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The relationship between agent and principal

Discuss about the Agency Law and Odious Debts System.

According to Saintier the relationship between the parties who are known as agent and principal is known as Agency. In this situation the agent has the duty of creating a contract where the parties are the principal and another third party[1]. The agent may also act as the principal’s representative under the power provided by the principal. DeMott has defined agency as the relationship which subsists between the agent and the principal and where the agent has been authorized by the principal to represent or act for him while dealing with any their party[2]. Thus in a relationship of agency two form of contracts takes place. The first contract is made between the agent and the principal through which authority is derived by the agent to act in the principal’s behalf. The other contract is between the third party and the principal through the actions of the agent.

This paper analyzes the law in relation to agency by analyzing the facts provided through the case study of Steve and Bianca. The paper identifies the facts of the case, followed by the issue and relevant law. The law is applied on the case facts to derive a conclusion.

It has been provided through the case study that Steve cares and breeds Alpacas. A charge of $100 is taken by Steve every week from owners for taking care of their Alpacas. It had been noticed by Steve that the one of the Alpaca which he cares for is not eating properly and showing respiratory problem. The animal was also producing nasal secretions. He had made an attempt to call the owner of the Alpaca Bianca through phone. However he got to known through his housemates that the Bianca was not present and had traveled to Ecuador for a 3 week period. Further the condition of the alpaca deteriorated over night and as it showed symptoms of dehydration and fever. In fear that the alpaca may die of a disease which is known as Bovine Viral Diarrhoea Steve contacted a veterinarian who suggested for a surgery. The surgery had been authorized by Steve knowing that without the surgery the animal would not be able survive. The total cost incurred for the surgery and transport was $3500. However Bianca refuses to pay the by making a claim that as the surgery had been authorized by Steve the liability of payment should be on him.

Facts of the case

The primary issue which needs to be analyzed in relation to the scenario is that whether Steve is the agent of Bianca or not. It also has to be analyzed that if Steve is the agent of Bianca who would be liable to pay the $3500.

There are three types of authorities which are provided to an agent by the principal.

  1. Express Appointment
  2. Implied Appointment
  3. Ostensible authority

Express authority is the form of authority which has been expressly provided to the agent by the principal through an oral or written contract between the parties.  In this form of authority if the powers provided to the agents are exceeded then the principal would not be liable for the actions of the agent. However in this situation in order to protect the interest of the innocent party the court may expand the scope of the authority. Although the principle has to pay the third party in relation to the loss incurred a claim can be made by the principal against the agent[3].

Implied authority takes place when the law creates a relationship of agency through the implication by which a person using his words and conduct acts as an agent and the principal acknowledges such actions. In the case of Chan Yin Tee v William Jacks and Co [1964] MLJ 290 it has stated by the court that where a person  has allowed another to place order for goods on his behalf and pays for them habitually an implied authority is created.

There are two situations in which an authority may be created by law where express or implied consent have not been provided by the principal. The first situation is that the principal by his words or conduct signifies to a third party that the agent is provided with the power of getting into contracts on his behalf. The second situation where an apparent authority may be created is that where the agent previously had the power to get into the contract but the power has been taken away from him and the third party not having knowledge about such withdrawal gets into a contract with the agent[4].

Another way in which authority may be created between the principal and an agent is by the way of necessity. This is the most relevant form of authority which needs to be discussed in order to analyze the issue in context. This form of authority is based on the principles of the doctrine of necessitous intervention. This form of authority is created when a person in a legal relationship with other acted on his behalf in situation if an emergency. In this situation based on the circumstances of the necessity and fact that the agent was not being able to contact the principal the court may treat the agent as they had the authority to take necessary action for protecting the principal’s property. In case this form of agency has been established it is the liability of the principal to reimburse the agent for the expenses incurred towards saving the property[5].

Primary issue in relation to the scenario

According to the case of National Assistance Board v. Prisk, [I9541 1 W.L.R. 443 there are three conditions which needs to be satisfied for the purpose of establishing the relationship of agency based on necessity. Firstly the agent is not possibly able to get the instructions of the principal. Secondly the actions which have been carried out by the agent is required for the purpose of preventing loss the principal or to his property. Thirdly the actions of the agents must have bona fide intentions.

Another case in relation authority created by necessity is the case of Great Northern Railway Co. vs. Swaffield (1874) LR 9 Exch 132.  In this case the defendant had arranged for a horse to be transported by the plaintiff to a specific location. However the defendant was not present to collect the horse. The plaintiff not being able to contact the defendant placed the horse in a stable. The question before the court in this case was that whether the plaintiff would be able to claim the cost incurred by him from the defendant to keep the horse in the stable. In this case it had been ruled by the court that as the actions of the plaintiff was in good faith to protect the horse and he was not able to contact the defendant, the defendant is liable to compensate him for the cost incurred.

Another case in which the application of the three conditions to establish agency through necessity had been done is the case of Stamp and Heacock Ltd [1924] 1 KB 566. In this case the plaintiff got into a contract to purchase goods from the defendant. The defendant kept thee goods in story due to war situation as they could not be transported.  As the price of the goods was increasing the goods were sold by the defendant again and he informed the plaintiff that the goods have been sold under the agency of authority. The court held in this case that there was no agency of necessity as the transaction was in bad faith.

Further in the case of Springer v. Great Western Railway Company [1921] 1 KB 257 there was agreement between the defendant and the plaintiff to carry his goods for by ship and train from Channels Island to London. However, due to bad whether the ship was halted at Channels Island for three days.  The defendant decided to sell the tomatoes as they were starting to get rotten. However the principle of necessity failed to apply in this case as the defendant did not attempt to communicate with the plaintiff before authorizing the sale.

Types of authorities provided to an agent by the principal

In the given situation it has been seen that there is a legal relationship between the Steve and Bianca for taking care of her Alpaca. Thus where a legal relationship exists between the parties the principle of agency through necessity can be applied in the situation as provided through the case of Great Northern Railway Co. vs. Swaffield. Whether such authority is present or not can be established through applying the principles provided in National Assistance Board v. Prisk. As per the case Firstly the agent is not possibly able to get the instructions of the principal. In the given situation Steve had made an attempt to call the owner of the Alpaca, Bianca through phone. However he got to known through his housemates that the Bianca was not present and had traveled to Ecuador for a 3 week period. Thus the first condition is satisfied by Steve.

 Secondly the actions which have been carried out by the agent are required for the purpose of preventing loss the principal or to his property. In relation to this condition the surgery had been authorized by Steve knowing that without the surgery the animal would not be able survive. Thus he carried out the act for the purpose of preventing loss the Bianca. The second condition is also satisfied by Steve as his actions was to protect the interest of Bianca.

Thirdly the actions of the agents must have bona fide intentions. In the given situation it is clear that there was no mala fide intention which was present in relation to Steve as he had no personal interest in the transaction. The facts of the case are totally contrary to that of Stamp and Heacock Ltd where the defendant had personal interest and the court held that there was no agency of necessity as the transaction was in bad faith. Thus the third condition has also been satisfied by Steve.

Therefore in the given situation  it is clear that as all three condition are satisfied the doctrine of necessity will intervene and Steve would be eligible to make a claim for $3500 as it was done in the case of Great Northern Railway Co. vs. Swaffield.

Conclusion

Steve would be eligible to make a claim for $3500 from Bianca as per the principle of agency law. The agency between him and Bianca has been created through the principles of Agency by necessity.

Chan Yin Tee v William Jacks and Co [1964] MLJ 290

DeMott, Deborah. "Fiduciary Principles in Agency Law." (2018).

Dimitriu, Cristian. "Agency law and odious debts." Ethics & Global Politics 10.1 (2017): 77-97.

Great Northern Railway Co. vs. Swaffield (1874) LR 9 Exch 132

National Assistance Board v. Prisk, [I9541 1 W.L.R. 443

Saintier, Séverine. Commercial agency law: A comparative analysis. Taylor & Francis, 2017.

Springer v. Great Western Railway Company [1921] 1 KB 257

Stamp and Heacock Ltd [1924] 1 KB 566

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