Agency

Definition of agency
• In roman law, the concept of commercial agency as we know of today was
unknown
• Law of agency draws from English law principles
• Def:- “ a contract whereby one person (the principal) employs another (the
agent) to act for him and enter into contractual relationships binding
between him and 3rd parties
• Representation is an essential part of Agency :- Blower v Van Noorden
1909 TS at 890
• “An agent is regarded as one to whom no contractual liability in respect of
agreements entered into in the name of his principal, can possibly attach.
He is simply the sole representative of another”
• The law of agency is basically concerned with relationship between
the principal & the agent, and the relationship between the principal
& the 3rd party.
• The objective in appointing of an agent is the performance of a
service for the benefit of a principal, in circumstances where the
principal finds it impossible, difficulty, inconvenient & taxing to do the
service himself.
Formation of the contract
• Its important to ascertain the parties, both the principal and the agent have
the capacity to contract – thus if either party lacks the necessary capacity,
the contract is void
• Generally no formality is required except where statute provides for
it/required by the law
• The word agency can be used in loose commercial terms- its important to
analyse whether the person appointed as an agent has the authority to
contract on behalf of the principal – if not the principal agent relationship
does not come into existence – there must be authority to represent
• **the authority of by the principal to the agent to represent him is the
essence of commercial agency **
• The principal – agent relationship should always be distinguished from
an independent contractor relationship.
• With agents, as soon as the contract is concluded between the
parties, the agent disappears from the scene, & the 3rd party has
recourse against the principal.
• What of an independent contractor?
Authority of the Agent
• Actual authority
• Express
• Implied
• Agency may arise where there has been on actual authority
• Ostensible authority ( agency by estoppel)
• Ratification
Express Authority
• i.e a manifestation by the principal of his intention that the other party
should act on his behalf
• Can be expressed through a formal document POA or an informal
document such a letter/ expressed orally see Faure v Lauw 1880 1 SC
• A power of attorney is a document defining the extent of the authority
given to an agent by the principal.
• Powers of attorney can be special or general.
• A special power of attorney gives authority to a specified agent, to do one
particular thing or specialised act.
• A general power of attorney gives authority to agent to act for his
principal generally (the agent act as he deems fit).
Implied authority
• Authority implied by law where one person is deemed by the law to
represent another, the law provides that certain persons are who are
considered incapable of handling their own affairs, will be represented by
another – guardian contracting on behalf of the minor, curator for the insane
• Authority may also be implied on the fact that is where the conduct of the
parties must be such that,
• Test- according to the rules of common sense, it admits, if of no other
interpretation, but that the parties intended to the relationship of principal
& agent to exist between them
• see the case of Strachan v Blackbeard & Son 1910 AD 282, Karol v Fiddel
1948 (4) SA 466, Festus v Worcester Municipality 1945 CPD 186.
• The law gives an agent implied authority to do any act incidental to the
authorised act. Nel v SAR & H 1924 AD 30 - authority extends to
executing the incidental act with ‘satisfaction and effect’
• Agent also employed in a particular capacity will have implied authority
to perform acts usually performed by agents in that capacity unless it is
expressly excluded
• Authority can also be implied by usage of trade
• It is the duty of the third party who dealing with the agent to make all
proper inquiries to ascertain the extent of the agent’s authority –
whether the act/contract to be concluded comes into the province of the
agency
Ostensible authority / agency by estoppel
• No authority exists-
• However, the conduct of the principal is such that it amounts to a representation that
the agent had authority from him to contract
• The principal is thus estopped from denying the agent had no authority - ostensible
authority gives rise to agency by estoppel
- Must be distinguished from implied authority
- See Monzali v Smith 1929 AD 382 at 385 :- discusses the requirements which must be
met for ostensible authority/ agency by estoppel to arise
- See also Gwafa v Small Enterprises Development Corporation 1999(2) ZLR 261 (s)
Henney v Annesley 1960 (4) SA 462, Seniors service (pvt) ltd v Nyoni 1986 (2) ZLR 293 (S)
- In reading these cases, try to establish if there is any difference between ostensible
authority/ apparent authority
• Estoppel : - a person is precluded from denying a fact/asserting a
fact/right. Preclusion arises due to a person’s actions. conduct,
statements, admissions, failure to act..
• Monzali v Smith 4 requirements to establish agency by estoppel
• (1)there was a representation by the principal
• (2) that the representation was of such a nature that it would
reasonably have been expected to mislead him
• (3) that he acted on the faith of the representation
• (4) that he was prejudiced by doing so
“apparent authority”
• Reed NO v Sager’s Motors (Pvt) Ltd 1970 (1) SA 521 (RAD):-
• ‘If a principal employs a servant or agent in a certain capacity and it is generally
recognised that servants or agents employed in this capacity have authority to do
certain acts, then any of those acts performed by such servant or agent will bind the
principal because they are within the scope of his “apparent” authority.
• The principal is bound even though he never expressly or impliedly authorised the
servant or agent to do these acts, nor had he by any special act (other than the act of
appointing him in his capacity) held the servant or agent out as having this authority.
• The agent’s authority flows from the fact that persons employed in the particular
capacity in which he is employed normally have authority to do what he did.
Whether an act is or is not within the scope of the apparent authority of an agent is
essentially a question of fact.’
Ratification
• This is necessary where no authority exist.
• The principal must affirm or ratify acts of an agent performed
professedly for the principal.
• The net effect of ratification is to legitimise or clothe the act with
authority, so that the position is the same as if the act has been
originally authorised.
• see Cases of Dreyer v Sonop 1951 (2) SA 392 and Flood Taylor 1978
RLR 230
• 4 requirements for ratification to be possible..
• For ratification to be possible, the following requirement should be
met,
(i) The person making the contract must profess, that at the time of making
the contract, that he was doing so on behalf of the principal
(ii) The professed principal must be named & ascertainable & act must have
been done in his name
(iii) The act itself must not have been illegal
(iv) The principal must have been in existence at the time of making the
transaction
• Ratification can be express/implied – it is necessary that the principal
confirm and adopt intentionally the unauthorised acts done on his
behalf
• Implied ratification?
• Ratification must take place within a reasonable time of unauthorised
act.
• Partial ratification is impossible – ie ratification of any one party of the
contract operates as ratification of the whole agreement.
• Its effect is to confer effect ex post facto authority on the agent, ie the
contract will be valid from the date of its conclusion
Negotiorum gestio
• The concept of negotiorum gestio allows a stranger to undertake the
business of another without the authority & in the latter’s absence.
• He is not entitled to any remuneration for his services
• Can only claim necessary & useful expenses utiliter coeptum incurred
by him in running the business - must be able to show that the
expenses were reasonable.
• He is delictually liable, if he causes loss to the principal by negligence
in his voluntary administration
• This must clearly be distinguished from agency - ?
Agency of necessity

• It applies in circumstances of emergency where:-

• Agent unable to contact principal
• Agent does what is reasonable in the circumstances
• He acts in the bona fide in the interest of the principal
• a person who is already the agent of another has implied authority to
exceed the limits of the authority given, in so far as it is necessary in
order to preserve the principal’s property or interest.
Rights and duties of agents and principals
Duties of the Agent
• The duties of the agent are:-
a) To perform his mandate
b) Honestly and carefully
c) In accordance with the principal’s instructions
d) To his principal’s account
Performance of the mandate
• Agent is duty bound to execute the instruction as given to him
Winterton v Taylor & Blooms v Taylor 1962 (2) SA 533
• If not, he forfeits his commission and becomes liable for damages.
• in performing the mandate he must obey the principal’s instructions
Performance of mandate must be done honestly
and carefully (fiduciary duties of an agent)

• Contract of agency creates a fiduciary relationship between agent and

principal
• The utmost good faith is required from an agent in his dealings with
his principal
• Agents must conduct the affairs of their principals in the interests of
the principal and not for their own benefit
• R v Milne & Elreigh 1951 (1) SA 791
“ the principal bargains for the disinterested skill and diligence and zeal of the
agent for his own benefit in the confidence that he will act with sole regard to
the interests of the principal so far as that may be lawfully done.”
• No secret profits:-
• The principal as an agent cannot make a secret profit out of anything
(including information which can be used for the purposes of the principal’s
business) which belongs to his principal and which the agent possesses in a
fiduciary duty
• Agent cant, without the consent of his principal, retain any profit acquired by
him in transactions within the scope of agency:- the agent is confined to a
commission
• No conflict of interest
• An agent cant place himself in any position where his interest and his duty
may conflict, no matter who honestly he may have acted
• Care, skill and diligence
• An agent must use care, skill and diligence as is reasonably necessary for the
due performance of his mandate
• It is a matter of evidence in each particular case whether the agent has meet
this standard- it’s a question of fact
• see Honey & Blackenburg v LSR 1965 RLR 685 -It has been held that, a legal
practitioner holds himself to clients as possessing adequate skills & learning
for the purpose of conducting all his business
• No delegation of authority
• As a general rule, personal performance is required of the agent, he cant
delegate his authority to a sub agent. Delegation is allowed as an exception
where the principal expressly/impliedly allows it
• Obedience to the principal’s instructions
• An agent must perform his mandate exactly in accordance with the authority
expressly/implied, given to him by his principal
• Duty to account to the principal
• Agent must give the principal full and accurate information of what he has
done in carrying out the mandate, and the full and accurate information of
any contract concluded by him on the principal’s behalf
• No disclosure of information
• An agent may not disclose any information of his principal ‘s affairs acquired
in the course of the agency, to the detriment of his principal
• The Duty to impart information –
• an agent is bound to give his principal all the information which a reasonable
person within the agent’s shoes would be expected to give, not all facts have
to be reported, but only those which are likely to affect the agreement of the
principal
Obligation of the Principal

• (i) To pay remuneration to the agent

• (ii) To compensate & to reinvest
• (iii) To account to an agent
Principal and third parties
• Where the agent has acted within the scope his authority/ his
previous acts have been ratified by the principal/ where the agent is
deemed to have ostensible authority – principal is liable to the 3rd
parties
The undisclosed principal
• An undisclosed principal v unnamed principal.
• A principal is undisclosed where a 3rd party enters into a contract
with an agent, with the belief that the agent is contracting on his own
account, 3rd party does not know whether there is a principal at all
and the 3rd party does not know that the agent is contracting on
behalf of the principal
• The contract is between the agent & the 3rd party.
• The law allows the principal to come into the open and sue/ be sued
on the contract
• See Nyamweda v Geogeous 2000-88-SC.
Principal and third parties/ agent and third
parties
• Principal is liable to third parties on contracts made on his behalf by
an agent.
• Agent can be liable on the contract where they expressly/impliedly
accepts personal liability on the contract.
• Where the agent does not disclose the fact that he is contracting as
an agent he will liable on the contract to the third party.
• Where an agent acts as agent for a principal who they know does not
exist – they will be personally liable on the contract to the third party
• Principal can also be held liable for agent action on the ground that by
principal was unjustly enriched at the third party’s expense see
Guarantee Investment v Shaw 1953 (4) SA 482
• Principal is bound by misrepresentations made by the agent in
concluding a contract with a third party, see Randbank v Santam
1965 (4) SA 363
• Where the agents contracts as an agent they expressly/impliedly
warrant that they have authority to act
• Where is it shown that the agent had no authority to act and the
principal cannot be held liable on the basis of ostensible authority/
agency by necessity - third party is entitled to claim damages from
him for breach of warranty of authority
Termination of agency
• Agency comes to end:-
• completion of the contemplated work/ proper execution of the
mandate by agent
• Revocation - termination by a unilateral act of the principal
• Renunciation – termination by unilateral act of the agent
• Where the principal revokes agent’s authority he must notify third
parties – where they do not third parties contract with agent on
jusitiable belief that the agent is still representing the principal, the
principal will be bound to the contract concluded see Salisbury
bottling v Arista bakery 1973 (3) SA 132