Commercial Law 2013 Exam Notes. Actual Authority Agency relationship already exists, question is the extent of an agent s authority

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1 Commercial Law 2013 Exam Notes Actual Authority Agency relationship already exists, question is the extent of an agent s Actual Express Authority Can be created by a written contract or spoken words Consent is the basis Authority - Actual arises where a principal grants, and an agent accepts, for the agent to perform specific tasks on behalf of the principal in short there must be a consensual agreement between the principal and the agent. Clarke and Cripps JJA in Equiticorp Finance v BNZ (1993) 32 NSWLR 50 at [132]. Actual Implied Authority Rests upon the consent of the principal, however consent is to be implied from the circumstances of the case. Even without an express agreement, the principal and agent can conduct themselves in such a way so as to suggest that the relevant has been conferred on the agent is inferred from the conduct Authority - Norwich Fire Insurance Society Ltd v Brennans (Horsham) Pty Ltd, [1981] VR 981 Court held that the agent had actual implied, even though the principal did not expressly state the, it was implied from the conduct of the parties. Focus on what the agent and principal are doing The exists, but it has not been spelled out in writing or orally said by the principal. Authority - In Equiticorp, Clarke and Cripps JJA stated: where the question is whether the agent has implied to act in a particular way the court directs its attention to the conduct of the parties in order to decide whether the inference of should be drawn. Authority - Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB > Diplock LJ stated: An "actual" is a legal relationship between principal and agent created by a consensual agreement to which they alone are parties. Its scope is to be ascertained by applying ordinary principles of construction of contracts, including any proper implications from the express words used, the usages of the trade, or the course of business between the parties. Contract may set out the express BUT from the contract can also be inferred a level of actual implied this must exists with the consent of the principal If the actual implied cannot be inferred from the contract might be inferred from the conduct of the parties. There is not set rule that sets out how much conduct is

2 Note All about principals consent and holding the principal accountable to the representation/consent they have made (as opposed to ostensible, where no consent has been given from the principal) 4 ways in which actual implied might be created: 1. Because the act performed by the agent is necessarily or normally incidental to the acts expressly authorised. Referred to as incidental Look at the contract/nature of the transaction 2. Because the act is one which the agent of the type concerned would usually have to do Referred to as usual Authority Hely Hutchinson v Brayhead Limited [1968] 1 QB > managing director can borrow money for the company or hire people Authority - Petersen v Moloney - > a real estate agent may have the to find a purchaser but not to accept money 3. The act is in accordance with reasonable business practice applicable to the particular transaction Customary An agent has implied to act in accordance with the usages and customs of the particular market or business in which the agent is employed. Sometimes the rules of a market, for example the rules of the stock exchange, are expressly incorporated into the contract made by the agent with the third party Before a trade, custom or usage may form the basis for the implication of terms into a contract, it must be shown that the usage or custom is notorious, certain and reasonable. Authority - Con- Stan Industries Australia Pty Ltd v Norwich (1986) 160 CLR 226. That is, it is necessary to identify evidence of usage within the particular market or area of business which shows a person who holds such a position customarily holds such an 4. Authority may be implied from the conduct of the parties and the circumstances of the case Authority may be implied from a history of dealings between them/course of dealings look for something that repeats itself/a pattern between the principal and the agent. Authority Cousens v Greyridge Pty [2000] VSCA 96. Can be implied from past dealings between parties involved History of dealings determines for future dealings Authority Hely- Hutchinson v Brayhead Limited [1968] 1 QB 549 Had actual implied because of his past dealings Can include the whole circumstances of the agent s position

3 The powers of the agent are not fixed in time at the point of the initial agreement but can expand as the principal confers more on the agent the principal will consent to the agent having more over time Limitation Under actual implied, the consent of the principal is inferred There can be no consent where there is express instruction from the principal to his agent that it contrary to the implication that is being sought. Authority - Fray v Voules (1859) 1 El & El 839. Therefore a contrary instruction will immediately defeat any argument of an implied actual. (However there is still a possibility that ostensible exists. Authority - Waugh v HB Clifford & Sons Ltd [1982] 1 Ch 374.) Ratification Ratification converts an act, which is unauthorised into one, which is authorised. An agent does an act without the approval of the principal but by virtue of the principal s subsequent approval that act becomes authorised agent does something outside the scope of their and the principal then finds out and must give approval. This approval converts the unauthorised act to one that is authorised. Benefit for principal, provides extra time to decide on their decision, and gives time to see whether circumstances in the market change Principal is able to walk away, third party cannot until ratification, the principal is not bound Authority - Hagedorn v Oliverson (1814) 2 M&S 485. Ratification is another way of finding (finding an existing agency relationship exists) If ratification occurs then the agency relationship or the particular is granted retrospectively Authority - Taylor v Smith (1926) 38 CLR 48. Act of agent originally done without becomes valid and effectual from the time of the agents act (not merely from ratification) Authority - Irvine v Union Bank of Australia (1877) 2 AC 36. This doctrine does not apply when third parties know that the agent they are dealing with does have only concerned when a third party genuinely believes that they are entering into a contract with an agent who has, they are unaware of the limits of agent s. A contract subject to ratification is not a binding contract until ratified. The reason that a contract made subject to ratification is not a binding contract until ratification is communicated to the third party from the principal is because the principal is well aware of the limits of the agent s Authority - Watson v Davies [1931] 1 Ch 455. Once ratified, the principal cannot withdrawal.

4 Ratification may apply whether it was a situation where the agent exceeded his or had no at all Authority - Firth v Staines [1897] 2 QB 70. If the third party suffers loss as a result of relying on the agents, they can sue the agent therefore very rare for agent to lie about their 6 Elements (must be satisfied) 1. The agent whose act is sought to be ratified must have purported to act for the principal fundamental requirement agent must be acting for the principal Contract must be expressly entered on behalf of principal A voluntary agent must expressly intend to benefit the person for whom he acts Byas v Miller An agent cannot be acting for themselves even if they have an undisclosed intention to confer a benefit on their principal Agent is acting without The doctrine of ratification cannot apply to the undisclosed principal. The reason for this is that the doctrine of the undisclosed principal, is predicted on the basis that the agent has actual. 2. The principal must ratify the agent s act either expressly or impliedly E.g. principal does not explicitly say anything to agent, however puts aside goods for that contract for the agent to organise, therefore implying ratification of this contract This is a factual question. Borg v Northern Rivers Finance [2004] QSC 29. Implied ratification exists where the conduct of the person in whose name the act was done (principal) is such as to show that he adopts or recognises such act, and may be implied from the mere inactivity or acquiescence (agreement) of the principle. Cox v Isles, Love & Co. For implied ratification the words or conduct must be unequivocal (clear, indisputable) cannot have significant doubt as to what the agent is doing. Petersen v Moloney. Has there been an election on the part of the principal to adopt the conduct of the agent? - Maudouit v Ross (1984) 10 VLR (L) At the time the act was done the agent must have had a competent principal. This principal must be disclosed and identifiable Communication of ratification Not necessary for the principal to communicate their ratification to the third party. Reason for this is as far as the third party is concerned, the agent had to communicate/sign the contract Rowe v B & R Nominees Pty Ltd. Ratification does not rest on estoppel, it is a unilateral (individual) act Harrison s v London [1917] 2 KB 755. If the principal does not wish to ratify he should notify his dissent within a reasonable time (International Paper Co v Spicer) to the third party

5 (Prince v Clark (1823) 107 ER 70) cannot just wait around or imposes far too significant disadvantage on the third party The principal has no right to pause and wait the fluctuation of the market, in order to ascertain whether the purchase is likely to be beneficial or prejudicial; he is bound, if he dissents, to notify his determination within a reasonable time, provided he has an opportunity of doing so. Bailey J in Prince v Clark *Authority - Firth v Staines [1897] 2 QB 70; Trident v McNeice Bros Pty Ltd 4. At the time of the ratification, the principal must be legally capable of doing the act himself. Authority - Firth v Staines [1897] 2 QB 70; Trident v McNeice Bros Pty Ltd (1987) 8 NSWLR 270. Authority to ratify Principal may ratify through an agent, agent need only have to ratify doesn t need to have to have performed the relevant act himself Re Portuguese Consolidated Copper Mines Ltd at The principal must know all material facts. A principal cannot be said to have truly ratified something if a material fact is not disclosed or displayed an intention to ratify no matter what the circumstances surrounding the transaction. Taylor v Smith (1926) 38 CLR 48. If the principal, after ratifying the contract made by the agent, is not informed about a particular fact about the agreement, the principal cannot be held to this contract 6. The principal must ratify within a reasonable time of the agent s act unless the contract stipulated another timeframe Authority - Life Savers Australasia v Frigmobile Pty Ltd [1983] 1 NSWLR 431. Ratification must occur within a reasonable time frame of the unauthorised act. The Managers of the Metropolitan Asylums Board v Kingham & Sons. No rigid rule as to what is reasonable. Life Savers (Australiasia) Ltd v Frigmobile Pty Ltd [1983] 1 NSWLR 341. Reasonable time frame will depend upon the circumstances of the case (argue based on the facts, no set formula) if involves goods, are the goods going to spoil, food Ratifying an insurance policy several years later was not a reasonable time. Trident General Insurance Co Ltd v McNiece at 282