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14 Jan

COMMERCIAL TRANSACTIONS 1.2 CAPACITY AND POWERS OF AN AGENT

CAPACITY

The principal, agent and the third party should be capacitated. However, the law focuses on the principal and third party.

Who can act as principal?

Anybody that can do what he wants his agent to do. In essence, since the acts of the agent is seen as that of the principal, he cannot appoint a person to do an act which he (principal) legally cannot do. Infants, insane persons… who cannot enter some contracts[1] cannot appoint an agent to enter such contract. E.g. an infant cannot own land. Therefore, he cannot appoint an adult agent to buy land for him. Similarly, a corporation cannot appoint an agent to carry out an act that is outside its scope of operation in the memorandum.

The agency agreement can terminate upon the loss of contractual capacity-Younge V. Toynbee. However, where a principal becomes insane, such development should be made known to the third party. An insane person can appoint during his lucid interval.

Drew V. Nunn

In this case, the husband held out his wife to be his agent to the trader and paid for the goods she pledged his credit upon. Subsequently, he became insane and while in a mental hospital, his wife bought some goods from the plaintiff and failed to pay. When he recovered, the plaintiff sued him for the price of goods. Brett LJ held that the wife’s authority as agent has been revoked by the man’s insanity but because they were married and cohabiting, the fact of his insanity did not reach the notice of the trader, the husband was liable.

The rule in; Imperial Loan Co V. Stone: The court held that for the insane principal to escape liability, should prove that he did not know what he was doing and that the third party was aware of his insanity. Therefore, if the 3rd party was ignorant of the principal’s insanity, then the contract can be enforced-Moulton V. Camroux. As regards an infant, his agent can do only what he can do-G V. G.

  • Capacity to act as an agent: because the agent is a mere instrument and a conduit pipe, that links the principal to the third party, and the principal bears the liability and obligations: therefore, anyone can be an agent irrespective of his contractual capacity. Whether he can do it or not… provided his principal has the capacity to do what the agent is appointed to do.

 

FORMALITIES REQUIRED FOR THE FORMATION OF AN AGENCY.

Generally, there is no formal requirement for the formation of an agency even if the contract is one required to be in writing. Writing is however advisable even though it is not required so that there would be no confusion in the future. EXCEPTIONS:

:: Agency under seal (power of attorney) whereby the agent is given the power to enter contracts under seal for his principal should be in writing. A power of attorney can be made irrevocable especially when consideration is given. In the absence of consideration, irrevocability should be one year. In distinguishing between gratuitous and contractual agency, the presence or absence of consideration is a determining factor.

:: Land Transactions: Appointment in writing is necessary in some cases like transfer of an interest in land- Section 5 law reform (frustrated contracts) act 1961. See Section 4, Statute of frauds 1677. See also Section 79 of the property and conveyancing law 1959.

 

CREATION OF AN AGENCY.

May be by

  1. Express or implied agreement.
  2. Necessity
  3. Certain relationships. For example, partnership, cohabitation.

 

  1. EXPRESS OR IMPLIED AGREEMENT.

Express: It may be orally or in writing an agent appointed for the execution of a deed needs to be appointed by deed-A.G V. Ogunlana. Consensus ad idem. No fraud, duress or misrepresentation. To solve the issue of confusion, writing is advisable.

Implied: is implied from the conduct of the parties, usually the principal’s conduct which does not protest the actions of the agent and circumstances which clearly indicate that he has granted his assent-Biggar V. Rock Life Insurance.

 

  1. RATIFICATION: ratification is a discretionary process whereby a principal expressly or impliedly accepts or adopts the previous un-authorized or ultra-vires conduct of the agent done on his behalf. Thus making the principal liable as though such act of the agent had been authorized previously. Thus having a retrospective effect-Bolton Partners Lambert.

Ratification does not need a particular form except the contract involved is that of deed.-Oxford Corp V. Crow. The mere requirement that such contract is meant to be in writing does not mean that the ratification should be in writing.

Before a valid ratification can be given, all the following must be present:

  • Declaration: When doing the unauthorized act, the agent must tell the third party that he is acting on behalf of a principal-Keighley, Maxsted and co Durant. Folashade V Duroshola. To enable the agent to know with whom he is contracting.
  • The said principal must be in existence at the time of “declaration”-Kelner Baxter. Firgos Nigeria limited V. Zetters Nigeria Pools ltd.
  • The principal must have the capacity to conduct the transaction which the agent contracted on his behalf-Boston Deep Fishing Ice and Co Fareham.
  • The Agent must disclose the full facts of the unauthorized transaction to the principal-Savery V Except where he is negligent and just jumps into the ratification without asking for the facts–Marsh V. Joseph.
  • The transaction must have been legal- the principal cannot ratify illegal or void or criminal acts-R V Woodward: Brook V Hook, In this case, the agent forged his principal’s signature as the maker of a promissory note. It was held that the act cannot be ratified.
  • It is the whole contract that gets ratified and not a part of it.
  • Ratification should take place within a reasonable time- Folashade Duroshola
  • Proof of ratification: Ratification may be construed from the un-protestant attitude of the principal.

 

THE EFFECTS OF RATIFICATION.

Ratification has a retroactive effect, as though the unauthorized act had been authorized. As such once the principal ratifies, it becomes binding on him and the third party, notwithstanding his withdrawal before the authorization.-*Bolton Partners V. Lambert. The third party can only withdraw any time before ratification if he makes his offer subject to ratification.-Watson V. Davies.

 

  1. AGENCY BY ESTOPPEL: estoppel is an equitable rule of evidence. The “ostensible agent”. Telling the principal to “stop” denying that Mr A is not his agent. This occur where A clearly makes a representation that leads the third party to reasonably believe that an agency exists and upon such belief or reliance, alters his position. The representation may have been express or by conduct-Summers Solomon: In Colonial Bank V. Cady. Y had been in the habit of paying for the goods purchased by X. He was held liable to pay for the instant one even though they were made fraudulently.

A retiring partner should give notice of retirement. No wander there are a lot of publications in the dailies by firms and companies declaring that some individuals no longer work for them. The termination of authority needs to be communicated to the third party-Drew V. Nunn.

  1. Agency by operation of the law. Agency is presumed in certain circumstances like;
  • necessity,
  • cohabitation,
  • partnership

NECESSITY. Emergency conditions leads a person to act in order to prevent irreparable damage to the property of the person on whose behalf the act is performed. The following conditions must be fulfilled.

:: There must have been a prior contractual relationship between the parties and the act is just an extension of such. For example, the master of a ship has discretion as regards the ship or its cargo when in danger.

Great Northern Railway V. Swaffield, In this case, the defendant’s horse arrived late at its destination. The railway company then lodged it at livery stable. They later delivered it to him and claimed for recovery of expenses for lodging the horse. The court held that Mr Swaffield was liable to the railway company as they acted in bonafide interest of Mr Swaffield. If there is no previous contractual relationship between the parties for example, your neighbor’s roof begins to leak and you call a carpenter to fix it. There can be no liability. Because no liability can be imposed on a person behind his back.

However, in Langan V. Great Western Railway co, The court held that the moral duty of lodging an injured passenger by the railway police inspector was sufficient to bind the company for expenses incurred.

 

:: There must be actual or imminent necessity or emergency. Mere inconvenience would not create an agency-Prager V. Blastpiel. In Stamp and Heacock, the agent bought fur skins for the principal and because he was unable to ship them owing to enemy occupation of the territory, he later sold them. The court held that there was no actual imminent necessity and that the goods were non-perishable. In Sachs V. Miklos; the bailee sold the furniture of the bailor alleging that they have become a burden and all attempts to communicate with the bailor failed. The court held that the bailee was liable in conversion.

:: Communication with the owner of the goods must have been impossible or impracticable to get his instructions. An attempt should have been made-in Springer V. Great Western Railway Co, the plaintiff’s tomatoes were found to be going bad and the railway company sold them. The court held that there was no attempt to communicate with the owner as such they were liable for damages to springer.

:: The act of the agent should be in the bonafide interest of the owner. Munro V. Willmott Great Northern Railway V. Swaffield. In contrast with prager V. Blastpiel, stamp and heacock.

There has been instances where a person carrying out a moral duty has been held to be the agent of the principal-Langan V. Great western railway co. The railway police inspector took an injured passenger to an inn. The railway company was held liable to pay for the lodging and care supplied to the passenger.

AGENCY BY COHABITATION. This relationship emanates from the cohabitation rather than marriage. Where a man and woman (though not married) live together, contracts entered into by the woman for necessaries in the household are binding on the man to pay. Today, women are equal to men thus it is usually hard to prove contracts for necessaries. Whatever she pledges should be necessaries. The law and  society has evolved more than this anyway. See Drew V. Nunn, Debenham V. Melon.

SCOPE OF AGENT’S AUTHORITY.

  • Actual authority is that which is conferred by the principal by agreement.
  • Incidental; the agent should do whatever is necessary for the normal and effective execution of his duties.
  • Usual authority; anything which another agent in the similar profession would do or are usually authorized to do.
  • Customary authority; the agent in his customary authority acts according to the customs and practices of the market or business.
  • Apparent authority: that which the principal has led a third party to believe.
  • Presumed authority: created by operation of the law namely agency presumed form cohabitation and an agency of necessity.

 

[1] At common-law, only contracts for necessaries can be enforced against an infant- Labinjoh V. Abake, Nash V Inman.

Isochukwu

Quite eccentric really

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