The principal is only liable if the agent was acting within the scope of his authority. Authority implies permission to do or engage in a particular act. It differs from power which is a legal concept. Whereas authority creates power, power may exist without authority. Though the two concepts are at times used interchangeably, they are not the same. In certain circumstances, the agent has power but no authority e.g. an agent of necessity. Authority is the ability of the agent to effect the principal‘s legal position in relation to 3 rd parties.
There are 3 types of authority an agent may have namely:
1. Real or Actual.
2. Ostensible or Apparent.
1. Real / Actual Authority
This is the authority which the agent has been given by the principal under the contract between them. The authority may be express, implied, customary or usual.
- Express Authority: It is the authority given to the agent by the principal in writing or by word of mouth. If in writing, it is interpreted restrictively.
- Implied Authority: It is the agent‘s authority implied from the nature of the business or transaction which the agent is engaged to transact. It is the authority reasonably necessary to accomplish express authority.
- Customary or Usual Authority: It is the agent‘s authority implied from the customs, usage and practices of the transaction or business. It is the authority which every agent in a particular business or profession is deemed to have and 3rd parties dealing with such agents expect such authority. It is a category of implied authority. Agents created by agreement or ratification exercise real or actual authority.
2. Apparent/Ostensible Authority
It is the authority which the agent has not been given by the principal but which he appears to have by reason of the principal‘s conduct. It is therefore apparent. Its scope is determined by the conduct of the principal. It is the authority exercised by agency created by estoppel.
3. Presumed Authority
It is a category of authority created by law and which an agent is deemed to have in certain circumstances. It is not given to the agent nor is it based on the principal‘s conduct. It is given by operation of the law. It is agency created by necessity or cohabitation
Liability for breach of contract If an agent with no authority to act warrants the same to a 3rd party who relied on the representation and suffers loss or damage, the 3rd party may have an action in damages against the agent for breach of authority.
Authority coupled with interest
It is a situation whereby the principal who is indebted to the agent gives the agent authority as a security for a debt. The agent has a personal interest in the relationship. In such a case the agent‘s authority lies irrevocable by the principal.
TERMINATION OF AGENCY
An agency relationship may terminate in any of the following ways: –
Where the relationship is consensual, the parties therefore may enter into a new agreement to discharge the agency. Their mind must be ad idem
2. Withdrawal of Consent
This is termination of agency at the option of other party. The agent may renounce the relationship while the principal may revoke the same. However, agency is irrevocable if: –
- The agent has exercised his authority in full.
- The agent has incurred personal liability
- The agent authority is coupled with interest
2. Death of Either Party
The death of principal or agent ends the agency relationship. This is because the obligations of agency are confidential and not transferable.
Execution of the agent‘s authority in full terminates the relationship as the obligation has been discharged. The contract if any is discharged by performance.
4. Lapse of Time
An agency relationship terminates on expiration of the duration stipulated or implied by trade usage or custom.
The unsoundness of mind of either party terminates the agency relationship since the party loses its contractual capacity.
6. Bankruptcy of the Principal
The declaration of bankruptcy of the principal by a court of competent jurisdiction terminates the agency relationship
7. Frustration of Contract
Agency related by agreement or contract comes to an end when the contract is frustrated.
8. Destruction of Subject Matter
If the foundation of agency whether contractual or not is destroyed, the relationship terminates.
9. Cessation of Emergency
Agency of necessity comes to an end when the circumstances creating the emergency cease and the party in possession is in a position to seek instructions from the owner.
10.Cessation of Cohabitation
Agency by presumption from cohabitation comes to an end when the parties cease to cohabit, whether voluntarily, judicial separation or by a decree of divorce.