Once an agency relationship is created, an agent comes into existence .An agency relationship may come into existence in the following ways;
1. By agreement, contract or appointment
2. By ratification
3. By estoppel
4. By necessity
5. By presumption or from cohabitation
1. AGENCY BY AGREEMENT
This agency arises when parties mutually agree to create it. Their minds must be at ad idem and both parties must have the requisite capacity .The purpose of the relationship must be legal. As a general rule, no formalities must be complied with however, an agent appointed for the purpose of signing documents in the principal‘s absence must be appointed by a deed known as the Power Of Attorney The contract of agency may be express or implied from the conduct of the parties.
2. AGENCY BY RATIFICATION
Ratification – This is the adoption or confirmation by a party of a contract previously entered Into by another purporting to do so on his behalf. Agency by ratification arises after the ―agent‖ has acted. It comes into existence when the person on whose behalf the agent purported to act and without whose authority he acted adopts the transaction as if there had been prior authorization .By ratifying the transaction the agents authority is backdated to the date of the transaction.
Ratification by the principal;
1. Creates the agency relationship
2. Validates the transaction entered into by the agent
3. Relieves the agent from any personal liability.
The principal of ratification of agency was applied in the case of Bolton Partners v. Lambert.
However, for agency by ratification to arise, the following conditions are necessary:
1. The agent must have purported to act for a principal.
2. The agent must have had a competent principal i.e. there was a natural or juristic person who could have become the principal
3. The principal must have had capacity to enter into the transaction when the agent did as well as when he ratified it
4. The transaction entered into by the agent must be capable of ratification i.e. it must not have been illegal or void
5. The principal must ratify the transaction within a reasonable time.
6. The principal must have been aware of the material facts affecting the transaction
7. The principal must ratify the contract in it‘s entirely.
3. AGENCY BY ESTOPPEL
This agency is created by the equitable doctrine of estoppel. It arises where a party by word or conduct represents other 3rd parties as his agent and the 3rd parties deal with the agent .The other party is estoppel from denying the apparent agency.
Agency by estoppel arises in circumstances: –
1. Where the parties have no relationship but one of them represents the other as agent and 3rd parties rely upon the representation.
2. Where an agency relationship exists between the parties but the principal represents the
agent as having more authority.
Requirements for Agency by Estoppel
The conditions necessary were laid down in Ramas Case must exist: –
1. A representation by word or conduct intended to be acted upon
2. Reliance upon the representation by the representee
3. Change in legal position as a result of the reliance
4. It would be unfair not to estop the representor
In Freeman and Lockyer v. Backhurst Park Ltd the Articles of Association of the defendant company created the position of Managing Director but at the material time, none had been appointed. However one director with knowledge of the others purported to act as Managing Director, he engaged in the plaintiff firm to work for the company. However, the company refused to pay for the services rendered and the firm sued. The company argued that it was not liable as the director was not its Managing Director and hence had no authority to contract on its behalf. It was held that the company was liable as it had represented this director as its Managing Director and 3rd parties replied upon the representation. It was estopped from denying his apparent authority.
4. AGENCY OF NECESSITY
This is a category of agency created by law in circumstances of necessity where one party is deemed to have acted as an agent of another.
Agency of necessity arises in 2 circumstances namely:
1. Commercial Agency of Necessity
According to Lord Simon in China Pacific case, commercial agency arises where a party is in possession of another‘s goods whether perishable or not and an emergency arises requiring immediate action in relation to the goods and it is impossible for the party in possession to seek instruction from the other.
This was also the case in Couturier v Hastie.
The party must therefore act in good faith as owner. For the agency to arise, these conditions are necessary:
1. There must be a genuine emergency necessitating action in relation to the goods.
2. It is impossible for the party in possession to seek instructions from the owner.
3. The party in possession must act in good faith for the benefit of the other party.
4. Domestic Agency of Necessity
At Common Law a deserted wife is regarded as an agent of necessity with authority to pledge her husband‘s credit for necessaries.
For the agency to arise, the following conditions are necessary:
1. The wife must have been deserted by the husband.
2. She must be free from blame.
3. Her authority is restricted to pledging her husband‘s credit for necessaries.
What are ―necessaries‖ is a question of fact and varies from case to case. In Nanyuki General Stores v. Patterson, the appellant had sold goods to Mrs Patterson valued at Kshs. 3552. She had pledged Mr. Patterson‘s credit who at the time was in prison. The appellant sued Mrs. Patterson for the sum alleging that she had not contracted with her as an agent since:
- Her husband was in prison.
- Some of the goods (groceries and liqour) were not necessaries.
However the Court of Appeal held that she had contracted as an agent as she was married and the goods were necessaries.
5. AGENCY BY PRESUMPTION OR COHABITATION
This is another category of agency presumed by law. It is presumed where a man and woman are living together in circumstances which portray them as husband and wife, the woman is presumed to be an agent and can pledge the man‘s credit for necessaries. Marriage is not essential for the agency to arise.
However, the following conditions are necessary:
1. Cohabitation: The two persons must be living together as husband and wife. It was so held in Jolly v. Rees.
2. Domestic establishment: The persons living together in a domestic establishment in the presumption of agency to arise. In Debenham v. Mennon where the parties were cohabiting in a hotel, it was held that the presumption of agency could not arise and the
woman was liable.
3. Necessaries: The woman‘s authority is restricted to pledging a man‘s credit for necessaries.
The agency does not arise if:
1. The woman contracts personally.
2. The man has expressly/implicitly instructed the woman not to pledge his credit
3. The goods pledged are not necessaries
4. The parties have stopped cohabiting by divorce.
5. The parties have separated by mutual agreement and the woman is provided for.
6. The trades‘ people extend credit to her personally.
7. She‘s prohibited from pledging credit.