Law of Agency - 3

Relations with third parties / Termination

Dr Ana Keglevic Steffek
Outline of the lecture
■Recap

■Relation between Principal and Third Parties,

where:
a) Principal is disclosed
b) Principal is not disclosed

■ Termination of Agency
■ Quiz – constructive alignment with assessment
Learning Outcomes of the Session
■Identify the relation between agents, principals and
third parties in disclosed and undisclosed agency

■Evaluate the liability of agents

■Compare the ramification between the relations with

third parties in disclosed and undisclosed agency
 Types of
authority 3. By ratification

1. With actual 2. Without

agreement actual
agreement

Express Implied Apparent Usual Operation

authority authority authority authority of law
• Incidental, Customary
• Usual
• Conduct of the parties
and circumstances of
the case
 Relations of the parties
Principal gives Agent is authorized =
authorization = has power to alter the
agrees that the agent principal’s legal
acts on his behalf relations with
Agent
- But note: sometimes
the principal does not
need to expressly
consent

Principal Third party

Rules on liability to third party –

often vary to T&C of the contract
1. Duties of the agent
a) To carry out Principal’s instructions
b) To act with due care and skill (Chaudhry v Prabhakar [1989] 1 WLR 29)

c) Fiduciary duties: an agent is placed in a position of trust and

confidence (Bristol and West Building Society v Mothew [1996] 4 All ER 698 (CA)
711 (Millett LJ)

d) Not to delegate his duties (De Bussche v Alt (1878) 8 Ch D 286 )

e) Specific duties* … duty not to take bribes

■ disgorgement or proprietary remedy
■ Attorney General of Hong Kong/FHR European Ventures
2. Rights of the agent

a) Remuneration

b) Reimbursement for costs and Indemnity damages

c) Lien
Today…
Relations with third parties differ depending on the
type of agency

Agency

Disclosed agency Undisclosed agency

- TP is aware of the existence of
P whether P is identified or not - TP is not aware of the existence of P
when dealing with A
- P is ‘named’
- P is ‘not named’
a) Where Principal is disclosed
a) Where P is disclosed
■The general rule: disclosed principal, whether
named or unnamed, is liable and entitled on the
contract, and the agent is not.

however

■Words, conduct or surrounding circumstances may

show that the agent is liable and entitled, either
instead of, or as well as, the principal.
 Universal Steam Navigation [1923] UKHL
■Facts:
■It was agreed that the steamship should proceed to the
loading port and there load from the charterers a full and
complete cargo of coal, and
■should proceed to one of certain Italian ports as ordered,
and there deliver her cargo.

■Under the charterparty, the charterers were liable for

demurrage (delay charges) at either loading port or
discharge port. Such a delay occurred.
Universal Steam Navigation [1923] UKHL
■Charterers had signed the contract at the bottom
“as agents”

■They claimed to be acting on behalf of an Italian

firm of Brandt Pagnini of Rome and denied liability

■Are they personally bound?

Universal Steam Navigation [1923] UKHL at para 5:
Generally NO:
■ If the respondents had signed the charter-party without
qualification, they would of course have been personally liable to
the shipowners; BUT
■ by adding to their signature the words "as agents" they indicated
clearly that they were signing only as agents for others and had no
intention of being personally bound as principals.
■’I can imagine no other purpose for which these words could have been added; and
unless they had that meaning, they appear to me to have no sense or meaning at all.’
b) Where Principal is undisclosed
 b) Undisclosed Principal
■The general rule is that the undisclosed principal
can sue and be sued on the contract.

■"When a party contracts with an agent whom he does not

know to be an agent, the undisclosed principal is generally
bound by the contract and entitled to enforce it as well
as the agent with whom the contract is made in the first
instance.“ (Pollock)
 b) Undisclosed Principal

■Also confirmed in the case law

■Lord Macnaghten in Keighley Maxsted v Durant (1901)

■if the authority is there ‘the contract is in truth, although not in the form,
that of the undisclosed principal himself’
■Both the P and the authority exist when the contract is made
 b) Undisclosed Principal

■Some criticism: Lord Macnaghten in Keighley Maxsted v

Durant (1901) HL made clear that

■ “civil obligations are not to be created by, or founded upon,

undisclosed intentions” and it would be unjust for the third party to
be viewed as contractually bound to a principal “whose existence
he does not even know.”

■Existence and the principal and authority must be the fact –

establishing that is the question of fact
Undisclosed Principal
P’s right to come into the contract, however, is subject to several
conditions.

1. A must have had authority from P to make the contract when

he did. P may come into contract either by
■ as undisclosed principal (potential disclosure later) or
■ ratification (if no authority)

2. An undisclosed principal cannot intervene if this would be

inconsistent with the terms of the contract.
■ See the following cases (Next slide)

3. No intervention if the third party intended to deal with A only

■See the following cases (slide 22)
Undisclosed Principal
Humble v Hunter (1894)
■son claims to contract as principal (signs charter party for the ship
The Ann as the owner) and act against terms of the contracts; father
(owner - undisclosed principal) cannot intervene and could not sue
for unpaid freight.
■The contract implied that son was the principal as indicated ‘owner’

Ferryways v ABP (The Humber Way) (2008)

■A shipowner or operator was able to take the benefit, as an
undisclosed principal, of the contract of employment between a
vessel’s crew and the ship management company.
Ferryways NV v Associated British Ports
(The Humber Way) [2008] EWHC 225
(Comm)
■ Ferryways owned the Humber Way (ship); its chief officer Mr Prutskoy was
killed at work by tugmaster driven by port operator’s (ABP) employee (due to
negligent driving).
■ F (its P&I club) paid to repatriate Mr Prutskoy’s body and paid compensation.
■ F sued ABP for the sums paid out; ABP refused saying that Mr Prutskoy was
not employed by F but by Ambra, ship management company.
■ Question was whether Ambra (agent?) had employed Mr Prutskoy but F is the
actual [undisclosed] principal.
■ Yes - The terms of the contract of employment were not inconsistent
with the intervention of F as principal
3. Undisclosed principal cannot intervene if the third
party intended to deal with only with A
Said v Butt [1920] 3 KB 497
■P knew he was not welcome at the play; asked friend to buy
ticket but was refused admission. Court held that identity was
important, so P could not derive any rights or obligations as an
undisclosed principal.
[Link]

Collins v Associated Greyhound Racecourses Ltd [1930] 1 Ch 1

500
■The identity of people being awarded the shares in the company
is important in this case. Therefore, the undisclosed principal had
no rights or liabilities under the contract.
 Contrast with Siu Yin Kwan v Eastern Insurance
Company Ltd [PC] [1994] 1 Lloyd's Rep. 616

■An undisclosed principal is entitled to sue and be

sued on an insurance contract made by an agent
acting within the scope of his actual authority, if the
agent enters into the contract intending to act on the
principal's behalf.

■Please read this case and discuss in tutorials, as appropriate.

Termination/Discharge of Agency
Termination of agency
■Revocation
■Performance of agency
■Execution of agent’s commission
■Fixed period
■Agreement
■Destruction
■A serious breach of the agency agreement e.g. bribe
■Automatic termination e.g. frustration
■Death, insanity or bankruptcy of the principal or the agent,
winding-up the company of the P or A
■Notice of renunciation by A
Termination of agency under Commercial Agents (Council
Directive) Regulations 1993

■ Regulations 14: Conversion of agency contract after expiry of

fixed period – if P-A continue to perform their activities

■ Regulations 15(1): Where an agency contract is concluded for an

indefinite period either party may terminate it by notice

■ Regulations 17: Entitlement of commercial agent to indemnity or

compensation on termination of agency contract
Summary of Session

■What are rights and obligations of P in disclosed agency

■What are rights and obligations of P in undisclosed

agency

■When the agency terminates

City, University of London
Northampton Square
London
EC1V 0HB
United Kingdom