| Monograph : Agency Law |
Contents |
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| (3) Formation
of agency |
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1. |
Agency by appointment |
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| a. |
An agency is created by express appointment
when the principal appoints the agent by express
agreement with the agent. This express agreement
may be an oral or written agreement between the
principal and the agent. |
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| b. |
Contract law principles apply to
an agency agreement. An agent may agree to act in
consideration for a reward. On the other hand, an
agency is gratuitous if the agent agrees to act
for no consideration. |
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| c. |
The general rule is that agency may
be created orally and there is no formality for
the creation of agency by express agreement, except
for one situation which is discussed below. This
general rule applies even to cases of appointing
agents for the signing of agreements for sale and
purchase of immovable property, whether on behalf
of the vendor or the purchaser.
The one exception is where an agent is appointed
to execute a deed on behalf of the principal.
In this case, the agent will have to be appointed
by deed, which is called a power of attorney.
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2. |
Agency by estoppel (implied appointment) |
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| a. |
Agency by estoppel arises when A
makes a representation to a third party, whether
by words or conduct, that B is his agent, and subsequently
that third party deals with B as A's agent in reliance
on such representation. A will not be permitted
(is estopped) to deny the existence of the agency
if to do so would cause damage (usually financial
loss) to that third party. |
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| b. |
The person who makes such representation
("A" in paragraph (a) above) is treated
as having created an agency relationship between
himself as the principal and the other person ("B"
in paragraph (a) above) as his agent, although there
is in fact no agreement between the two parties
("A" and "B" in paragraph
(a) above) as to the creation of the agency relationship.
Agency by estoppel is sometimes called implied appointment
of agent. |
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| c. |
In agency by estoppel, the authority
of the agent is described as only apparent or ostensible
but not actual, as the principal has, in fact, not
granted the agent such authority to act on the principal's
behalf. |
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| d. |
The extent of apparent or ostensible
authority of the agent in an agency by estoppel
depends largely upon the contents of the representation
made by the principal to the third party who relies
and acts on the representation. The principal is
said to "hold out" a person as his agent
with such authority as the principal may induce
the third party to believe and is estopped from
denying the existence of agency. |
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3. |
Agency by ratification |
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| a. |
Agency by ratification arises when
a person (the principal) ratifies (that is, approves
and adopts) an act which has already been done in
his name and on his behalf by another person (the
agent) who in fact, had no actual authority (whether
express or implied) to act on his (the principal's)
behalf when the act was done. |
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| b. |
Ratification by itself only creates
an agency relationship between the principal and
the agent in respect of the act ratified by the
principal, but not in respect of any other act,
whether past or future. |
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| c. |
The person who ratifies an act of
another person must have been in existence and have
the legal capacity to carry out that act himself
both at the time when the act was done and at the
time of ratification. A person may lack legal capacity
on grounds of bankruptcy, infancy or mental incapacity.
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4. |
Agency of necessity |
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| a. |
Agency of necessity arises when a
person ("A") is faced with an emergency
in which the property of another person ("B")
is in imminent jeopardy and it becomes necessary,
in order to preserve the property for A to act for
and on behalf of B. In this case, A acts as an agent
of necessity of B. |
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| b. |
Agency of necessity arises only when
it is practically impossible for the agent to communicate
with the principal before the agent acts on behalf
of the principal. (This would be difficult to establish
with today's advanced communication systems
and is the reason why agency of necessity does not
often arise.) |
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| c. |
Authority to act in case of emergencies
cannot usually prevail over express instructions
to the contrary given by the principal. |
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