where the application of the doctrine would result in prejudice to the third party.
- See Cullinan [creates three different persons that would be sued for the money. The
court said it only applies to one principal, not three]

Misrepresentation and non-disclosure (page 41 notes)

- Link to general principles:
- A) if the principal makes the misrepresentation, and that is conveyed by the agent
unwittingly- the 3P has the normal remedies, as the contract is between P and 3P
- B) if the agent is the one who makes the misrepresentation, that is also attributable to
the principal (Randbank, Hay)
 - Can extend beyond voidable misrepresentation also to mistake: Allen v Sixteen
Stirling Investments- contract A.

The law of agency

Section H
Relations between agent and third persons
Can the agent ever be bound to a “warranty of authority”?
- Yes…
1. Expressly
2. Tacitly
- Especially relevant if the agent had neither actual nor apparent authority, and the third
party cannot bind the principal, and no ratification occurs
- The claim is for damages for a breach of contract to this effect between A and third
person.

But: beyond express or tacit warranties, is there in law a further, residual warranty of
authority?
- Yes… (see Nebendahl and Blower v Van Noorden)
- Although the actual juridicial basis for its existence, and the nature of the claim under
it, has not yet been finally determined
- See the Claud neon lights case at 409
- ?? delict, breach of contract?? (no court really says it but it’s a form of delict)

The requirements, as far as can be ascertained thus far:

A) a representation of authority
B) inducement (a “causal relationship between the agent’s resentation of authority
and the conclusion of the contract has to be established”)
C) absence of any authority in fact
D) loss suffered
E) fault? (it is debated whether the claim requires proof of fault [intention or
negligence] or whether a bona fide mistaken agent Is also in breach)
cases
Blower v Van Noorden and Claude neon lights
Successful- Claude
- D (‘A’) concludes a lease with CNL (3p) on behalf of hotel
- No authority of any kind to do so.

Unsuccessful- Blower
- VN (‘A’) had authority to sell a farm, but not to lease it. B was keen to lease
- Code arrived: warrier (?)
- B and VN: must be ‘warrior’ = “I have given warrant” In fact: ‘worrier’ = “I will
write you further instructions”

Section I
Termination of the power to act as agent
- Performance
- Effluxion of time
- Supervening impossibility
- Agreement (bilateral)
- Revocation of power (unilateral)
- Renunciation (unilateral)