Liability and Delegation

Liability of Agent

In a clear case of agency, the agent is not liable on the contract, and the principal is liable. Equally, the agent cannot enforce the contract on his own behalf. The principal may enforce the contract and the third party may enforce it against him.

Where an agent concludes a contract within the scope of his apparent authority, then the third party can enforce it directly against the principal.  In strict terms, the principal cannot enforce the contract against the third party if the agent did not have actual authority on the agent’s behalf.  However, the principal may ratify the agent’s actions, where the agent acted without his actual authority, provided that the agent purported to act on his behalf.

Where the agent exceeds his authority, he may be liable for breach of his contract or the terms of his mandate with the principal. The principal may be liable to the third party, on the basis of the agent’s apparent authority. The principal may suffer loss when he is rendered liable on a contract or act whihc is within the scope of the agent’s apparent authority, but which exceeds his actual or implied authority.

The agent may breach his warranty of authority to the third party, where the principal is not bound. He may also be personally liable on the contract, at the third party’s option.  The principal may ratify the transaction, in which event the breach may be cured.


Undisclosed Principal I

A person may act as another’s agent, but may not disclose that his so acts.  This may happen where the principal wishes to conceal his identity.  Where the agent enters a contract/ transaction with a third party, without disclosing that he is an agent, the agent is liable under the contract.  If the third party discovers the undisclosed principal, he may enforce the contract against either the agent or the principal.

If the agent acted with his actual authority, the undisclosed principal may enforce the contract directly against the third party.The undisclosed principal may intervene, only if the agent had actual authority.  He cannot ratify a contract which was made without his authority.

If the contract provides or implies that only the agent may perform it or have the benefit of it, an undisclosed principal cannot intervene.  The contract may expressly state this to be the case. Often, the circumstances may imply this to be the position.


Undisclosed Principal II

 

It may be that the agent has been selected for a personal reason such as by reason of his skill, solvency, et cetera.  If the contract is personal in this sense, the undisclosed agent may not intervene to take advantage of it.

The mere fact that the third party has a personal objection to contracting with the principal is not generally enough to prevent the third-party principal from enforcing the contract. There must be an express stipulation or an implication based on objective and sufficient reason, that the third party means to contract with the agent exclusively.

If the agent has misrepresented on whose behalf he is contracting, then the principal may not intervene. They third party may be entitled to set the contract aside on the basis of misrepresentation.


Warrant of Authority

The agent may be liable in a personal capacity under his warrant of authority if he does not, in fact, have the requisite authority from the principal.  This is a separate contractual obligation undertaken by the apparent “agent” with the third party with whom he purports to contract on behalf of the principal. The entry into the principal contract is the consideration for this independent obligation.
Where an agent purports to have authority to do an act or enter a transaction with a third party but does not, in fact, have the requisite authority, then he will be in breach of his implied warranty of authority.  The implied warranty of authority is a personal undertaking or a promise to the third party by the agent that he has the requisite authority.

Warrant of Authority II

The breach of warranty may occur unknown to the agent, where there is a technical termination of the agency.  This may occur, for example, on the death of the principal or upon his losing mental capacity.  The principal liable personally on the warranty, irrespective of fault.

In order to rely on a warrant of authority, the third party must contract with the apparent or purported agent, in circumstances where the latter lacked authority.  The agent is liable to compensate the third party for any loss incurred, in consequence of the absence of authority.
The third party must have relied on the express or implied representation of authority. If there are reasons to question his authority, the third party is obliged to make appropriate enquiries.  The third party must, in fact, rely on the apparent agency.

Delegation

The general principle is that an agent may not delegate the performance of his duties in whole or in part, without the authority of his principal. It is presumed that he should perform his obligations and duties personally. The agent may delegate performance if the right to do so is provided by the agreement or is implied.

There may be an express on implied requirement that the agent performs personally. Where the principal reposes personal confidence in the appointed agent, a delegation is unlikely to be implied.

Where a person has a legal duty to do something or where he holds an office or position created by law (such as the office of director), he may not usually appoint another to act in his place.  Where the law confers a particular power on a person, it usually requires as a matter of interpretation, that it be exercised by the appointed person himself.


Right to Delegate

Where there is express authority to delegate performance, the position will usually be clear. The only issue likely to arise is whether a particular delegation is permissible in accordance with the terms of the contract.

Commonly, the contract provides or contemplates that some or all of the work will be undertaken by another. Once again, the questions that may arise will be determined by the interpretation of the contract in the circumstances.

The right to delegate is often implied. In many commonly encountered circumstances, common sense will dictate that the contract may be performed through others and that the agent cannot or need not perform personally.

Where no issue of personal confidence arises, where no special skill is required, where the acts are routine and where the duties might equally be discharged by another, a right to delegate will be readily implied.

An implied right to delegate may arise by custom in a particular business or profession. In other cases, the principal may acquiesce in delegation and may be accordingly “estopped” from objecting to it, at least retrospectively or unless he gives reasonable notice.


Necessary Delegation

Delegation of performance may be a practical necessity in some cases. The agent may be an intermediary, without the legal or technical capacity to perform.

A company must by necessity exercise its powers through its directors and others The management may delegate some authority and functions to senior executives, who may, in turn, delegate particular functions to others at lower levels in the corporate hierarchy.

Delegation may be required in circumstances of urgency.  Where due to unforeseen circumstances,  delegation is urgently necessary, it may be permissible where it would not be otherwise allowed.


Sub-Agent

The person to whom a delegation is made is a sub-agent. The same principles as apply between principal and agent, apply between agent and sub-agent. Generally, the sub-agent is liable only to the agent.

Where the principal is party to the appointment of the sub-agent, or subsequently adopts or ratifies the appointment, then there may be a direct contractual relationship (and accordingly, mutual obligations) between the principal and sub-agent. The agent may have authority to create this relationship by the terms of his appointment.

Sub-agents employed without authority do not bind the principal unless he ratifies their acts or their acts are, in substance, the acts of the agent. Where the sub-agent is employed with the principal’s express or implied authority, he will have the capacity to bind the principal in accordance with the terms of the authority to do so.

The sub-agent’s authority to bind the principal does not require or necessarily imply that he has a direct contractual relationship with the principal. If there is a contractual relationship, the sub-agent may owe duties to and enjoy rights of the principal.  Otherwise, the sub-agent’s rights and duties are with the agent, who in turn owes duties to the principal. He may be thereby liable to the principal for the acts and default of the sub-agent.

Where there is no direct contractual relationship between the principal and the sub-agent, the subagent’s recourse for remuneration and indemnity is against the agent.  Correspondingly, his obligations are owed to the agent who employs, him who is in turn responsible to the principal.


References and Sources

Irish Sources

Commercial Law, Fidelma White 2nd Ed. Thomson Round Hall, Dublin, 2015.

Commercial Law Michael Forde, 3rd Ed Tottel, Haywards Heath, 2005

UK Sources

 

Principles of the Law of Agency Howard Bennett  2013,

Agency 3e: Law & Principles (3rd Revised Ed)  Munday, Roderick;

Bowstead & Reynolds on Agency, 20th Ed.  Professor Peter G. Watts

The Law of Agency  Friedman