COMMERCIAL LAW STUDY NOTES
AGENCY
Approach:
identify the legal relations between the parties;
identify the transactions engaged in by the parties;
what are the obligations (rights and duties) of the parties?
what are the issues?
what causes of action are available?
what remedies are the parties seeking?
Introduction
An agent is one that can create legal relationships between the principal and third parties:
International Harvester v Carrigan’s Hazeldene Pastoral Co.
Capacity
principal must have capacity to do the act which the agent performs on the principal’s behalf.
agent is not required to have legal capacity.
The nature and extent of an Agent’s authority
express grant by B
relationship between B and A is such that A impliedly has B’s authority
representations made by B to a third party that A has B’s authority
operation of law
operation of statute
ratification
General agency issues:
what forms of authority are at issue?
check which of actual express, actual implied, ostensible agency or agency by ratification are
applicable for each relevant legal actor. Ensure that you understand the differences between
them.
how has the agency relationship involving A been created?
is there more than one form of agency at issue here?
Look for form of Authority1
1
In answering a question always go through all the forms of authority:
1. Did this person actually have express authority to enter into this act or
transaction - look at employment contract between that person and the sale of
whatever (in questions there will usually be some limiting written agreement that
PREPARED BY MR. ANTONY AMBIA Page 1
, actual authority
ostensible authority
ratification
Actual Authority
They will be hold to have consented if they have agreed to what amounts in law to such a
relationship - even if they don’t recognize it themselves and even if they profess to disclaim it.
The consent must have been gien by each of them - the principal and agent.
It can be expressly given or by implication from their words or conduct.
Primarily one looks to what the parties said and did at the time of the alleged creation of the
agency (or act or transaction): Garnac Grain v HMF Faure and Fairclough.
Actual Implied Authority
Subcategories:
incidental authority
usual authority
customary authority
authority implied from the course of dealing in the circumstances of the case
This type of authority stems from the circumstances of the case and the conduct of the parties:
Equiticorp.
An agency agreement can be implied when each has conducted himself in relation to the other
that it is reasonable for the other to infer consent to the agency relationship.
There are no particular agency laws applicable here - that is semply recognition of the fact that
contracts are not always express and can be inferred by the court from the circumstances -> the
promises are expressed partly or wholly by conduct rather than by words.
Ostensible Authority
other two forms consentual
can exist without consent/authority or where principal has forbidden agent to do something or
agent has exceeded authority
Elements of ostensible authority or Agency by representation
representation by words or conduct by the principal (not the agent) to the third party that the
agent acts for him
reliance by the third party on the representation
alteration of the third party’s position resulting from such reliance: Rama Corporation v Proved
Tin & General Investments
Ostensible authority: Reliance can not be claimed where:
will limit the agent’s authority).
PREPARED BY MR. ANTONY AMBIA Page 2
, it is an unusual transaction: Rama Corporation.
the third party knows or had the power to know the truth: Hely Hutchinson
the articles of association do not allow for delegation of the relevant power on the particular
agent: Northside Developments
a person with ostensible authority cannot confer ostensible authority on another: Crabtree
Vickers
Freeman Lockyer v Buckhurst Park Properties
usual transaction
can rely on power in articles without knowing of it
Examples:
where principle appoints an agent to a particular position or entrusts agent with some responsibility
a course of delaings between a third party and a principal through an agent
where principal stands by mute where someone deals with a third party apparently on behalf of the
principal
Rama Corporation v Proved Tin & General Investments
unusual transaction
cannot rely on power in articles unless aware of it
First Sport Ltd v Barclays Bank
- applied above principles
Ratification
The elements are:
the agent whose act is to be ratified must have purported to have acted for the principal.
at the time that the act was done, the agent must have had a competent principal.
at the time of ratification, the principal must be legally capable of doing the act: Firth v Staines;
Trident General Insurance Co Ltd v McNiece Bros Pty Ltd.
the principal must be disclosed or identifiable (Trident General Insurance Co Ltd v McNiece Bros
as well as competent to do the act personally: Black v Smallwood (1966).
the principal must have full knowledge of all material facts relating to the act to be ratified:
Taylor v Smith.
ratification must take place within a reasonable time of the agent’s act unless the contract
stipulates another, more specific timeframe: see Life Savers Australasia Ltd v Frigmobile Pty Ltd.
Time for Ratification:
has ratification occurred within a reasonable time?
The time for ratification by the principal of the agent’s act depends on the circumstances of the
case. If the particular contract specifies a timeframe within which ratification must take place
the that timeframe must be observed. If there is not timeframe specified, then ratification must
take place within a reasonable period of time: Life Savers Australasia v Frigmobile.
NOTE: A limit on ratification appears in the rule that ratification cannot be made which divests
PREPARED BY MR. ANTONY AMBIA Page 3
, persons not parties to the ratified contract of their rights or to affect prejudicially those rights
where those rights have vested before the act of purported ratification: A-G v Wilde
will ratification cause an injustice to the third party?
has the principal dealt with the third party in a manner suggesting that the contract has gone off?
Ratification Issues
Who may ratify?
Only person able to ratifiy is the person:
in whose name the act was purported to be done
which person must be in existence at the time the act was done
competent at that time to be the principal of the person doing the act
not necessarily known, personally or by name, to the third party
Howard Smith
ratification between principal and agent only
agent must disclose at time of contracting that he is acting on behalf of a principal.
principal need not be named but must be capable of identification: Kelly Maxstead v Durrant.
When can a principal ratify?
see above.
What constitutes ratification?
Ratification may take a variety of forms to be effective at general law:
(1) Express - this requires clear and unequivocal acts: Petersen v Maloney.
(2) Implied - by conduct (such as a putative principal commencing legal proceedings on the
contract concluded by the agent: Cox v Isles, Love & Co.
The act of adoption must be accompanied by full nowledge of all the essential facts: Taylor v
Smith.
The assignment by the principal of the benefit of a contract entered into by an agent without
authority is a ratification of the contract: Thompson v Hickman.
It is also necessary for the entirety of the third party transaction to be ratified - it is not possible
to adopt in part and disclaim in part: Howard Smith.
When courts will not invoke the doctrine of ratification:
ratification occurs after performance of the contract
where there is a time stipulation in which the contract is to be accepted
where there has been a breach or loss under the contract before ratification
where ratification occurs after withdrawal of the offer
will not be effective when it will unfairly prejudice a third party
What happens if:
A makes offer to B
|
Unauthorized acceptance by B
|
A withdraws offer
|
PREPARED BY MR. ANTONY AMBIA Page 4
AGENCY
Approach:
identify the legal relations between the parties;
identify the transactions engaged in by the parties;
what are the obligations (rights and duties) of the parties?
what are the issues?
what causes of action are available?
what remedies are the parties seeking?
Introduction
An agent is one that can create legal relationships between the principal and third parties:
International Harvester v Carrigan’s Hazeldene Pastoral Co.
Capacity
principal must have capacity to do the act which the agent performs on the principal’s behalf.
agent is not required to have legal capacity.
The nature and extent of an Agent’s authority
express grant by B
relationship between B and A is such that A impliedly has B’s authority
representations made by B to a third party that A has B’s authority
operation of law
operation of statute
ratification
General agency issues:
what forms of authority are at issue?
check which of actual express, actual implied, ostensible agency or agency by ratification are
applicable for each relevant legal actor. Ensure that you understand the differences between
them.
how has the agency relationship involving A been created?
is there more than one form of agency at issue here?
Look for form of Authority1
1
In answering a question always go through all the forms of authority:
1. Did this person actually have express authority to enter into this act or
transaction - look at employment contract between that person and the sale of
whatever (in questions there will usually be some limiting written agreement that
PREPARED BY MR. ANTONY AMBIA Page 1
, actual authority
ostensible authority
ratification
Actual Authority
They will be hold to have consented if they have agreed to what amounts in law to such a
relationship - even if they don’t recognize it themselves and even if they profess to disclaim it.
The consent must have been gien by each of them - the principal and agent.
It can be expressly given or by implication from their words or conduct.
Primarily one looks to what the parties said and did at the time of the alleged creation of the
agency (or act or transaction): Garnac Grain v HMF Faure and Fairclough.
Actual Implied Authority
Subcategories:
incidental authority
usual authority
customary authority
authority implied from the course of dealing in the circumstances of the case
This type of authority stems from the circumstances of the case and the conduct of the parties:
Equiticorp.
An agency agreement can be implied when each has conducted himself in relation to the other
that it is reasonable for the other to infer consent to the agency relationship.
There are no particular agency laws applicable here - that is semply recognition of the fact that
contracts are not always express and can be inferred by the court from the circumstances -> the
promises are expressed partly or wholly by conduct rather than by words.
Ostensible Authority
other two forms consentual
can exist without consent/authority or where principal has forbidden agent to do something or
agent has exceeded authority
Elements of ostensible authority or Agency by representation
representation by words or conduct by the principal (not the agent) to the third party that the
agent acts for him
reliance by the third party on the representation
alteration of the third party’s position resulting from such reliance: Rama Corporation v Proved
Tin & General Investments
Ostensible authority: Reliance can not be claimed where:
will limit the agent’s authority).
PREPARED BY MR. ANTONY AMBIA Page 2
, it is an unusual transaction: Rama Corporation.
the third party knows or had the power to know the truth: Hely Hutchinson
the articles of association do not allow for delegation of the relevant power on the particular
agent: Northside Developments
a person with ostensible authority cannot confer ostensible authority on another: Crabtree
Vickers
Freeman Lockyer v Buckhurst Park Properties
usual transaction
can rely on power in articles without knowing of it
Examples:
where principle appoints an agent to a particular position or entrusts agent with some responsibility
a course of delaings between a third party and a principal through an agent
where principal stands by mute where someone deals with a third party apparently on behalf of the
principal
Rama Corporation v Proved Tin & General Investments
unusual transaction
cannot rely on power in articles unless aware of it
First Sport Ltd v Barclays Bank
- applied above principles
Ratification
The elements are:
the agent whose act is to be ratified must have purported to have acted for the principal.
at the time that the act was done, the agent must have had a competent principal.
at the time of ratification, the principal must be legally capable of doing the act: Firth v Staines;
Trident General Insurance Co Ltd v McNiece Bros Pty Ltd.
the principal must be disclosed or identifiable (Trident General Insurance Co Ltd v McNiece Bros
as well as competent to do the act personally: Black v Smallwood (1966).
the principal must have full knowledge of all material facts relating to the act to be ratified:
Taylor v Smith.
ratification must take place within a reasonable time of the agent’s act unless the contract
stipulates another, more specific timeframe: see Life Savers Australasia Ltd v Frigmobile Pty Ltd.
Time for Ratification:
has ratification occurred within a reasonable time?
The time for ratification by the principal of the agent’s act depends on the circumstances of the
case. If the particular contract specifies a timeframe within which ratification must take place
the that timeframe must be observed. If there is not timeframe specified, then ratification must
take place within a reasonable period of time: Life Savers Australasia v Frigmobile.
NOTE: A limit on ratification appears in the rule that ratification cannot be made which divests
PREPARED BY MR. ANTONY AMBIA Page 3
, persons not parties to the ratified contract of their rights or to affect prejudicially those rights
where those rights have vested before the act of purported ratification: A-G v Wilde
will ratification cause an injustice to the third party?
has the principal dealt with the third party in a manner suggesting that the contract has gone off?
Ratification Issues
Who may ratify?
Only person able to ratifiy is the person:
in whose name the act was purported to be done
which person must be in existence at the time the act was done
competent at that time to be the principal of the person doing the act
not necessarily known, personally or by name, to the third party
Howard Smith
ratification between principal and agent only
agent must disclose at time of contracting that he is acting on behalf of a principal.
principal need not be named but must be capable of identification: Kelly Maxstead v Durrant.
When can a principal ratify?
see above.
What constitutes ratification?
Ratification may take a variety of forms to be effective at general law:
(1) Express - this requires clear and unequivocal acts: Petersen v Maloney.
(2) Implied - by conduct (such as a putative principal commencing legal proceedings on the
contract concluded by the agent: Cox v Isles, Love & Co.
The act of adoption must be accompanied by full nowledge of all the essential facts: Taylor v
Smith.
The assignment by the principal of the benefit of a contract entered into by an agent without
authority is a ratification of the contract: Thompson v Hickman.
It is also necessary for the entirety of the third party transaction to be ratified - it is not possible
to adopt in part and disclaim in part: Howard Smith.
When courts will not invoke the doctrine of ratification:
ratification occurs after performance of the contract
where there is a time stipulation in which the contract is to be accepted
where there has been a breach or loss under the contract before ratification
where ratification occurs after withdrawal of the offer
will not be effective when it will unfairly prejudice a third party
What happens if:
A makes offer to B
|
Unauthorized acceptance by B
|
A withdraws offer
|
PREPARED BY MR. ANTONY AMBIA Page 4
