12 Agency and partnership
1 Definition
Overview
1.1 An agent (A) is a person who is appointed by another (Principal) to enter into a contract with a third party (TP).
2 Creation of agency
2.1 (a) By consent
(b) By operation of law
(c) By estoppel
(d) By ratification
2.2 Consent
(a) Consent may be express or implied. (Actual authority)
(b) Express authority e.g.. by way of contract.
(c) Implied authority, two persons may by their relationship or conduct to each other imply an agreement between them that on is the agent of the other e.g.. employer and employee, company and company director.
2.3 Operation of law
(a) The most important instance in which agency can arise by operation of law is in the case of agency of necessity.
(b) Conditions:
(i) the agency must have no practical way of contacting the principal to obtain instructions.
(ii) there must be some pressing need for action.
(iii) the agent must have acted bona fide (in good faith)
(iv) the action taken by agent must have been reasonable and prudent.
2.4 Estoppel (see 5.7) below.
2.5 Ratification
(a) The principal must exist and have contractual capacity when contract made.
(b) The principal must have been identified at the time of contract.
(c) The principal must have been made aware of all material facts.
(d) The contract must be valid and legal.
(e) The principal must ratify the whole contract.
(f) Ratification must be within a reasonable time.
3 Duties of an agent
3.1 (a) Performance and obedience.
(b) Reasonable care and skill.
(c) Personal performance.
(d) To be accountable.
(e) No conflict of interest.
(f) No secret profit.
4 Rights of an agent
4.1 (a) Reimbursement of expenses and indemnity.
(b) To be paid (if contractual). If the amount is not specified then a reasonable amount must be paid. If the contract provides for a commission to be paid the commission will become due only once the strict terms of the contract are complied with.
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