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166 Chapter 6Agency

Statutory agency

Various statutes create agency in very specific situations. These statutory agencies are not

of importance outside these specific situations.

No authority

If an agent makes a contract with a third party, claiming to have authority but in fact

having no authority, then neither the third party nor the principal will be bound by the

contract. If, however, the lack of authority causes loss to the third party, he can sue the agent

for breach of warranty of authority, a matter considered later in this chapter. The principal

could choose to ratify the contract, in which case the agent would be regarded as having

had actual authority when he made the contract. So if the principal did ratify, the agent’s

liability for breach of warranty of authority would disappear.

Table 6.1 shows the requirements and effects of the different types of authority.

Figure 6.2 shows how a question on the authority of an agent should be approached.

Table 6.1 The types of authority which an agent can have

Type of authority

Actual

(express or implied)

Apparent

Ratification

(a form of actual

authority)

Watteauv Fenwick

Necessity

No authority

(but ‘the agent’

claimed there was)

How created

P agreed with A, expressly or

impliedly, that A should have the

authority.

(i) P represents to T that A has

authority.

(ii) T relies on this.

(iii) P is estopped from denying it.

A, without actual authority, made a

contract with T on P’s behalf. Later, P

ratified (authorised) the contract.

(i) When contract made, T thought it

was made with A personally.

(ii) A had no actual authority to make

the contract.

(iii) The contract was a type which an

agent such as A could usually

have made.

(i) A real emergency.

(ii) Impossible to get P’s instructions.

(iii) A acted in good faith and in

P’s interests.

None of the above types of authority

existed. Nor was there authority by

operation of law.

Effect

P can enforce the contract against T.

T can enforce the contract against P.

A has no liability.

T can enforce the contract against P.

P cannot enforce the contract against T.

P can sue A for acting without actual

authority.

The same as if A had prior actual

authority.

T can enforce the contract against P

(in which case P can sue A for acting

without actual authority).

P cannot enforce the contract against T,

and cannot ratify it (because A did not

appear to be acting for P).

The same as if A had prior actual

authority.

P cannot enforce the contract against T

(but P might be able to ratify).

T cannot enforce the contract against P.

T can sue A for breach of warranty of

authority.