LAWS 203 - Agency

Front

How can actual authority be expressly given? Why is this?

Back

In the case of Heli-Hutchinson, the court held that if actual authority is expressly given,then the company has authorized their agent to complete specific tasks (e.g. a company appoints an agent to enter into agreements for sale and purchase of computers, because the company really needs computers), and this authority can be documented in an agreement. 

Front

How can actual authority be implictly given? Why is this?

Back

In the case of Heli-Hutchinson, the court held that If actual authority is implicitly given, then the company has appointed their agent to a specific position (e.g. a managing director), and therefore, the agent has all of the implicit authority associated with that specific position (e.g. the authority to sign agreements on the company’s behalf).

Front

What happens if actual authority is granted?

Back

If actual authority is granted and followed, then the principal is bound by the contract(s) that the agent enters into, regardless of how oblivious the principal is to the third party.

Front

A counter-arguement can be raised that this may lead to agents exploiting principals by recklessly entering into contracts that bind the pricipal. How can this counter-arguement be counteracted?

Back

In order to stop agents from exploiting principals, the case of Heli-Hutchinson, set up 6 duties for agents to follow: 1) To perform the tasks set upon them by the principal, 2) To only take actions that are permitted by their authority, 3) To conduct themselves carefully, with precicon and skill, 4) To operate within their principals best interests, 5) To generate no profit behind the principals back, and 6) To keep account of the money attained.

Front

What do agents receive in return for completing these duties and why is this?

Back

In return for completing their duties, the agent is entitled to two rights as stated in the case of Heli-Hutchinson. These rights are: 1) The right to make a genuine profit by attaining a commission from the funds of the contract, and 2) The right to receive indemnity from liability. 

Front

Give an example of a pricipal not taking action to communicate that the agent does not have the authority that they are proclaiming to have (in which case they have apparent authority) using case law.

Back

In the case of freeman the court held that if an agent within the company falsley labels himself to be the managing director, with all of it's rights and responsibilities (authority), and the company becomes aware of this false proclamation, but does not take action to remove the false label from the agent, then that agent still has the apparent authoriy to enter into contracts that are binding on the company!

Front

What is a distinction between 'apparent authority' and 'actual authority'?

Back

Apprarent authority is about the relationship between the principal and the third party, in that the principal has communicated in some way that the agent as the 'apparent authority' that they claim, even though the agent may not have the 'actual authority' to bind the principal!

Front

How can this communication, manifest?

Back

This communication can either express this authority or imply this authority (e.g. principal/ company appoints agent to a specific role)! 

Front

What if an agent has neither the 'apparent' nor 'actual authority' to conduct his affairs?

Back

If an agent enters into a contract on behalf of the principal, despite having no apparent or actual authority to do so, then the principal can ratify the contract.

Front

What does ratification mean?

Back

Ratification can allow the principal to accept the contract, as if the agent had the authority, in the first place (i.e. when the agent entered into the contract).