Various ways in which an agency may be created An agency may be created by express appointment, implied appointment, necessity, ratification and estoppels or ‘holding out’. The first way is by express appointment. It might be expressed in oral or written form. Power of Attorney is one of the examples of an express appointment. In appointing an agent, even words spoken or a letter written may be effective. Then, an agency is created by implication under certain circumstances. This can be inferred by the law- Section 140 and Illustration, Contracts Act 1950.
When a person holds out another person as having authority to act for him bywords or induct, an agency is created by implied appointment. For instance, an agency may be implied when X gives his consent to Y to order goods on Ax’s behalf and habitually pays for them. In such a case, X will be bound by the contract as if X has expressively authorized Y to make the transactions. In Chain Yin Tee v. William Jacks & Co. (Malay) Ltd. 1964, the appellant, Chain and Young, a minor, were registered as partners. The appellant held himself out to be Yang’s partner in a meeting with a representative of the respondent company.
Young received goods supplied but did not pay. The company sued Chain and Young to obtain judgment. The appellant made an appeal to the Federal Court. It was held that the appellant was liable for Yang’s act as he held Young out as his agent who had the authority to perform things on his behalf. Illustration Section 140: A who lives in Koala Lump owns a shop in Kananga and visit the shop occasionally. B manages the shop and orders goods from C in the name of A. B pays for the goods using As fund with As knowledge. For the purposes of the shop, B has an implied authority from A in ordering goods from C in the name of A.
The third way of creating agency is by necessity. This can arise when three conditions are met. Under Section 142, Contracts Act 1950, it is impossible for the agent to get Principals instructions as it is difficult to fulfill nowadays because of the use of modern telecommunication. To prevent loss to the Principal to the goods under his care, the agent’s action is necessary. The last condition is the agent acted in good faith. In Great Northern Railway Co. V. Sheffield, the defendant’s horse is carried to its destination by the railway company.
There was nobody to receive the horse so the horse was put in a stable because the station master did not know the pendant or his agent’s address. The railway company claimed for the fees for the stable but the defendant was reluctant to pay. The court held that the defendant must pay. It was due to the plaintiff acted as an agent of necessity. Next, an agency by ratification happens when an agent who has been duly appointed, exceeded his authority or an individual who does not have the authority to act for the Principal, has acted as if he owns the authority.
Under Section 149, the Principal can accept or reject the contract. He ratifies the agency if he accepts the contract. The effect of ratification is the contract becomes ending on the Principal as if the agent was authorized beforehand as stated in Section 149. Illustration: X appointed Y as his agent to buy a car with a cost not exceeding Rumor on 1st January. Y ordered a car costing Rumor from Z and told Z that it was ordered for X on 2nd January. Z delivered the car to X on 3rd January. Y exceeded his authority so X can reject or accept and confirm the contract.
Y is an agent through ratification if X accepts the contract. Then the contract of purchasing the car which is entered into by Y on 2nd January is binding on X. The last way of creating an agency is by estoppels or ‘holding out’. An individual cannot be bound by a contract made on his behalf if he does not grant his authority. However, when a third party is misled by CSS words or conduct to believe that D is Co’s agent and owns authority to act on Co’s behalf when D does not have the authority, an agency by estoppels may happen.
If the third party relies on it to the detriment of the third party, C (principal) will be precluded or stopped from denying that D does not have the authority. There are three elements to form agency by estoppels. Firstly, principal made a representation to a third party that the individual is his agent and owns authority y words or conduct. The second element is third party relied on the statement. Eventually, the third party modified his legal position on the strength of the representation. For instance, ABA tells Eng that he is Maps agent in the presence of Amy and Amy does not contradict his statement.
Amy cannot repudiate that Alai is her agent if Eng sells goods to Alai and demands Amy to pay, believing that Alai is Amoy’s agent. In Seasons v. London and South Western Railway Co. (191 9), porters of a railway company were supplied with uniforms and they were held out as the company’s agent. A porter took charge of a passenger’s luggage when he was off-duty and did not act as an agent. The passenger sued the railway company because his luggage was stolen. The court held that the railway company was liable for the porter’s action because it was precluded from repudiating that the porter was its agent under Section 190. ) Issues: Zed, who is a theatre designer, appointed Pansy as his agent. Zed was instructed Pansy to search and buy five bales of blackout cloth costing not more than RAMMER. Pansy saw a clearance offer for RAMMER and no bargain is allowed as this is a very high quality blackout cloth. Finally, Pansy purchased five bales for RAMMER. However, Zed was so upset about what had Pansy done. He refused to pay her. Section/Case Law: According to the section 149 of Contract Act 1950, the principal can either reject the contract or accept the contract.
Section 149 states that where acts done by one person on behalf of another but without his knowledge or authority, he may elect to ratify or to disown the acts. If he ratifies, the same effects will follow as if they had been performed by his authority. On the other hand, no agency relationship exists if the principal does not agree. Moreover, the principal loud not be liable Upon such contracts. For example, on 20 July, Hymn Gong appoints Amino as his agent to buy a car with instruction that it should not cost more than RMI 50,000. On 22 July, Amino went to a shop and ordered a car costing RMI 60,000.
He told the salesman that he was buying the car on Hymn Songs behalf. On 23 July, the salesman delivered the car to Hymn Gong. Amino has exceeded his authority and so Hymn Gong can either accept and confirm the contract or reject it. If Hymn Gong adopts the contract, then Amino is said to be his agent through ratification. Alternatively, Hymn Gong can also reject the entrant on 23 July since Amino has exceeded his authority. The case law that can be applied in this case is Bolton & Partners Ltd v Lambert (1889) 41 Chi D 295. It is an offer of purchase was made by the Defendant, A. J. Lambert, to P. A. Scratchily, who was acting as an agent of the Plaintiffs, Bolton Partners (Limited). However, on 8th of December 1886, it was not authorized to make any contract for sale. On 9th of December, on behalf of the Plaintiffs, Scratchily accepted the offer with a direction that the company’s solicitor had been instructed to prepare the necessary documents. On the 13th of January, 1887, the defendant withdrew his offer. The reason is that he had been misled by the statements that had been made to him as to the value of the property.
The Plaintiffs ratified the acceptance of the offer by S after the withdrawal on 28th of January. Under Section 1 64 Contracts Act, the duty of the agent is to obey Principals instruction. The Principal have to give the directions to the agent to conduct the business of his principal. It is called a breach of contract if is failure to obey and is responsible for any loss suffered by principal. For example, if agent fails to assure car when instructed to do so and the car has been stolen, he will be liable. Merely, an agent is not under a duty to obey any unlawful instructions of the principal.
Due to Section 167 Contracts Act, when faced with difficulties, the principal must communicate with his principal by using all the reasonable efforts. Besides, in Section 142 of Contracts Act 1950, the agent will use his own discretion to take some necessary action if the agent failed to communicate with the Principal. Furthermore, it’ll help to prevent loss to the principal with respect to the interest committed to his charge. For example, the agent sells perishable goods to prevent rotting. Case law that can be applied in this section is Jabberer v Ottoman Bank [1 972] 2 KGB 254.
This case law can explain by the agency by necessity only exists if the agent is consigned with the goods of the principal or being instructed to deliver the goods to certain destination and where at the time emergency occurred while the goods are under the responsibility of the agent. Apply and conclusion: Pansy purchased five bales of blackout cloth for RAMMER, which has over the expected cost of Zed, RAMMER. Pansy has done the duty given by Zed but which was exceeded his authority. Under Section 149 of Contract Act 1950, Zed can either reject or accept the contract.
If Zed confirms it, then Pansy is an agent through ratification. It also means that Zed accepts the contract. However, it is Pansy’s responsibility to compensate the damage for Zed if Zed rejects the contract. Under Section 164 CA 1950, Pansy can be said that failure to obey Zed’s instruction that asked Pansy buy blackout cloth which are not more than RAMMER. It is called a breach of contract. Pansy has to inform Zed when purchased for the new blackout cloth with RMI 8000, but Pansy did not o it. Under Section 167 CA 1950, Pansy has to communicate with Zed by using all reasonable diligence.
Thus, Zed has the right to reject to help Pansy pay the RAMMER for blackout cloth. 3) Issue: Freeze Bed. (FEB.) delivery frozen seafood to Nice to Eat Restaurant (NEAR) and there was no one to receive the container of the frozen food because of NEAR were under investigation by the local health authority for a week. And the Fib’s driver also can’t contact any of the representatives of NEAR to collect and receive the container of the frozen seafood that they had order so FEB. decide to keep the tock in the nearby warehouse as preservation for NEAR then FEB. instructed its driver to deliver those frozen seafood to the nearby warehouse.
After NEAR open their restaurant FEB. delivered it to NEAR and wanted to claim for the warehouse storage charges from NEAR together but NEAR refused to pay it. Case Law: Under Agency by Necessity is recognized in the courts and typically applies when a party is unable to make. Means that it is a type of relationship whereby a party can make essential decision for another party. Just as in an emergency, an agent has authority to do all such acts for the purpose of protecting his principal from joss as would be done by a person of ordinary prudence, his own case, under similar circumstances.
Under section 142 that within the agency of necessity that can arise conditions were the plaintiff is acting as an agent’s action that is necessary in the situation to prevent losses to the principal with respect the goods committed to his charge as one of the duty of the agent to principal and the agent of necessity has acted in a good faith. Under the duties of agent to principal of section 164 were duty to obey the principals instruction, as an agent is bound to conduct the business of his principal according to the directions hat given by the principal.
Just as the driver of FEB. had obey the principals(FEB.) instruction that to send the container of frozen seafood to the nearby warehouse’s cold room. In the other side, the driver also fulfilled the duty that to communicate with the principal(FEB.). Just as under the section of 167 said that in cases of difficulty that driver can’t contact any of the representatives of NEAR, the agent means the driver of FEB. must use all reasonable diligence to communicate with his principal which is FEB.. In the case law of Great Northern Railway Co. Sheffield , that the railway company that carried the defendant’s horse o its destination. And when it is arrived at the destination there was no one to receive and collect the horse. And the station master did not know any of the defendant contact number nor his agent’s address so he directed that the horse be put in a stable. After they contacted the defendant and send the horse to them, the railway company claimed with the defendant for the charges that for the stable of the horse but the defendant refuse to pay it.
And the court held clearly that the plaintiff had acted as an agent of necessity in this case so that the defendant must pay for the charges. Apply: As NEAR have no any representatives around to receive the container of frozen seafood that Fib’s driver delivered due to the closing of shop which were under the investigation by the local health authority for a week so FEB. have the authority to make the decision instead as an agent when NEAR was unable to do so.
So FEB. decided to send it to the nearby warehouse cold room to keep the container of the frozen seafood of NEAR as preservation for NEAR under the agency of necessity of section 142. And the driver of FEB. had followed by the section of 164 that were duty of obey the principals (FEB.) instruction, as FEB. had instructed to its driver to lace the seafood in a cold room in a nearby warehouse.
In the other way that the driver also had fulfilled the duty of communicate with the principal which is under the section of 167, as the driver got communicate with FEB. (principal) when he can’t contact any of the representatives of NEAR. After NEAR reopen their restaurant and FEB. send the container of frozen seafood to NEAR and claimed the warehouse storage charges and with the case law and section had mention above, NEAR have the right to pay for the warehouse storage charges to FEB. without any rejection or argument nor any circumstances to refuse to pay for it.