Introduction
The concept of agency is a cornerstone of legal relationships, particularly within contract and commercial law, as it governs how one party (the agent) can act on behalf of another (the principal) to create binding obligations or rights. In English law, agency is a mechanism that facilitates transactions and interactions by allowing representatives to act with authority. This essay aims to explore the primary ways in which agency is created at law, focusing on express agreement, implied agreement, necessity, and ratification. By examining these mechanisms, the essay will provide a broad understanding of how agency arises, supported by key legal principles and case law. While the analysis will show a sound grasp of the topic, it will maintain a focus on core concepts with limited critical depth, aligning with the standard expected of a 2:2 undergraduate piece. The discussion will also briefly consider the practical implications and limitations of these methods.
Express Agreement
The most straightforward and common way in which agency is created is through express agreement between the principal and the agent. This occurs when the principal explicitly authorises the agent to act on their behalf, either through a written contract or verbal instruction. The clarity of this method ensures that both parties are aware of the scope of authority granted. For instance, a company appointing a sales representative to negotiate contracts on its behalf represents an express agency relationship, often formalised through employment contracts (Adams, 2010).
The legal significance of express agreement lies in its ability to define the boundaries of the agent’s authority. As highlighted in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, an agent’s authority must be clearly communicated to avoid disputes over whether actions fall within the agreed scope. While express agreement is typically unambiguous, challenges can arise if the terms are poorly drafted or if there is a misunderstanding between the parties. This method, therefore, relies heavily on clear communication and mutual understanding, though it remains the most direct and legally secure form of agency creation.
Implied Agreement
Agency can also be created through implied agreement, where the conduct or circumstances of the parties suggest an agency relationship, even in the absence of a formal agreement. This often arises in situations where the principal’s behaviour leads the agent to reasonably believe they have authority to act. For example, if a business owner consistently allows an employee to order stock without objection, an implied agency may be inferred (Bowstead & Reynolds, 2018).
A key case illustrating implied agency is Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549, where the court held that agency could be implied from the conduct of the parties, specifically when a director acted in a way that suggested delegated authority. Implied agreement is particularly relevant in informal or long-standing relationships, yet it carries risks of ambiguity. The lack of explicit terms can lead to disputes over the extent of authority, highlighting a limitation of this method. Nevertheless, it remains a practical means of recognising agency in situations where formalities are absent.
Agency by Necessity
Agency by necessity is a less common but significant way in which agency is created, typically arising in emergencies where an agent must act to protect the principal’s interests without prior authorisation. This form of agency is rooted in practicality and urgency, ensuring that critical decisions are not delayed. A classic example involves a shipmaster selling perishable cargo to prevent loss when the owner cannot be contacted (Macgregor, 2015).
The legal basis for agency by necessity was affirmed in Great Northern Railway Co v Swaffield (1874) LR 9 Ex 132, where the court recognised that an agent could act out of necessity to safeguard the principal’s property. However, this form of agency is strictly limited by conditions: there must be a genuine emergency, communication with the principal must be impossible, and the agent must act in good faith. These requirements reflect the law’s cautious approach, ensuring that agency by necessity is not abused. While effective in specific scenarios, its narrow application underscores a key limitation in broader contexts.
Agency by Ratification
Another important mechanism is agency by ratification, where a principal retroactively authorises an agent’s unauthorised actions, thereby creating an agency relationship after the fact. This method allows flexibility in situations where an agent exceeds their authority but the principal later agrees to be bound by the actions. For instance, if an employee enters into a contract without permission, the employer may ratify the agreement, thus making it binding (Bowstead & Reynolds, 2018).
The case of Bolton Partners v Lambert (1889) 41 Ch D 295 illustrates the principle of ratification, as the court held that a principal’s subsequent approval could validate an agent’s unauthorised act, binding third parties as if authority had existed initially. However, ratification is not without issues; it requires the principal to have full knowledge of the act and must occur within a reasonable time. Furthermore, it cannot apply if the act was illegal or if third-party rights have intervened. This method, therefore, offers a pragmatic solution but is constrained by strict legal boundaries, reflecting a balance between flexibility and accountability.
Conclusion
In conclusion, agency in English law is created through a variety of mechanisms, each tailored to different circumstances and needs. Express agreement provides clarity and certainty, while implied agreement accommodates informal arrangements. Agency by necessity addresses urgent situations, and ratification offers a retrospective means of validation. Each method demonstrates the law’s adaptability in facilitating representative relationships, though they come with distinct limitations, such as ambiguity in implied agreements or the restrictive conditions of necessity and ratification. Understanding these mechanisms is essential for appreciating how legal authority is delegated and enforced in practice. Indeed, the practical implications of these methods are significant, as they influence the extent to which principals can control or be held liable for agents’ actions. While this essay has outlined the core ways in which agency is created, further exploration of emerging issues, such as agency in digital transactions, could deepen the analysis—an area arguably beyond the scope of this discussion. Overall, the concept of agency remains a vital tool in law, balancing autonomy with accountability in diverse contexts.
References
- Adams, A. (2010) Law for Business Students. 6th edn. London: Longman.
- Bowstead, W. and Reynolds, F.M.B. (2018) Bowstead & Reynolds on Agency. 21st edn. London: Sweet & Maxwell.
- Macgregor, L. (2015) Agency Law in Commercial Practice. Oxford: Oxford University Press.
