Agency: Contract and Principal
1. INTRODUCTION
Agency is a fiduciary relationship created by express or implied contract or by law, in which one party (the agent) may act on behalf of another party (the principal) and bind that other party by words and/or actions. The etymology of the word agent or agency says much. The words are derived from the Latin verb ago, agere (the respective noun agens, agentis). The word denotes one who acts, a doer, force or power that accomplishes things.1 Agency is the exception to the doctrine of privity under the law of contract.
2. LIABILITY OF A PRINCIPAL AGAINST THIRD PARTIES
Lord Alverstone CJ in THE QUEEN V KANE2 defined an agent simply as ‘any person who happens to act on behalf of another’. A principal is one who authorizes another to act on his or her behalf as an agent.
The general rule is that where an agent makes a contract on behalf of his principal, the contract is between the principal and the third party and prima facie at common law, the only person who can sue and be sued on the contract is the principal. The agent acquires no rights under the contract, nor does he incur any obligation. Having performed his task by bringing about a contract between his principal and a third party, the agent drops out of the picture subject to any outstanding matters between him and principal.3 The onus is on the person alleging that he entered into a contract with another person through an agent to prove that in fact the agent was acting as such. Agents of the state can never be personally liable for the state’s failure to perform a contractual obligation as stated in STICKROSE (PTY) LIMITED V THE PERMANENT SECRETARY MINISTRY OF FINANCE4.
In law, agents are recognized as having the power to affect the legal rights, liabilities and relationships of the principal. In CAVMONT MERCHANT BANK v AMAKA AGRICULTURAL HOLDINGS5, the Supreme Court held that where an agent in making the contract discloses both the interest and the names of the principal on whose
Agency is a fiduciary relationship created by express or implied contract or by law, in which one party (the agent) may act on behalf of another party (the principal) and bind that other party by words and/or actions. The etymology of the word agent or agency says much. The words are derived from the Latin verb ago, agere (the respective noun agens, agentis). The word denotes one who acts, a doer, force or power that accomplishes things.1 Agency is the exception to the doctrine of privity under the law of contract.
2. LIABILITY OF A PRINCIPAL AGAINST THIRD PARTIES
Lord Alverstone CJ in THE QUEEN V KANE2 defined an agent simply as ‘any person who happens to act on behalf of another’. A principal is one who authorizes another to act on his or her behalf as an agent.
The general rule is that where an agent makes a contract on behalf of his principal, the contract is between the principal and the third party and prima facie at common law, the only person who can sue and be sued on the contract is the principal. The agent acquires no rights under the contract, nor does he incur any obligation. Having performed his task by bringing about a contract between his principal and a third party, the agent drops out of the picture subject to any outstanding matters between him and principal.3 The onus is on the person alleging that he entered into a contract with another person through an agent to prove that in fact the agent was acting as such. Agents of the state can never be personally liable for the state’s failure to perform a contractual obligation as stated in STICKROSE (PTY) LIMITED V THE PERMANENT SECRETARY MINISTRY OF FINANCE4.
In law, agents are recognized as having the power to affect the legal rights, liabilities and relationships of the principal. In CAVMONT MERCHANT BANK v AMAKA AGRICULTURAL HOLDINGS5, the Supreme Court held that where an agent in making the contract discloses both the interest and the names of the principal on whose