Agency

Relationships
- Agent Principal
- Principal 3rd Party
- Agent 3rd Party
Miscellaneous issues:
- How to prove apparent (ostensible) authority?
- How can a principal ratify a contract?

Agency
An agent is a person who, through the authority conferred upon him by his
principal, is empowered to establish legal relations on his principals behalf with
a 3rd party. (pg 418)
The principal is the person whom the agent represents.
The 3rd party is the person whom the agent deals with on behalf of the principal.
The general rule is that an agent is not liable to his principal or 3 rd party as long
as he acts within the scope of authority given to him by his principal.

Agent

Principal

Contract

3rd party

The creation of an agency relationship may be due to

1) An expressed agency contract, be it oral or written
2) Statures Partners in a partnership are deemed to be agents of both the
firm and one another s5 Partnership Act
Upon termination of agency, actual authority ends immediately, but notice must
be given to 3rd parties to negate the agents apparent authority

Relationships
Principal - Agent relationship
(Super rare, unlikely to appear)
Agent
1) The agent must act according to the terms of appointment and follow the
instructions of the principal
Case to cite: Bertram, Armstrong & Co v Godfray [1830]
2) The agent must carry out his duties with reasonable care and skill.
Standard required would be that which a reasonable man would expect
from an agent in that field of activity.
Case to cite: Keppel v Wheeler [1927]
3) The agent has a duty to keep true and proper accounts
4) The agent owes fiduciary duties to the principal (in good faith)
The agent cannot make secret profits or gains
Case to cite: Hippisley v Knee Brothers [1905]
The agent cannot accept bribes
The agent cannot have conflict of between his own interests and his
duties as an agent

 De Bussche v Alt [1878]

The agent cannot delegate his responsibility to others
Case to cite: John McCann & Co v Pow [1975]
Principal
1) The principal must pay remuneration to the agent as per the agreement
2) The principal will pay for the expenses incurred by the agent, so long as
the expenses are reasonably incurred in the performance of the agents
duties

Principal - 3rd Party relationship

The main issue at hand is would the contract entered by the agent on the
principals behalf binding on the principal and 3 rd party. (pg 435)
The general rule is that, as long as an agent acts within his actual or apparent
authority, or the principal ratifies the agents act, the principal is bound to the 3 rd
party for the agents acts, even if such acts were committed fraudulently or
negligently.
Scenario 1 (Actual authority + disclosed principal)
1) Is the principal disclosed?
Does the 3rd party know that the agent is acting on behalf of the
principal?
2) Does the agent has actual authority from his principal to enter into this
contract? If yes, contract binding on P and 3P. If no, see next scenario.
The authority that the agent in actual fact has
Can be expressed or implied
o Did the principal expressly, by oral or written terms, give the
agent actual authority? If yes, expressed actual authority
o Was the authority to perform this act implied? If yes, implied
actual authority
Was the act performed reasonably incidental to the
effective execution of the agents duties? OR
Was the act something a person in the agents line of work
would normally be authorised to do?
If point 1 and 2 are fulfilled, both the principal and 3 rd party can sue and be sued
under the contract.
If only point 2 is fulfilled, then when the principal is subsequently revealed, the
3rd party can sue either the agent (See agent - 3rd party relationship) or the
principal (ONLY ONE)
Scenario 2 (Apparent authority)
3) Does the agent have apparent authority? If yes, contract binding on P and
3P. If no, no contract
Principal must be disclosed
See miscellaneous issues to determine if apparent authority is present
Scenario 3 (Ratification)

Once it is established that the agent does not have the authority to act, would
the principal want to ratify the contract? If yes, contract binding on P and 3P.
Principal must be disclosed
See miscellaneous issues to determine if ratification is applicable

Agent - 3rd Party relationship

The general rule is that as long as the agent had actual or apparent authority or
the principal ratified the agents act, then the agent owes no liability to the 3 rd
party (pg 439)
Exceptions:
1) The agent might be sued under a situation where he acted with actual
authority and the principal was initially undisclosed
The 3rd party was under the impression that he was contracting with
the agent
2) Did P and 3P intend for A to be a contracting party?
3) 3rd party may sue agent under breach of warranty of authority if it is
discovered that the agent acted without authority
Remedies available are damages

Miscellaneous issues
How to prove apparent (ostensible) authority (pg
421)?
Case to cite: Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964]
(pg 423)
1) Was there a representation made to the 3rd party indicating that the agent
had authority?
Can be written, oral or implied through conduct
Eg. appointing agent to position
2) Was this representation made by the principal or a person with the
principals authority to make such a representation?
Principal must be disclosed
Case to cite: Viknesh Dairy Farm Pte Ltd v Balakrishnan s/o P S Maniam
[2015]
3) Was the 3rd party induced by the representation and relied on it to enter
into the contract?
4) Does the 3rd party know for a fact that the agent has no actual authority? If
yes, 3rd party cannot argue apparent authority
Case to cite: Jurong Shipyard Pte Ltd v BNP Paribas [2008]
If points 1, 2 and 3 are fulfilled, apparent authority present.
Only 3rd party can plead apparent authority
Upon termination of agency, actual authority ends immediately, but notice must
be given to 3rd parties to negate the agents apparent authority

How can a principal ratify a contract?

Ratification is the process through which a principal retrospectively confirms or

ratifies an agents act, binding the principal to the 3 rd party as if the agent had
actual authority to do so in the first place. (pg 426)
Conditions for ratification:
1) Did the agent purport to represent the principal?
Only disclosed principal can ratify contract
Case to cite: Keighley, Maxsted & Co v Durant [1901]
2) Is the principal in existence at the time of contracting?
Exception for companies s41 Companies Act
3) Does the principal have the capacity to enter and perform the contract
when the contract was made?
Is the principal a minor?
4) Was the ratification made within a reasonable amount of time?
If yes to all 4 points, the contract can be ratified.
How to ratify:
1) The principal must make a clear indication to that he affirms the agents
unauthorised act
Expressed
Implied (Must be of positive conduct)
2) The principal must ratify the contract within a reasonable amount of time
If ratification is successful,
1) The 3rd party and principal will be bound to the contract as per the
moment acceptance is communicated
2) The 3rd party cannot revoke any offers made after the acceptance if the
principal ratifies