Legal Implications Of Implied Authority In Agency Relationship - Freeman Lockyer V Buckhurst Park Properties

Discuss About The Freeman Lockyer V Buckhurst Park Properties.

A statement has been made by the court in the case of Hely-Hutchinson v Brayhead Ltd [1967] 1 QB 549 that the principal has to bind with the action of the agent where there is an Apparent Authority or Actual Authority.

The term implied authority is the individual’s authority to make a contract that is legally bound on behalf of the organization by interacting with the public on behalf of company. A person who carries the trademark of the organization and functions his authority according to the organization is said to be as having an implied authority.If the agent has the limited authority that has been done by the principal, then the third party will not be restricted from making a claim. In the case of Watteau v Fenwick [1893] 1 QB 346, the provisions for the implied authority has been discussed. In this case a pub owner has appointed a manager and his role is to be the management of the pub and some authorities, in this scenario the ­­­­­­­­­­manager was specifically forbidden from buying cigars. As the act was done in the common course of the usual authority hence such a situation occurred. Therefore, the limitations will only be effective when the third part is informed about it.

The agent allocated certain duties to the principal which also included the duty which was mentioned in the case of Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 that was the duty to avoid conflict of interest. As per the case of Attorney General for Hong Kong v Reid [1994] 1 AC 324 the duty of not making any secret profit was also included, the discussion was also regarding the case of Robb v Green in which not misusing the confidential discussion being an agent was used. It is the duty of an agent to comply with the instructions which are being stated by the principal and also perform accordance to the accounting, as per the case of Kelly v Cooper [1993] AC 205. According to the case of Chaudhry v Prabhakar [1989] 1 WLR 29 the court declared that among such duties one of which is to make sure that the agents implement care and sensible skills in the process of completing their duties. Whether or not an agent is able to abide by the above mentioned duties were determined by applying an objective test by the court in the case of Calico Printers' Association Ltd v Barclays Bank Ltd (1931) 145 LT 51.

Meaning

The principal could be bind by the acts of the agent as he had the control to do so, and then the claim would be directly made from the principal by the third parties, as per the case of Armagas Ltd v Mundogas Ltd or The Ocean Frost [1986] AC 717. Meanwhile, when the agent is seen to perform outside the authorities given to him, then he might be set responsible through the principal for paying the loss they faced.

According to the case of European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45 the court stated that if an individual was seen to create any impression of agency whereas no such agency exists as per the principal in accordance to the third party permits that in such case an individual has the right to do so.Though, such authorities in reality are not been given, the violation of the warrant of authority is done, and the claim can be made by the third party.

According to the scenario, ‘The Thin Heads’ had an agent named Jevan who frequently gets involved in a contract with John on the behalf of theband for the servicing of the guitar. He was given the responsibilities of the manager of the band, the responsibilities also includes the booking of instruments, organizing the meals and maintaining as well as repairs of the instruments. So, the authorities which were given to Jevan is a part of express authority. Jimbo who was also a member of the band gave a responsibility to Jevan for the servicing of the guitar which was highly collectible. The guitar was frequently serviced by John earlier, this time around the cost was $8800 for rebuilding the guitar completely. In this scenario it was mentioned that Jimbo declined to pay this amount. A principal is bind by the actions which are made by the agent if there is Apparent or Actual authority as stated in the case of Hely-Hutchinson v Brayhead Ltd. In this case an implied authority was given by Jimbo to Jevan. If an authority which is made for the purpose of making sure proper execution of the actual authority is done, and no express authority is been given but falls within an agent’s position is said to be implied authority. As Jevan was the manager of the band it was within his usual authority to repair the given instruments. The principal in this case Jimbo, imposed no such limitations to Jevan, as Jevan had usual authorities of repairing the instruments thus he repaired the guitar. The dealings between Jevan and John were likely as an agent. Therefore, as Jevan repaired the guitar under his common authority, John being the third party might make the band accountable to the pay the sum of $8800.

Several duties are imposed on an agent in regards to principal by the provisions under common law, because the relationship between them is said to be fiduciary, as per the case of Chaudhry v Prabhakar. Among the duties one of which states that an agent requires to show care and sensible skills while performing his duties. According to the case of Calico Printers' Association Ltd v Barclays Bank Ltd, it was stated that whether or not an agent can abide by the duties is determined accurately. Therefore, if any sensible individual might was exposed a much higher degree of care and skill, then the duties are said to be violated. In this scenario, any sensible individual was there in place of Jevan then he would also have repaired such a guitar which was of high value and collectible item. Therefore, the duties are not been violated by him as the guitar was repaired.

As there was no violation of the duties done by Jevan in regards to the duties which he hold in the band being an agent, so he hold no liability as per Armagas Ltd v Mundogas Ltd.

No further violation was seen in regards to the warrant of authority made in this scenario through Jevan. This happened as the time when an individual makes an impression of agency though no such agency exists on the behalf of the principal in accordance with third party permits the individual giving him the authority for doing this. Though, if existence of no such authorities is seen then the third party is liable to get the claim against the agent, as the violation of the warrant of authority was done. In this scenario, implied authority was seen between the band and Jevan.

According to the scenario which is mentioned above, the actions which were made by Jevan falls under the implied authority which he received through the principal. Meanwhile, no such proof was found which could confirm that Jevan violated the duties he holds as an agent. Therefore, in regards to the principal Jevan holds no such liabilities.

A well-known doctrine in regards to law of agency expresses the idea of the apparent authority. Such a doctrine is used in certain scenario in which it is assumed by a sensible third party, that the individual they require to deal with has been authorized by the principal. It means if apparent authority is present then the principal will be liable by the acts of an agent even though no expressed or implied authorities are given by him. The apparent authority raised the doctrine of promissory estoppel, because when a third party is been given the guarantee by which he can rely for getting indulge in a contract and would violate provisions under equity in case the principal does not accept the given authority. But, even at places where no authorities are seen still we could find apparent authority there. Though for this authority to be present there it requires to be an act committing an error, which in this case was done by the principal, and if the actions which are done by the agent are based on wrong impression then there will be no responsibility that the principal would hold.Thus, in a scenario in which such an act has been done by an agentwhile the principal is present, and being present he has not prohibited the third party or the agent to get involved in a transaction then there will be an existence of apparent authority. The provisions of such a authority might also occur in certain situations in which the principal is seen to dismiss the agent’s authorities but has no notified the third parties regarding this.

The four elements of a valid apparent authority have been explained in the case of the Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480. According to the above mentioned case it has been explained by the court that there must be four considerations to analyse if there is any valid or legalized apparent authority that is present in the situation. The first consideration or element is the principal who has some way prepared a representation so that the authority is present in context. The second one is a proper third party who is bona fide and believes that the authority has been given to the agent by the principal. The third party is depended on the responsibility that has been provided by the principal t the agent in sign the contract. As per the loss that has been caused because of reliance, the third party must have gone through some changes regarding the position. In the abovementioned case apparent authority has been developed as the principal has prepared a representation that agent has the authority on behalf of the organization to get in the contract. This kind of misrepresentation has been prepared by the original authority. The contractor was dependent on the authority and was convinced to get in the contract and because of reliance the contractor has faced many losses.

According to the identification of the elements the Apparent Authority has been recognized by the courts. Due to this the principal is legally bound by the actions that has been promised by the agent that carries the Apparent Authority. The Doctrine of Estoppel has prevented the principal from denying that the authority that has been given to the agent by him in forming the contract from the third party as it totally relies on the contract. However, this kind of authority cannot be taken into consideration when the third party does not act in a good way and they also know that the agent do not carry any authority that has been given by principal. In the famous case named Royal British Bank v Turquand (1856) 6 E&B 327 these provisions have been given.

Ratification is the primary remedy that is available with respect to that Apparent Authority. According to the principles of the ratification, an agreement can be ratified by the principal and has been entered into it through the agent in an unlawful manner. In situation where the actions of the agent have been ratified by the principle the third party form a valid contract with the principles and the agreement becomes binding on both the parties to the contract. Where such ratification has not taken place the third party can still hold the principal liable for the actions of the agent. Thus it is best for the principle to ratify the contract with the third party so that that can benefit for the transactions.

References

Armagas Ltd v Mundogas Ltd or The Ocean Frost [1986] Accounting 717

Attorney General for Hong Kong v Reid [1994] 1 AC 324

Calico Printers' Association Ltd v Barclays Bank Ltd (1931) 145 LT 51

Chaudhry v Prabhakar [1989] 1 WLR 29

European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45

Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480

Hely-Hutchinson v Brayhead Ltd [1967] Economics QB 549

Henderson v Merrett Syndicates Ltd [1995] 2 AC 145

Kelly v Cooper [1993] AC 205

Watteau v Fenwick [1893] 1 QB 346