Agency in English law

Agency in English law is the component of UK commercial law that deals with the application of agency law in the United Kingdom, and forms a core set of rules necessary for the smooth functioning of business.

In 1986, the European Communities enacted Directive 86/653/EEC on self-employed commercial agents. In the UK, this was implemented into national law in the Commercial Agents Regulations 1993.[1]

Authority

An agent who acts within the scope of authority conferred by their principal binds the principal in the obligations the agent creates with third parties. There are essentially two kinds of authority recognised in the law: actual authority (whether express or implied) and apparent authority.

Actual authority
Main article: Actual authority

Actual authority can be of two kinds. Either the principal may have expressly conferred authority on the agent, or authority may be implied. Authority arises by consent, and whether it exists is a question of fact. An agent, as a general rule, is only entitled to indemnity from the principal if they have acted within the scope of their actual authority, and if they act outside of that authority they may be in breach of contract, and liable to a third party for breach of the implied warranty of authority.

Express actual authority

Express actual authority means an agent has been expressly told (i.e., explicitly told) they may act on behalf of a principal.

  • Ireland v Livingstone (1872) LR 5 HL 395
Implied actual authority

Implied actual authority, also called "usual authority", is authority an agent has by virtue of being reasonably necessary to carry out their express authority. As such, it can be inferred by virtue of a position held by an agent. For example, partners have authority to bind the other partners in the firm, their liability being joint and several, and in a corporation, all executives and senior employees with decision-making authority by virtue of their position have authority to bind the corporation.

Apparent authority
Main articles: Apparent authority and Estoppel

Apparent authority (also called "ostensible authority") exists where the principal's words or conduct would lead a reasonable person in the third party's position to believe that the agent was authorized to act, even if the principal and the purported agent had never discussed such a relationship. For example, where one person appoints a person to a position which carries with it agency-like powers, those who know of the appointment are entitled to assume that there is apparent authority to do the things ordinarily entrusted to one occupying such a position. If a principal creates the impression that an agent is authorized but there is no actual authority, third parties are protected so long as they have acted reasonably. This is sometimes termed "agency by estoppel" or the "doctrine of holding out", where the principal will be estopped from denying the grant of authority if third parties have changed their positions to their detriment in reliance on the representations made.[2]

  • Rama Corporation Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147, Slade J, "Ostensible or apparent authority... is merely a form of estoppel, indeed, it has been termed agency by estoppel and you cannot call in aid an estoppel unless you have three ingredients: (i) a representation, (ii) reliance on the representation, and (iii) an alteration of your position resulting from such reliance."
  • Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480
  • The Raffaella or Egyptian International Foreign Trade Co v Soplex Wholesale Supplies Ltd and PS Refson & Co Ltd [1985] 2 Lloyd's Rep 36
  • Armagas Ltd v Mundogas Ltd or The Ocean Frost [1986] AC 717, an agent cannot clothe himself with ostensible authority simply by saying that he has authority
  • Hudson Bay Apparel Brands Llc v Umbro International Ltd [2010] EWCA Civ 949

Watteau v Fenwick

In the case of Watteau v Fenwick,[3] Lord Coleridge CJ on the Queen's Bench concurred with an opinion by Wills J that a third party could hold personally liable a principal who he did not know about when he sold cigars to an agent that was acting outside of its authority. Wills J held that "the principal is liable for all the acts of the agent which are within the authority usually confided to an agent of that character, notwithstanding limitations, as between the principal and the agent, put upon that authority." This decision is heavily criticised and doubted,[4] though not entirely overruled in the UK. It is sometimes referred to as "usual authority" (though not in the sense used by Lord Denning MR in Hely-Hutchinson, where it is synonymous with "implied actual authority"). It has been explained as a form of apparent authority, or "inherent agency power".

Operation of law
  • China-Pacific SA v Food Corporation of India or The Winson [1982] AC 939

Ratification
  • Keighley, Maxsted & Co v Durant [1901] AC 240
  • Bolton Partners v Lambert (1889) 41 ChD 295

Disclosure

Disclosed agency
  • Montgomerie v United Kingdom Mutual Steamship Association [1891] 1 QB 370, Wright J
  • Irvine & Co v Watson & Sons (1880) 5 QBD 414, Bramwell LJ, settlement with the agent
  • Thomson v Davenport (1829) 9 B&C 78, merger and election
  • Debenham's Ltd v Perkins (1925) 13 LT 252
  • Lewis v Nicholson and Parker (1852) 18 QB 503, between agent and third party
  • Universal Steam Navigation Co Ltd v James McKelvie & Co [1923] AC 492
  • Bridges & Salmon Ltd v The Swan (Owner) or The Swan [1968] 1 Lloyd's Rep 5
  • N&J Vlassopulos Ltd v Ney Shipping Ltd or The Santa Carina [1977] 1 Lloyd's Rep 478, Lord Denning MR, oral contracts
  • Rayner v Grote (1846) 15 M&W 359
  • Yonge v Toynbee [1910] 1 KB 215

Undisclosed agency
  • Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199
  • Keighley, Maxsted & Co v Durant [1901] AC 240, Lord Lindley
  • Fred Drughorn Ltd v Rederiaktiebolaget Trans-Atlantic [1919] AC 203, exclusion of undisclosed principal by contract terms
  • Said v Butt [1920] 3 KB 497
  • Dyster v Randall & Sons [1926] Ch 932
  • Greer v Downs Supply Co [1927] 2 KB 28
  • Rolls-Royce Power Engineering plc v Ricardo Consulting Engineering Ltd [2003] EWHC 2871
  • Clarkson Booker Ltd v Andjel [1964] 2 QB 775
  • Cooke & Sons v Eshelby (1887) 12 App Cas 271
  • Armstrong v Stokes (1872) LR 7 QB 598, Blackburn J, settlement with the agent

Principal and agent relations

Duties of agent
See also: Duty of care and Fiduciary

Rights of agent
See also: Quantum meruit
  • Way v Latilla [1937] 3 All ER 759, contractual right to remuneration
  • Millar, Son & Co v Radford (1903) 19 TLR 575, work effective cause of services
  • Luxor (Eastbourne) Ltd v Cooper [1941] AC 108, opportunity for commission
  • Rhodes v Fielder, Jones and Harrison (1919) 89 LJKB 159, reimbursement and indemnity

Reciprocal duties of principals and commercial agents

The Commercial Agents Regulations require agents to act “dutifully and in good faith” in performing their activities (Reg. 3); co-extensively, principals are required to act “dutifully and in good faith” in their “relations” with their commercial agents (Reg 4). Though there is no statutory definition of this obligation to act “dutifully and in good faith”, it has been suggested that it requires principals and agents to act "with honesty, openness and regard for the interests of the other party to the transaction".[7]

  • Npower Direct Ltd v South of Scotland Power Ltd [2005] EWHC 2123
  • Rossetti Marketing Ltd v Diamond Sofa Co Ltd [2011] EWHC 2482 (QB)
  • Simpson v Grant & Bowman Limited [2006] EuLR 933

Termination of agency
  • Campanari v Woodburn (1854) 15 CB 400
  • Frith v Frith [1906] AC 254
  • Lonsdale v Howard & Hallam Ltd [2007] UKHL 32, indemnity and compensation
  • Drew v Nunn (1879) 4 QBD 661

See also

Notes
  1. Boston Deep Sea Fishing and Ice Company v Ansell, (1888) 39 Ch D 339, is an 1888 English law case which established that the summary dismissal of an employee may be justified by the subsequent discovery of misconduct of which the principal or employer was unaware at the time of dismissal, and therefore substitute a "good" reason for a "bad" reason to justify the dismissal. The Court of Appeal held (reversing the decision of Kekewich, J. at first instance), that Mr. Ansell's receipt of a commission from a shipbuilding company supplying the company "was good ground for dismissal, although it was not discovered till after the dismissal had taken place; and although it happened several months previously, and might have been an isolated act".[5] In subsequent case law, the principle adopted by the court has been referred to as the "Boston Deep Sea Fishing principle".[6]

References
  1. Andrea Tosato (2013), An exploration of the European dimension of the Commercial Agents Regulations, Lloyd's Maritime and Commercial Law Quarterly, 544-565
  2. International Principle: Trans-Lex.org, Restatement of Agency (Second)§ 27: "Except for the execution of instruments under seal or for the conduct of transactions required by statute to be authorized in a particular way, apparent authority to do an act is created as to a third person by written or spoken words or any other conduct of the principal which, reasonably interpreted, causes the third person to believe that the principal consents to have the act done on his behalf by the person purporting to act for him."
  3. [1893] 1 QB 346
  4. e.g. GHL Fridman, 'The Demise of Watteau v Fenwick: Sign-O-Lite Ltd v Metropolitan Life Insurance Co' (1991) 70 Canadian Bar Review 329
  5. Boston Deep Sea Fishing and Ice Co v Ansell, accessed 24 August 2023
  6. For example, in England and Wales High Court (Commercial Court), Phones 4u Ltd v EE Ltd [2018] EWHC 49 (Comm), delivered 16 January 2018, accessed 24 August 2023
  7. Tosato, Andrea (1 September 2016). "Commercial Agency and the Duty to Act in Good Faith" (PDF). Oxford Journal of Legal Studies. 36 (3): 661–695. doi:10.1093/ojls/gqv040. ISSN 0143-6503.

References
Books
  • LS Sealy and RJA Hooley, Commercial Law: Text, Cases and Materials (4th edn OUP 2009)
Articles
  • GHL Fridman, 'The Demise of Watteau v Fenwick: Sign-O-Lite Ltd v Metropolitan Life Insurance Co' (1991) 70 Canadian Bar Review 329
  • S Saintier, 'Final guidelines on compensation of commercial agents' (2008) 124 LQR 31
  • G McMeel, 'Philosophical Foundations of the Law of Agency' (2000) 116 LQR 387
  • A Tosato, 'An Exploration of the European Dimension of the Commercial Agents Regulations' (2013) 4 LMCLQ 544
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