LAW OF AGENCY

BY JUSTICE FRANCIS OBIRI

THE LAW OF AGENCY

• An agent is a person empowered or authorized by another person (the principal) to bring the principal into legal relation with a third party. An agent may be an employee of the principal. Example is where a firm employs salesmen or buyers.

• An agent can be an independent contractor such as, an estate agent, normally; there would be contract between the principal and the agent who would be paid salaries, commission or fees.

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CLASSIFICATION OF AGENTS ACCORDING TO THEIR POWER.

• Agents may be classified according to the degree of authority conferred by the principal or their liability and functions.

• Universal Agents: They have unrestricted authority. The principal is bound by all acts done by such agents. Such agents are rare in practice.

• General Agents: They are appointed to do anything within the authority given them by the principal in all transactions relating to a specified trade or matter.

• Special Agents: They are appointed for specific purpose. If the special agent does anything outside his authority, the principal will not be bound by it. The third party should make an enquiry to the authority of such an agent

CLASSIFICATION ACCORDING TO FUNCTION

• Auctioneer, Bankers, Lawyers, Partner, Wife, Broker, House Keeper among others.

• 1. The Auctioneer: An auctioneer is an agent who sells goods at a public auction. He has authority to receive the purchase price and can sue for it in his own name. He has possession of the goods and a lien owed for his charges or commission. He is an agent for both parties. That is both the principal and the third party (the buyer). He must sell only for cash, unless otherwise authorized and the best price available.

• If the owner fixes a reserve (minimum) price for the goods, the auctioneer is liable for damages to the owner if he sells the goods below the reserve price, but in such a situation, if the buyer acquires goods below the reserve price, the buyer acquires good title to the goods, unless he knew of the auctioneer’s breach of authority.

• 2. Broker: a broker has been defined as ‘an agent employed to make bargains and contracts in matters of trade, insurance etc for compensation commonly called brokerage’.

• 3. Factors agent (mercantile agents): a factor commonly referred to as ‘mercantile agent’ under the Laws of Ghana is an agent employed to sell goods or merchandise consigned or delivered to him by or for his principal for compensation. His powers are to sell in his own name, to give warranty if it is usual in the course of the business. To receive payment for the goods sold, give valid receipt and grant reasonable credit and to provide the goods to the buyer.

REASONS FOR THE CREATION OF AGENCY

• Assistance: A principal may not be present when an act needs to be performed. In such situation, some other person may have to act on his behalf.

• Time: where a person will have to act within a given period of time but he may be busy at that time, there would be the need to engage someone else to act which may give rise to the creation of agency.

• Skill: due to the technical nature of a type of job to be executed, a different person who may be skilled in that field may be engaged for a better execution of the job.

• Training or Apprenticeship: A task may be handed over to an apprentice or a trainee as a means of teaching him to do it. It is also a means of practicing the art of delegation.

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CREATION OF AGENCY

• An agent may be appointed either expressly or impliedly. Express authority arises from the instruction given by the principal.

• An agent may be impliedly authorized to do such things that are normally done in carrying his express instructions.

• By contract or deed: Agency is created when the principal expressly sign a document to the terms settled in the contract. The deed is known as power of Attorney under the Powers of Attorney Act 1998(Act 549)

• By Ratification: when an unauthorized person contract as an agent, the principal for whom he intended to contract would be bound if he subsequently ratify the contract. Such ratification is retrospective. Ratification takes place when the principal confirm the contract entered into by his agent.

• Ratification is based on rule that every ratification is retrospective and equivalent to a previous command.

• Agency created by estoppel: if a person has so acted as to lead others to suppose that a certain person is his agent, if it is by words or conduct of the principal, he would be estopped from denying the agency relationship.

• For example, where a customer regularly send his clerk to collect his bank statement. The customer would not be allowed to challenge the bank if it realizes his statement given to the clerk on any particular occasion has been used for something he did not authorized the agent to do.

RIGHTS OF A PRINCIPAL OVER AN AGENT

• A principal may sue his agent for breach of contract if the agent agrees to effect a contract on behalf of his principal and fails to do so.

• The principal may sue the agent for damages if the agent having agreed to the terms of the agency fails to obey his principal’s lawful instruction.

• He may sue the agent for damages for negligence if the agent fails in his duty to exercise reasonable skills and care.

• The principal may refuse to accept a contract entered into by a person to whom the responsibility has been delegated to by the agent.

• The principal may recover any secret profits made by the agent whiles conducting his principal’s business.

• He may set aside any contract made by an agent who has permitted his own interest to conflict with those of his principal.

DUTIES OF A PRINCIPAL

• He must pay the agent his wages that has been agreed and not to prevent or hinder the agent from earning the agreed commission or the wage. If nothing has been agreed on, the agent must be paid reasonable wages.

• He must pay him his commission. The agreed point in time at which the right to commission arises depends on the terms of the contract between the principal and the agent. This has given rise to difficulty particularly in cases concerning estate agents.

THE RIGHT OF AN AGENT

• 1. Indemnity: the principal must indemnify his agent for expenses properly and legally incurred in executing his duties. The agent should be indemnified against the consequences of wrongful acts against third parties if done innocently and bonafide within the scope of his authority.

• Remuneration: the agent must receive the salary agreed upon in express terms in an agreement. The principal may not after a contract of agency makes nor do any act which would prevent the agent from earning his remuneration.

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DUTIES OF AN AGENT

• 1. Obedience: an agent must obey his principal instructions, if he fails to do so he will be liable for damages. The principal may however be liable to third party for acts of his agent.

• 2. Personal performance: an agent must perform his duties in person. He may delegate his duties to a sub-agent only where the contract between him and his principal expressly provide .

• 3. Care and skills: an agent must use such care and skill as is reasonable in all circumstances. Moreover, if he has professed some special skills he must show the degree of care and skill an ordinary person expected from that profession will do.

• 4. Duties of good faith: an agent must never permit and disclose conflict of interest. This means that, he must never allow his own interest to conflict with those of his principal. Example

• A. An agent must not personally buy from or sell to his principal without full disclosure.

• B. An agent must not act for both sides without full disclosure.

• C. An agent must not take any secret profit from an unauthorized use of his position.

• D. An agent has no power to delegate.

TERMINATION OF AGENCY

• This occurs either by an act of the agent or the principal or by operation of law. Agency may also be terminated in the following ways;

Performance: if the agent is engaged for a specific tasks ,his authority ends as soon as his task is completed. For example, an estate agent engaged to find a buyer for a house has no further authority once the sale is effected or completed.

Revocation: the principal may revoke the authority of his agent at any time. This rule is subject to the following qualification;

• If the agent has previously contracted with any party on behalf of the principal, the principal must give specific notice to the third party that he has revoked the agent’s authority.

Expiration of time: if an agency is created for a certain definite period, then the agency terminates at the end of that period.

Destruction of the subject matter: if for example, an agent is employed to sell a horse, the contract is terminated if the horse dies before the sale.

Death or Insanity of one of the party: the question of whether one of the party authority is terminated depends on whether he has become unfit to act as an agent. The death of the principal automatically ends the authority of the agent.

Agreement: the agency relationship can come to an end by the mutual agreement between the principal and the agent appointed for a particular task.

Breach of major term of agency relationship: if an agent commits a serious breach of an express or implied duty eg. making a secret profit, the principal may terminate the agency agreement without notice and sue for damages.

Where the agent is also an employee, proper notice must be given to terminate his contract of employment.

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