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Summary Commercial Law 120 Chapter 10,11,12 (Part Three)
Summary notes on Part Three (Agency): Chapter 10, 11, 12 Good for exam preparation
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KRG120 notes by Jessika JiranCOMMERCIAL LAW
Part Three - Agency
Chapter 10 - Introduction to the Law of Agency
Introduction and Basic Concepts
Agency or representation refers to the legal phenomenon whereby one person (the agent),
who is duly authorised, performs a juristic act on behalf of another person (the principal)
Eg. concluding a contract with a third party
● Occurs in circumstances where it is inconvenient for the principal to act in person or
the principal is incapable of concluding his own contracts. The principal is a juristic
person, like a company, which needs a natural person to act on its behalf and bind it
contractually. Another eg. guardians who act on behalf of mentally incapacitated
persons or infants (ages 0-7) and minor children (ages 7-18) respectively
● Agency always involves at least three parties - tripartite relationship between the
principal, agent and third party. To perform an act of agency, needs permission
(authority or mandate) and act within the confines of such authority. Authority
originates via contract or by operation of law. If the act of agency was concluded
validly and authority granted to agent, rights and duties will exist between the
principal and the third party as if the principal himself had concluded the contract.
Agent will not be a party to the legal relationship and only acts as a mere conduit
between the principal and the relevant third party
● Agency refers to the legal situation where one person is lawfully authorised to act on
behalf of another person and whereby the latter acquires all rights and duties in
terms of the act performed on his behalf. Agent - person who has authority to
represent another person. Principal - person who authorises the agent to act on his
behalf and who then will acquire all rights and duties under the act performed on his
behalf by the agent. Authority - power or consent that is given to the agent to act in a
way that binds the principal to certain rights and duties. Authority can be granted
contractually via mandate or employment contract or arise from ratification, estoppel
or by operation of law
Act of Agency
● Juristic act that the agent performs on behalf of the principal eg. conclusion of
contract. Legal consequences of the act of agency will be attributed to the principal
and not the agent (properly authorised to perform)
● In the case of concluding a contract on behalf of the principal, all the normal
requirements for contractual liability must be fulfilled by the agent on the principal’s
behalf. Must be consensus, parties must have contractual capacity, contract must be
legal, performance is possible and all formalities must be fulfilled. If all of these
elements are in place between agent and third party, principal is bound to the
contract BUT the agent must have the authority to conclude the contract on the
principal’s behalf and must not have acted beyond the ambit of his authority
● Certain juristic acts must be performed by the principal in person and not the agent
on his behalf. The act is of such a personal nature that personal performance by the
principal is of material importance for the third party eg. cannot appoint an agent to
get married on your behalf
1
, KRG120 notes by Jessika Jiran
Authority
General
● Concept of authority is central in the law of agency. For the agent to bind his principal
to the juristic act performed by the agent, must have acted in accordance with lawful
authority. No authority or acted outside authority = agent incur personal liability for
the duties that stem from the act of the agency
- Did the agent have authority (what was the source of the authority)?
- What was the scope of the agent’s authority (did he act within the confines of the
authority or transcend them)?
Sources of authority
Introduction
Authority can derive from a contract between agent and principal or derive from other
sources (ratification, estoppel or by operation of law)
Contractual authority
● Typical way in which agent receives authority to act on behalf of another is via a
contract between agent and principal. Principal makes offer to agent, requests agent
to perform a certain juristic act on his behalf. Agent accepts offer by agreeing to
perform act
● Contract between agent and principal takes form of a mandate. Principal (mandator)
instructs agent (mandatory) to do something on his behalf, which instruction (offer)
agent can accept/reject. Agent accepts instructions = consensus between parties and
authority to act on principal’s behalf comes into existence. Naturalia of a contract of
mandate (rights and duties) applicable between agent and principal
● Contract must comply with normal requirements for a valid contract, in addition to
consensus, both must have contractual capacity. If one party (principal) doesn’t have
contractual capacity, agent not granted authority via contract ONLY by operation of
law
● Agent’s authority may derive from an employment contract (depends on terms) -
Agent = employee and Principal = employer. If agent is not subject to control of his
employer, but can act independently and in own discretion, he is an agent NOT an
employee
● Express contractual authority doesn’t have to be granted in writing but can be
granted orally as well
Ratification
● Ratification linked to contractual capacity except ratification involves the express or
tacit approval by the principal after the agent has already acted, hence without
having had the necessary to act or having acted outside the confines of the authority
that had been granted. Permission given after the fact = act of agency performed
validly, juristic act be of full legal force and bind principal to its terms - as if agent had
authority when performed act
● Requirements for valid ratification:
- Principal must have existed when the alleged agent performed the juristic act
- Principal must have the intention to ratify the unauthorised act
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