Agency

Agency is the legal relationship between two persons — the principal and the agent — where the agent is authorised (or deemed authorised) to act on the principal's behalf and to create legal relations between the principal and third parties. Section 182 ICA defines: 'An agent is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the principal.' The essential feature is that the agent's acts bind the principal — the principal, not the agent, is the party to the contract or transaction entered into by the agent.

Authority of an agent is central to agency law. Types of authority: (1) Express authority — specifically conferred by the principal in express terms (e.g., by a power of attorney); (2) Implied authority — authority inferred from the position the agent holds or from the usual incidents of the agent's business or role (Section 188 ICA — an agent has authority to do all acts necessary for, or usually done in, the course of conducting the business entrusted to them); (3) Ostensible (apparent) authority — authority that the principal's conduct or representations lead a third party to reasonably believe the agent has, even though no such authority was actually conferred; and (4) Authority by ratification — where an agent acts without authority but the principal subsequently ratifies the act, it is treated as authorised from the time of the act (Section 196 ICA).

The sub-agent and substituted agent distinction under Sections 190-195 ICA is important. An agent cannot ordinarily delegate their authority to a sub-agent — 'delegatus non potest delegare' (one who is delegated authority cannot re-delegate). But the ICA permits sub-agents in cases where: (a) it is the custom of the trade; (b) the nature of the business makes sub-agency necessary; or (c) the principal has expressly permitted sub-agency. Where a sub-agent is properly appointed, the principal is bound by the sub-agent's acts (and the agent is not personally liable to the principal for the sub-agent's acts); where the sub-agent is appointed improperly, the principal is not bound and the agent is personally liable.

Termination of agency (Section 201 ICA) occurs by: revocation by the principal; renunciation by the agent; completion of the business for which the agent was appointed; death or insanity of the principal or agent; or insolvency of the principal. An agency coupled with an interest — where the agent has a personal interest in the subject matter of the agency — cannot be revoked at will by the principal (Section 202 ICA). This protects agents from being arbitrarily removed when they have invested resources in reliance on the agency arrangement.

For advocates, agency law is relevant in: (1) company law — directors as agents of the company, the board as agent of the shareholders; (2) commercial transactions — brokers, commission agents, clearing agents as agents for their principals; (3) banking — bank officials acting as agents of the bank; (4) real estate — estate agents' authority to bind their principal; and (5) power of attorney transactions — the attorney's authority is strictly limited to what the power of attorney expressly grants, and any act outside that authority does not bind the principal.