Commercial Law
Definition of Agency
Many industries use third parties in their businesses to conduct their dealings with other
companies and parties. These third parties are employed to conduct various roles, due to
their special skills or knowledge which they possess, they may have special skill or expertise
in particular areas or markets, negotiate contracts; or the proprietor of the business may not
be able to handle all the dealings of the company. However, it is important to note that not all
those who are referred to as ‘agents’ are agents in law, and vice versa; a person who is in
fact an agent in law may be called factors/brokers. As per, Ferguson v Wilson (1866)1, an
individual may be an ‘agent’ even if they are not specifically referred to as such.
A significant power of an agent in the commercial context is that; contracts made by an
agent on behalf of the principal are treated in law as the principal’s contract and are directly
enforceable by and against him. He who acts through another, acts for himself – Qui facit
per alium, facit per se; this a fundamental principal of the law of agency, as seen in the case
of Stroman Motor Co. v Brown (1925) 2. It is an exception to the doctrine of privity. A
definition for agency can be found in American Restatement of the Law of Agency, where it
states; “Agency is the fiduciary relation which results from the manifestation of consent by
one person to another that the other shall act on his behalf and subject to his control, and
consent by the other so to act”3. A similar definition is given in Bowstead & Reynolds4;
‘Agency is the fiduciary relationship which exists between two persons, one of whom
expressly or impliedly consents that the other should act on his behalf so as to affect his
relations with third parties, and the other of whom similarly consents so to act or so acts’.
The two definitions above states consent as the main objective for an agency relationship.
Therefore, once an individual act as an agent for a principal, the rules applicable to an agent
will apply to the said individual.
1
Ferguson v Wilson (1866) LR 2 Ch App 77.
2
Stroman Motor Co. v Brown (1925), 116 Okla 36, 243 P 133.
3
American Restatement of the Law of Agency (2nd Ed. 1958, para 1(1)).
4
Bowstead & Reynolds on Agency, (15th Ed. 1985).
, Commercial Law
Creation of Agency
An agency agreement is made upon consent. The consent can be implied from conduct of
the involved parties. An agency can be made by any one of the following ways.
1. Express/ Implied agreement between principal and agent for authority (Actual
Authority),
2. Apparent authority
3. Doctrine of Necessity
4. Ratification of the agent’s acts by the principal
The relationship between a principal and agent will usually be consensual but does not need
to be contractual. When in a contractual relationship, the agent is usually in an obligation to
carry out his duties and the principal is expected to pay for the services provided. The
agreement may be expressed orally, in writing or by deed. There are no formal
requirements, although there are a limited number of statutory exceptions for example,
S53(1) & S54 Law of Property Act 1925. Under The Commercial Agents (Council Directive)
Regulations 1993 the principal and commercial agent can request from the other a signed
written statement of the terms of the contract, this can include terms agreed after the
creation of the contract. Another way an agreement can be made is through implied conduct.
Silence, however, can not be used to presume conduct unless other factors indicate so. For
example, the principal hires a person in a position to carry out duties that which an agent
would carry out. Therefore, the person who is hired would be an agent as he is expected to
act for the principal’s best interest.
Express/Implied between Principal and Agent for authority (Actual Authority)
Actual authority can either be in express form or implied, the issue lies in identifying the
exact scope of an agent’s authority e.g. agents warrant to authority. Furthermore, an agent is
only liable to compensation from his principal for acts within his authority.
Definition of Agency
Many industries use third parties in their businesses to conduct their dealings with other
companies and parties. These third parties are employed to conduct various roles, due to
their special skills or knowledge which they possess, they may have special skill or expertise
in particular areas or markets, negotiate contracts; or the proprietor of the business may not
be able to handle all the dealings of the company. However, it is important to note that not all
those who are referred to as ‘agents’ are agents in law, and vice versa; a person who is in
fact an agent in law may be called factors/brokers. As per, Ferguson v Wilson (1866)1, an
individual may be an ‘agent’ even if they are not specifically referred to as such.
A significant power of an agent in the commercial context is that; contracts made by an
agent on behalf of the principal are treated in law as the principal’s contract and are directly
enforceable by and against him. He who acts through another, acts for himself – Qui facit
per alium, facit per se; this a fundamental principal of the law of agency, as seen in the case
of Stroman Motor Co. v Brown (1925) 2. It is an exception to the doctrine of privity. A
definition for agency can be found in American Restatement of the Law of Agency, where it
states; “Agency is the fiduciary relation which results from the manifestation of consent by
one person to another that the other shall act on his behalf and subject to his control, and
consent by the other so to act”3. A similar definition is given in Bowstead & Reynolds4;
‘Agency is the fiduciary relationship which exists between two persons, one of whom
expressly or impliedly consents that the other should act on his behalf so as to affect his
relations with third parties, and the other of whom similarly consents so to act or so acts’.
The two definitions above states consent as the main objective for an agency relationship.
Therefore, once an individual act as an agent for a principal, the rules applicable to an agent
will apply to the said individual.
1
Ferguson v Wilson (1866) LR 2 Ch App 77.
2
Stroman Motor Co. v Brown (1925), 116 Okla 36, 243 P 133.
3
American Restatement of the Law of Agency (2nd Ed. 1958, para 1(1)).
4
Bowstead & Reynolds on Agency, (15th Ed. 1985).
, Commercial Law
Creation of Agency
An agency agreement is made upon consent. The consent can be implied from conduct of
the involved parties. An agency can be made by any one of the following ways.
1. Express/ Implied agreement between principal and agent for authority (Actual
Authority),
2. Apparent authority
3. Doctrine of Necessity
4. Ratification of the agent’s acts by the principal
The relationship between a principal and agent will usually be consensual but does not need
to be contractual. When in a contractual relationship, the agent is usually in an obligation to
carry out his duties and the principal is expected to pay for the services provided. The
agreement may be expressed orally, in writing or by deed. There are no formal
requirements, although there are a limited number of statutory exceptions for example,
S53(1) & S54 Law of Property Act 1925. Under The Commercial Agents (Council Directive)
Regulations 1993 the principal and commercial agent can request from the other a signed
written statement of the terms of the contract, this can include terms agreed after the
creation of the contract. Another way an agreement can be made is through implied conduct.
Silence, however, can not be used to presume conduct unless other factors indicate so. For
example, the principal hires a person in a position to carry out duties that which an agent
would carry out. Therefore, the person who is hired would be an agent as he is expected to
act for the principal’s best interest.
Express/Implied between Principal and Agent for authority (Actual Authority)
Actual authority can either be in express form or implied, the issue lies in identifying the
exact scope of an agent’s authority e.g. agents warrant to authority. Furthermore, an agent is
only liable to compensation from his principal for acts within his authority.
