Creation of Agency Relationships

Discuss About The Commercial And Business Organizations Law.

When one person is authorized by another person to undertake acts and omissions on his behalf then the relationship is called the relation of agency. The person who is delegating his power to his inferior is called the Principal and upon whom the power is delegated is called the agent of the Principal.

When the agency is created amid the principal and the agent then an agent has the power to carry out functions that are delegated upon him by the principal. An agent can enter into a contract with the third parties on behalf of the principal. The third parties will consider the agent as the represented of the principal and the acts and omissions that are carried out by the agent with his delegated powers are binding upon the principal. No principal can disapprove the actions undertaken by the agent with in his authority. In (International Harvester Co of Australia Pty Ltd vCarrigan’sHazeldene Pastoral Co[1], it was rightly held that the agency is a situation where in an authority is created upon one person (agent) who has the ability to affect the relationship amid other persons, that is, the principal and the third parties.[2]

1. That the agent is authorized to represent the Principal in front of the third parties/outsiders;
2. This agency is created by the presence of agreement. The agreement can be either in the form of words of mouth, in written form deed) or by expressly creating agency amid the parties. In (Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd 1964[4], the court held that an agency can be established either actually by the principal or apparently by representing the person as his agent in front  of the outsider

Any agency that is created amid the parties, regardless of the manner in which the same is formulated, every such agency is comprised on the above stated elements.

However, there is no one form of agency that is established amid the parties. an agency can be categorized in four major forms.

The first is an agency by Actual or express authority. When the principal delegates his authority on the shoulders of the agent expressly, that is in writing or by words of mouth then it is an actual agency that is established amid the principal and the agent. In Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd[5], Lord Diplock has rightly explained the actual or express form of agency.[6]

The seconds is the agency created by implied authority. In the leading case of (Hely-Hutchinson vBrayhead[7], it is submitted by Lord Denning that implied author is an authority that is assumed by the agent as his usual course of business. This authority is part of the express authority and is not specifically given to the agent.[8]

The third is the agency created by estoppel.  When the agency is created by the principal by holding out the person as his agent in front of outsiders and is rightly established in the leading case of Lysaght Bros & Co Ltd v Falk[9] and International Harvester case[10].[11]

Forms of Agency

The forth is the agency created in necessity. it is a situation when the agency is created amid the agent and the principal because of the situation of emergency or necessity.  It is a deemed agency that is established amid the parties because of the need of the situation and time and the circumstances in which the agent has found himself to act on behalf of the principal and is rightly held in Bank of New South Wales vOwston[12]. It is a satiation wherein the agent has not under circumstances to obtain consent from the principal and is acting in good faith and in the interest of the principal and is rightly held in China Pacific SA v Food Corp of India[13]. Thus, to prove agency in necessity, the basic requirements includes:[14]

1. That the agent is entrusted with the property of the principal.
2. That the property is at risk and is necessary that the agent must have assumed property.
3. That there is presence of real emergency (property  is at risk) because of which the agent has assumed agency and has undertaken actions on behalf of the principal without seeking prior approval;
4. That the agent who has assumed agency on behalf of the principal must have assumed the authority in the interest of the principal and there is no self good or hidden interest of the agent.
5. That the agent is not able to contact the principal or it becomes extremely difficult to contact the principal.

Now, every agent is duty bound to comply with his official duties. Once the duties are comply with then there are few rights that an agent can avail against the principal. The right includes:[15]

1. Right to seek remuneration – Every agent has a legal right to seek salary of the work that is conducted by him and is rightly held in (Tian Chan Ltd v The Tower Ltd 2000)
2. Right to seek indemnity – If the agent faces losses while incurring his duties, then, the principal is under obligation to pay the losses.
3. Right to seek expenses – The agent if faced with expenses while catering his duties, then, the expenses must be paid off by the principal to the agent. The principal cannot deny the expenses by saying that the expenses are incurred without his permission.
4. Right to Lien – If the principal does not pay the remuneration of the agent or the expenses or losses that are incurred by the agent, then, the agent has the right to hold the goods of the principal and does not return the good till the time his dues does not cleared.

Steve is the owner of Mundaring (large farm). He is in the services of breeding and taking care of Alpaca. He keeps the Alpaca in secure areas, feeds them and gave water every day and put the Alpaca in closed areas at night. For the services, Steve charges $100. Bianca takes the services of Steve and put Alpaca in the custody of Steve. 

On the basis of the said facts, Bianca has made Steve as his agent to take care of his Alpaca and cater the services that is assured by him. So, as per (Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd 1964), there is an express authority that is entrusted upon Steve and they are in the relationship of agency.

However, later this agency is extended and the Steve is held to be the agent in necessity for the act of approving surgery on the Alpaca of Bianca. This is because of the following facts:

As pert the facts, Steve is catering the services of taking care and feeding the Alpaca for $ 100. Though Bianca has placed the Alpaca in the custody of Steve for limited services only, however the fact remains that the Alpaca of Bianca is in the custody of Steve with the approval of Bianca. Thus, the first necessity to prove the agency in necessity is complied with;

Further, when Steve was providing his services to the Alpaca of Bianca, then at that time, there was arisen of an emergency under which Steve has to take the decision of carrying out the surgery upon Alpaca.

Rights and Duties of Agents

As per the facts, one day, alpaca has shown the sign of pregnancy and had stopped feeding herself. There were also respiratory issues and nasal secretions that are faced by the Alpaca. After some time, she also contracted with fever and she started dehydrated. Thus, the condition is much worse than expected. It was later confirmed that the alpaca is suffering from Bovine Viral Diarrhoea (BVD) which was later confirmed by the doctor. The doctor also confirmed that the alpaca is also five month pregnant but the fetus is dead and he further recommended that the alpaca might not survive if an immediate surgery is not conducted on alpaca.

Thus, all the above facts revealed that the condition of the alpaca is not normal condition but it is a situation of emergency wherein if the surgery is not carried out timely it will result in the death of the alpaca. Thus, this is one of the important requirements that must be proved in order to hold Steve as the agent in necessity of Bianca.

Further, the facts reveal that Steve has tried to contract twice prior giving approval for the surgery. Steve contacted Bianca for the first time when he gets aware that alpaca has shown the sign of pregnancy and had stopped feeding herself. There were also respiratory issues and nasal secretions that are faced by the Alpaca. Steve called Bianca at the contact details that were provided by him. However the call is answered by the house mate and she submitted that Bianca is not available for three weeks and she does not have any contact member to go through Bianca.

Later when the condition of the alpaca is worsened, that is, she was contracted with fever and she started dehydrated. It was later confirmed that she is suffering from BVD, at that time also, Steve again called Bianca but could not reach her.

Thus, Steve has made each and every attempt to contact Bianca prior giving approval to the surgery of the Alpaca.

From the facts that are delineated above it is crystal clear that the only motive that is found to be present is that Steve had tried to make all attempts so that the condition of alpaca does not worsen and he made all attempts so that alpaca is saved. The only intention that is present is to protect the interest of Bianca. If alpaca is save then the only person who is at gain is Bianca. There is no personal gain that can be achieved by Steve by protecting the life of alpaca.

Case Study: An Agent in Necessity

So each and every action that is conducted by Steve depicts that the sole intention was to gave life to alpaca and there is no hidden profits that are present that is achieved by Steve by giving permission to the surgery of the alpaca.

Thus, it is rightful in submitting that though Steve was an express agent and is only allowed to cater few services to the alpaca of Bianca, but, this author is exceeded and Steve had become the agent in necessity and thus is now permitted to have authority to gave permission of surgery to the doctor in order to protect the interest of Bianca.

It is further submitted that since the actions that are undertaken by Steve are the authorized actions under the agency in necessity, thus, Steve has the rights of an agent and under such legal rights Steve is permitted to seek his legal remuneration from Bianca. Apart from that Steve is also permitted to raise the expenses that are incurred by him, that is, $ 3500 while taking care of the alpaca, the transportation charges etc, and the same must be paid off by Bianca to Steve.

If Bianca does not pay back the expenses that are incurred by Steve, then, Steve has every right to exercise his right of lien and must not return the Bianca till the time his dues are not paid off.

Conclusion

Thus, Steve is the agent in necessity and has the power to approve the surgery of alpaca. If Bianca does not pay the legal expenses that are incurred by Steve, then, Steven can exercise his right of lien.

References

Dowler, M. 2015. Thomas and Reuters.. https://legal.thomsonreuters.com.au/product/AU/files/720506676/chapter_summary_21e___ch_5.pdf (accessed April 14, 2018).

Mugambwa, J., Harrison A and Val H. 2007. Commercial and Business Organizations Law in Papua New Guinea.

Pont, G. 2008. Law of Agency7. Australia: LexisNexis Butterworth.

Thampapillai, D., Vivi, T., Claudio, B and Matthew, A. 2016. Australian Commercial Law. Australia: Cambridge University Press

Case laws

Bank of New South Wales vOwston . LR 4 App Cas 270 (1878).

China Pacific SA v Food Corp of India . AC 939 (1982).

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

Hely-Hutchinson vBrayhead. (1968).

International Harvester case. (1958).

International Harvester Co of Australia Pty Ltd vCarrigan’sHazeldene Pastoral Co . 100 CLR 644 (1958).

Lysaght Bros & Co Ltd v Falk . 2 CLR 421 (1905).

Tian Chan Ltd v The Tower Ltd . (2000).