AUTHORITY OF AN AGENT

CONTENTS

1.0      Introduction

2.0      Objectives

• Main Content
• Actual Authority of an Agent
• Usual Authority

4.0      Conclusion

5.0      Summary

6.0      Tutor-Marked Assignment

7.0      References/Further Readings

INTRODUCTION

Authority of an agent simply means the power or right reposed in that agent by the principal. But in the context of an agency relationship, this issue has a broader and wider connotation. This is because the  issue  of authority has been  engulfed  in  serious debates as to its relevance to the concept and its effects on  the  parties  to  an  agreement  on  the one hand and a third parties on the other hand.

OBJECTIVES

The major objectives of this unit is to state the importance  of authority of  an  agent  in  with emphasis on the known  distinctions  between  the actual  authority of an  agent  and his usual authority. It will  also  involve  the  effects  of  this  authority  on  contracts  carried out by the agent on behalf of the principal with a third party believes in the existence of the authority of the agent to so act.

MAIN CONTENT

The word, “Authority” is used in this unit to mean the ability of the agent to bind the principal. This authority is entangled with the creation of agency by the  principal  and agent agreeing to the creation of the agency. That agreement will embody the authority of the agency.

Generally, the principal is bound only by those acts of the agent that are within  the scope of that agent authority and every action carried outside that authority will be that of the agent unless the principal ratifies it.

Actual Authority of an Agent

The scope of an agent’s actual authority is important.  Generally,  it is only if an  agent cuts within actual authority that h is able  to  claim  an indemnity from the principal for any expenses incurred or remuneration under the agency contract with the principal.

In the same vein, an agent who acts outside this  actual  authority  may be liable to  the third party for breach of the implied authority.

The actual authority of an agent is determined by the agreement between the  principal  and the agent. It is a matter of content construction. Two types of actual authority exist.

 Express Actual Authority

This is the authority, which the principal expressly gives to  the agent. An example is where the agent is instructed to sell a particular property for the principal.

 See: Electr onics Ltd v. Akhter Computer Ltd (2001) 1/BCLC/433

Implied (or Incidental) Actual Authority

In addition to express actual authority, the agent may have implied actual authority. However, implied authority cannot contradict express actual authority because it is only a way of filling the gaps in the agency agreement. It is not a means of altering that agreement.

An agent may have implied authority of his principal in the following ways.

• To do things that are necessarily incidental  to  the  execution  of  the  express actual authority,
• To undertake   that   which   is   implied   from   the   particular  circumstance of the relationship between him and the principal such as where  there has been a previous course of dealings.
• Such authority as is customarily enjoyed by dealings in  the particular market. A custom must be uniform certain, notorious (generally known), recognized as binding and reasonable.

SELF ASSESSM ENT EXERCISE 1

Discuss the two heads of actual authority of an agent.

Usual Authority of an Agent

The  usual  authority of an  agent  first  came  up for  consideration  in  the case of  Watteau  v Fenwick (1893) IQ.B.346. In that case Humble (H) sold out to Fenwick (F), a firm of brewers, but stayed on as manager. He continued to run the business on Fenwick's behalf. The change in ownership was not publicised, and to all external appearances matters continued as before. Fenwick, whose business included the supply of most of the consumables, instructed Humble that he was not to order them from anyone else. Humble in breach of this instruction ordered some cigars, in his own name, from Watteau. Watteau (W) believed that Humble was buying for himself. The cigars were ordered for, and used in, Fenwick's business. The goods were not paid for. Having found out about Fenwick's interest in the hotel, Watteau sued them for the price of the cigars.

Held Fenwick liable on the ground that Humble had acted within the authority usually given to agents of this kind.

It might be argued that W did not think H was an agent, he believed H to be the principal, so if W had not been allowed to enforce the contract against F,  W  would  have  lost nothing because he was unaware of F’s existence . Against this it might be said that F’s action in allowing his agent, H, to represent himself as the principal placed W in a weakened position W had ever y reason to suppose that H was the original  principal and this misconception was facilitated by F.

The case does not fall within the normal understanding of the doctrine of  apparent  authority because F made no representation to W that it was acting as F’s agent.

Also, the decision does not appear to be the same with those case where someone is appointed to a particular position and the principal is bound by actions that fall within the usual authority of an agent in that position.

As will be seen later, the doctrine of undisclosed principal will not assist because for  that  to operate the agent must enter the transaction within  the  actual  authority  of  the principal.

In the same vein, the principal cannot ratify the transaction because this would have required H to have told W that he was an agent and this he did not do.

Usual authority can therefore be likened to implied authority which an agent  has  in  respect of his dealings with innocent third parties who are not aware that he lacks the authority to enter into such transaction on behalf of the supposed principal.

This is however subject to whether the principal  was disclosed  at the time  of  entering  into the agreement with the third party and whether such action is ratifiable.

SELF ASSESSM ENT EXERCISE 2

Discuss the decision in WATTEAU V FENWICK.

CONCLUSION

The authority of an agent to enter into control on behalf of the supposed principal is very fundamental in the study of Law of Agency in relation to commercial transactions. Care must be taken so that the occurrences of these authorities will not be confused with one another.

SUMMARY

Actual authority of an agent refers to those express authorities contained in the agency agreement while the implied authorities includes those authorities the agent would reasonably be expected to exhibit in relation to demanding situations. Usual authority, as confusing as it may appear, is the direct and unequivocal direction of the principal provided no vitiating element is detected.

TUTOR-MARKED ASSIGNMENT

Distinguish  between  the  Express  Actual  Authority  and  Implied   (or incidental)   Actual Authority of an agent.

The decision in Wattean v Fenwick is confusing and does not relate to  the  usual  Authority of an agent. Discuss

REFRENCES/FURTHER READINGS

Kingsley Igweike (1993). “Nigeria Commercial Law:  Agency.”  Jos, Nigeria:  FAB Educational Books.

Pollock and Maitland. “The History of English Law,” Vol. 11. Sir William Holdsworth, “A History of English Law,” Vol. IV.

Walker,     D.W.     (1980).     “The     Oxford     Companion     to     Law.”     London: Butterworths.

American Restatements, Second, Agency, Article.

Friedman,     G.H.L.     (1984).     Law    of     Agency,     7th        Edition.     London: Butterworths.

Companies and Allied Matters Act (1990). Laws of the Federation of Nigeria.