Corporate Responsibility & Law Lecture Notes PDF

Corporate Responsibility & Law Claire Russell LLB (Hons) FHEA MN 22026 The Law of Agency A typical agency transaction usually involves three persons: o The Principal o The Agent o A Third Party Creation of an Agency Relationship Agency appointment can arise in a number of ways:- o By agreeme...

Corporate Responsibility & Law Claire Russell LLB (Hons) FHEA MN 22026 The Law of Agency A typical agency transaction usually involves three persons: o The Principal o The Agent o A Third Party Creation of an Agency Relationship Agency appointment can arise in a number of ways:- o By agreement - (Express authority) o By conduct - (Implied authority) o By operation of law - (Agency of necessity) o Arising due to estoppel - (Apparent authority) o Ratification  Agents Authority  Express (actual) authority  Where an agency agreement (written or verbal) expressly delineates the authority of the agent.  Implied authority  Where the law has deemed authority to have been bestowed by the principal upon the agent as a result of their dealings, circumstances, relationship or conduct.  Usual/customary authority  Apparent/ostensible authority  Agency of necessity  Hely-Hutchinson v Brayhead Ltd The Chairman of Brayhead Ltd acted as the company’s managing director with the board’s acquiescence. He agreed to indemnify the third party (Hely-Hutchinson) by way of guarantor for another company. When that other company went into liquidation, the third party called in its guarantee. Brayhead refused to pay claiming the Chairman had no authority to provide the guarantees. Held: The Chairman had no express actual authority but as the board had acquiesced to his acting as managing director, he had implied actual authority to do all such things as fall within the usual scope of that office. Apparent/Ostensible Authority This type of agency exists where the principal is estopped from denying an agency relationship where his words or conduct have previously indicated it did. o There is a representation o A reliance on that representation o An alteration of your position from such reliance. In this situation, the representation (which may be verbal or otherwise) is made by the principal to the third party. The agent must be performing an act which would be outside the scope of their usual authority, BUT the third party must not know this. If they do know this, then they will not be relying upon the representation that is made by the principal. This type of agency operates as an estoppel which requires that the third party is altering their Freeman & Lockyer v Buckhurst Park (Mangal) Properties Ltd “The representation when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract. It is irrelevant whether the agent had actual authority to enter into the contract”. Per Diplock LJ Agency of Necessity o Where the agents actions are necessary o Where it is not necessarily practicable for the agent to communicate with the principal to seek instructions o The agents actions should be performed in the principal’s interests o The agents actions must be reasonable and prudent. The Winson A ship carrying a cargo of wheat was stranded on a reef in the South China Sea. Salvors lightened the vessel by offloading part of the cargo into barges and carrying it to a place of safety where the Salvors arranged for it to be stored under cover. The Salvors sought to recover the costs of such recovery and storage from the cargo owners. Held: The storage was both reasonable and necessary for the preservation of the cargo and to prevent its deterioration. Ratification Effective ratification is ‘equivalent to an antecedent authority’ and will have retrospective effect. It is applied subject to a number of restrictions and conditions in order to avoid having an adverse effect upon the Doctrine of Privity of Contract. Koenigsblatt v Sweet The copy of a contract signed by a vendor was altered after his signature by his solicitor to correspond to the copy signed by the purchaser. Held: The vendor’s subsequent ratification of the altered document related back, so that the position was as if the alterations had been in the document when he signed it. Breach of Warranty of Authority Yonge v Toynbee Held: The principal’s certification of insanity had terminated their authority and they had accordingly breached their warranty of authority. The fact that they did not know that their authority was terminated was irrelevant. Agents Duties Competence: (a) To obey instruction (Not obliged to carry out an illegal or void act) Turpin v Bilton (1843) (b) Of care and skill (Judged objectively) Chaudhry v Prabakhar (c) Of personal performance (Unless authorized to delegate) Agents Duties Good Faith Boardman v Phipps Fiduciary Duties: (a) To avoid any conflict of interest (b) Not to make a secret profit (c) Not to take a bribe (d) To account (e) To disclose to principal/confidentiality towards outsiders Rights and Liabilities of the Agent Rights: Liability:  To indemnity  Liability to principal  To be paid  Liability to third party  Lien Said v. Butt Termination of Agency  Under agreement  By breach  By performance  By operation of law - Death Insolvency Insanity Supervening illegality or frustration  By revocation Commercial Agents (Council Directive) Regulations 1993 “a self-employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another person, or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of that principal.”