170 Chapter 6Agency
If the principal ratifies the agent’s actions, then the agent will not be liable for breach of
warranty of authority, because the agent will have acquired back-dated actual authority.
Nor will the agent be liable for breach of warranty of authority if the third party knew, or
should have known, that the agent did not have the authority warranted. Damages for
breach of warranty of authority are calculated by reference to the two rules in Hadleyv
Baxendale(see p. 150). These damages are therefore designed to put the third party in the
position he would have been in if the warranty had not been breached.Usually, the third party will act upon the warranty by making the contract with the prin-
cipal. An agent can become liable for breach of warranty of authority where he has no
authority at all, or where he exceeds the authority which he does have. Liability can arise
even if the agent could not have known that his authority had been revoked.The rights and duties of the agent
Contractual capacity
Agents owe both contractual and fiduciary duties to their principals. The three contractual
duties are as follows:
(i) The duty to obey the principal’s instructions.
(ii) The duty to show an appropriate amount of care and skill.
(iii) The duty to perform the agency duties personally.Yonge vToynbee (1910) (Court of Appeal)A client (the principal) instructed a solicitor (the agent) to defend a case. The principal
became certifiably insane and this automatically terminated the agent’s authority to act for
him. The agent did not know that the principal had become insane and continued to act
for him.
HeldAs soon as the principal was certified insane the agent lost his authority to act for
him. All proceedings taken after this date were therefore struck out, and the agent had to
pay all the costs of the other party to the litigation which were incurred after this date.Simons vPatchett (1857)An agent bought a ship from a third party, claiming to have authority from the principal.
In fact the agent had exceeded his limited authority in doing this. The contract price was
£6,000. The principal refused to be bound by the contract. The third party therefore sold
the ship to another buyer, X, for £5,500. This was the best price that the third party could
get, and was a fair price at the time. The third party sued the agent for breach of warranty
of authority.
HeldThe agent had to pay £500 damages to the third party.