Corporate Responsibility & Law: Agency

Corporate Responsibility & Law

• This is a lecture on Corporate Responsibility & Law, likely part of a university course.
• The lecture covers the law of agency.

The Law of Agency

• A typical agency transaction involves three parties: the Principal, the Agent, and a Third Party.

Creation of an Agency Relationship

• Agency can be created by agreement (express authority), conduct (implied authority), operation of law (agency of necessity), estoppel (apparent authority), or ratification.

Agents Authority

• Express Authority: A written or verbal agreement explicitly defining the agent's powers.
• Implied Authority: Authority inferred from the principal's actions, dealings, circumstances and relationship with the agent.
• Usual/Customary Authority: Authority based on the usual practices and customs in a particular field.
• Apparent/Ostensible Authority: The principal gives a third party the impression that the agent has authority, even if they do not. This is based on the principal's words or actions.
• Agency of Necessity: When the agent acts in an emergency to protect the principal's interests, where communication is impossible, and the agent's actions are reasonable and prudent.

Case Examples

• Hely-Hutchinson v Brayhead Ltd [1968]: A company's chairman, acting with board acquiescence, had implied authority to make guarantees for another company, as this was within the usual scope of his managing director role.

• Freeman & Lockyer v Buckhurst Park (Mangal) Properties Ltd [1964]: The principal is estopped from denying an agency relationship if their actions give the appearance of authority, and a third party acts in reliance on it.

• The Winson [1982]: Salvors had the authority to take reasonable actions to preserve cargo on a ship in distress.

• Koenigsblatt v Sweet [1923]: Ratification can relate back to the time the action was performed by the agent on behalf of the principal, thus making the contract legally valid.

• Yonge v Toynbee [1910]: A principal's insanity terminates their agent's authority and a warranty of authority is automatically breached by the agent, even if they were unaware.

Agents Duties

• Competence:
  • Agents must obey lawful instructions from the principal.
  • Agents must exercise reasonable care and skill.
  • Performance of duties should be judged objectively.
• Good Faith:
  • Agents must avoid conflicts of interest.
  • Agents must not make secret profits.
  • Agents must refrain from bribery.
  • Account for all funds received.
  • Should maintain confidentiality.

Rights and Liabilities of the Agent

• Rights: The agent has a right to indemnity, payment, and a lien.
• Liabilities: The agent is liable to the principal and to third parties (e.g., Said v. Butt [1920]).

Termination of Agency

• Termination: An agency relationship can be terminated by agreement, breach of duty, performance, operation of law (e.g., death, insolvency), revocation, or supervening illegality/frustration.

Commercial Agents (Council Directive) Regulations 1993

• Defines a commercial agent as a self-employed intermediary who has ongoing authority to negotiate sales or purchases on behalf of a principal.

This quiz explores the legal framework surrounding the law of agency, focusing on the relationships and authorities involved. Understand the various ways in which agency can be created and the types of authority agents possess. Ideal for students studying corporate law or related subjects.