Executive Summary

Law of agency is an important topic in the field of law. There has been a lot of research and

case study on this field. So in this assignment we have described about Law of agency,

concepts and brief statement of legal principles. Then we have discussed the objectives of the

study about types of agent, liabilities, duties, termination criteria etc. and methodology part in

which source we have been followed. After that we have done the most important topic

which is analysis where we have been discussed about objective, concepts, types of authority,

liabilities of agent to third party, termination of agency and so on. At last we have included

the conclusion with bibliography and references.

THE LAW OF PRINCIPAL & AGENT AND THE LAW OF MASTER& SERVAN;by Huffcut, Ernest W. (Ernest
1 Wilson), 1860-1907
 Introduction

The law of agency is an area of commercial law dealing with a contractual or quasi-
contractual, non-contractual set of relationship when a person, called the Agent, that is
authorized to act behalf of another to create a legal relationship with third party.

In contract act, 1872 SS: 182-238, The Law of agency is in most cases defined as the
relationship between two persons, where one may act on behalf of the other and bind the
principal by words and actions. It is also defined as the relationship in which one person acts
for or represents another by the latters authority, either in the relationship of principal and
agent, master and servant, employer or proprietor and independent contractor. The law of
agency could also be defined as the judiciary relation which results from the manifestation of
consent by one person to another that the other shall act on his behalf and subject to his
control, and consent by the other so as to act-Blacks law dictionary, 1991

The law of agency deals with the ways in which one person, physical or juridical, can deal
with other persons through the medium of intermediary. Of course one person may deal with
another directly, without any assistance. However a person can perform only one thing and be
in only one place at one time. The complexity of modern life, particularly in the commercial
area, is such that the law must permit a person to make contracts and perform other juridical
acts by a means of the representative-Paul Mc Carthy.

Succinctly, it may be refers to as the relationship between a principle and an agent whereby
the principal, expressly or impliedly, authorizes the agent to work under his control and on
his behalf. The agent is thus, required to negotiate on behalf of the principle or bring him and
third parties into contractual relationship.

The reciprocal right and liabilities between principal and an agent reflect commercial and
legal realities. A business owner often relies on an employee or another person to conduct a
business. It can only act human agents. The principal is bound by the contract entered into by
the agent, so long as the agent performs, within the scope of the agency.

THE LAW OF PRINCIPAL & AGENT AND THE LAW OF MASTER& SERVAN;by Huffcut, Ernest W. (Ernest
2 Wilson), 1860-1907
Methodology:
In our assignment here we used only secondary data source.

The secondary data sources are:

1. Different type writers book

2. Different web sites, Internet.

OBJECTIVE OF THE STUDY:

Creation of Agency:
A person who has capacity to contract can enter into contract either by himself or though
some other person. If he adopts the first method there is no question of agency. If he adopts
the second method, then there is agency. The person who represents another in his dealing
with third parties is called agent and that person who is so represented by agent is called
principal.

The following are different modes of creation of agency.

Agency by Express agreement

Agency by Operation of law

Agency by Ratification

Agency by Implied authority

Agency by Express agreement:

Number of agency contract come into force under this method. It may be Oral or documentary or
through power of attorney.

Agency by operation of law:

At times contract of agency comes into operation by virtue of law.

For example: According to partnership act, every partner is agent of the firm as well as other
parties. It is implied agency. On account of such implied agency only a partner can bind over
firm as well as other partners, to his activities. In the same way according to companies act
promoters are regarded as agents to the company.

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Agency by Ratification:
Ratification means subsequent adoption of an activity. Soon after ratification principal agent
relations will come into operation. The person who has done the activity will become agent and the
person who has given ratification will become principal.

Ratification can be express or implied. In case where adoption of activity is made by means of
expression, it is called express ratification.

Agency by implied authority:

This type of agency comes into force by virtue of relationship between parties or by conduct of
parties.

Agency by implied authority is of three types as shown below:

Agency by Necessity
Agency by Estoppel
Agency by Holding out

Different Types of agents: To work on behalf of the principal there might need different
types of agents and thus there are different types of agents under law of agency. The most appointed
and popular terms of agents are described below-

General
agent

Auctioneers sub-agent

Universal Special
agent agent

General Agent: The term general agent refers to have the authority to carry out
transactions on behalf of the principal. A manager of a branch of a firm or
commission agent is instances of general agent.

Sub-agent: The term sub-agent refers to the agents whom general agents need to
carry out their duties. A sub-agent, according to section 19, is the person whom
general agent employs in the business and who is under the control of the general
agent.

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 Special Agent: The term special agent refers to have the authority to act only in
a specifically designated transactions. As soon as the said period ends, the agency
needs to get terminated.

Universal Agent: The term universal agent refers to the person who has a
universal or unlimited power to act on behalf of his principal.

Auctioneers: The term auctioneers refers to the mercantile agent who is

appointed to sell goods on behalf of his principal. An auctioneer gets reward in the
form of commission from his principal.

Liabilities of an agent to a principal:

When an agent get appointed under a principal from that time he has some liabilities to carry out to
the principal.

Foreign Principal: If the merchant is a resident of abroad, in case of breach of

contract the third party can make the agent personally liable

Personal liability by agreement: It happens when the agent expressly by

agreement undertakes personal liability of the contract.

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 Agents liability for breach of warrant: When an agent acts without or
beyond his authority, he can be hold liable for breach of warranty

Undisclosed Principal: Sometimes it can happen that the agent is not disclosing
the name of the principal, in that case the third party can make the agent personally
liable if he has relied upon the responsibility of the agent.

Agency Coupled with interest: Where the contract of agency relates to a

subject matter in which the agent has a special interest, agent shall be personally
liable to the extent of his interest since he shall be a principal for that interest

Agent signs the contract with his own name: If an agent signs a negotiable
Instrument such as bills of Exchange, promissory notes on his own name without
making it clear that he is signing as an agent, will be held, personally liable.

Duties and authorities of the agent:

Like the way an agent has liabilities towards his principal, he has some directions of duties
and authorities as well-

From the time an agent is appointed to deal with a transaction on behalf of the
principal, its his duty to act in the principals best interest within the authority of the
agent.
If an agent starts working for a principal, he should never start working for another
principal at the same because there might have a chance to have conflict between the
interest of them.
An agent never ever should gain anything from the business transaction or from the
profit without letting know the principal
An agent should always maintain the confidentiality rules of the business so that it
does not harm the business of the principal
An agent should never delegate his duty without the consent of the agent

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Analysis:

Case 1
The agent must act in person and not delegate his duties.

The principal in appointing an agent expects him to act personally and not through others.
Accordingly, unless when appointing the agent, the principal had permitted a delegation of
duties, it is a well established rule of agency that an agent cannot delegate his duties to others.
The Latin maxim is delegatus non potestdelegare which means that a person to whom
authority has been delegated may not delegate it to another. In other words, the principal is
entitled to rely on and receive the benefit of the skill and knowledge of the agent he has
appointed.

In John McCann & Co v Pow (1975) 1 All ER 129, a principal appointed a firm of real
estate agents to sell his flat. Without the principals approval, the real estate agents gave
details of the flat to a sub agent who found a buyer. Then the agents asked for their
commission for the sale of the flat. The court held that since they had delegated the sale to a
sub-agent without the principals permission, the principal was not liable to pay the
commission to the agent although the flat had been sold for the price requested.

Solution:

There are three main exceptions to this rule that an agent must not delegate his duties to
another. These are;

i. The agent may delegate his duties where there is an express or implied authority to
delegate such as by professional or trade usage.

ii. The Agent may delegate purely ministerial acts such as the signing of a letter or the giving
of a notice where such act requires no personal skill or confidence. See Allam& Co Ltd v
Europa Poster Services [1968] All ER 826

iii. If the delegation is ratified or approved by the principal, then obviously it will be valid. In
De Bussche v Alt (1878) 8 Ch. D, 286, the agent took the precaution of obtaining the
approval of the principal for the appointment of a sub-agent. It was held that the delegation
was valid and binding on the principal.

IV. Agents duty to act in the Principals interest.

The relationship of principal and agent is a confidential one. The agent must always act in
the interests of and for the benefit of the principal. The agents interests must not conflict
with the principals. If there is any problem for the agent to so conduct himself, he must
relinquish his duties and terminate the agency. The courts have jealously upheld this duty
very strictly and taken the view that the principals interest must always have priority over

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the agents. The agent must also disclose anything he knows or learns which may affect the
principals interest and judgment. As the principal places trust and confidence in the agent,
the agent must act honestly and must not do anything improper.

Case 2
Compensation after Renunciation of Agency.
TIMBERLAKE v. THAYER.

71 Mi88. 279. 1893.

Action against indorser of a promissory note. Defence, payment by maker, and release by act
of plaintiff in agreeing with the maker that the latter should perform services for the former in
payment of the note. The court charged that if the maker agreed to serve plaintiff for a year,
but abandoned the contract before the end of the year, he could recover nothing for the
services performed. The court refused to charge that such a contract would release defendant.
Judgment for plaintiff.

Cooper, J. If we were authorized to make the law, instead of announcing it as it is already

made, we would unhesitatingly hold that one contracting to render personal service to another
for a specified time, could, upon breach of the contract by himself, recover from that other for
the value of the service rendered by him and received by that other, subject to a diminution of
his demand to the extent of the damage flowing from his breach of contract. In Britton V.
Turner, 6 N. H. 481, Judge Parker demonstrates, in an admirable and powerful opinion, the
equity of such a rule; and it was held in that case that such was the rule of the common law.
The courts of some of the states have followed or been influenced by that opinion, and have
overturned or mitigated the rigorous rule of the common law. Pixler v. Nichols, 8 Iowa, 106
(74 Am. Dec. 298) ; Coe v. Smith, 4 Ind. 79 (58 Am. Dec. 618) ; Eiggs v. Horde, 25 Tex.
Supp. 456 (78 Am. Dec. 584) ; Chamblee v. Baker, 95 N. C. 98; Parcell v. McComber, 11
Neb. 209. But the decided weight of authority is to the contrary. Lawson on Contracts, 470,
n. 4, and authorities there cited. And it was decided at an early day in this state that an entire
contract of this character could not be apportioned, and that under the circumstances named
no recovery could be had by the party guilty of the breach of contract ; that he could not
recover on the special contract because he himself had not performed, nor upon quantum
meruit, because of the existence of the special contract.

Wooten V. Read, 2 Smed. & M. 585. In Hariston v. Sale, 6 Smed. & M. 634, and Robinson v.
Sanders, 24 Miss. 391, it was held that an overseer's contract with his employer, though made
for a definite time, was not an entire contract, and recoveries were allowed on the common
counts.

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Solution:
The cases relied on to support the rule announced in these decisions were Byrd v. Boyd, 2
McCord (So. Car.) 246; Eaken v. Harrison, id. 249; McClure v. Pyatt, id. 26. Of these, the
leading case is Byrd v. Boyd ; the others simply follow it. In Byrd v. Boyd, the court
evidently legislates the exception into the law, and so, in effect, declared, for, after referring
to the rule of the common law, the court proceeds to say : " There is, however, a third class of
cases for which it is necessary to provide," and then declares that these cases for which it is
necessary for the court " to provide " are " those where the employer reaps the full benefit of
the services which have been rendered, but some circumstance occurs which renders his dis-
charging the overseer necessary and justifiable, and that, perhaps, not iromediately connected
with the contract, as in the present case." The South Carolina court put its decision expressly
upon the ground of expediency, and confined its effect, by necessary implication, to the
particular sort of contract under consideration. Since the abolition of slavery we have no such
contracts, stride, as those which formerly existed between employer and overseer, and the
decisions in Wooten v. Read, and Hariston v. Sale have no field of operation. The
instructions for the plaintiff were properly given. (The court then decides that the trial judge
erred in refusing the instruction as to the effect of such a contract in working a release of the
surety, and on this ground reversed the judgment.)

Conclusion

In our assignment we have discussed about different agency law issues. Although our
research doesnt explore the vast complexities of the agency law as it varies throughout
various terms. This research will hopefully assist to establish a basic framework for
understanding these types of issues.

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 References

https://chilot.files.wordpress.com/2011/06/agency-law.pdf

https://www.scribd.com/

https://www.eaa.org.hk/en-us/

http://www.lawsofbusiness.com/2012/04/creation-of-agency.html

https://www.casrilanka.com/casl/images/stories/EDBA/law%20of%20agency.pdf

https://ia902504.us.archive.org/18/items/casesonlawofagen00huffiala/casesonlaw
ofagen00huffiala.pdf

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 Bibliography

Hailezgi, Damtie: Agency-Law. Ethiopian Law of Agency. The Justice and Legal System Research
Institute, 2009.

Creation of Agency: Person who has. Laws of Business. Blogger, 2012.

Ernest, W. Huffcut: THE LAW OF PRINCIPAL AND AGENT. CASES ON THE LAW OF
AGENCY. California Los Angeles: Boston Little, Brown, and Company, 1907.

Subject to the exceptions. Consumer Education Website. Estate Agents Authority, 2016.

Creation and termination of Agency. Law of Agency. The institute of Chartered Accounts Sri Lanka:
Sri-Lanka, January 10, 2009.

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