Agency 2: Agent’s rights/liabilities to Third Parties

Disclosed agency

Montgomerie v UK Mutual Steamship: A generally has no right.

• Facts: Charterparty signed ‘for and on behalf’ of P. Held where a person contracts as an agent for another, he prima facie has to right to sue/be sued unless he has exceeded his authority.

Undisclosed agency

Clarkson Booker v Andjel: where the agency is undisclosed, both A and P assumes liability until T conclusively elects to sue a party.

• Facts: T supplied plane tickets to A, who has previously dealt with them as principal. It turns out A is acting for P. T issues invoices to both A and P. P becomes insolvent. Held T may still take legal action against A as he had not made a conclusive election.

Miscellaneous Contractual liabilities of the Agent

Breach of Warranty of Authority Yonge v Toynbee:

• Where A warrants to have authority but acts w/o authority, he is personally liable to T if T induced by the representation to act.
• Warranty is strict liability, it does not matter if A not aware that his authority has terminated
• Facts: firm of solicitors lost authority once their client becomes insane, even if they were not aware of this.

Damages assessed under the 2 limb rule of Hadley v Baxendale:

• Those which fairly and reasonably be considered arising naturally from the breach
• Such damages as may reasonably be supposed to have been in the contemplation of both parties at the time the contract was made

A may also be liable for a breach of duty he owes  his P

A’s duties to P

2 types of duties: contractual, and fiduciary. Also Commercial Agents Regulations 1993.

Contractual duties

1. To obey instructions
2. To use an appropriate amount of care and skill
3. Not to delegate

Law also imposes certain fiduciary duties by virtue of his A-P relationship (because of confidentiality and ease of abuse). Armstrong v Jackson.

• Facts: P told A to buy some shares. A sold his own shares to P without telling him. There was a conflict of interest, so breach of fiduciary duty.

To obey instructions

Turpin v Bilton: this is simply contractual.

• Facts: P asked A to renew insurance on his ship. A failed to do so. Ship lost. A liable.

Dufresne v Hutchinson

• Facts: A sold P’s items for less than he stipulated for. P has claim on A, but trover will not lie against third party (no proprietary claim)

Williams v Evans (US case), Cohen v Kittel: instruction must not be illegal, otherwise null and void.

• Facts: Cohen. Illegal betting transaction so void.

Ireland v Livingston: if instructions were unclear, a reasonable bona fide interpretation is enough (although unlikely applicable now due to ease of communication).

• Facts: P told A to buy 500 (+/- 50) and have it shipped to the UK. Impossible to procure 500 tons, so A bought 400. P was not entitled to reject.

To use reasonable care and skill

Contract may stipulate either strict performance or reasonable care and skill.

Dunlop Howards v Barbon Insurance: this is a fundamental duty

Chaudhry v Prabhakar: the giving of advice sought in the context of family, domestic or social relationships will not in itself give rise to any duty in respect of such advice.

• Facts: A sued her friend for his advice regarding a faulty car.

Youell v Bland Welch: standard of care varies according to individual professions (underwriting case)

To perform agency duties personally (not to delegate)

De Bussche v Alt: an agent cannot delegate authority to another unless there was express or implied consent to do so. If sub-agent makes a transaction, P will not be bound, unless T can rely on SubA’s apparent authority. P may still ratify.

• A still liable to P for the defaults of Sub

Schmaling v Thomlinson: P not liable to SubA for commission

Solly v Rathbone: Sub has no claim against P

Elphinstone, Balsamo v Medici: A may be liable for money had and received by Sub

Calico Printers v Barclays: goes both ways. P has no rights against Sub.

• Facts: P asked A to insure some cotton. Because A had no office in Beirut, A sub-delegated the task to another bank, who failed to do so completely. P claimed against both Sub and A, first failed because no privity, second failed because exclusion clause.

This is all unless Sub had apparent authority (Bowstead v Reynolds) or was acting as fiduciary by way of position (A-G of HK v Reid) in taking bribes.

==

Fray v Voules: A must not exceed authority conferred by P, regardless of motive

Baber v Tayler: A must carry out P’s instructions within time limit stipulated. If not, then within reasonable time. It is a matter of fact for the court to determine as to what is a reasonable time.

Fiduciary duties

1. Avoid conflict of interest
2. Duty not to make secret profit
3. Duty not to take a bribe
4. Duty to account
5. Duty to preserve P’s confidentiality

Summarised in Bristol v Mothew. Fiduciary duties are distinct from contractual obligations and the contract itself.

Avoid conflicts of interest

Arberdeen Railway v Blaikie Bros: no Fiduciary shall enter into a contract where personal interest conflicts with interst of those he is bound to protect

Unless P has full knowledge of the conflict (Fullwood v Hurtley), and has consented to it (Bray v Ford).

Duty is a strict one, does not matter if F had honest motive, as long as there was a ‘real possibility of conflict (Fullwodd v Hurley), and burden falls on F to prove otherwise (Collins v Hare)

Armstrong v Jackson

• F departs from good faith when he sells his own property to his principal
• F wants best price, P wants lowest price ➔ conflict of interests

However, this principle is not absolute

Kelly v Cooper:

• Two P’s each with a house to sell. A is agent of both. T buys one house and then the other. One of the P’s argued that had A informed him of the first buy, he would have raised the price of his house.
• Held: even though the fact that T wanted to buy both houses could affect the price of P1, relationship should be construed upon the terms of the agreement …
• Policy: estate agents must be free to act in this way, and it was not sensible to suggest that they act in P’s contended way…

Duty not to profit from position

Regal Hastings v Gulliver

• Strict liability
• Not permitted to profit from position as agent, unless P permits it

Boardman v Phipps: there are 3 types of breaches, listed below

• Agent uses position of authority to make profit ➔ accounts to P (IDC v Cooley)
• Uses property entrusted to P, w/o consent ➔ Shallcross v Oldham
• Acquires profit from information or knowledge acquired ➔ Lamb v Evans

Remedies

• Recovering profit by way of trust
• Injunction from profiting from information
• Damages for breach of contract

Duty not to accept bribes

Anangel v Ishikawajima-Harima:

• “a commission or another inducement given by a third party to an agent as such, which is secret from his principal”.

AG for HK v Reid

• This is an ‘evil that threatens society”

Industries GM v Lewis: elements of a bribe

• Receiver is an agent of whom T is dealing
• T knows this
• A fails to disclose such a transaction to P7

Shipway v Broadwood

• Needs to prove that bribe influenced A’s decision making
• Very wide remedies

But now a right in personam, not a right in rem (Sinclair Investments v Versailles re-established this principle originally introduced in Lister v Stubbs)

Other punishments under the Bribery Act 2010

Duty to account

Gray v Haig: Duty to keep P’s assets separate from A’s own and that of other persons

Burdick v Garrick: P is entitled to whole mixed fund unless A can distinguish property

Henry v Hammond: where asset (money/property) is not owned beneficially by P, or P has consented to mixing them, A is treated as a debtor, not an agent.

Duty to preserve P’s confidentiality

• Lamb v Evans: profit from information case

Duty owed by Commercial Agents

(EC Directive) Commercial Agents Regulations 1993.

Regulation 2(1): “commercial agent” means self-employed intermediary who has continuing authority to negotiate and conclude the sale and purchase of goods in the name and on behalf of another. Except:

• A person in the capacity as an officer of a company, is empowered to enter into commitments binding on that company.
• A partner authorised to do such things
• A person who is or equivalent to an insolvency practitioner

The rest of duties and obligations are set out in statute.

Parks v Esso Petroleum Co Ltd: A is not a ‘commercial agent’ because he had no power to negotiate the price, merely sell fuel at the price fixed by his P.

Tamarind International v Eastern Natural Gas: Regulations only binding on ‘primary activities’ as opposed to ‘secondary activities’. Selling gas and electricity fell into the former, so Regulations bind. Although the contract was termed a ‘service agreements’ not ‘commercial agency agreements’, references to the Regulation within the contract suggest that it is an agency relationship.

Mercantile International Group v Chuan Soon Huat: As entered into contracts using language of agency for 20 years, and received mark-up on every sale. P argued that relations were more of a retail chain relationship, as A’s contract terms with customers were different from that of P. Held mark-up and wording evinced commercial agency relationship.

Reg 3: Commercial agent’s duty to P is to act ‘dutifully and in good faith’, Cranston J opined could be equivalent to fiduciary duty rule. Simpsons v Grant & Bowman.

Agent’s rights against Principal

1. The right to remuneration
2. The right to an indemnity
3. A lien

While common law reluctant to give A anything other than a the right to be remunerated and security for that sum, CAR 1993 reg 4 stipulates that:

• P must act dutifully an in good faith
• P must
• Provide A with necessary documents relating to the goods
• Obtain for A information necessary for performance of agency contract, and inform within reasonable time if he anticipates that volume of commercial transactions will be significantly lower than expected
• Must inform A within reasonable time acceptance, refusal or non-executionof a commercial transaction procured for P

Right to remuneration

Depends on express and implied terms of the agreement.

Kofi v Strauss:

Way v Latilla: where A is promised remuneration but no sum contracted, courts will arrive at a ‘quantum meruit’, they will do their best to arrive at a fair and reasonable sum to both parties on all the facts of the case. Courts should look at past communication to identify whether sum promised was ‘salary’ or ‘commission’ and calculate on that basis.

Green v Bartlett: If the bargain was a direct result of A’s effort, entitled to commission.

Coles v Enoch: A authorise to find a tenant for an empty shop. A asked another to find a tenant for him (act of subdelegating), and S revealed vacancy but did not inform T of exact location. T located the shop himself and entered into lease. Held Agent stopped short of actually procuring tenancy, therefore no remuneration.

Luxor Eastbourn v Cooper: A property owner was under no implied obligation not to deal with his property in such a way as the deprive the A of the opportunity of earning the agreed commission. However, L. Wright criticised use of implied terms:

• ‘not necessary to use implied terms, enough that A had not brought about condition required to obtain commission. Until then, A may not complain if P refuses to proceed with, or complete, transaction with A’s client.’  

Right to an indemnity or reimbursement

Re Parker: he is not entitled to any remuneration to carry out an act that is criminal

Adamson v Jarvis: P instructed A to sell cattle. Turned out cattle was stolen, so A had to pay damages by way of conversion to T. A entitled to an indemnity from P.

Right to a lien

Taylor v Robinson: A may have a claim in trover (right to recover value of personal property wrongfully disposed of by another) against his P for the remuneration, but may not tortuously seize upon his debtor’s goods, and then claim to retain them by virtue of a lien.

Termination of the Agency Relationship

Principle means are:

• Completion of task or expiry of period of agency
• By agreement
• Revocation by P, unless an irrevocable agreement
• Death or insanity of P
• Winding up or dissolution of P
• Insolvency of P or A

Irrevocable Authority

If authority given was coupled with an interest, it would be irrevocable.

Eduardo Fernandez v Longino and Collins: P owed A some money, and allowed him to sell off P’s amber to offset this debt. P later tried to revoke the authority, but A sold anyway. Held this authority was irrevocable as coupled with an interest (the loan).

Re Hannan’s Empress Gold Mining: P agreed to buy any shares in company promoted by A, so that P can buy mine from A. P authorised A to apply for unsold shares on his behalf. P was bound to buy 980 shares and tried to revoke authority of A to get it by himself. Held he was barred from doing so, as authority was designed to protect the interest of the Agent (sale of mine).

Note: here P’s owe A something, or authority was an insurance for A’s right to come through.

Revocable agencies

Rhodes v Forwood: termination happens when P’s business ceases to exist.  

Termination by Operation of Law (bankruptcy of P or A, frustration, death/insanity of P)

Campanari v Woodburn: A authorised to sell painting. P died before painting was sold. Held no right to remuneration  (unless P’s executor ratifies sale), but entitled to quantum meruit.

Quantum meruit: restitution remedy ➔ a reasonable sum for work done rather than contractual commission.

Termination and Apparent Authority

Drew v Nunn: termination of actual authority (in this case by way of insanity) may still not remove ostensible/apparent authority. P still bound.

Termination under CAR 1993

Grants rights to self-employed commercial agent upon termination of the contract. Part IV.