Principles of Law of Agency

The Law of Agency is derived from the Roman Law of Mandatum which means
in English Mandate.

This refers to a situation where one entrusts or requires another person to

perform a particular act for and on their behalf. The aim of the appointment of
the agent is the performance of the service for the principal.

To become an agent one has to be appointed by the principal.

In essence there has to be an agreement between principle and Agent under

which the agent agrees to represent the principal in return for certain benefits.
The contract between P&A is governed by the general terms and conditions of
the contract. For one to identify a relationship of P&A the following essential
elements must be met.

1.) there must be REPRESENTATION OF THE PRINCIPAL BY THE

AGENT. This requires that the principle be in existence at that time, the
principal must have the capacity to perform the act himself, the agent must have
capacity to act as an agent, the agent must have the authority to represent the
principal in performing the act in question and the agent must indicate that
he/she is acting in a representative capacity.

2) there should be authorisation of the agent by the principal.

In the Case of Gravet Vs Van DerMerwe 1996 Vol 1 S.A L R pg 531 Van
DeMerwe owed money to the decreed person D. it was a term of their
agreement that the money would be repaid to Ds wife or nominee. Gravet Ds
executer sued for the money in his capacity as executor. Van DeMerwe raised a
special plea saying that Gravet had no Locus Standi as the money was not
payable to the estate.

Gravet then alleged that he had been appointed by Ds wife to collect the money.
The court held that since Gravet had brought the action on behalf of Ds estates
he could npt also be suing against Ds wife.

3) The principal and the 3rd party are bound on a contractual relationship with
each other that is any rights and obligations that arise are between the principal
and third party and not between agent third party. The agent may not sue or be
sued by the third party. Based on the contract of P& third party.

Ericson Vs Germi Motors BPK 1986 Vol4 SALR pg 67. In this case Fargher
authorised Ericson to sell a car for him. Fargher knew that the car was stolen
and was thus aware of the illegality of the intended sale but Ericson did not
know. Ericson approached and negotiated a sale with Germi Motors and
warranteed that he had authority to sell the car.

When Germi Motiors discovered that the car was stolen it sued Ericson for
damages. Arguing that since Fargher had tried to defraud the sale of the car
through Ericson, it was not only the sale of the car it was illegal but also the
contract of Agency between Erison since there was no valid contract of Agency
Germi Motors could hold Ericson personally liable on the basis of his warranty.

The court held that the illegality of the sale did not invalidate Ericson and
Farghers contract of Agency and therefore Ericson could not be held liable
personal on the contract.

Types of Agency
There are numerous types of agency but the most popular types of Agents are
brokers,

Factors, Auctioneers, Estate agents, delcreder Agents

Broker
A Broker is a type of agent employed by the principal to try and negotiate
contracts with third parties.

His duty as a broker is only to negotiate the contract and not to conclude the
contract.

Example: an insurance Broker.

Factor
Is an agent to whom goods are sent and he keeps those goods in trust on behalf
of the principal? He has authority to sell the goods without disclosing they are
selling the goods on behalf of someone. He can sue on behalf of the principle
and he can retain the goods if he is not paid.

Factors are common when one wants to sell goods abroad.

Auctioneer
This is an agent of the seller with implied authority to sell on his own terms
however he does not have authority to make warrantees about the property.

Estate Agent
An Estate Agent is not a proper agent because he does not make a contract for
the Principal. His mandate is to introduce the buyer to the seller.

He earns his commission upon completion of him mandate

Delcredre
An agent who guarantees payment of the purchase price to the Principal. He
gives the guarantee in return to a commission

Types of Authority
Actual Authority
Authority by Ratification
Unauthorised Authority

For an agent to act on behalf of a principal they should have authority to do so.

The extent of authority would defer in each case (contract).

The issue of whether an Agent had authority to perform a particular act or not
will be gathered from looking at the contract of agency that exists amongst the
parties

Actual Authority
Actual Authority is divided into parts Express Authority (unequivocal) and
Implied Authority

Authorisation is a unilateral juristic act performed by the principal it does not

need or require the agents agreement and the act of authorisation is therefore
distinct from entering the underlining act of contract although the two may
often take place simultaneously.

Express Authority

As a general rule there is no prescribed formalities which have to be followed to

form a contract of agency. The parties have to agree on the scope of authority
and the remuneration to be paid. Express appointment is where one is actually
appointed whether verbally or in writing.
Implied Authority

Implied Authority exists were the principal authorises the Agent to represent
him although not directly or in so many words. The Agents authority is implied
or inferred from the principal’s conduct.

A court will not likely infer (conclude) that one person impliedly authorized
another to perform a juristic act for and on his behalf. It will only draw such a
conclusion were no other reasonable interpretation can be given to the alleged
principals conduct than that he or she intended that the relationship of Agency
should exist.

CoetzerVs Mosenthals 1983 SALR pg 22 in this case Coetzer’s son and

Mosenthals business partrner had to Coetzers Knowledge purchased goods
from Mosenthals on Coetzer’s account and in his name. Coetzer knew that this
was being done but took no action to stop it.

It was held that where a person knowingly allows another to do acts in his name
without any opposition or objection he is presumed to have given authority to
the other to perform the act. Accordingly Coetzer had impliedly authorised the
purchase on his account.

The consequence of an act of representation by a duly authorised agent is that

the principal will be legally bound by the agent’s act where the agent has
concluded a contract with a third party for and behalf of the principal the
principal is bound by such a contract and cannot vary the contract without the
3rd parties consent. The principal has no recourse against the agent who acted in
good faith with the requisite care and skill and within the terms and scope of his
or her authority even if the principal ultimately suffers loss or is dissatisfied
with the results.

Ostensible Authority/ Authority by Estoppel

Where there is no authority expressly of impliedly a third party may still hold
the principal liable to the contract entered into by him and the Ostensible
(Alleged) Agent. If the principal’s behaviour is misleading to a 3rd party to
believe that surely the 3rd party has been induced to contract with the ostensible
agent on the strength of such conduct then the principal will be bound.

In such cases the principal may be estopped or prevented from denying the
agents authority to perform the act for and on his behalf.
The requirements for holding the principal liable on the basis of ostensible
authority of its agents were administered

In the Case of a NBS Bank limited Vs Cape Produce 2002 SALR pg296

Highlighted as follows:-

There should be a representation by word or conduct made by the principal that

the agent had the authority to act as he did.

(i.) A representation should be in such a form that it could reasonably be

expected to mislead a third party.
(ii.) There should be reliance by a third party
(iii.) The third party should have suffered prejudice on the reliance with the
representation

Authority by Ratification
Where there is no authority to act either expressly of impliedly an act performed
by a person who professed to be an agent can be accepted if confirmed by the
purported principal.

Where someone enters into a contract purporting to have authority when in

actual fact he does not have such authority the person in whose name the
contract was entered into can later accept it as his contract. The principal in
these circumstances is clearly not bound by such acts but if he or she so desires
can elect to abide by what was done for and on his behalf. This is to say he or
she can ratify act.

An act that has been dully ratified is as effective ad binding as if the agent had
been authorised to perform it in advance.

Ratification is not always possible and for one to be able to accept a contract
entered in his name without authority or for a principal to be able to ratify the
contract the following requirements have to be satisfied:-

(i.) The agent must in fact have represented the principal that is all the
requirements relating to the act of representation must have been met
save only for the fact that the agents authority was lacking at the time.
(ii.) The act must be one cable of being ratified.

Only an act that would have had full legal force if it had been performed by a
duly authorised agent is cable of being ratified. Illegal acts and contracts that
 are Contra Bonos Mores (contrary to good morals) cannot be ratified. The
same applies to acts which cannot be performed through an agent.

(iii.) The act may not be ratified partially. If the principal wishes to ratify
the act then he or she must abide by the legal consequences of the act
and not only those which are to his benefit. (fully aware of
consequences)
(iv.) Ratification must take place within a reasonable time of the Principal
becoming aware of the Agents Act or Actions.
(v.) Ratification must be express or implied.
Where ratification is express the Principle must intend to ratify with
full knowledge of all the material circumstances or he must intend to
ratify irrespective of the circumstances.
On Implied ratification the conduct of the Principal after the event will
be paramount in determining whether ratification has taken place or
not.

This was stated in the case of Dreyer Vs Sonop BPK 1951 Vol 2 SALR
pg392 where Dreyer’s minor son got a school blazer from Sonop on
his father’s account but without his authority. Dreyer knew that his
son was required to wear such a blazer and he had seen him wearing
it but did nothing about it. Dreyer did not pay the account and Sonop
sued him.
The court held that Dreyer had done nothing about the blazer when he
realised that his son had bought it. In these circumstances he had
impliedly ratified his son’s purchase.

Negotiorum Gestor/ Unauthorised Administration

This is voluntary management by a person called the Gestor of the affairs of
another called the Dominus for the Dominus benefit but without his or her
knowledge or consent. It usually arises in case were the Dominus affairs require
urgent management but he or she is not available to manage them personally.
Negotiorum Gestor does not arise out of a contract but never the less gives rise
to reciprocal rights between the parties which are similar in many respects to
those arising out of agency. The two should not be confused.

The following essential requirements must be established in order to establish a

relationship of Negotiorum Gestor
 1. The affairs that must managed are those of the Dominus and not those of
the Gestor.
2. The Dominus must be unaware of the fact that his affairs are being
managed (if the Dominus is aware but does nothing about it then this will
give rise to an Implied Agency)
3. The Gestor must act throughout with the intention of benefitting the
Dominus and recovering his necessary expenses.
4. The management of the affairs must be reasonable and be concluded or
conducted in a reasonable way. It does not matter however weather or not
the Gestor is ultimately successful in what he or she sets out to do.

Rights of the Gestor against the Dominus

The Gestor has the right:-

i. To be reimbursed of all necessary and useful expenses incurred on

behalf of the Dominus.

ii. To payment of damages for any loss or other income

iii. To be released by the dominus from the liability of third party.

i. Have the right to exercise a lien over any property of the Dominus
which may be in his possession pending his satisfaction of his claim.
Unlike an agent the Gestor has no right to remuneration for his
services even if he or she falls into a category of persons who
normally charge for such services.

The gestor’s action against the Dominus for recovery for the necessary and
usefull expenses and on damages suffered during the course of gestor the is
known as Actio Negotirum Gestorum Contratria

Rights of the Dominus against the Gestor

The Dominus has the right:-

i) To have the undertaking properly compçleted by the gestor.

ii) To an account by the Gestor of his management by the dominus affirs
iii) To compensate for loss by the Gestor’s negligence where the gestor
has acted in an act of urgency then he or she is only liable if Grossly
liable.
 The Dominus action against the Gestor for exerting compliancy with the
latter’s duties is known as Actio Negotiorum Gestorium Director

Duties of an agent
The agent has the duty to perform the mandate as promptly as possible and
substantially in accordance with the instructions given to him by the
principal. His he does not do so he will be liable for damages from breach of
contract and will not be entitled to any remuneration.

In performing his mandate the agent is required to observe the following:-

i) He or she must act within the scope and limit of his or her authority.
ii) He must act substantially in accordance with all the principals’
instructions. Not only those that may have been given expressly but
also those which are to be implied from custom and trade usage for
that particular type of agency.
iii) He/she must perform the mandate personally unless the parties
expressly or impliedly agree otherwise.
In the case of Mead Vs Clark 1922 EDL pg 49 where Mead entrusted
Clark with the management of his business affairs one of Clarks duties
was to keep proper books of accounts which he failed to do. When
Mead sued Clark for damages for negligence Clark argues that he did
not know how to keep books of accounts. The court held that Clarks
lack of ability was no defence to Meads Claim and there for Clark was
held Liable.

2) The duty to keep accounts/ Account to the principal.

An agent must give account on what he has done in carrying out the mandate
and should allow the principal to inspect all the books.

The Agent must keep his money and property separate from that of the
principal. Failure to do so will result in everything unaccounted for being
presumed to belong to the principal.

In Hanser and Dinbro Trust 1949 SALR pg513 U the courts held that the rights
of the Principal to inspect the books continues after the Principal Agent
relationship.

3) The duty of Utmost good Faith

The duty of Utmost good Faith Is the most important duty that an agent has
towards his principal. The agent is required to excercise due care and diligence
in performing the mandate.

The Agent should not put himself in a position where his interests would
conflict with those of the principal. He must act for the benefit of the principal.
Were an agent breaches his duty of good faith the principal is entitled to cancel
the Agency agreement, refuse to pay the Agent any commission or
remuneration and claim contractual damages from the agent.

Duties Of The Principal

1. Payment of Remuneration to the Agent
Principal as the mandate to pay the agent remuneration once the agent has
performed in accordance to the contract. The amount may be expressly
agreed between the parties or may be determined according to the usage
or custom to the relevant trade or profession.

In the case of Banabus Plein Vs Sole Jacobson and Son 1928 AD pg25 in
this case Jacobson gave Barnabus the mandate to purchase a business,
the question of commission was only mentioned months later at which
Barnabus had agreed to accept less than the usual tariff because the
purchaser they had found was not going to pay the full asking price.
Ultimately the business was sold for must more originally expected but
less than the asking price. Barnabus Plein then claimed commission at
the full tariff rate.
It was held that because there was no implied term entitling Barnabus
Plein to commission at the full rate if the business was sold at a higher
price there were not entitled to the commission at full rate but were
entitled to reasonable remuneration.

2.) Duty to reimburse and indemnify the Agent

The principle must reimburse the agent for all expenses incurred by the
agent in performing the mandate provided that those expenses were
necessary, reasonable and incurred in good faith.
This was highlighted in the case of Blesboke vs Cantemessa 1991 SALR
Vol2 Pg
Blesble negotiated purchase of a farm on behalf of Cantemessa. The
purchaser needed a Valuation in order to arrange the finances which
 Cantemessa did ask Blesbok to arrange. Blesboke paid the valuators fee
and claimed it back to Cantemessa.
It was held that the payment of the fee was necessary, reasonable and
incurred in good faith and Blesboke was entitled to reimbursement.

The principal indemnify the agent against any loss or liabilities that the
agent incurs as a result of performing his mandate.

Highlighted in the cadse of Blumenthal Vs Bond 1960 pg 719Blumenthal

instructed Bond a stock broker to buy certain shares for him. Bond bought the
shares, but as they were not delivered within a certain time Blumenthal refused
to accept them. Under the rules of the Jo burg Stock exchange Bond became
personally liable to pay for them.

It was held that because Bond had incurred this liability in the performance of
his manadate Blumenthal was obliged to indemnify Bond

Termination of the Principal Agency Relationship

Agency is a contractual relationship and it comes to an end by the ordinary
means by which a contract comes to an end.

However there are special was by which a contract comes to an end namely:

1. Revocation by the principal. The general rule is that the principal has
the Power and right to revoke without incurring any damages.
2. Renunciation of Agency an agent may renounce his authority at any
time provided he does so, on just grounds. In the absence of such just
cause the Agent will be liable to the principal in such damages as the
principal may prove.