LAW OF AGENCY

Why?

Convenience

What is agency? …When one person, with the

necessary authority to do so, conducts a juristic act for and on behalf of another in such a manner that he obtains rights and obligations for the other person without him acquiring any rights or becoming accountable

Fouché (2007) pg 244

What is agency

Agency is a contract whereby one person (the agent) is given permission (authority) and usually asked by another (the principal) to contract or to negotiate a contract on behalf of the principal with a third person. Business Law Study Guide, MANCOSA (2015) pg 94

What is agency then?

One person acts on behalf of another

The act is a juristic actThe act is authorisedThe action results in a legal

tie between two people, one of which was not involved in the original action

The parties

The principal – gives the instruction

The agent – carries out the instruction

The duties (or instruction) is called a mandate

How does agency arise?

By agreement (express authority)Oral agreementGPASpecial power of attorney

By operation of lawNegotiorum GestioBy ratification

Authority by Agreement

By agreement Principal gives Agent authority to act on his behalf

No formalities requiredCan be by way of written

Power of Attorney

Authority by Operation of Law

Where one party in absence of agreement has authority by law to represent another

Eg:Guardian representing a minorCurator acting for mentally insanePartner representing a partnership

or other partners

Authority through Estoppel

Where a person creates the false impression that another person may act on his behalf and a third party acts on the strength of that (mis)representation, the “principal” can be bound by the false impression he created.

Authority by Ratification

Where the “principal” gives his consent or authority after the representation has taken place

The Effects of Representation

The legal bond will exist between the principal and the third party.

The agent does not acquire any rights or duties

Duties of the Principal

To pay the agreed remunerationTo reimburse the agent for all

expenses necessarily incurred by him

To indemnify the agent for all losses or liabilities incurred in performing the authorised act

Duties of the agent To execute the Principal’s instructions To account to the Principal To keep his property separate from

that of the Principal To act honestly and in good faith –

fiduciary relationship exists To avoid conflicts of interest Not to delegate his authority To act with care, skill and diligence

The duty of good faith

Put the Principals interests above your own

May not make a hidden secret profit

May not sell his own goods to the Principal without disclosing the fact

Not to disclose confidential or private information of the Principal

Agents LiabilityGenerally, agent not liable to 3rd

parties, but certain exceptions:If principal does not exist (agent

lies) – agent is liableIf principal does not have legal

capacity If agent acts beyond scope of

authorityIf agent fails to disclose he is an

agent (see next slide)

The Doctrine of the Undisclosed Principal

Where the agent acts on behalf of a principal without disclosing the fact.

Requirements Agent must be authorised to act for principal Agent must have intended to contract on

behalf of principal Agent must fail to disclose agency at all

Third party can sue principal or agent but not both

Termination of agency

Completion of the mandate Effluxion of time Death, insanity or insolvency of the

Agent or the Principal Revocation of mandate by the

Principal Renunciation of the mandate by the

Agent Mutual consent

Specific types of AgentsFactorsAuctioneersDel Credere AgentsBrokersEstate Agents Insurance Agents