Agency is a relationship of three parties: the principal, who hires an agent to act on their behalf, and the third party, with whom the principal creates a legal relationship with.
Seller agent buyer. Landlord agent tenant. Buyer agent seller. Disneyland agent traveller. Cruise ship agent traveller. Company agent job seeker.
Agency creation
Bilateral relationship — both parties must consent, with the principal allowing the agent to represent them and be bound by the contracts created.
Agency by consent / agreement, express or implied, in speech or writing. Best to use an Estate Agency Agreement from CEA and have it in writing. Sale, purchase, lease (landlord / tenant), and the same in Exclusive Agency Agreement.
Agency by estoppel (holding out) happens when the principal gives a third party the impression that their mutual contact is their agent, and the third party acts on it.
The principal is estopped from denying the agency. (You can’t deny it, you gave the impression!)
(We saw this is Land Law, in estoppel licence, where you cannot take back a license given.)
Agency by ratification is a retrospective relationship. The principal and third party are already in a contract, and ratification validates what the agent has already done.
Conditions:
- The principal existed when the agent acted,
- The principal has legal capacity to make the contracts (from the beginning),
- The agent named / sufficiently identified the principal at the time the contract was made,
- The ratification is made in a reasonable time frame, and
- To the entire contract.
The principal needs to communicate a sufficiently clear intention of ratifying to ratify the contract.
Agency of necessity is usually by a party, already in an existing contractual relationship, to preserve the property or interests of another. Conditions:
- Agent had no practical way of contacting the principal,
- Actions arose out of pressing need / emergency,
- Actions were in good faith (for the principal),
- Actions were reasonable and prudent.
Agency types include:
- Non-exclusive agency
- one owner, many agents
- Sole agency
- one owner, one agent, both market the property
- Exclusive agency
- one owner, one agent,
- owner sells, compensates agent
- agent sells, commission paid
Uberrimae fidei — most abundant faith / utmost good faith.
Ubberimae fidei contracts are made without lies or secrets. Everything is disclosed.
Agent’s authority
Contracts are only valid when an agent acts within authority.
Actual express authority is permission made verbally or in writing.
Actual implied authority is implied from what is usual in the circumstances.
Ostensible / Apparent authority occurs when the principal represents to the third party the authority that the agent has, and the third part relies on that representation. (Agency by estoppel, because you’ve given the impression that this is your agent. No take backs!)
Agents can describe and discuss property, but neither sign the contract without Power of Attorney, nor receive money in principal’s name.
Warranty of authority is breached when the agent enters into a contract with third party without principal’s authority.
Agent duties and rights
Duty to act / perform the contract of agency for the benefit of the principal.
Duty to obey principal’s instruction to what’s reasonable, lawful, and in the agency agreement.
Duty to exercise reasonable care and skill generally associated or higher as agreed upon.
Duty not to delegate unless authorised by principal. Sub-agent actions are the responsibility of the agent.
Duty to act honestly [fiduciary — in good faith for another, in Trust — duties] disclosing all, including conflict of interest, to principal (not to other clients).
Duty not to misrepresent fraudulently, negligently or innocently.
(we see this in Contract Law, misrepresentation.)
Right to remuneration either expressed in the agency agreement or implied (when it needs to go to court).
Right to reimbursement and indemnity for all reasonable expenses and losses incurred in the performance of their duties. e.g. travel expenses, photocopy charges, document registration…
Breach and termination
In a breach, the agent is not entitled to commission, the third party may sue principal for damages, and principal may sue agent for damages.
Termination may occur by:
- Agreement
- mutual agreement verbally or in writing
- also timeframe expiry
- Performance by agent
- task accomplished
- Revocation by principal
- unilateral, in accordance to agency agreement (otherwise liable for breach)
- any word or conduct
- notice to third party as soon as possible.
- Renunciation by agent
- by refusing to act or notifying the principal
- unilateral, before fulfilling obligations in agency agreement, liable for breach
- By notice
- if written in agency agreement
- if not, a reasonable notice must be given to other party
- By law
- death, insanity, bankruptcy, frustration of the contract.
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