MLL215 Study Guide - Final Guide: Apparent Authority, Christopher Slade, Implied Warranty
24 May 2018
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1 LAW OF AGENCY
An agent (A) is a person with express or implied authority to act for a principal (P) with the general
object of bringing the principal into legal relations with a third party (TP)
IMPORTANCE:
Business matters are conducted through an agent. Such a relationship arises generally through an agreement
of P and A. Agents could be:
- Travel agents, real estate agent, company directors, lawyers, talent agents
AGENCY DISTINGUISHED FROM OTHER REALTIONSHIPS:
Employees: the essee of age is that it should be within the scope of the employment that the person
eploed igs the eploe ito a legal elatioship ith a thid pat. E.g. a shop assistat is a aget,
whereas a maid is not.
Independent contractors: An auctioneer is an agent, not an uber driver.
Trustee: a trustee is a principal vis-à-vis the beneficiaries. Principals only with full contractual capacity may
employ an agent; such must be able to undertake the job themselves in order to appoint an agent. Any person
can be an agent but cannot have greater powers conferred upon them than the principal possesses.
AGENCY CREATED EXPRESSLY:
Deed: necessary where the agent is required to execute any instrument under seal on behalf of their principal
(created by power of attorney).
Writing: sometimes specifically required by statute e.g. buying/selling land.
Verbally: a verbal offer followed by acceptance in writing or verbally is enough to conclude a contract of
agency for most purposes.
HOLDING OUT OR ESTOPPEL
Where P holds out to a TP that A is Ps aget, P ill e estopped fo deig that A ated as his aget. P ill
be bound to the contract with TP. Where P, by words or conduct, leads others (i.e. at TP) to believe (i.e. by
holdig out that A is Ps aget, the P ill ot e alloed to suseuetl de the authoit of A to at as Ps
agent where a TP has entered into an agreement with A on the faith of the representation that A was the
agent of P.
Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480.
With the knowledge of the board of directors, K acted as de facto managing director and entered into
otrats o the opa’s ehalf. O oe oasio K eploed a fir of arhitets to apply for a
planning permission to develop the estate and to do other work in that connection. K had no actual
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authority to do this. When the architects claimed their fees from the defendant company, an issue
arose as to whether K had apparent authority to bind it.
The company was the principal, K was the agent, and the architects were the third party.
HELD: Apparet authorit a operate:
(a) to create authority where there was none before;
(b) to elarge a aget’s atual authorit;
(c) to clothe an agent with authority where he would usually have actual
authority but for the existence of a restriction unknown to the third party;
and
(d) to eted a aget’s authorit beyond termination of the agency
relatioship.
RATIFICATION
Where one persons acts without the authority to do something, ratifying it renders it valid and effectual. This
occurs where an agent exceeds their authority. Ratification must be the whole of contract.
AGENCY OF NECESSITY
An emergency situation may allow one person to bind another without the authority of that other. E.g a
shipmaster may sell damaged cargo which would be ruined by further delay.
- A peso has ee etusted ith aothes popet.
- An immediate expense must be required for the preservation of the property, or there must be some
commercial necessity for the action.
- It must be commercially impossible or extraordinarily difficult to communicate with the property
owner.
- The agent must act bona fide in the interest of the principal.
NATURE OF SCOPE OF AN AGENTS AUTHORITY
P will not be affected by what the A does in excess of their authority unless ratifies it.
If A ats outside the authoit, a e liale fo eah of otat of age o to TPs fo eah of iplied
warranty of authority. That authority may be:
ACTUAL AUTHORITY:
If A enters into a contract with actual authority with a TP, it creates contractual rights and liabilities
between P and TP. Actual authority is: created by contract, express words, usage of trade, course of
business.
EXPRESS ACTUAL AUTHORITY:
Atual authoit is authoit that A easoal thiks she possesses ased o Ps dealigs ith he.
Created orally or by writing. May be limited by the terms of the agreement.
IMPLIED ACTUAL AUTHORITY:
A reasonably believes they have as a result of actions by P. Authority to do whatever is necessarily
iidetal to aig out the piipals epess istutio. Whee a peso eplos a patiula
type of agent to carry some act on behalf of P, the agent will have such implied authority as agents of
that class usually have. It is what the agent thinks they have.
Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549. The authoit of a Aget as it appeas to othes
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IMPLIED FROM EXPRESS AUTHORITY:
E.g. P authoizes A to aage his apatet uildig epess authoit. A hies a jaito to
help with painting, cleaning and maintenance of the building. The authority of A to do these
things is implied because these acts are necessarily incidental to the proper management of the
building.
IMPLIED FROM CUSTOM AND USAGE:
A must have knowledge of the custom or usage.
IMPLIED BY ACQUIESCENCE:
e.g., Ma, the offie aage fo Petes opa, has egulal ought its offie supplies
without previous authorization. Peter never objected. Mary has implied authority by
acquiescence to continue these purchases.
APPARENT AUTHORITY
Whee P epesets eithe ods o odut that a A has authoit to otat o Ps ehalf, P
will be bound by those acts of A which fall within that represented authority. It is what the TP thinks
the A has. Hely.
Rama Corpn Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147:
“lade J: Ostesile or apparet authorit … is erel a for of estoppel, indeed, it has been termed
agency by estoppel, and you cannot call in aid an estoppel unless you have three ingredients: (i) a
representation, (ii) reliance on the representation, and (iii) and alteration of your position resulting
from such reliance.
REPRESENTATION BY CONDUCT
P a peit a peso to at i the aageet of a Ps usiess so that a TP is led to eliee
that suh peso has authoit to otat o Ps ehalf. “uh a peso ill hae as pat of thei
apparent authority all the usual authority of a person occupying that position. P is bound by acts
within this scope. Freeman.
An employer may hold out that an employee has authority if the employer/principal permits the
employee to act in a particular way.
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35
e.g., Ma, the offie aage fo Petes opa, has egulal ought its offie supplies ithout
previous authorization. Peter eventually prohibits Mary from buying more office supplies. 6 months
later, Mary having forgotten about the instruction, buys more supplies for the office.
The basis of apparent authority is that there has been a representation of authority of A on which TP
relied.
The representation of authority can only be made by P, who must be someone who has the authority
to make the representation:
Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72.
E.g. in the case of a company, the representation must have been made by a person or persons who
had actual authority to manage the business for the company.
Zhang v VP302 SPV (2009) 223 FLR 213.
A solicitor with apparent authority can bind a client to a TP
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Document Summary
An agent (a) is a person with express or implied authority to act for a principal (p) with the general object of bringing the principal into legal relations with a third party (tp) Such a relationship arises generally through an agreement of p and a. Travel agents, real estate agent, company directors, lawyers, talent agents. Independent contractors: an auctioneer is an agent, not an uber driver. Trustee: a trustee is a principal vis- -vis the beneficiaries. Principals only with full contractual capacity may employ an agent; such must be able to undertake the job themselves in order to appoint an agent. Any person can be an agent but cannot have greater powers conferred upon them than the principal possesses. Deed: necessary where the agent is required to execute any instrument under seal on behalf of their principal (created by power of attorney). Writing: sometimes specifically required by statute e. g. buying/selling land.
