The concept of the agent is a useful one in the law of contract, but not all that easy to define.

1 For our purposes, we may take it as referring to the situation where one person (the agent) has the power to bring another person (the principal) into a contractual relationship with a third party. to describe someone as an agent is to identify a relationship and not a job.2 Because the central core of agency is the relationship that it denotes, the labels used by the parties are of only minor significance. If a person is described as an agent this may well indicate that he or she has authority to bind his or her principal, but it does not necessarily do so. The point was considered in Lamb & Sons v Goring Brick Company .3 GBC were manufacturers of bricks and other building materials. Lamb & Sons were builders merchants. An agreement was made under which Lamb were appointed sole selling agents of GBCs bricks and other materials. Following a change of ownership of GBC, it became important to establish the exact effect of this agreement. The Court of Appeal held that it did not create a relationship of agency. The arrangement was that GBC sold its bricks to Lamb, and that Lamb then sold them on to others. In a true agency relationship, Lamb, as agent, would simply have brought GBC into a contractual relationship with the purchasers, and would not themselves have bought and sold the bricks. In some situations, agency operates as an exception to the doctrine of privity. This is particularly so where the agent contracts on behalf of an undisclosed principal. This, as far as the third party is concerned, is an exception to the general principle that only those who are parties to a contract can have rights and liabilities under it. Moreover, the concept of agency can be used to circumvent the restrictions of privity. In New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd , The Eurymedon, 4 for example, the carriers were deemed to be the agents of the stevedores in order to create a contract between the stevedores and the owners, and thus give the stevedores the protection of an exclusion clause set out in the contract between the owners and the carriers. Creation Agency creation does not come into existence just anyhow. It is created in a variety of ways. The three principal ones are express agreement; implied agreement; and operation of law. The agent may be appointed generally, to make contracts on behalf of the principal in a range of situations, or simply to act in connection with one particular project. Subject to the limitations indicated by Lamb & Sons v Goring Brick Company, 5 there are no particular problems with this way of creating agency. No special formalities are required, and the agreement does not even need to constitute a contract. The one exception to this is where the agent is to have power to execute a deed, for example, a conveyance of land. In that situation, the agency itself must be created by deed, generally known as a power of attorney. As regards implied agreements to create agency, the courts here profess to be looking for the intentions of the parties, and if they think that they intended to create an agency relationship,

then that will be given effect. As is usual in contract law, the intention will be determined by an objective consideration of what the parties have said or done. Agency can also be imposed by law, irrespective of the intentions of the parties in three ways, that is, by statute, by necessity, or from cohabitation. Agency of necessity arises chiefly in relation to shipping contracts. Thus, if a cargo is in danger of perishing, the master of the ship will have the power to sell it, or even jettison it.6 Similarly, if the ship itself is in urgent need of repairs, the master may incur expenses towards this, or even sell the ship to raise the money to carry out the work.7 The Court of Appeals decision in Industrie Chimiche Italia Centrale and Cerealfin SA v Alexander G Tsavliris Maritime Co, The Choko Star8 emphasised the exceptional nature of agency of necessity, and the fact that it would only arise where the agent was unable to receive instructions from the principal. Modern communications make it rare that such instructions will be unobtainable, and thus the scope for this type of agency seems greatly reduced. Agency from cohabitation is presumed wherever a man and woman are living together in a household (not, for example, as managers of a hotel), whether or not they are married. It will entitle the woman to pledge the mans credit in order to purchase necessaries. In Miss Gray Ltd v Earl Cathcart9 the presumption was said to be rebuttable by the issue of an express warning to traders; by the fact that the woman was already adequately supplied, or had a sufficient allowance, or had been specifically forbidden to pledge the mans credit; or if the order was extravagant. Given these limitations, the practical application of this type of agency seems as limited as it is outdated in social terms. The powers of an agent The power that an agent has to bind the principal depends on the agents authority. There are three types of authority to be considered: express, implied and ostensible. As regards express authority, the limits of the agents authority may well be expressly established by the agreement between the principal and agent. This may occur when the relationship is first established, or may change over time. The principal will generally be entitled at any time to alter the agents authority, provided that this does not conflict with any contractual agreement between them. The third party will be bound by the limits of the agents express authority, as long as he or she is aware of them. If the third party does not know of certain limitations, and contracts outside them, then issues of implied or ostensible authority, or ratification, may arise. This will also be the case if the agreement between principal and agent is silent, or unclear, as to the extent of the agents authority. Implied authority derives either from the type of work which the agent is doing, or the place where the agent is working.24 The first category will be referred to here as usual authority, that is, the authority usually attaching to a particular job. The second category will be labelled customary authority, in that it will arise out of the customs of a particular place of business. A classic, though not unproblematic, example of usual authority is to be found in Watteau v Fenwick.10 The defendant owned a beerhouse and employed a manager, who had authority to buy goods for the business. The manager was under express instructions, however, not to buy cigars, as these would be supplied by the defendant. The manager bought cigars on credit from the

plaintiff. The plaintiff sued the defendant for the price of the cigars. It was held that, since the plaintiff was unaware of the express limitation, and since it was within the usual authority of a manager of a beerhouse to order goods of this type, the defendant was liable. The decision may be contrasted with Daun v Simmins11 where it was held that the manager of a tied public house would normally only have authority to buy spirits from a particular source. The supplier in this case could not rely on an implied usual authority in order to sue the principal. The main issue here is therefore one of fact. What exactly is the usual authority of this particular type of agent, and was the third party aware of any express limits on it? Customary authority operates to authorise the agent to act according to the usages or customs of a particular place or market. Thus, in Scott v Godfrey,12 a custom of the Stock Exchange allowed a stockbroker to act as agent for several principals at once in buying shares from one seller, thus bringing each principal into a separate contractual relationship with the seller. The third type of authority, ostensible authority, involves the principal having, by words or action, led the third party to believe that the agent has authority, when in fact the agent does not. It is also sometimes referred to as apparent authority or agency by estoppel. 13 The requirements for its existence were set out in Rama Corporation Ltd v Proved Tin and General Investments Ltd.14 Slade J said that ostensible authority was a kind of estoppel, and that therefore what was needed was: (a) a representation; (b) a reliance on the representation; and (c) an alteration of position resulting from such reliance. The precise nature of the representation required was expanded on by Diplock LJ in Freeman and Lockyer v Buckhurst Properties (Mangal) Ltd in the following passage:15 ... ostensible authority ... is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the apparent authority so as to render the principal liable to perform any obligations imposed upon him by such a contract. Moreover, the agent must not purport to make the agreement as principal himself. The representation may come from conduct rather than a statement. In Summers v Solomon, 16 for example, it came from the conduct of the principal in allowing the agent to buy goods for his jewellery business. When the agent was dismissed, the ostensible authority created by this conduct survived, and a third party who was unaware of the termination of the agency was allowed to recover from the principal the price of jewellery with which the agent had absconded. As the quotation by Diplock given above makes clear, the representation must emanate from the principal, not the agent. This was confirmed in Armagas Ltd v Mundogas SA, The Ocean Frost, 17 where the agent, a chartering manager, falsely represented that he had authority for a particular

transaction involving the sale and lease back of a ship. The third party could not enforce the transaction against the principal, since the principal had not made any representation of authority. The other two requirements for ostensible authority noted by Slade J are more easily dealt with. That of reliance simply means that the third party will not be able to plead ostensible authority if he or she was not aware of the representation, or did not actually believe that the agent had authority, or ought to have known that the agents authority was limited.18 The requirement of an alteration of position will be satisfied in the context in which we are discussing agency by the fact that the third party has entered into a contract. Duties of the agent An agent has a duty to carry out instructions, to act with due care and skill, and to act personally rather than through another. In addition, the agent has various fiduciary duties. As regards the duty to carry out instructions, an agent is obliged to do anything which the agreement creating the agency binds him or her to do. In Fraser v Furman Productions Ltd19 an agent failed to take out an insurance policy on behalf of some employers, who, as a result, were liable to compensate an injured employee. The agent was held liable to reimburse the employer. An agent is also under a duty not to exceed the authority granted by the principal. The issue of authority as affects the third party as seen above. Looking at the express and implied authority as between principal and agent, Express authority gives clear limits. Implied authority will arise from the relationship, and will include authority to take all actions necessarily incidental to the purposes for which the agent has been engaged. The authority as between principal and agent may not be identical with that between agent and third party, as is shown by the following quotation from Waugh v HB Clifford & Sons.20 Brightman J said that if, in a defamation action, the defendants solicitor offered 100,000 in settlement: It would in my view be officious on the part of the plaintiffs solicitor to demand to be satisfied as to the authority of the defendants solicitor to make the offer. It is perfectly clear that the defendants solicitor has ostensible authority to compromise the action on behalf of his client, notwithstanding the large sum involved ... But it does not follow that the defendants solicitor would have implied authority to agree to damages on that scale without the agreement of his client. In the light of the solicitors knowledge of his clients cash position it might be quite unreasonable and indeed grossly negligent for the solicitor to commit his client to such a burden without first inquiring if it were acceptable ... It follows in my view that a solicitor (or counsel) may in a particular case have ostensible authority vis vis the opposing litigant where he has no implied authority vis vis his client. Thus, an agent may be able to bind the principal to a contract with the third party, but at the same time be in breach of the duty to carry out instructions.

The second general duty is to act with care and skill. The degree of care and skill required of an agent will depend on the circumstances. The agent must act with the skill which an agent in his or her position would normally possess. Thus, a solicitor or accountant must act with the skill to be expected of someone qualified in that profession. The standard is one of reasonable care in that context. If the agent is not acting for reward, then this duty will be applied less strictly. There is generally a duty of non-delegation. In other words, the agent is normally expected to act personally on behalf of the principal. Delegation of the agents responsibilities will only be permissible where this has been authorised, expressly or impliedly, by the principal. 21 such delegation will not create any privity between the subagent and principal, unless this is specifically provided for. This was the case in De Bussche v Alt,22 so that the sub-agent was, unusually, held directly liable to the principal. Since the sub-agent had made a secret profit from dealing with the principals property, he was liable to account to the principal for this. The final area of duties derives from the fact that an agent is treated as a fiduciary. The duties of a fiduciary were said by Millett LJ in Bristol and West Building Society v Mothew to include the following obligations: 23 The fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not a comprehensive list. The duty not to make a profit will apply also to profiting from information acquired as an agent. Moreover, in Henderson v Merrett Syndicates Ltd Lord Browne-Wilkinson suggested that the fiduciary duties of an agent are not static but may change with circumstances.24 To the list given by Millett LJ we might also add the duty to account for transactions undertaken for the principal. These duties will now be considered in turn. The agent must not put him or herself into a position where there is a conflict between the duties owed to the principal and the agents own interests. In Armstrong v Jackson, a stockbroker sold his own shares to a client. This was held to involve a conflict of interest:25 As vendor it is to his interest to sell his own shares at the highest price. As broker, it is his clear duty to the principal to buy at the lowest price and to give unbiased and independent advice ... as to the time when and the price at which shares shall be bought.