Application Of Principal The Law Of Agency In An Essay.

The Legal in the Scenario of Rodney and Penelope

How Do Application of Principal the Law of Agency?

An agency relationship is one of the most prevalent and significant legal relations. The relationship starts with two parties. One becomes the principle, and the other one becomes the agent. The sole purpose of the agent is to represent the principal in its dealings. So through the agent, the principal can reach a third party, who is the customer. For example, a cashier in a supermarket is an agent, while the bank is the principal. So through the cashier (agent), the third party (Customer) executes a transaction with the supermarket (Principal). In any agency relationship, it's the principal that controls the conducts of the agent.

This main issue in here is a question of creation of agency through cohabitation. The law recognizes that a man and a woman living together through cohabitation can form an acceptable agency. In Stone in (Stone, 2005) the work explains this agency as the agency that arises two people are in a de facto relationship.

The exact mirror case of Rodney and Penelope was analyzed by Miller in (Miller, 2015) “The courts may find an agency relationship when one spouse purchases certain necessaries and charges them to the other spouse’s account. For example, the courts will often rule that the second spouse is liable to pay for the necessaries, either because of a social policy of promoting the general welfare of a spouse or because of a legal duty to supply necessaries to family members.”

So as explained above, the main purpose of this agency is to promote the well being of the parties’ living standards, and it doesn’t apply to luxurious properties. The same meaning was given in (Campbell & Dennis, 2009) stating that “two parties can create an agency by presumption or cohabitation. This type is agency exists through presumption that if a man and a woman are living in a de facto relationship, the woman is presumed to be an agent and can pledge the man’s credit for necessaries.” The same meaning applies to the case of Rodney and Penelope. The supermarket presumes that Rodney has authority from Penelope’s to acquire household necessities.

Notably, necessities are things like food, medical attention, and clothing. All things considered, these are mainly things that help in keeping their family’s social status standing (Miss Gray Ltd .v Earl Cathcart, 1922). Another point to note is that the agency of cohabitation only exists in the cases of cohabitation but not in marriage. After all, there is also a chance for invalidating this agency. For example, the husband can refute the authority if he expressly forbids the wife on buying luxuries.Apart from the agency through cohabitation, we are also told that

The Role of Apparent Authority to Establishing the Existence of the Principal-Agent Relationship

Rodney orders groceries online and receives a delivery of groceries from the local TN supermarket where Penelope holds a credit account is known to regularly pay outamountsput on that account for the groceries that Rodney orders

This part introduces the agency through estoppels. According to (Miller, 2015), in a situation where a principal (Penelope) makes a third party (Supermarket) think that another person (Rodney) is her agent, and then a third party (Supermarket) deals with the assumed agent, the principal (Penelope) will be  “estopped to dispute” such agency relationship. Following this explanation, Penelope made the supermarket think that Rodney is her agent by paying all the groceries. By doing this, the supermarket had no otherwise but to believe that Rodney was getting the microwave for Penelope. This is assumed that there is already an existing agency between Penelope and Rodney.

For instance, in (Freeman & Lockyer v Buckhurst Park Properties Ltd, 1964) in this cases, The respondent corporation had four managers, but in practice, only one manager executed all the contracts assuming the duties of the Senior Manager. However, he never held that position, so he had no actual power to bind the organization. The other managers were aware but never complained. In one transaction, this manager contracted the Claimant Company, but his company declined to pay alleging that the manager had no authority. The judge held that the respondent company was liable for the misconduct of its manager.

The issue here is a question on whether the action of an agent can bind the principal with the third party. In apparent authority, a contract formed with between agents with a third party is as binding the same it would have been had the third party contracted directly with the agent.  (Carper, McKinsey, West,  2007). 

This case was well stated by (Mallor, 2013) that “Apparent authority confers upon the agent, or supposed agent, the power to bind the disclosed or unidentified principal in contracts with third persons and precludes the principal from denying the existence of actual authority. Thus, when authority is apparent but not actual, the disclosed or unidentified principal is nonetheless bound by the act of the agent.”

The same case applies to MODO sending Tim to search for an office but instead, he exceed to acquiring a lease agreement. Apparent authority can be actual, expressed or implied, Plus, it could also happen by estoppels. Concerning this case, this study will lean towards apparent authority.

Notably, if it happens that the third party will rely on that representation; it’s no doubt that the principal will then be bound by any of the actions of the agent. So, MODO would be bound by the lease agreement, and this is because Tim made Adam believe that Tim was there on behalf of Modo. In (Doncaster Metropolitan Borough Council v Racing UK Ltd, 2005), the court ruled that Mr Sanderson had apparent authority to bind the council the contract. The case applies to MODO, Tim had apparent authority to bind MONDO to the agreement.

On the other hand, MODO may argue that he had instructed Tim to just visit and bring back the recommendations. However, it may still not work considering the point by (Mann, & Roberts, 2016) that “When a principal appoints an agent to a position in an organization, the third parties may reasonably believe that an agent has the authority to do those acts customary of an agents in such a place.

Comparably, a similar comment was made by the judge in (Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd, 1971) In this case; the secretary had entered into a contract while the principal was away. The principal argued that the secretary had implied authority. In the ruling, the judge held, "The secretary is the chief administrative officer of the company’ so he has ostensible authority with administrative matters." Similarly, Tim is the chief administrator to MODO and therefore has the apparent authority to bind MODO with Adam.

Business transactions will have to overlook the limits to express or implied authority for them to operate efficiently. In other words, limiting the application of apparent authority is the same as bringing the principal to the work to conduct transactions. Apparent authority enables the agent to use its own judgment in making decisions where express or implied instructs do not provide for the arising issues. This one is the specific reason why the agents are allowed to execute transactions on behalf of the principle. In (Jones, & Sufrin, 2016), the work states that there is need to have apparent authority to substantially decrease the costs that would arise if inquiries were to be made to the principal every time there is a transaction that's not covered in the provisions of actual authority

However, the perception of apparent authority has been struggling with the mischief of the agents. There are situations where an agent within apparent authority has committed fraud or errors drawing the principal causing the third party to sue the principal. There is a need to understand that, when an agent enters into a contract with a third party, the final contract is between the third party and the principal. Nevertheless, the courts have always reasoned to prevent the misconduct of the agent from enrichment and fraud as in In (Skandinaviska Enskilda v. Asia Pacific Breweries, 2011). In this case, the Court dismissed the reasoning that the defendant’s finance director had apparent authority to undertake the money that the plaintiff had given him.

For the protection of transactions, agency law has evolved to create the concept of apparent authority as the ground for transactions. This doctrine facilitates the operations by having the agent represent the principal where both contracts and claims would not be possible with the original principal.

This reasoning was held in (Ermoian v. Desert Hospital, 2007) where the court held that “In the medical context, vicarious liability has been extended to a hospital entity under a theory of ostensible agency for the acts of nonemployee physicians who perform services on hospital premises”

Apparent authority arises in different cases. It can arise where the parties terminated their agency relationship, but the third party doesn't have such information. Also, it can arise after the termination or limitation of actual authority, yet the principal has not communicated to the third party (Kleinberger, 2008). It can still occur even where there has been an established agency relationship forged between the agent and principal (Ghaly, & Wilken, 2012).

Due to ineffective communication or lack information on the side of the third party, apparent authority allegedly comes into force to protect third parties. The manifestation of Estoppels and apparent authority can be established in the following ways. There must be a representation from the principal by words or conduct that the agent has authority (Rama Corp Ltd v. Proved tin & General Inv. Ltd, 1952). The law requires that third party demonstrates that it acted due to the misrepresentation of the principal by the agent (Baskind, 2015).  Ultimately, it’s vital to note that the appearance of authority must have arisen from the principal's previous conducts as held in (Sigma Cable (Pte) Ltd v NEI Parsons Ltd, 1992)

Conclusion

The paper looked at the main principles of agency through that can be formed when people are cohabiting. It also looked at the principles of apparent authority. The goal was to analyze the formation of apparent authority and how its effect can lead to binding both the third party and the principal. Therefore, there is always a need for agents to act with diligence and credibility to maintain their good relationship with the principal.

References

Miller, R. (2011). Business Law Today, The Essentials: Text and Cases  (11th ed., p. 604).

Adamson, J., & Morrison, A. (2016). Law for Business and Personal Use (19th ed., p. 387). Cengage Learning.

Stone, R. (2005). The modern law of contract. London: Cavendish.

Campbell, D., & Dennis, E.C. (2009). International Agency and Distribution Law: Lulu Enterprises Incorporated.

Carper, D., McKinsey, J., West, B. (2007) Understanding the Law. Cengage Learning

Jones, A., & Sufrin, B. (2016). EU competition law (6th ed., p. 753). Oxford, United Kingdom, UK: Oxford University Press.

Baze, D. (2015). Common Law Of Agency. Supplemental Chapter For Oklahoma Real Estate Principles, 9. https://dx.doi.org/405-361-4602

Kleinberger, D. (2008). Agency, partnerships, and LLCs (3rd ed., p. 34). New York, NY: Aspen Publishers.

Ghaly, K., & Wilken, S. (2012). The law of waiver, variation and estoppel (3rd ed., p. 329). Oxford: Oxford University Press.

Mann, R., & Roberts, B. (2016). Smith & Roberson's business law (17th ed., p. 390). Mason, OH: Cengage Learning.

Baskind, E. (2015). Commercial law (1st ed., p. 176). Oxford University Press.

Mallor, J. (2013). Business law (15th ed., p. 919). New York, NY: McGraw-Hill/Irwin.

Sigma Cable (Pte) Ltd v NEI Parsons Ltd, 2 SLR 1087 (1992).

Doncaster Metropolitan Borough Council v. Racing UK Ltd EWCA, Civ 999 (2005)

Ermoian v. Desert Hospital 61 Cal. Rptr. 3d 754 (Cal. Rptr. 3d 754 ,2007)

Rama Corp Ltd v. Proved tin & General Inv Ltd, 2 QB 147, (1952)

Skandinaviska Enskilda v Asia Pacific Breweries, 3 SLR 540. (2011)

Sigma Cable (Pte) Ltd v NEI Parsons Ltd, 2 SLR 1087 (1992).

Miss Gray Ltd V Earl Cathcart (1922) 38 TLR 562

Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd, 2 QB 711 ( 1971)