UNIT 5
Law of agency
Introduction & Basic Concepts
Definition:
Agency is when one person (agent) is legally authorised to act on behalf of another
(principal), creating rights and duties for the principal as if they acted themselves.
Key Parties:
Principal: Person who grants authority.
Agent: Person who acts on behalf of the principal.
Third party: Person with whom the agent deals.
Authority Requirement:
Agent must have proper authority (permission/mandate).
Must act within scope of that authority.
Authority can be granted by contract or operation of law.
Legal Effect:
If properly authorised, the principal is bound to the contract.
The agent is not a party to the contract — acts as a conduit.
Examples of Agency Relationships:
1. Estate Agent: Emily sells Sarah and John’s house on their behalf.
2. Legal Representative: Attorney Mark represents business owner Emily in a lawsuit.
3. Legal Guardian: Sarah is appointed by court as Lily’s guardian after Emma is
incapacitated.
Act of Agency
Definition: The juristic act performed by the agent (e.g., signing a contract).
Legal Consequences:
Bind the principal not the agent, if properly authorised.
Contractual requirements must be fulfilled (consensus, capacity, legality, possibility,
formalities).
Certain acts cannot be delegated (e.g., signing specific contracts in person).
, Authority
Key Questions:
Did the agent have authority?
What was the scope of that authority?
Types of Authority:
(a) Contractual Authority:
Based on a mandate contract between principal and agent.
Offer by principal; acceptance by agent.
Must meet requirements of a valid contract.
(b) Ratification:
Principal approves an unauthorised act after it was done.
Requirements:
Principal must have existed at the time.
Must intend to ratify.
Ratification must occur within a reasonable time.
Act must have been intended on behalf of principal.
The act must be valid.
Example: Emily exceeds her authority in a negotiation, but John ratifies the agreement after
the fact.
(c) Implied Authority (Operation of Law):
Authority given automatically by law (e.g., court-appointed guardian/curator).
(d) Ostensible Authority (Estoppel):
Third party believes agent had authority due to principal’s conduct.
Requirements:
Representation by principal (intentional/negligent).
Reasonable belief by third party.
Third party acts on the representation.
Third party suffers prejudice.
Example: B buys equipment from C for A after agency is terminated. A didn’t inform C, and is
bound due to estoppel.
Scope of Authority
Defines the extent of actions the agent may take.
Types:
Law of agency
Introduction & Basic Concepts
Definition:
Agency is when one person (agent) is legally authorised to act on behalf of another
(principal), creating rights and duties for the principal as if they acted themselves.
Key Parties:
Principal: Person who grants authority.
Agent: Person who acts on behalf of the principal.
Third party: Person with whom the agent deals.
Authority Requirement:
Agent must have proper authority (permission/mandate).
Must act within scope of that authority.
Authority can be granted by contract or operation of law.
Legal Effect:
If properly authorised, the principal is bound to the contract.
The agent is not a party to the contract — acts as a conduit.
Examples of Agency Relationships:
1. Estate Agent: Emily sells Sarah and John’s house on their behalf.
2. Legal Representative: Attorney Mark represents business owner Emily in a lawsuit.
3. Legal Guardian: Sarah is appointed by court as Lily’s guardian after Emma is
incapacitated.
Act of Agency
Definition: The juristic act performed by the agent (e.g., signing a contract).
Legal Consequences:
Bind the principal not the agent, if properly authorised.
Contractual requirements must be fulfilled (consensus, capacity, legality, possibility,
formalities).
Certain acts cannot be delegated (e.g., signing specific contracts in person).
, Authority
Key Questions:
Did the agent have authority?
What was the scope of that authority?
Types of Authority:
(a) Contractual Authority:
Based on a mandate contract between principal and agent.
Offer by principal; acceptance by agent.
Must meet requirements of a valid contract.
(b) Ratification:
Principal approves an unauthorised act after it was done.
Requirements:
Principal must have existed at the time.
Must intend to ratify.
Ratification must occur within a reasonable time.
Act must have been intended on behalf of principal.
The act must be valid.
Example: Emily exceeds her authority in a negotiation, but John ratifies the agreement after
the fact.
(c) Implied Authority (Operation of Law):
Authority given automatically by law (e.g., court-appointed guardian/curator).
(d) Ostensible Authority (Estoppel):
Third party believes agent had authority due to principal’s conduct.
Requirements:
Representation by principal (intentional/negligent).
Reasonable belief by third party.
Third party acts on the representation.
Third party suffers prejudice.
Example: B buys equipment from C for A after agency is terminated. A didn’t inform C, and is
bound due to estoppel.
Scope of Authority
Defines the extent of actions the agent may take.
Types:
