agency2

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The Law of Agency 代理人
@ Nature of Agency (2)
@ Creation of Agency Relationship (3)
@ Capacity of Agents (5)
@ Rights and Duties of Agents (7)
@ Agent's Authority (16)
@ The undisclosed principal and Settlements between Agent and Principal

(21)
@ Termination of Agency (25)
Tutorial (27)
ACY 2151 BUSINESS LAW : LECTURED BY TERMAN WONG, K.N.(黃覺岸; 筆名: 王岸然,) TEL: 2609-7843
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@ Nature of Agency
Agency is a necessary commercial device. Eg, as company is a legal

person, all its acts are done by agents. Even small business need agents
in order to carry out business, eg the shop assistants.
The function 功能 , of the agent is to act on behalf of his principal to

establish a contractual relationship between the principal 委托人 and a third
party.
Normally, the Agent makes the contract for the Principal and then drops
out of the picture and the rights and obligations in the contract continue
with the principal and the third party, the agent has no rights or liabilities
under that contract. In law, however, the relationship is far more
complicated.
The principal is jointly 共同 and severally 各自 liable with his agent for any
torts committed within the scope of his authority. More often the wrongful
act is performed by the agent acting within his apparent 明顯 or ostensible
表面的 authority. [Charles 268]
Lloyd v Grace, Smith & Co. [1912} A.C. 716

- L. who owned cottages 村舍 and money lent on mortgage consulted G &
Co., Solicitors. She was seen by S., their managing clerk, who fraudulently
欺詐 induced L. to sign deeds, which in fact transferred the cottages and
the mortgage to S. S realised these assets and absconded 潛逃.
- Held: G.& Co. were liable for the fraud of S.
United Bank of Kuwait v Hammond; City Trust v Levy [1988] 1 WLR 105
- Two cases
- A solicitor acting as a partner in the first case and as an assistant in the
second, signed forms of guarantee 擔保 and undertakings 許諾, without actual
authority, and resulted in both Banks lending money to fraudulent third
parties.
- Held he Banks were reasonable in believing that the solicitors was
acting within the firm's authority. Thus both firms were liable.
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@ Creation of Agency Relationship
The general rule is that the relationship between a principal and the
agent is consensual 在兩愿下成立的 in that no one can claim to be another's
agent unless under consent. The consent may be expressed or implied.
[borrie 4]
White v Lucas (1887) 3 TLR 516

- a firm of estate agents 地產代理 were anxious 渴望 to act on behalf of the
owner of certain property whom they knew was wanting to sell.
- The owner told the estate agents in clear terms not to put the property
on their books.
- The property was sold to someone introduced by these estate agents.
- The court held that the estate agents had no right to claim any remuneration since the
property owner had never agreed to their acting on his behalf.
*However, an agent's authority to bind 約束 the principal can arise by virtue

of the doctrine of estoppel, ie a person may so act as to be precluded
from denying that he has given authority to another to act on his behalf.
Agent's authority can also arise by necessity and operation of law.(see
Agent's Authority later)
The relationship can arise in the following ways :
1. By contract under seal
If an agent is required to execute a deed such as a conveyance 辦理不動產轉讓与

事務 or a lease of land for a period over three years, he must himself be
appointed by deed, called a power of attorney, unless he executes the
deed in the presence of his principal and with his authority.
2. By contract in writing or verbal
Heard v Pilley (1869) 4 Ch App 584

- an agent was orally appointed to obtain to obtain the lease of a house,
remuneration to be a share of the profit expected to be made on a resale.
- the agent entered into a written agreement for the lease in his own
name and then refused to give his principal the benefit of the lease.
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- The court held that the agreement for the lease vested the equitable
estate in to he principal and he was entitled to a decree of specific
performance against the vendor.
3. By contract implied from the conduct or situation of the parties
4. By consent express or implied where there is no contract as the agent

is acting gratuitously
5. By ratification 認可 - this happen where agent has no authority but

purports to make a contract with third party on principal's behalf and
principle later ratifies expressly or impliedly what agent has done.
Names of agents :
Agents may be commonly called as the followings :
- a sales representative 營業代表

- a broker 經紀人
- a factor 代理商業務 (mercantile agents)
- a commercial travellers
- travel agents 旅遊代理
- auctioneers 拍賣人
- estate agents
* Directors of a company are agents of the company.
* Partners are normally each other's agents and agents of the firm
* It is the legal relationship rather than the name that matters. Not
all those who describe themselves as agents will be considered in law as
so being. The dealer of BMW may be called as the `sole agent' 獨家代理 in
Hong Kong. The dealer is not agent in law for the manufacturer and
customers. In practice, the dealer buys the cars from the manufacturer
and sell them on the dealers's 經銷商 own account. No privity of contract
exists between the manufacturer and the car purchaser.
* Agents can be a servant or an independent contractor, the

difference is the possibility of vicarious 擔任代理的 liability in Tort.
* When an agent is employed to act for his principal in all matters

concerning a particular trade of business, he is called a general agent. A
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special agent is one who is employed to make only a particular contract

or series of particular contracts. A managing director of a company is the
general agent of the company, but if a man sends a friend to bid for him
at an auction, the friend is the special agent of the sender.[257 Charles]
@ Capacity of Agents
It is not necessary for someone to have full contractual capacity in order

to be the agent of another person; a minor (one under the age of 18) can
effectively bring about contractual relations between his principal and an
third party.
However, a minor can only appoint an agent to make a contract on his

behalf if the contract is one which he could validly make himself, eg a
contract to buy necessaries.
If a minor does appoint an agent to purchase necessaries, what could the

principal - agent relationship be? One leading work favours the view that
such relationship can constitute a valid contract analogous 類推 to a
contract of service.
Where, in order to be enforceable, a contract has to be evidenced by a

note or memorandum in writing, signed by the party to be charged or his
agent, such as a contract for the sale of land or a contract of guarantee,
it is not possible for one party to act as agent of the other.
However, some person, for example an auctioneer or solicitor, may act as

agent for both parties for this purpose. [3 Borrie]
* Since the agency relationship is a personal one, the death, mental

incapacity or bankruptcy of either the principal or the agent (assuming
the agent is unfit to continue his duties) brings the contract to an end and
notice of such event to the other party is immaterial.
Young v Toynbee [1901] 1 KB 215

- a solicitor started legal proceedings on behalf of a client. the client was
later certified insane 神經錯亂, and
- without knowledge of this, the solicitor continued to act for him and took
certain steps in the litigation 訴訟.
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- The solicitor as agent was liable to the third party for breach of warranty
of authority, i.e. purporting to have an authority which he no longer had
by reason of his principal having become insane.
* However, statute will normally give some protection as when a

principal become bankrupt, the agent is not liable for breach of warranty
of authority in respect of a contract made by him before the date of the
receiving order, without notice of any act of bankruptcy. If the principal is
a company, a winding-up order will terminate the authority of its agents.
[Borrie 47]
Breach of Warranty of Authority
Where agent purports to have authority to act for principal but does not
in fact have such authority, the agent can be sued in the tort of deceit 欺騙
by anyone who relies on his representation and suffers loss if agent has
no honest belief in its truth. Even where deceit cannot be proved, agent
can still be sued in damages for breach of warranty of authority and be
liable personally to the third party.
Wife or mistress as agent
By virtue of cohabitation 同居, a man's wife or mistress is presumed to have

authority to pledge 抵押 the man's credit for necessaries. In determining
whether goods supplied are necessaries, regard is made to the man's
style of living rather than to his actual means. This is a presumption only.
However, where a man has in the past held out his wife to a trader as
having his authority to pledge his credit, for example, by regularly paying
his wife's debts to that trader, the husband will be liable on any later
contract made by his wife unless the trader has knowledge that the
authority has been withdrawn.(agency by estoppel)
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@ Rights and Duties of Agents
Common law imply a number of rights and obligation as between an

agent and his principal, these are implied terms of the agency agreement
and are subject to express terms of the agreement.
Rights of Remuneration
An agent is only entitled to enumeration if that has been agreed with the
principal.
However, even if there is no express agreement that the agent should be

paid for services, the court may imply a term giving him a right to
remuneration.
Such a right will probably be implied where the agent is acting in the
course of a professional or business as it will be rare that a commercial
agents will agree to act gratuitously 免費.
Rights to payment will be implied on the same basis in which terms are
generally implied into a contract.
But no term can be implied where that would contradicts the express
terms of the contract. Where a right to payment is implied, the agent will
be entitled to received a reasonable sum for his services to be assessed
on a quantum meruit for the work done.
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John Meacock & Co v Abrahams [1956] AER 660

- The principal, as mortgagee of certain houses, give notice to exercise
his power of sale and instructed a firm of auctioneers (the agent) to sell
by auction.
- It was agreed between P and A that if a sale of the property, whether
arranged by the auctioneer or not, were effected before the date of the
auction, commission was payable to the auctioneer on the same scale as
for a sale by auction.
- The day before the date of the auction, the mortgagor 抵押人 , having
entered into contracts of sale to sitting tenants 房客 of the houses,
redeemed 贖回 the mortgage so that the sale envisaged 設想 by the
mortgagee was not effected.
The Court of Appeal held that, on the terms of the agreement, no scale
fee was payable on a sale made not by P or an agent of his, but by a third
party over whom P had no control (the mortgagor), and a claim for a
quantum meruit could not be entertained as the terms of remuneration
were covered by express words. (copy)
* If the agency agreement provides for the agent to be paid a sum to

be arranged at the principal's discretion, the court cannot imply a right to
be paid a reasonable sum to do so would usurp 篡奪 the principal's right
under the contract and would substitute the court's discretion for the
agreed term.
Kofi v Strauss 1951

- Express term for A to receive expenses,
- also stated to receive commission at company's discretion
- the court would therefore not intervene
* An agent gets enumeration on the basis his job is done.
Burchell v Gowrie and Blockhouse Collieries Ltd [1910] AC 614

- the appellant agent introduced the ultimate purchasers of his
principals's property.
- The principles sold the property behind his back on terms he advised
them not to accept.
The judicial committee held that the agent was entitled to claim the
commission, he had directly brought about the sale.
Nightingale v Parsons [1914]2 KB 621

- the plaintiff was employed as an agent to find a tenant for a house
owned by the defendant.
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- He did find a tenant and was paid commission for doing so.
- Three years later the tenant's wife brought the house from the
defendant.
- The plaintiff had nothing to do with the negotiations leading to the sale.
- the Court of Appeal held that since the plaintiff's original introduction of
the tenant was not the effective cause of the subsequent sale, the
plaintiff had no right to a commission on the sale.
* Problematic situation when agent's reward is based on commission

and the principal prevent the agent to earn commission.
* The general rule is that no commission is payable till the sale is

completed through the agent, and if the vendor himself or other agent
negotiates the sale (but not the situation when the agent got sole right to
sell), or no sale is completed at all, the agent is not entitled to any
commission.
Luxor (Eastbourne) Ltd v Cooper [1914] AC 108

- estate agent were instructed to sell two cinemas.
- Commission of ten thousand pounds was payable on a sale and the
agents introduced a buyer, but the owners decided not to proceed.
- The agent sue for breach of implied term that the owners should not
refused to sold to a buyer introduced by the agent.
- HL refused to imply such a term, a term can only be implied in order to
give business efficacy 功效 to the contract, here no such term was
necessary. The agent were held to have assumed the risk that the sale
would not be completed.
* Generally, if the commission is payable òn introducing a person

ready, able and willing to purchase', commission will be payable only if
the person introduced shows his willingness and ability to buy and
remains so willing and able up to the time of completion. If the purchaser
does not complete, no commission is payable even if the purchaser's
deposit is forfeited 沒收, 罰金 by the vendor. Nor is the vendor bound to claim
specific performance of any binding contract.
* Once there is a binding contract of sale, the vendor cannot

withdraw 退回 from it except at the risk of having to pay his agent
commission, because it is his own fault that the sale has not been
completed.(25 Borrie)
Right of Indemnity
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* Subject to any express terms in the agency agreement, an agent

has a right to claim from his principal an indemnity against all expenses
or loss incurred in acting on the principal's behalf.
Hichens, Harrison, Woolston & Co v Jackson & Sons [1943] AC 266

- The defendant solicitors instructed the plaintiff stockbrokers to sell
certain shares.
- The stockbrokers did make a contract to sell the shares, but incurred
liability to the intended purchaser because the solicitors' client declined
to execute a transfer of the shares.
- The HL held the stockbrokers was entitled to claim an indemnity from
the solicitors, the amount of the indemnity being the cost of obtaining
substituted stock for the intended purchaser.
* An agent has no right to claim indemnity if the actions are

unauthorized or the loss was caused by the agent's own default or
negligence.
Duncan v Hill (1873) LR 8 Exch 242

- brokers bought shares for principal on a running account.
- The brokers became defaulters, their transactions were closed in
accordance with the rules of the Stock Exchange, and the shares were
sold at a loss.
- It was held that such loss could not be recovered from the principal as it
was caused by the agent's own default in becoming insolvent.
Rights of Lien 留置權
* An agent who is entitle to claim an indemnity and remuneration or

both from his principal may exercise a lien on any goods belonging to the
principal which are in his lawful possession as an agent until his claims
are met. Liens are either general or particular. General liens arise by
express agreement or by trade usage.
Duty to obey instructions of his principal
Whether and agent is acting gratuitously or not, if he proceeds to carry

out the agency, he must do so as agreed and comply with his principal's
lawful instructions and is liable in damages to his principal if he does not.
An agent does not commit any breach of duty if the principal gives and
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order in such uncertain terms as to be susceptible 容許 of two different

meanings and the agent bona fide 真誠地 accepts one of them and acts upon
it.
To exercise duty with care and skill
Even a gratuitous agent must exercise due of care and skill. There is
some doubt whether an agent for reward owes a higher duty of care than
a gratuitous 免費的 agent. Professor Powell thought that any distinction is
unsound in principle. Professor Friedman, on the other hand says the
cases do show a difference in that while an agent for reward by
implication holds himself out to be as skilful and as careful as people in
his trade or profession normally are, a gratuitous agent does not imply
that he is any more skilful or careful than he actually is.
Older cases suggested that a lower standard was expected of a

gratuitous agent i.e. same degree of duty of care in management of own
business. This approach is not consistent with modern development of
law in negligence, ie the Hedley Byrne v Heller [1964] AC 456 case.
However, this decision shows that a gratuitous agent can unilaterally 單方面
disclaim 不承諾 any obligation to take care.
* It is now settled that in principal even a gratuitous agent own a

duty to his principal to act with reasonable care and skill
Keppel v Wheller [1927] 1 KB 577

- agents were employed to sell a block of flats and received an offer from
X which the owner accepted `subject to contract'
- subsequently, the agents received a higher offer from Y
- instead of transmitting 轉送 this to the owners, the agent arranged a
resale 轉售 from X to Y after the original sale to X was effected
- The Court of Appeal held that the agents owed the owners a duty to
obtain the best price reasonably obtainable, which included a duty to
communicate any better offers than the one received from X and that
duty continued until a binding contract of sale was affected
- the agents were made liable in damages for breach of their implied duty
- damages being the difference between X's offer and Y's offer
Baxter v Gapp & Co Ltd [1939] 2 KB 271

- the agents made an excessive valuation 估价 of freehold property which
was relied on by the plaintiff when advancing money on a mortgage to
the owner of the property
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- the Court of Appeal was satisfied that the agents were in breach of their
duty of care and skill and allowed the plaintiff to recover as damages the
actual loss suffered as a result of lending the money
- damages awarded included the difference between the sum advanced
by the plaintiff and that received by him when he sold it after entering
into possession of the property, the amount of interest the mortgagor
had failed to pay, and the expenses both of maintaining the property
while in the plaintiff's possession and of selling it.
* The duty of an agent to exercise due care and skill can come into
conflict with his duty to obey his principal's lawful instructions. Normally,
if an agent obeys his principal's lawful instructions, he will not be liable
even though following those instructions is against the principal's best
interest.
Duty not to delegate duty
Unless expressly or impliedly authorised by the principal to delegate 轉授權

the work to another person, an agent owns a duty to act personally.
Where the principal expressly gives authority to delegate, delegation is of
course permissible.
* If he is in contravention 違反 of this duty, the principal is not bound by

any contract effected on his behalf by the sub-agent, and the agent is
liable for breach of duty.
De Bussche v Alt (1878) 8 Ch D 286

- a was appointed by the principal to sell a ship in China at an agreed
price
- agent was unable to effect such a sale and obtained the principal's
permission for the appointment by agent of a sub-agent to sell the ship in
Japan
- the Court held there was no breach of duty by agent in appointing a
sub-agent as delegation was expressly agreed
* Similarly, delegation may be impliedly authorized by trade usage,

by having been authorised in similar dealings between the parties in the
past, or in an emergency such as the agent's illness. If a client instructs a
country solicitor, that country solicitor is impliedly authorised by his client
to delegate work, such as work concerning litigation in London to "London
agents"
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* An agent may delegate minor duty of administrative nature without

offending the rule, such as a duty to sign letters.
Allan v Europa Postal Services [1968] 1 AER 826

- site owners authorised the defendant company who were outdoor
advertising contractors to serve notice on the plaintiff company (also
outdoor advertising contractors) terminating their licences from the site
owner to use sites for advertising purposes
- the defendant company instructed a firm of solicitors to serve formal
notice on the plaintiffs
- held that the defendant company, like any incorporated company, must
act through agents and could validly give notice of termination by way of
a notice signed by its solicitors as distinct from one of its directors as this
was a purely ministerial act.
Duty to avoid conflicts of interest
When acting for the principal, an agent must not allow his own personal
interests to come into conflict with the interests of his principal.
If the agent has any personal interest that might conflict with his
principal's interest, he must disclose it and the principal must consent to
the agent continuing to act for him. If the agent breaks this duty, his
principal may set aside any transaction effected by the agent and claim
any profit made by the agent.
* Practical situations include while acting as agent for the buying or

selling of property, he sell property to or buy property from his principal
without full disclosure of the relationship.
McPherson v Watt (1877) 3 App Cas 254

- a solicitor acted as the agent for two ladies who wished to sell certain
houses
- the solicitor himself purchased the property though nominally 名義上 the
property was bought in the name of his brother
- the House of Lords refused to grant the solicitor specific performance of
the contract of sale
- such a breach of duty would, however, be waived 免除 if the agent makes
a full disclosure of his interest to the principal and the latter is still willing
to proceed with the transaction
* If an agent is employed to buy property for his principal, he must
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not sell his own property to his principal unless he discloses his fact
Lucifero v Cstel(1887) 3 TLR 371

- an agent was asked to purchase a yacht 游艇 for his principal
- the agent bought a yacht for himself and then resold it to his principal
at a profit
- the principal was unaware that he was buying the agent's own property
- the court held that the agent must give up the profit he had made and
that he be allowed to retain only the price he had paid for the yacht and
him commission
Fullwood v Hurley [1928] 1 KB 498

- a hotel broker was instructed by the owner of a hotel to sell his hotel for
him
- broker arranged to sell the hotel to buyer on the terms of a letter which
concluded ìf business is done, we shall act for you at the usual
brokerage 經紀人之業務'
- the sale having been made, the owner paid broker a commission and in
this action the broker claimed a second commission from buyer
- the Court of Appeal rejected the claim on the ground that the terms of
the letter were not sufficient to establish a contract by buyer to pay
broker a double commission and that, in any case, since broker was
acting as agent for the vendor he was not entitled to enter into such a
contract with the buyer without full disclosure to both parties
Duty not to make secret profit
* Similarly, any agent who uses his position as agent to acquire a

befit for himself is in breach of his duty of good faith.
Boardman v Phipps [1967] 2 AC 46

- a trust held 8,000 shares in a private company, and X the solicitor to the
trustee together with one of the beneficiaries 受惠者 , 受益人 Y attended the
annual general meeting of the company to improve the value of the trust
holding
- using information they had received while so acting for the trustees
which satisfied them that a purchase of shares in the company would be
a good investment, and having the opportunity to acquire them which
they obtained as representatives of the trustee
- X and Y acquired some 21,000 shares for themselves personally and
made a substantial profit
- the House of Lords held that by attending the company's AGM and
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conducting negotiations with the company's directors X and Y were put in

a fiduciary position
- they had made a profit by using such fiduciary position and must
account for it to the trust
Duty not to take a bribe 賄賂
A bribe is one particular kind of secret profit, it is a payment to agent by a

third party who knows the agent is acting as an agent, the payment being
kept secret form his principal.
The purpose of such a payment is an inducement to the agent to act in

the third party's favour in the making of contract between the third party
and the principal. It is note that prove of corrupt motive 動机 is unnecessary
for this rule. Once a bribe is established there is an irrebutable 無可反駁的
presumption that it was given with an intention to induce the agent to act
favourably to the payer.
Industries and General Mortgage Co v Lewis [1949] 2 AER 573

- the defendant wanted to arrange a loan and employed an agent to
obtain it for him
- the plaintiffs, who agreed to provide the loan, made a promise to the
defendant's agent that he would receive one-half of the commission that
they would charge the defendant
- in an action or interest due on the loan, the defendant counter claimed
for the amount of the bribe as damages
- Slade J assumed that the defendant had suffered damage because,
probably, the interest the defendant was obliged 強制 to pay was higher
than it would have been so as to cover the plaintiff's payment of a bribe
to the defendant's agent, and the defendant's counterclaim was upheld
- once a bribe 賄賂 is established, there is an irrebutable presumption that
it was given with an intention to induce the agent to act favourably to the
payer and therefore unfavourably to the principal
Andrews v Ramsay & Co [1903]2 KB 635

- an owner of certain property instructed estate agents to find a
purchaser for the property at 2,500 pounds and agreed that if the agents
sold it at that price he would pay them 50 pounds as commission
- the agents managed to arrange a sale of the property at 2,100 pounds
and when the purchaser paid the agents 100 pounds as a deposit, the
owner agreed that the agents could retain 50 pounds as commission.
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- later the owner discovered that the purchaser had made a secret
payment of 20 pounds to the agents
- when the owner brought an action against the agents, the agents paid
the 20 pounds into court but the court held that the owner was entitled in
addition to the 50 pounds which the agents had retained as commission
Duty not to misuse confidential information
It is a breach of good faith if the agent uses information, acquired while

acting as agent, for his own personal advantage or for the benefit of a
third party. This applies even after the agency ceases 終了.
Robb v Green [1895] 2 QB 315

- an injunction was obtained against a former manager of a business to
prevent him using for his own purpose a list of customers of the business
which he had copied out while he was the manager
Faccenda Chicken Ltd v Fowler [1986] 1 AER 617

- the duty of good faith is broken if an employee makes or copies a list of
his employer's customers for use after his employment ends or
deliberately memorises such a list even though, except in special
circumstances, there is no general restriction on an ex-employee
canvassing 兜攬生意 or doing business with customers of his former employer
- Neill L.J said that the following matters must be taken into account in
deciding what is confidential :
a. the nature of the employment : was confidential information habitually
習常地, normally or only occasionally handled
b. the nature of the information itself : only trade secrets or information
of a highly confidential nature would be protected
c. whether the employer impressed upon the employee the confidential
nature of the information
d. whether the relevant information could be isolated easily from other
information which the employee is free to use or disclose
* Restrictive clauses in employment contracts, however, are

enforceable if it is a genuine 真誠的 and reasonable protection of the
employer's interest.
Duty to account
* There is a duty on the agent to keep proper accounts of all
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transactions he enters into on his principal's behalf, and to keep the

money involved in the agency apart from his own.
De Mattos v Benjamin (1894)63 LJQB 248
* However, if the relation between Principal and agent is itself illegal,

no action could be maintained against the agent requiring him to account
for money received on principal's behalf.
Harry Parker Ltd v Mason [1940] 2 KB 590

- where the principal conspired 共謀 with agent to make shame(偽裝) bets 賭注
on the course and bets with street bookmakers 賭博業者 contrary to the
existing law
- agent had failed to apply, as agreed the money that the principal
handed to him
- the Court of Appeal held that the principal could not recover it from
agent on the general principal that money paid under an illegal contract
is irrecoverable
@ Agent's Authority
The agents authority may be created either from the authority vested in
the agent or from operation of law, ie law imposes an agency relationship
in certain factual 實際的 situations.
Another distinction is drawn between actual authority, ie the authority

that is expressly given by the principal to agent, or which is implied from
the conduct of the parties and the circumstances of the case.
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The authority may also be classified as apparent 顯然的 , 外觀上的 authority

which the agent appears to others to have as a result of some
representation or conduct by the principal intended to be acted upon by
the third party.(Borrie 30)
Express 明示 authority
This type of authority is created by words, either written or oral. No

particular form is required unless the agent is required to executed a
deed, in which case he must be appointed by a deed, called a Power of
Attorney 授權書.
Implied 隱含 or usual 通常的 authority
This permits the agent to perform all reasonable incidental 附帶的 or

subordinate 附屬的 acts necessary in exercise of his given express authority.
It may sometimes relates to agent of a certain type acting in the usual

ways of such agent as his trade or profession usually does have authority
to do or make.
This may be so even if the principal has expressly informed the agent
that he has no such authority unless the third party knew of that
exclusion 排除.
Watteau v Fenwick [1893] 1 QB 346

- The defendant had employed H as manager of an hotel
- the name of H appeared alone over the bar as licensee
- the defendant limited H's actual authority by forbidding him to buy
cigars
- H, however, did order cigars from W who knew nothing of the existence
of the defendant
- Held, the defendant was liable to pay for the cigars as such purchases
were within the usual authority of a hotel manager.
* Where A is engaged for act for P in a particular market, he is

impliedly authorized to act according to the custom of that market. Eg. an
estate agent 地產代理 has no authority to effect a contract of sale on behalf
of his principal nor to receive a pre-contract deposit as agent for the
vendor 賣方.
19
Sorrell v Finch [1977] AC 728

- P arranged to sell his house through agent
- nothing was said about the taking of deposits from prospective 預期的
purchasers prior to contract
- the buyer was interested in buying the house and paid a deposit to
agent of 10 % of the purchase price
- Agent gave buyer a receipt signed by himself on his firm's writing paper
- no indication was given as to whether agent received the deposit as
agent for principal or as stakeholder
- subsequently agent disappeared and buyer sued principal for the return
of the deposit contending that it had been received by the agent for the
principal
- the HL held that when a prospective vendor 賣方 engages an estate agent
this does not confer on the estate agent any implied authority to receive
as agent for the vendor a pre-contract deposit from a would-be
purchaser. when a deposit was paid to agent in such circumstances,
agents holds it as a stakeholder 保証金保存人 , the purchaser was at all times
until contract the only person with any claim or right to the deposit
moneys and this was a right on demand, the vendor had no such claim or
right and no control over the deposit moneys
- It followed that as principal had not expressly authorised agent to
received deposit on his behalf, he was not under any liability to buyer to
repay it following agent's default
Agency by estoppel 不容反悔法 or ostensible 表面的, 外表的 authority
If the principal has so acted as from his words or conduct to lead another
to believe that he has appointed a person X to act as his agent or that X
has authority from the principal and X purports 要領是 to act as the
principal's agent, principle will generally be estopped from denying
agent's authority though in fact no agency really existed. The agent in
this situation is said to have apparent or ostensible authority. (Borrie 32)
Spiro v Lintern [1973] 3 AER 319

- the owner of a house asked his wife to put it into the hands of estate
agents with a view to sale
- she had no authority to instruct the estate agents to enter into a binding
contract of sale but a contract was made, signed by the plaintiff as
purchaser and by the estate agent às agent for the vendor
- subsequently, the owner treated the plaintiff as the purchaser, allowing
him to engage a builder to carry out repairs on the house, but the owner
refused to complete
20
- the Court of Appeal held that when the owner learned that the plaintiff
believed the owner was under a binding obligation to him, the owner was
under a duty to disclose the non-existence of that obligation
- failure to disclose that his wife had acted without authority amounted 等于
to a representation by conduct that she had that authority and the owner
was estopped from asserting that the contract had been entered into
without authority
- the plaintiff was entitled to specific performance of the contract
Freeman and Lockyer v Buckhurst Park Properties (Mangal)Ltd (1964) 1

AER 630
- one of the four directors of a company formed to develop certain
property, contracted to engage a firm of architects 建筑師, 設計者 to apply for
planning permission for the property. The company's articles provided
that a quorum 法定人數 of the board was four and that a managing director
might be appointed, but this was never done. To the knowledge of the
board, K acted as if he were managing director. It was held that the
company was liable for fee claimed by architects for work they have
done. The act of engaging architects was within the ordinary scope of a
managing director of a proper company. The architects did not have to
enquire.
Ratification 追認 of authority
Where A has no authority but purports 意味著 to contract with third on

principal's behalf, the principal may later ratify 批准 , the contract and the
ratification then relates back to the making of the contract by agent.
Ratification 追認 is the express adoption 采用 by principal of the contract, or
conduct showing unequivocally 不含糊的, that he adopts 采納 agent's act.
Bolton Partners v Lambert (1889) 41 Ch. D.295

The managing director of a company, p7urporting to act as agent on the
company’s behalf, but without its authority, accepted an offer by the
defendant for the purchase of sime sugar works belonging to them. The
defendant then withdraw his offer, but the company ratified the
manager’s acceptance.
Held: the D was bound, the ratification related back to the time of the
agent’s acceptance and so prevented the defendant’s subsequent
revocation.
Matilda & War Memorial Hospital v Henderson [1997] 1 HKC 590

The defendant was employed as chief executive of the plaintiff hospital
21
for two years commencing 4 March 1996. It was a term of his contract
that he would he provided with rent-free accommodation within the
hospital. The plaintiff claimed that the defendant's employment contract
was terminated on 31 October 1996 by letter given to him by the
chairman at the board meeting held on the same day and so the
defendant had no right to remain in possession of the flat.
The plaintiffs application for possession was resisted on a number of

grounds. It was said that on the true construction of the defendant's
contract of employment. it was for a fixed term of two years which was
not terminable during that period and that the provision for the giving of
six months' notice was referable only to any extended or renewed term
after the expiration of the initial two year term, therefore the defendant
was entitled to remain in the flat until 4 March 1998, or alternatively 30
April 1997, the end of the six months' notice. Further, the plaintiff's letter
of 31 October i996 was nothing more than an offer to treat which should
only take effect upon the parties reaching mutually acceptable terms. In
the alternative, the letter should be construed as a dismissal upon notice
and that the contract remained extant until the expiration of the notice
period, accordingly, the defendant was entitled to remain in occupation
of the flat under his contractual licence until 30 April l997. It was further
contended that the letter operated as an immediate dismissal without
notice, whether or not within s 7 of the Employment Ordinance (Cap 57)
(the Ordinance), because the wages in lieu due under s 7 were never
tendered with the letter. In any event, the defendant argued the
termination was ineffective because the decision to terminate the
defendant's contract was not properly put before the board, and because
of that procedure; irregularity, the chairman was not duly authorised by
the board to deliver the letter to the defendant. As to this, the plaintiff
claimed that any procedural irregularity was cured by the board's
resolution passed on 22 January 1997 validating the act of the chairman.
The defendant contended in turn that the January meeting was not duly
convened for want of notice, which was not tendered until'2U minutes
before the meeting by way of addendum to the agenda to one of the
board members; for this reason. any resolution passed at that meeting
was invalid and a permanent injunction should be granted to restrain the
plaintiff from recovering the flat.
Held, granting the order for possession and refusing the defendant's
application for a permanent injunction:
(1) The defendant's construction of the contract was not a ground for
resisting possession. Even a contract for a fixed term could be ended
22
prematurely. The notice provision was referable to this contract', which

had a term of two years subject to any extension or renewal by mutual
agreement. There was nothing in that clause to warrant an interpretation
that the notice provision was referable only to any extended term and not
also to the original term.
--------------------
(6) Even if the resolution to terminate the defendant's employment put to
the board and was irregular, the defendant was in no better position than
a member of the company, who could not question the lawfulness of
decision on the basis of a mere informality or irregularity if the intention
of the meeting was clear.
(7) Once the act of an unauthorised agent was ratified, the ratification
was retroactive and related back to when the act was done. If the
chairman was not authorised by the board to give the letter to the
defendant because of any irregularity, a subsequent resolution passed at
the meeting in January would have validated that act. Wilson v Tumman
(1843) 6 M&G 236 and Bolton Partners v Lambert (1888) 41 Ch D295
followed.
---------------------
Further Note:
1. The principal must have been in existence at the time when the agent
entered into the contract;
Kelner v Baxter (1866) LR 2 CP 174

Where the promoters of a hotel attempted to enter into a contract on
behalf of the hotel as yet an unformed company. It was held that the
company could not ratify the contract after the incorporation of the
company and that the promoters, as agents, were personally liable on the
contract. I.e. said that the defendants were acting “for and on behalf of
the Gravessend Royal Alexandra Hotel Company”
2. The principal must have legal capacity to make the contract, i.e. it is
not possible for minors to ratify a contract even though it was made in
their name.
23
3. Contract was made expressly on behalf of principal, ie an undisclosed

principal cannot ratify a contract.
4. Ratification must be done within a reasonable period of time.
5. Principal must adopt the whole of the contract, i.e. cannot pick and
choose which parts of the contract to adopt but they must accept all of
its terms.
Keighley, Maxsted & Co v Durant [1901] AC 240

P authorised A to buy wheat on a joint account for A and P at a certain
price. A was unable to buy at the authorised price and , without authority,
bought wheat from T at a higher price. A bought in his own name though
intending it to be on a joint account for P and himself. The following day P
agreed with A to take this wheat on a joint account with A, but both P and
A refused to take delivery of the wheat.
The House of Lords held P could not be made liable for breach of contract
as A had not, when acting without authority, professed to be acting for a
principal and P’s purported ratification was ineffective. (If, however, A
does make the contract in the name of P (without authority) but with the
intention of fraudulently taking the benefit of the contract for himself, P
may ratify and enforce the contract.)
Agency of necessity
Eg. the master of a ship, in times of emergency, may contract for

provisions and urgent repairs and bind the owner of the ship to such a
contract.
Great Northern Rail Co v Swaffield (1874) LR 9 Exch 132

- the railway company had carried a horse to its destination and there
being no one to receive it and no appropriate accommodation for it on
the company's premises
- the horse was placed with a stable keeper and the company paid the
stable keeper's charges
- It was held that although the company had no express or implied
24
authority to incur such charges it had acted in an emergency as an agent

of necessity and was therefore entitled to claim an indemnity from the
owner of the horse
@ The undisclosed principal and settlements between

agent and principles
[Note: This is a difficult part of the Agency law and would not be included
in the Exam.]
It is a rule of business convenience that the undisclosed principal should

be permitted to sue and the so - called `doctrine of undisclosed principal'
is a unique feature of the common law system. Several situations may
arise :
Where the existence of the principal is disclosed to the third

party
*Provided that agent has express, implied or usual authority to bind the
principal and principal's existence is disclosed to the third party, the
general rule is that only the principal and third party have right and
liabilities under the contract effected by the agent who is subsequently
dropped out of the picture.
*Exceptionally, the agent may expressly or by implication from the

contract or by reference to trade usage he a party to the contract either
in addition to or in place of principal.
*There is also a technical rule that if agent executes a deed, only the
agent, not the principal, can sue and be sued even when agent is
described as acting for someone else unless the principal is described in
the deed as a party to it and the deed is executed in the name of the
principal.
25
*If agent is appointed by a power of attorney, any deed executed by

agent is effectual in law as if it had been executed by agent in the name
and with the signature and seal of the principal.
*If is thought that an intention that the agent shall be a contracting party
is more readily inferred of the name of the principal has not been given.
It is still, however, a matter of construction and if the signature of agent
is accompanied by such words as àgent', clearly negatives any personal
liability on the part of the agent.(Borrie 39)
Where the Principal's existence is not disclosed to the third party
When, for example, the principal gives agent authority to sell principal's
furniture and agent does effected a contract to sell the furniture to the
buyer without disclosing the existence of the principal but intending to
contract on principal's behalf, then:
1. Agent can enforce the contract against the buyer,
2. Principal can enforce the contract against buyer,
* Principal may not sue the third party if the terms of the contract made
by the agent with the third party are inconsistent with the existence of an
agency
Humble v Hunter (1848) 12 QB 310

- P authorized agent to make a contract of charter in relation to a ship
owned by principal
- agent did make such a contract with third party without disclosing that
he was acting for a principal and describing himself in the charterparty as
òwner'of the ship.
- It was held that principal could not enforce the contract
- to allow evidence that principal was really the owner would be to
contradict the terms of the contract and agent had impliedly contracted
that he was the only principal.
Fred Drughorn Ltd v Rederiakt Transatlantic [1919] AC 203

- where principal authorized agent to obtain a charter of a ship owned by
third
- agent made such a contract without disclosing he was acting for a
26
principal and simply signing himself as `charterer'

- the House of Lords held that principal was entitled to enforce the
charterparty
- the term `charterer' is very different from the term òwner', that the
term `charterer' merely indicates someone who is entering into a
contract and that to allow evidence to show that the `charterer' merely
contracted as an agent is not to contradict the terms of the contract.
3. Buyer generally have a right to elect to sue either agent or the

principal
Clarkson Booker Ltd v Andjel [1964] 2 QB 775

- third party sold goods to agent who did not disclosed he was purchasing
them on behalf of a principal but the third party later discovered this
- letters were written by the solicitor of third party to both the principal
and agent threatening proceedings in respect of the price of the goods
and a writ was then issued against the principal
- when the principal went into liquidation, a writ was issued against the
agent and judgment obtained against him
- the Court of Appeal upheld the judgement. The court pointed out that
the institution of proceedings against either the agent or principal did not
amount as a matter of law to a binding election so as to bar proceedings
against the other.
- The institution of proceedings was normally strong evidence of such
election but as third party had never withdrawn the treat to sue the
agent, third had not by suing the principal unequivocally elected to hold
principal alone liable foe the price.
Payment to the agent by the principal, and agent default
The general rule is that if principal owes third party X some money under
a contract made by agent on principal's behalf, eg. a contract to purchase
goods from X, should the principal pay agent and agent default, principal
is still liable to X.
Irvine & Co v Watson & Sons (1879) 4 QBD 102

- principal engaged agent to buy oil for him and agent made a contract to
buy oil from X informing X that he was acting for a principal but without
naming his principal
the terms of the sale were `cash on delivery' but X delivered the oil
without insisting on prepayment.
- principal believing that agent had paid X for the oil, paid agent.
27
- agent defaulted and X sued principal

- the Court of Appeal held that the mere omission on the part of X to
insist on prepayment was not, in the absence of an invariable custom to
that effect, such conduct that could reasonably induce in principal a
believe that X had been paid by agent
- principal was therefore liable to X
* Of course, if X has directed principal to pay by settling with agent or

X had let the principal to believe that X is looking to agent alone for
payment or that he had already been paid by the agent, principal's
settlement with agent discharges principal from any further liability.
The third party makes payment to the agent
Third party is liable to the principal unless agent was authorised to

receive payment of the price and as a general rule, an agent to sell goods
does not have authority to receive payment. X will only avoid having to
pay twice in these circumstances if he can show that agent had express,
implied or apparent authority to receive payment. Eg. a factor, an
auctioneer.
* If X, before he pays the agent, does not know the existence of the
principal. It seems unfair but X may have to pay over again if principal
had not authorised the agent to receive payment, and X did not believe
the agent is contracting as a principal of his own.
Cooke v Eshelby (1887) 12 App. Cases 271

- C knew that A, when he contracted in his own name, did so sometimes
on his own account and sometimes as agent.
- A as agent for D sold goods to C without disclosing his agency
- Held that C could not set off as against D a debt owed him by the agent
because he did not believe that A was contracting as principal
28
@ Termination of Agency
Termination by act of parties
* The parties to an agency contract may at any time mutually agree

to bring it to an end
* There is normally a right in both the principal and the agent

unilaterally to revoke the agency contract at any time before the agency
has been completely performed by giving notice.
* Revocation requires no formality so that even a deed containing a

power of attorney can be revoked orally. However, such unilateral
withdrawal or revocation of agent's authority may be a breach if the
agency contract and principal can be made liable in damages to agent for
such breach.
Termination by operation of law
* Unless there are special terms in the appointment contract or the

contract is of an irrevocable type, an agency is normally terminated
automatically when :
1. End of fixed period in the contract or if no fixed period, contract

terminates after the agent has completed all he has been authorized to
29
do.
2. Death, mental incapacity or bankruptcy of either party. Notice of such

event to the other party is immaterial.
Toynbee [1901] 1 KB 215

- a solicitor started legal proceedings on behalf of a client
- the client was later certified insane and without knowledge of this, the
solicitor continued to act for him and took certain steps in the litigation
- the solicitor agent was liable to the third party for breach of warranty of
authority, ie purporting to have an authority which he no longer had by
reason of his principal having become insane.
* Statute may intervene to give protection in other situation: A donee

受贈者 of a power of attorney who acts in pursuance of the power at a time
when it has been revoked shall not, by reason of the revocation 撤銷, incur
any liability if at that time he did not know that the power had been
revoked (S.5(1) of The Powers of Attorney Ordinance)
3. Supervening illegality or frustration. The general law of contract will

apply.
Irrevocable authority
* It has long been a rule in common law that where an agent has
been given authority to act for his principal as a security for some debt or
obligation by the principal to the agent, the authority is irrevocable
without the agent's agreement.
* Eg. if principal owes agent $1000 and then as security for that
liability, principal appoints the agent to sell goods on his behalf, allowing
agent to retain $1000 out of the proceeds, such authority is irrevocable
without agent's consent. It is an àuthority coupled with an interest'.
Where a power of attorney is expressed to be irrevocable and is given to

secure proprietary interest of the donee of the power or the performance
of an obligation owed to the donee, then as long as the donee has that
interest or the obligation remains undischarged, the power shall not be
revoked by the donor without consent of the donee or by the death,
incapacity, or bankruptcy of the donor or, if the donor is a corporation, by
its winding up or dissolution. (S.4 Power of Attorney Ordinance)
30
Further Readings :
1. Paul Dobson, Clive M. Schmitthoff, Charlesworth's Business Law,

Chpater 13, 15th ed., Sweet and Maxwell.
2. Gordon Borrie, Commercial Law, Chapter 1, 6th ed, 1988,

Butterworths.
3. Robert Bradgate and Nigel Savage, Commercial Law, p.73-140,

Butterworth, 1991.
Tutorials
1. Agent’s Authority
Lowes is the managing director of Macbeth Company Ltd. Macbeth is an

important computer hardware manufacturer and seller in Hong Kong.
Other directors of the company are basically dormant in the day to day
business of Macbeth, and Lowes therefore rest with all executive powers
and appears as the only boss of the company. However, the company
does have a board of directors' meeting every month to decide important
matters. By special resolutions of the board, Lowe's power has been
explicitly prohibited to enter into any trading activities with Nero
Company Ltd., which is another important rival computer supplier in Hong
Kong. The board also limited Lowes' power in recruitment or termination
of services of company officers up to grades below managers.
31
Lowes made the following decisions for the company in the last month:
1. He brough finished products from Nero at competitive price and

prepare to re-sell the products to overseas importers as products of
Macbeth, this was agreed by Nero as Nero was in financial difficulties.
2. He brought spare parts from Nero at reasonable price. It was an

emergency measure as the suppliers of those spare parts were all out of
stock and Macbeth need the spare parts to meet the deadlines of a
number of orders.
3. He dismissed Oriando, the branch manager of Central, as Oriando had

made many serious decisional mistakes. Oriando had a contract of
service of two years and still have one and half year to go. As part of the
employment benefit, Oriando was provided by Macbeth with a quarter to
live. Lowes request Oriando to move out immediately but Oriando
refused, claiming that the dismissal of Lowes was illegal as Lowes was
acting without authority from the board.
Now the Board has it monthly meeting. The board is angry with decision
(1) as it would help rival company. The board is prepare to overruled the
decision of Lowes and inform Nero that Macbeth will not buy the finished
products form Nero. The decision (2) is considered by the board as
correct but as a gesture, the board would still refuse to paid for the spare
parts and tell Lowes that Lowes should be responsible for the payment as
Lowes was acting out of authority. However, decision (3) is considered
absolutely correct, and the board would like to ratify the decision.
Advise Lowes, Macbeth Company Ltd, Nero Company Ltd, and Oriando of
their relevant legal positions of the decisions.
2. Agency : Duty and Authority of Agents
Wong contracted with Able to arrange for the repair of the windows and
other parts generally of Wong's village house for the house to be leased
out later on. Wong made it clear to Able that no work was to be carried
out on the house other than the necessary repairs.
Able contracted with Tom for the house to be repaired. Tom was a friend
of Able and, on that basis, Able gave him a discount on the repairs. Able
did not pass the discount back to Wong.
32
When Tom had repaired the windows, he offered to repaint the whole
house. Able accepted but, before work commenced, Able told Tom that
he was withdrawing his offer. Wong, on the other hand stated that he
would like to ratified the agreement for the repainting of the house.
Able made a contract of a short lease of the house to Jackson but no

money was paid under that agreement as Wong refused to hand the Keys
to Jackson.
Advise Wong.
3. Ratification of Agent's Authority
Mark and Spencer, a high class department store has an internal

management system that only managers have authority to give discount
on goods sold over $5,000. Jack is a Chinese University student working
as a part time salesman. On Lunar new year eve he sold out a camera of
$6,000 to Peter, and a set of Hi Fi of $8,000 to Paul that was to be
delivered three days later. He gave each of them a discount of 5%.
Mr Shark, the chief manager discovered that the Hi Fi was not a good
deal and decided to refuse delivery and cancel the sale on the ground
that Jack had no authority to make the sale. Peter returned to complain
that the camera was still too expensive after the discount and wish to
return it and have the $6,000 back. Until that moment, Mr Shark had first
noticed this sale by Jack. He immediately decided to ratify the sale.
Advise Peter and Paul.

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1

The Law of Agency 代理人

@ Nature of Agency (2)

@ Creation of Agency Relationship (3)

@ Capacity of Agents (5)

@ Rights and Duties of Agents (7)

@ Agent's Authority (16)

@ The undisclosed principal and Settlements between Agent and Principal

@ Termination of Agency (25)

Agency is a necessary commercial device. Eg, as company is a legal

The function 功 能 , of the agent is to act on behalf of his principal to

Lloyd v Grace, Smith & Co. [1912} A.C. 716

@ Creation of Agency Relationship

White v Lucas (1887) 3 TLR 516

*However, an agent's authority to bind 約束 the principal can arise by virtue

The relationship can arise in the following ways :

1. By contract under seal

If an agent is required to execute a deed such as a conveyance 辦理不動產轉讓与

2. By contract in writing or verbal

Heard v Pilley (1869) 4 Ch App 584

3. By contract implied from the conduct or situation of the parties

4. By consent express or implied where there is no contract as the agent

5. By ratification 認 可 - this happen where agent has no authority but

Agents may be commonly called as the followings :

- a sales representative 營業代表

* Directors of a company are agents of the company.

* Agents can be a servant or an independent contractor, the

* When an agent is employed to act for his principal in all matters

special agent is one who is employed to make only a particular contract

It is not necessary for someone to have full contractual capacity in order

However, a minor can only appoint an agent to make a contract on his

If a minor does appoint an agent to purchase necessaries, what could the

Where, in order to be enforceable, a contract has to be evidenced by a

However, some person, for example an auctioneer or solicitor, may act as

* Since the agency relationship is a personal one, the death, mental

Young v Toynbee [1901] 1 KB 215

* However, statute will normally give some protection as when a

Breach of Warranty of Authority

Wife or mistress as agent

By virtue of cohabitation 同居, a man's wife or mistress is presumed to have

@ Rights and Duties of Agents

Common law imply a number of rights and obligation as between an

However, even if there is no express agreement that the agent should be

John Meacock & Co v Abrahams [1956] AER 660

* If the agency agreement provides for the agent to be paid a sum to

Kofi v Strauss 1951

* An agent gets enumeration on the basis his job is done.

Burchell v Gowrie and Blockhouse Collieries Ltd [1910] AC 614

Nightingale v Parsons [1914]2 KB 621

* Problematic situation when agent's reward is based on commission

* The general rule is that no commission is payable till the sale is

Luxor (Eastbourne) Ltd v Cooper [1914] AC 108

* Generally, if the commission is payable `on introducing a person

* Once there is a binding contract of sale, the vendor cannot

* Subject to any express terms in the agency agreement, an agent

Hichens, Harrison, Woolston & Co v Jackson & Sons [1943] AC 266

* An agent has no right to claim indemnity if the actions are

Duncan v Hill (1873) LR 8 Exch 242

Rights of Lien 留置權

The function 功能 , of the agent is to act on behalf of his principal to

5. By ratification 認可 - this happen where agent has no authority but

order in such uncertain terms as to be susceptible 容許 of two different

The authority may also be classified as apparent 顯然的 , 外觀上的 authority

This permits the agent to perform all reasonable incidental 附帶的 or

Where A has no authority but purports 意味著 to contract with third on