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4â Agency of necessity |
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appellants, who owned 49 per cent of the shares in a French company, were a company of trawler owners who had taken control of a trawler that was owned by the French company. The appellants had no authority from the French company for their actions but were granted permission by the Minister of War Transport and the Fisheries Section of the French Naval Forces to send the trawler to sea. The appellants were never appointed manager of the trawler but kept records of the ship’s income and expenses. After the end of the Second World War, the trawler returned to France and the French company approved the appellants’ actions. The court held that, at the time when the appellants acted as an agent of the French company, the French company was an alien enemy at common law, and therefore its attempted ratification was invalid.
The final requirement is that it must be possible to establish the identity of the principal at the time when the act was done. This point was explained in Watson v. Swann, where Willes J stated:
To entitle a person to sue upon a contract, it must clearly be shown that he himself made it, or that it was made on his behalf by an agent authorised to act for him at the time, or whose act has been subsequently ratified and adopted by him. The law obviously requires that the person for whom the agent professes to act must be a person capable of being ascertained at the time. It is not necessary that he should be named; but there must be such a description of him as shall amount to a reasonable designation of the person intended to be bound by the contract.68
Therefore, it is essential that the specific principal who the agent represents must be ascertainable at the time of the agent’s actions.69
Q3 What is the difference between actual and apparent authority?
4â Agency of necessity
Agency of necessity often arises when a person acts in an emergency, for example to protect the property interests of another person. This will result in the agent being authorised, even though there is no actual authority. In
China-Pacific SA v. Food Corporation of India (the Winson),70 Lord Diplock discussed two different aspects of the law of agency of necessity: first, ‘where an agent enters into a contract with a third party on behalf of the principal, consequently binding the principal contractually to the third party’; and secondly, ‘where a person acts for another and subsequently seeks reimbursement or an indemnity from him’.71 Whereas under an agency of necessity, privity of contract arises between the principal and third party, even where a person acts to
68(1862) 11 Common Bench Reports (New Series) 756; 142 ER 993.
69See Bradgate, above n. 1, at 155.
70[1982] AC 939.
71Dobson and Stokes, above n. 5, at 436–7.
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The authority of an agent |
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preserve the property of a complete stranger, that person is unable to claim for |
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reimbursement.72 |
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Munday noted that ‘there exist a number of situations in which the law will |
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impose the incidents of agency where one party has acted on behalf of another |
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in the course of an emergency. This occurs when one party (the agent) is con- |
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fronted with an emergency that poses such an imminent threat to the property |
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or other interests of another person (the principal) that there is insufficient time |
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for the former to seek the latter’s authority or instructions before acting’.73 In the |
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case of Springer v. Great Western Railway Company, the court determined that |
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agency of necessity will only arise in extreme circumstances.74 The court held that |
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there must be ‘an actual and definite commercial necessity’ for the agent’s action.75 |
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Bradgate noted that four requirements must be satisfied for the agency of neces- |
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sity to arise. First, there must be an emergency. Secondly, as a result of the emer- |
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gency it must be impossible to obtain instructions from the principal. Thirdly, the |
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agent must have acted bona fide in the interests of the principal. Finally, the agent |
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must have acted reasonably.76 Dobson and Stokes took the view that ‘in certain, |
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strictly controlled, circumstances the law will impose an agency relationship or |
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where such a relationship already exists, extend an agent’s authority to act by |
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virtue of an emergency’.77 |
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5â Conclusion |
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This chapter has outlined the different types of authority that are available to |
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an agent and has commented on how each affects the relationship between the |
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agent, principal and third party. The next chapter will outline the obligations |
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owed by an agent to a principal and by the principal to the agent. |
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6â Recommended reading |
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Bradgate, R. Commercial Law (Oxford University Press, Oxford, 2005) |
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Brown, I. ‘The agent’s apparent authority: paradigm or paradox?’ (1995) Journal of |
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Business Law (Jul.) 360 |
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â ‘The significance of general and special authority in the development of the agent’s |
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external authority in English law’ (2004) Journal of Business Law (Jul.) 391 |
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Busch, D. and Macgregor, L. ‘Apparent authority in Scots law: some international per- |
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spectives’ (2007) 11(3) Edinburgh Law Review 349 |
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Dobson, P. and Stokes, R. Commercial Law (7th edn, Sweet and Maxwell, London, 2008) |
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French, D., Mayson, S. and Ryan, C. Mayson, French and Ryan on Company Law (Oxford |
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University Press, Oxford, 2010) |
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Markesinis, B. and Munday, R. An Outline of the Law of Agency (Butterworths, London, |
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1992) |
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72 |
See Bradgate, above n. 1, at 155. |
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73 |
Munday, above n. 3, at 91.â 74â [1921] 1 KB 257. |
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75 |
See Bradgate, above n. 1, at 153.â 76â Ibid. |
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77 |
Dobson and Stokes, above n. 5, at 436–7. |
27 6â Recommended reading
Munday, R. Agency: Law and Principles (Oxford University Press, Oxford, 2010) Noonan, C. and Watson, S. ‘Examining company directors through the lens of de facto
directorship’ (2008) 7 Journal of Business Law 587 at 619–20
Reynolds, F. ‘Case comment: apparent authority’ (1994) Journal of Business Law (Mar.) 144
Stone, R. ‘Usual and ostensible authority: one concept or two?’ (1993) Journal of Business Law (Jul.) 325
Street, A. ‘Ostensible authority and ratification’ (2006) 119 Insurance and Reinsurance Law Briefing (Sept.) 1