LAW 601 Lecture Notes - Lecture 3: Apparent Authority, General Partnership, Joint Venture
19 Feb 2017
School
Department
Course
Professor
LAW 603
Agency and Other Methods of Carrying Business → Chapter 20
Agency relationships follow common law rules
Agent → acts on behalf of a principal for a specified purpose
Authorities of Agents:
Actual Authority
Apparent Authority
Exists when principal through
express terms authorizes the
agent to act on its behalf
Principal makes it reasonably clear that agent has the authority to act on its
behalf
➢ Priipal’s stateet or odut
➢ Priipal’s acquiescing (Agent going around saying they are an
aget, ad Priipal KNOWS ut does’t do aythig aout it
➢ Usual Authority (The position ALLOWS them to make these calls)
➢ Actual authority can be granted informally through oral delegation by principal
➢ Apparet authority is alid if ad he the priipal’s atios reate a reasoale ipressio
that the agent is authorized (See Case Spiro v Lintern)
➢ A contract created as apparent authority is just as enforceable as actual authority
Principal → person who the agent represents
Agency → legal relationship between principal and agent [CONCEPT SUMMARY 20.1]
Three ways to create an agency agreement (look at pg. 521):
1. By express agreement (actual authority)
o Express delegation
o Appoint them to the position that typically has that authority
o Implied by past conduct by the parties
2. By apparent authority
o Principals statement or conduct
o Principals acquiescing (letting something happen even if you know that person has not
authority e.g. wife sells house example)
o Usual Authority
3. By law
o General partnership
o Ratification
o Legal standards of behavior are set out for agents but in contrast principals have less obligations to
the agents
STATUE OF FRAUDS: provinces where this is still in effect, all contracts of agency relationships if lasting
longer than a year, must be in writing and the agreement must be in writing if the agent is going to have
the authority to sign cheques on behalf of principal. Statue of frauds is a common law practice as such
its probably practiced in every province other than Quebec
find more resources at oneclass.com
find more resources at oneclass.com
LAW 603
Agency and Other Methods of Carrying Business → Chapter 20
Commercial Representation Agreement: occurs when a principal appoints an agent (usually an external)
to enter into a contract to sell its goods to a third party. Example, Nike manufactures shoes, appoints
SportsChek to sell its shoes, SportsChek sells it to its customers
**Note: an agency agreement can also arise in a partnership relationship. Partners act as agents and can
bind one another into contracts**
Ratification → contract is ratified when someone accepts a contract on their behalf but without their
authority for doing so. Example, I know you want to buy a DVD player so I enter into a contract on your
behalf to purchase one from a seller, you have no obligation to accept the contact. Requirements for
ratification:
o Ratification must be clear, it must be clear that you want to ratify the contract
o It must occur within a reasonable time frame of the contracts creation
o Principal must accept whole contract or none of it
o Principal must be identified by Agent
o Principal must have the legal capacity to enter into a contract at the time of the creation of the
contract and the ratification of it (e.g. War Dogs and Chinese bullets)
If the priipal does ot at to ratify the they do’t hae to aept the otrat and since they made
the dealings with the intent to bind the principal, the agent would not be held liable. But under the
contract if the agent is put under the contract then they can be held liable if the principal defaults. BUT
the third party can sue for a tort of deceit and/or breach of authority of duty.
Scope of Authority
Disputes often arise to argue the scope of the agents authority. You might have given a sales agent to
sell your cars at the dealership but not to give a 20% discount. Third parties are usually not aware of
who has the authority to do what.
-in the real world you might just assume that someone has the authority to carry out the contract
In large transactions, each party in the contract will do a significant amount of research before satisfying
themselves that the person that they were talking to has the actual authority to execute the contract.
Spiro v Lintern
Facts: John owns a house. He tasks his wife to list the property with a real estate agent but
did not give the authority to sell the house. She finds a buyer, enters into a contract with a
third party. John is aware of this and even allows TP to come in with architect to discuss
repairs to the home.
Issues: John refuses to sell saying wife had no authority to sell.
Holding: Court ruled that wife had apparent authority to sell the house (acquiescing).
Rational: The court held that buy allowing his wife to act the way she did, John had given her
apparent authority to sell the house.
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Agent acts on behalf of a principal for a specified purpose. Exists when principal through express terms authorizes the agent to act on its behalf. Principal makes it reasonably clear that agent has the authority to act on its behalf. Pri(cid:374)(cid:272)ipal"s acquiescing (agent going around saying they are an age(cid:374)t, a(cid:374)d pri(cid:374)(cid:272)ipal knows (cid:271)ut does(cid:374)"t do a(cid:374)ythi(cid:374)g a(cid:271)out it(cid:895) Usual authority (the position allows them to make these calls) Actual authority can be granted informally through oral delegation by principal. Appare(cid:374)t authority is (cid:448)alid if a(cid:374)d (cid:449)he(cid:374) the pri(cid:374)(cid:272)ipal"s a(cid:272)tio(cid:374)s (cid:272)reate a reaso(cid:374)a(cid:271)le i(cid:373)pressio(cid:374) that the agent is authorized (see case spiro v lintern) A contract created as apparent authority is just as enforceable as actual authority. Agency legal relationship between principal and agent [concept summary 20. 1] Three ways to create an agency agreement (look at pg. 521): by express agreement (actual authority, express delegation, appoint them to the position that typically has that authority.
