Agency in English law

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Agency in English law is a component of UK commercial law, and forms a core set of rules necessary for the smooth functioning of business.

In 1986, the European Communities enacted Directive 86/653/EEC on self-employed commercial agents. In the UK, this was implemented into national law in the Commercial Agents Regulations 1993.[1]

Authority

An agent who acts within the scope of authority conferred by their principal binds the principal in the obligations the agent creates with third parties. There are essentially two kinds of authority recognised in the law: actual authority (whether express or implied) and apparent authority.

Actual authority

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Main article: Actual authority

Actual authority can be of two kinds. Either the principal may have expressly conferred authority on the agent, or authority may be implied. Authority arises by consent, and whether it exists is a question of fact. An agent, as a general rule, is only entitled to indemnity from the principal if they have acted within the scope of their actual authority, and if they act outside of that authority they may be in breach of contract, and liable to a third party for breach of the implied warranty of authority.

Express actual authority

Express actual authority means an agent has actually been expressly told they may act on behalf of a principal.

Implied actual authority

Implied actual authority, also called "usual authority", is authority an agent has by virtue of being reasonably necessary to carry out their express authority. As such, it can be inferred by virtue of a position held by an agent. For example, partners have authority to bind the other partners in the firm, their liability being joint and several, and in a corporation, all executives and senior employees with decision-making authority by virtue of their position have authority to bind the corporation.

Apparent authority

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Main articles: Apparent authority and Estoppel

Apparent authority (also called "ostensible authority") exists where the principal's words or conduct would lead a reasonable person in the third party's position to believe that the agent was authorized to act, even if the principal and the purported agent had never discussed such a relationship. For example, where one person appoints a person to a position which carries with it agency-like powers, those who know of the appointment are entitled to assume that there is apparent authority to do the things ordinarily entrusted to one occupying such a position. If a principal creates the impression that an agent is authorized but there is no actual authority, third parties are protected so long as they have acted reasonably. This is sometimes termed "agency by estoppel" or the "doctrine of holding out", where the principal will be estopped from denying the grant of authority if third parties have changed their positions to their detriment in reliance on the representations made.[2]

Watteau v Fenwick

In the case of Watteau v Fenwick,[3] Lord Coleridge CJ on the Queen's Bench concurred with an opinion by Wills J that a third party could hold personally liable a principal who he did not know about when he sold cigars to an agent that was acting outside of its authority. Wills J held that "the principal is liable for all the acts of the agent which are within the authority usually confided to an agent of that character, notwithstanding limitations, as between the principal and the agent, put upon that authority." This decision is heavily criticised and doubted,[4] though not entirely overruled in the UK. It is sometimes referred to as "usual authority" (though not in the sense used by Lord Denning MR in Hely-Hutchinson, where it is synonymous with "implied actual authority"). It has been explained as a form of apparent authority, or "inherent agency power".

Operation of law

Ratification

Disclosure

Disclosed agency

Undisclosed agency

Principal and agent relations

Duties of agent

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See also: Duty of care and Fiduciary

Rights of agent

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See also: Quantum meruit

Termination of agency

See also

Notes

  1. ↑ Andrea Tosato, An exploration of the European dimension of the Commercial Agents Regulations (2013) LMCLQ 544-565 [1]
  2. ↑ International Principle: Trans-Lex.org, Restatement of Agency (Second)§ 27: "Except for the execution of instruments under seal or for the conduct of transactions required by statute to be authorized in a particular way, apparent authority to do an act is created as to a third person by written or spoken words or any other conduct of the principal which, reasonably interpreted, causes the third person to believe that the principal consents to have the act done on his behalf by the person purporting to act for him."
  3. ↑ [1893] 1 QB 346
  4. ↑ e.g. GHL Fridman, 'The Demise of Watteau v Fenwick: Sign-O-Lite Ltd v Metropolitan Life Insurance Co' (1991) 70 Canadian Bar Review 329

References

Books
  • LS Sealy and RJA Hooley, Commercial Law: Text, Cases and Materials (4th edn OUP 2009)
Articles
  • GHL Fridman, 'The Demise of Watteau v Fenwick: Sign-O-Lite Ltd v Metropolitan Life Insurance Co' (1991) 70 Canadian Bar Review 329
  • S Saintier, 'Final guidelines on compensation of commercial agents' (2008) 124 LQR 31
  • G McMeel, 'Philosophical Foundations of the Law of Agency' (2000) 116 LQR 387
  • A Tosato, 'An Exploration of the European Dimension of the Commercial Agents Regulations' (2013) 4 LMCLQ 544 [2]
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