1.0.

Introduction:
Agency works with a situations in which a person the principal - uses another person agent to act on his behalf. Sometimes, the acts of the agent are assigned by the Act of
legal, sometimes not. Describe the conditions in which each is true this is what makes the law
of Agency.
The case of Watteau v Fenwick met much criticism over the last century. Academics have
condemned the decision, because the case has decided that the undisclosed principle may be
held responsible for an act of the agent, which had been expressly prohibited. In addition, the
power judicial, both within the United Kingdom and the Commonwealth, have overall
decided to make the distinction either the case or to ignore the decision. However, despite
this, the case is still performing and therefore now stands as a good law. In this report we will
discuss about agency, three relationship of agency, different types of authority and most
imploringly Watteau vs Fenwick case.
2.0. Definition of Agency:
An agency relationship arises when one or more principals (e.g. an owner) engage another person
as their agent (or steward) to perform a service on their behalf. 1
Elaborately, an agency relationship arises when one or more principals (e.g. an owner) engage
another person as their agent (or steward) to perform a service on their behalf . According to
RSA, agency is the fiduciary relationship that results from (1) the manifestation of consent by
one person (the principal) to another (the agent) (2) that the agent shall act on the principals
behalf (3) and be subject to the principals control and (4) consent by the agent to so act.2

3.0. The 3 Relationships in Agency:

1. Principal/agent relationship;
2. Agent/third party (customer) relationship; and
3. Principal/third party (customer) relationship.
Principal

Agent

Customer
1 Tamar Frankel, 1997
2 Clarke Spring, 2009

Contract between the principal and agent

Principal pays agent and agent finds buyers for principal and may negotiate with them
on the principals behalf or even contract with them on principals behalf.

Agent normally receives commission

Rights and duties of principal and agent

Agent/third party relationship
Although agent is not privy to the contract he negotiates on behalf of the principal, he
may, in certain circumstances, incur liability to the third party.

Principal/third party (customer) relationship

Agents power to bind the principal turns on the agents authority.

The result of the agents actions is a sales contract whereby the principal supplies
goods and/or services and customer pays the principal.

4.0. Types of Authority: There are different types of authority. We are going to discuss those
below:
4.1. Actual Authority: The agents act on behalf of a principal, because these powers are
explicitly or implicitly permitted. Consent may be express or implied.
4.1.1. Express actual authority: The main Principal who has an explicit agreement with the
authorizing officer to take special action. When the Board of Directors of the company will
vote to authorize the President to purchase a new office building, it is express actual
authority.3
Example: Ireland v Livingston [1872] LR 5 HL 385.( Ireland v Livingstone 1872:
Livingstone asked Ireland to send 500 tonnes of sugar and said that it doesn't bother me if this
sum was more or less 50 tonnes. Sugar from Mauritius and the uncertainty about how much
available sugar stand and that he was carrying would be. The Ireland could get 400 tons of
sugar, and it sent them Livingstone, then refused to accept it. The House of Lords stated that
Livingstone was obliged to accept that the wording of the Treaty is unbreakable. If the
3 Eric Rasmusen, 2001

amount was important, it would have specifically in its formulation in relation to the quantity.
The words that might be more or less 50 tons of Livingstone do not get the impression that he
was important, a certain quantity, quality, etc., it should be specifically stated in the Contract.)
Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1972] AC 741.

4.1.2. Implied actual Authority: The Principal has an explicit agreement to the agent, and
although certain action is not explicitly approved, agent may reasonably inferred that
authority, so that the action has been transferred to him. If the Director-General of a
department store hires employee, the store is strictly bound by the contract even if he was not
expressly granted that authority.4
Example: Black vs Cornelius (An architect was held to have implied authority to hire a
surveyor but this was decision was made as a result of the particular circumstances of the
case only. There are other cases in which an architect has been held to have the authority to
do so.)
Rosenbaum v Belson [1900]
Hely Hutchinson v Brayhead Ltd
4.2. Apparent Authority:
Apparent authority is based on the behaviour or the words of the principal, which lead onethird on ample reason to believe that the agent acts with authority.5 The principal has no
agreement with the agent authorizing the action, but a third party could reasonably infer from
the principal's conduct that the agent was authorized.6 If a customer said the Ministry of the
Interior, that the sales manager has the authority to sell the flour without confirmation and
then remove that real authority without notice to the customer, the Sales Manager is still
apparent authority. This differs from the actual authority implicitly in this apparent makes
may be present, even if the principal has forbidden action of the agent. Apparent authority is
based on the faith of the third, and not on the actual relationship between client and
contractor.
Example: Criterion Properties plc v Stratford UK Properties LLC [2004] 1 WLR 1846 (HL),
1856 (Lord Scott)-( If you do know the person with an agent, that the agent has no real of the
contracting authority or the relevant transaction complete, no person can be called apparent
authority. Apparent authority can be called only by a person who does not know that the
agent has no real power. And when dealing with an agent who knows or has he reason to
believe, that is, the contract or transaction contrary to the commercial interests of the
principal, the agent should claim it very difficult credibly for the person that he believed that
the agent had actual authority. Absence of such a belief would be fatal to a claim that the
agent had apparent authority.)
4 American Law Institute's series of Restatements, 1993
5 Eric Rasmusen, 2001
6 American Law Institute's series of Restatements, 1993

4.3. Usual Authority:

This term is absent from the first redesign of the Agency.
It was officially introduced in 1958 in the second adaptation of ' 8a, where said:
"Usual authority is a term used in the reformulation of the subject on the power of the
intermediary, is not the authority, apparent or is neither expressly nor implied, but from the
agency relationship exists only at the end and are there for the protection of the data subject
or dealing with a servant" or of other agents. "The agency relationship can other to damage
somehow to the agent who makes, even if there is no manifestation of the principal that the
representative on his behalf acts. Usual authority the new term is coined to cover this
source of responsibility, which was already known, but without a clear doctrinal basis.7
The best-known example of usual authority in the law of agency and contracts is the classic
teaching case, Watteau v. Fenwick.

5.0. Watteau v Fenwick:

Evidence showed, it is obvious that humble did his activities in a
Beer House Hotel called Victoria in Stockton-On-Tees, which shop moved by the defendant,
a company of breweries and a few years before the present action. After the transfer of the
company remained humble as Manager of the defendant; but the license on behalf of the
humble always drawn and painted his name on the door. Under the terms of the agreement
between the humble and Fenwick had no power of the former, were for the company except
for the bottle of beer and mineral water to buy; all other necessaries were supplied by the
Fenwick itself. The agent had limitations on his authority by the contracting authority,
including that he could buy the cigars on credit. Violation of this humble agreement bought
cigars for the plaintiff, even though he had only paid to humble (because at the point where
he was not aware that the humble was a principal behind him), was applied to obtain the price
of the defendant. Cigars were such as normally would be for object into a branch. Watteau,
found out that it started in a brokerage contract, he sues Fenwick to recover the price of the
delivered to the Hotel Victoria over few years, for which, it was assumed that the applicant
gave credit only humble: it consisted of cigars, Bovril and other elements. The learned judge
allowed the application for cigars and the only Bovril and judgment for the plaintiff.8
6.0. Analysis of this Case:
Watteau v. Fenwick solves problems for the Agency's traditional teachings and ideas of
Justice. There is no actual, express or implicit authority for the agent to order cigars, because
it was not specifically asked to order. There is no apparent authority as the principal did
nothing to convey the idea that the Manager acted as a mediator. The applicant could deny
that humble was its agent, was from humble able to do, but neither expressly nor implied,

7 American Law Institute's series of Restatements, 1993

8 Watteau v Fenwick, 1892

only for the recovery of the costs of the goods to the seller, not, admit their price would be
prevented. Ratification does not apply. All that remains is the "common authority".
The ability of the Manager, based on his use of the principals, pending third-party damage.
The notions of fairness no help or others. Who should bear the costs for the wrong order for
cigars? Not the most important thing, it seems, because he never cigars commanded and
expressly prohibits the agent to do so. Not the agent, not it as it seems, buy cigars for himself
and no advantage in turn not third, apparently, was because he had no way to know that the
Manager was an agent, had no authority.
If analysis case between a main and a third, in which the liability of a contract provided by an
agent, a court can address a number of doctrines, but the diversity of the teachings more is a
sign, is the difficulty of the Court in addition to the ease with which it can find a definitive
solution. Doctrines require considerable thought in their application. What is the authority '
fast '? Must be obvious, such as "apparent authority"? When shooting the judge the last resort
of the "common authority"? This last category was created because account visited the
American Law Institute and the judges, existing teachings not quite all cases indeed come to
the courts. All these lessons are applied, randomly, what (typically sense) come out the
suspicion that the judges decide how the case should for reasons of reason and then grope for
legal formalisms.
If the third still don't know that the party concerned is an agent? You say that rights are the
third person by the restrictions of a principal's authority the agents not affected, it means that
a headquarters not limitations on the authority of the agent be a method to influence third
parties; because if he is obliged to inform third such restrictions, it must first talk about the
Agency, and then, of course, it stops, a principal.
Cases cited the extensive rights against a principal would be from third parties, she would be
disclosed against a principal; because if the client is specified, must prove that the agent
within its real powers acted or that it acted within the apparent power and been misled (third
parties) the wrong impression about the true extent of his powers have. In case the main onethird still in a position to recover from the principal.
On the basis of the partnership, we which say if an active and inactive partner can do it can
no restrictions of authority and he believed that same must apply for agency contracts. It was
presented, but this analogy of the third partner is flawed, because in a partnership agreement
are known third party partners the existence of sleeping in a brokerage contract, be sure won't
know the existence of a security principal. Moreover, liable to a silent partner to the same
extent as an active partner in the Treaty, while that situation should arise, the third must
decide whether remain the principal or the agent.
7.0. Academics:
Academic during the decision as Watteau vs Fenwick, question of the accuracy of this case.
Collier (1985) considers that "The controversy and confusion" on the decision.9 In addition,
Hornby (1961)10 who considers that the decision is wrong, but it is against this article because
Hornby believes that the decision on apparent authority based11, and it is argued that it is
wrong, because obviously the main apply, must be disclosed when Watteau was unknown to
the principal. Many of them against the decision, especially bad reasoning in the decision
9 Collier, 1985
10 Hornby, 1961

itself. It is assumed that the following principles law society, founded in wills J Partnership
Act was wrong. In addition, it is difficult, the idea to capture the principal shall be liable for
the actions of the agents, sticking out of his power.
While it is claimed that the reasons for the decision of wills J can be factually incorrect, the
decision is even though. Tettenborn (1998) States: Despite the press mixed it - got it is not
justified, but can be justified, is fully compatible with accepted principles.12
Hornby (1961) is of the opinion that the second chain of wills J decision (i.e. a principal)
responsible is correct for the acts of the agent, if the actions of the agents of record of the
usual authority attributed to broker of this kind. Tettenborn sends the purchase of cigars as
Watteau is within the usual authority for this type of agent. Tettenborn believes that Watteau's
decision was correct. He argues that Fenwick had set humble in a position where it appeared
to the owner of the company, in contrast to the easily manage. It would therefore be unfair,
Fenwick, to exclude liability. The setup of the arrangement shows that the humble of owner
of the company was. How Fenwick had placed the humble in this position, should be
responsible for the actions of the humble Fenwick. Another reason on Watteau right decision
is described by Cohen (1998):
If the Agency do not the only solvency of the client, the principal can act with the agents, but
to distort the payment ability of the agents work together...If published the case [Watteau]
from the other direction, leadership of the school which can unknown would contract
insolvent agents for her rent and then claiming that the contracts were not allowed, while they
were secretly Division or money with the agent.13
8.0. Against Cases:
This case has been criticised since it was decided.14 Because it failed to take into account
earlier cases which had similar facts, yet were decided in the alternative. Miles v McIlwraith
decided that an undisclosed principal cannot be liable for acts of his agent, who has acted
beyond their authority. This view is supported by Montrose (1939) who states the decision
was the result of unsound reasoning, the errors in which involved a misstatement of the
existing law.15 Since the decision, the courts have generally been unwilling to follow the
ruling. In Jerome v Bentley Donovan J stated that it is difficult, this consideration be applied
to the present case" then to distinguish it from Watteau, that modest, there was an agent and
his authority, while Jrme had passed, there was no agency and therefore no power to hurt.
The decision of Jrme was followed by Rhodian river shipping co. SA V Halla. 14 LJ
Bingham said on the
Watteau case as follows: the true report of the decision is not easy to recognize, and certainly
does not seem the case, have a desired line of case-law...I had the application of this doctrine,
11 Kevin Rogers, 2004
12 Tettenborn, 1998
13 Cohen, 1998
14 Harver Law Review, 1993
15 Montrose, 1939

extremely suspicious, if it exists.16 There were other decisions criticized or distinguished by

Watteau. However, the decision in first instance by V Kinahan Parry is the only one to
support the decision. In this case he decided judge was the principle that a third party could
sue a principal jurisdiction. As stated, they have criticized the majority of cases however and
rejected the decision. Woods already was in the Canadian case of sign-O-Lite Plastics Ltd. v.
Metropolitan life insurance co. to say:
It is amazing that after all these years, the authority should this dubious origin and so
unanimously intra-European reputation always signs of life and disturb the rest of the mind of
the judge. Set an end time, to the uncertainty that can persist in the law of agency as regards
their place. I have no concern to know that it is not the law of this province.

9.0. Why It Is Good Law

Watteau vs Fenwick is always a good law, because this case was criticized by many judges
and academics and the actual result is very beneficial for plaintiff. The result is based only on
public order. As the Principal hires the agent, it's just that the principal must bear the burden
of risks, for example, in contrast to the third, is not aware of the restrictions.

16 Lloyds, 1984

References:
1. Spring, C. (2009). Abstract. In: Spring, C CORPORATIONS OUTLINE. London, p9.
2. Frankel, T. (1997). Definition of "fiduciary duties". In: Frankel, T The New Palgrave
Dictionary of Economics and the Law, . 5th ed. US. p127-128.
3. Rasmusen, E. (2001). THE LAW OF AGENCY. In: Rasmusen, E AGENCY LAW AND
CONTRACT FORMATION. US: Harvard publication. P5.
4. American Law. (1993). Restatement. In: American Law Institute American Law Institute's
series of Restatements. US: American Law Institute. p73.
5. Rasmusen, E. (2001). THE LAW OF AGENCY. In: Rasmusen, E AGENCY LAW AND
CONTRACT FORMATION. US: Harvard publication. P10-11.
6. American Law. (1993). Restatement. In: American Law Institute American Law Institute's
series of Restatements. US: American Law Institute. p77.
7. American Law. (1993). Third Restatement. In: American Law Institute American Law
Institute's series of Restatements. US: American Law Institute. p89.
8. Collier, J.G. (1985). Watteau v fenwick revisited. Cambridge Law Journal. 17 (4), 363.
9. Hornby, J.A. (1961). The Usual Authority of an Agent. Cambridge Law Journal. 13 (6),
239.
10. Tettenborn, A. (1998). Agent, business owners and estoppel. Cambridge Law Journal. 15
(6), 274.
11. Cohen, G. (1998). The Collusion problem of agency law. Cambridge Law Journal. 11 (6),
274.
12. Montrose, j. (1939). Liability of pronciple for act exceeding actual and apparent authority.
Canadian Bar Review. 17 (8), p693-695.
13. Fishman, S. (1987). Inherent Agency Power -- Should Enterprise Liability Apply to
Agents. Rutgers Law Journal. 19 (1), p556.
14. Levmore, S. (1987). Variety and Uniformity in the Treatment of the Good Faith
Purchaser. Journal of Legal Studies. 6 (1), p43-65.

10.0. Conclusion:
In summary, it seems that, upon the theories of the common law antedating the Law of
Agency, and upon the principles of the Law of Agency itself as hitherto accepted, the case of
Watteau vs. Fenwick should not be rejected insofar as they hold that a principal can be liable
other than for authority actually given to his agent, or in order to prevent fraud upon third
persons. It may well be, however, that these cases will be followed and will become the
established rule.
In this case, maybe we should have another instance of masculinity and the opportunity for an
interesting, independent development of the law of Agency. It was certainly not the first time
that the Agency right over the old common law doctrine won. Would be useless, but try to
explain the result, the "well-known analogies. It would be then easy
accepted as a new phenomenon, and our conceptions, even of the Law of Agency itself,
would have to be considerably modified and enlarged.