Part D The formation and constitution of business organisations 10: Agency law 159Types of agent
Promoters A promoter is someone (except professionals acting in their professional capacity)
who undertakes to form a company.
Factors A factor, sometimes called a mercantile agent, is a person whose job is to sell or buy
goods on behalf of another person. For example, motor dealers are often factors.
Brokers A broker may operate in many trades. They are essentially an intermediary who
arranges contracts in return for commission. For example, an insurance broker.
Auctioneers Auctioneers are agents authorised to sell property at auction on behalf of the seller.
When an auctioneer accepts a bid from a buyer, they become the agent of the buyer
for the purpose of making a record of the sale.
Commercial agents A commercial agent is an independent agent who has continuing authority in connection
with the sale or purchase of goods.2 Formation of agency
The relationship of principal and agent is created by mutual consent in the vast majority of cases. This
agreement does not have to be formal or written.
The mutual consent comes about usually by express agreement, even if it is informal. However, it may
also be implied agreement, due to the relationship or conduct of the parties.2.1 Express agreement
This is where the agent is expressly appointed by the principal. This may be orally, or in writing. In most
commercial situations, the appointment would be made in writing to ensure that everything was clear. An
agent expressly appointed by the principal has actual authority of the principal to act on their behalf.2.2 Implied agreement
An agency relationship between two people may be implied by their relationship or by their conduct.
For example if an employee's duties include making contracts for their employer, say by ordering goods
on their account, then they are, by implied agreement, the agent of the employer for this purpose. An
agent authorised in this way is said to have implied authority.2.3 Ratification of an agent's act: retrospective agreement
A principal may subsequently ratify an act of an agent retrospectively.An agency relationship may be created retrospectively, by the 'principal' ratifying the act of the 'agent'.
Therefore it is created after the 'agent' has formed a contract on behalf of the 'principal'. If the principal
agrees to the acts of the agent after the event, they may approve the acts of the agent and make it as if
they had been principal and agent at the time of the contract.
The conditions for ratification are:
The principal must have existed at the time of the contract made by the agent
The principal must have had legal capacity at the time the contract was made
The ratification must take place within reasonable time
They ratify the contract in its entirety
They communicate their ratification to the third party sufficiently clearly
Once a contract has been ratified by the principal, the effect is that it is as if the agency relationship had
been expressly formed before the contract made by the agent took place.FAST FORWARD
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