Introduction to the law of agency

This chapter deals with some preliminary matters:

(a) The creation of agency;

(b) The doctrine of ratification;

(c) Agency by operation of law;

(d) Termination of agency. It is important to distinguish agency from other relationships such as:

(a) selling ‘agent’ – see Lamb v Goring Brick Co (1932);

(b) Trust – for example, trustee has legal interest in trust property, A has no such interest in P’s property; (c) employment – employees may be, but are not necessarily, as of the employer;

(d) Bailment – Bailee has no inherent power to deal with the Baylor’s property.

The creation of agency

Although agencies are usually created by contracts, a contract is not essential. Normally, the agency will come into existence because the parties have agreed that one will be the principal and the other the agent (Garnac Grain v HM Faure and Fairclough (1967)).

The doctrine of ratification

Where an agent enters into a contract where he had no authority from his principal to do so, the doctrine allows the principal, by ratification, to repair the agent’s lack of authority and so render the contract binding (Bolton Partners v Lambert (1889)). There are, however, limitations on its scope:

(a) P must be in existence (Kelner v Baxter (1866));

(b) P must be disclosed (Keighley, Maxted & Co v Durant (1901));

(c) ratification must be within a reasonable time (Metropolitan Asylums Board v Kingham (1890));

Agency by operation of law

There is a very limited number of cases where the law has created an agency relationship even though the parties did not agree. This may arise through:

(a) agency from cohabitation (Debenham v Mellon (1880), though no recent examples have been reported);

(b) Agency of necessity – for example, arising from an emergency while a ship is at sea (The Choko Star (1990); The Winson (1982)).

Termination of agency

As between the principal and agent, when the relationship comes to an end is primarily a matter of construing the agreement that set up the relationship. In many cases, the agent will be appointed for a specific purpose and the relationship comes to an end automatically when that purpose is carried out. In other cases, the agent will be appointed for a fixed term or for an indefinite term which is subject to termination by a stated period of notice on either side. If there is no stated period of notice, the courts will imply a term that the agency can be terminated by reasonable notice on either side.

Lastly Comment

Special rules apply to ‘commercial agents’ under the Commercial Agents (Council Directive) Regulations 1993. These provide for an A to receive compensation or an indemnity on bases derived from French and German law: see, for example, Moore v Piretta (1998).