Agency CASES

In English law, agency refers to a legal relationship where one party (the agent) is authorised to act on behalf of another (the principal), creating legal obligations between the principal and third parties.

Definition and principles

Agency arises when the agent acts with authority—express, implied, or apparent—to affect the principal’s legal position. The principle from Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd (1915) emphasises that an agent creates contractual obligations directly between the principal and third parties, not between the agent and third parties.

Authority of agents

Agents act within specific limits of authority: express authority is explicitly granted; implied authority arises from the nature of their role or conduct; apparent (ostensible) authority occurs when the principal’s actions reasonably suggest authority to third parties.

Duties and obligations

Agents owe fiduciary duties, including loyalty, care, and transparency, acting in the principal’s best interests. Principals must indemnify agents against liabilities incurred while acting lawfully within their authority.

Liability and relationships

Typically, the principal, not the agent, is liable for contracts entered into by the agent within their authority. However, agents acting outside their authority or without disclosure of agency may incur personal liability.

Termination of agency

Agency relationships terminate by mutual agreement, completion of the agreed purpose, revocation by the principal, renunciation by the agent, death, bankruptcy, or mental incapacity of either party.

Criticism and contemporary application

Critics argue agency principles can be overly rigid, occasionally mismatching modern commercial realities. Courts balance traditional rules with evolving business practices.