The law of agency

1. SEMINAR XI
THIRD YEAR

2. Meaning of
the law of
agency

3. Agency can be defined as the relationship between two parties, whereby one has the authority to
act on behalf of another.
It is based on the fact that one person cannot perform all the transactions and so he can appoint
another to perform or act on his behalf.
The law of agency therefore falls under commercial law and deal with a set of relationships that
involve a party, called the agent, that is authorized to act on behalf of another, the principal, to
create legal relations with a third party.
The principal, expressly or implicitly, authorizes the agent to work under their control and on
their behalf. The agent is, thus, required to negotiate on behalf of the principal or bring them and
third parties into contractual relationship

4. Under Cap 23 Laws of Kenya is the law that governs Agency law in Kenya. It is based on the
common law rules developed by English courts and rulings made by other courts in the
Commonwealth. Kenya adopted this on march 14th, 1978.
(1962) Schroeder, J.A. stated, interalia, that "the outstanding feature of an agent's employment
in a legal sense is that he is employed primarily to bring about business relations between the
principal and third persons,and this characteristic is perhaps the most distinctive mark of the
agent as contrasted with others not agents who act in representative capacities"
Relationships that are commonly associated with agency law include employer-employee,
administrator-decedent or executor, and guardian-ward.

5. The law of agency prescribes the legal
rules for determining:
● The law of agency prescribes the legal rules for
determining:
● (a) How a person may become an agent
● (b) The rights and duties between the agent and the
principal
● (c) The relations between the agent and the third party
● (d) The manner in which the relationship between the
agent and the principal may be brought to an end.

6. TYPES OF
AGENTS

7. There are three major types of agents.
Mercantile
Agents.
Special
Agents.
General
Agents.
01 02 03

8. i) General Agent.
This is an agent who is employed to do everything connected with the business or trade of his
employer.i.e. A manager.
ii) Special Agent.
This is an agent one who is employed to do some particular act or
represent his principal in some particular transaction. As soon as the act is
performed the authority of agent comes to an end .i.e. a house sales person.
iii) Mercantile Agent.
A mercantile agent is an agent that has authority to either buy or sell
goods or to raise money on the security of goods in their possession.
The following are included:

9. -Factors.
A factor is a mercantile agent who is given goods for sale. He can sell the goods in his own name
and as he thinks fit.
-Del credere Agent.
This is an agent who guarantees his principal that the third persons with whom he enters into
contracts on behalf of the principal shall perform their financial
Obligations on condition that he gets an extra commission. He assures the principal that if the
buyer does not pay, he will pay. He is a special type of agent who acts as both a guarantor as well
as an agent.

10. -Commission Agent.
This is a mercantile agent who is employed to buy & sell goods for his principal on best possible
terms.
-Bankers.
They act as mercantile agents on behalf of the customer when he collects cheques, drafts bills &
pay insurance premium & buy or sell securities.
-Brokers.
A broker is an agent who is employed to make contracts for
purchase and sale of goods or property. A broker is not entrusted with the
possession of the goods and only acts as a connecting link and brings the buyer
and seller. The broker is entitled to his commission only if the transaction is successful.

11. -Auctioneers.
This is an agent who is appointed by the principal to sell the goods on his
behalf at a public auction for a reward in form of commission.
The buyer is usually the highest bidder.

12. LA
W OF
AGENC
Y

13. Agency can be defined as the relationship between two parties, whereby one has the authority to act
on behalf of another.
It is based on the fact that one person cannot perform all the transactions and so he can appoint
another to perform or act on his behalf.
The law of agency therefore falls under commercial law and deal with a set of relationships that
involve a party, called the agent, that is authorized to act on behalf of another, the principal, to
create legal relations with a third party.
The principal, expressly or implicitly, authorizes the agent to work under their control and on their
behalf. The agent is, thus, required to negotiate on behalf of the principal or bring them and third
parties into contractual relationship
Meaning of the law of agency

14. Under Cap 23 Laws of Kenya is the law that governs Agency law in Kenya. It is based on the
common law rules developed by English courts and rulings made by other courts in the
Commonwealth. Kenya adopted this on march 14th, 1978.
(1962) Schroeder, J.A. stated, interalia, that "the outstanding feature of an agent's employment
in a legal sense is that he is employed primarily to bring about business relations between the
principal and third persons,and this characteristic is perhaps the most distinctive mark of the
agent as contrasted with others not agents who act in representative capacities"
Relationships that are commonly associated with agency law include employer-employee,
administrator-decedent or executor, and guardian-ward.

15. The law of agency prescribes the legal rules for determining:
(a) How a person may become an agent
(b) The rights and duties between the agent and the principal
(c) The relations between the agent and the third party
(d) The manner in which the relationship between the agent and the principal may be brought to
an end.

16. Rights and
Duties of
Agents

17. Lien on Goods
Some agents who have the possession of
products, securities, or properties of their
principal even have a lien on this
merchandise, securities, or properties
relating to their remuneration and conjointly
for any expenses or liabilities that they once
associate unpaid merchant, he incorporates
a right to prevent the products in transit.
0
2.
Right to Compensation
In line with section 225 of the
aforementioned Act, the associate agent
is entitled to say compensation for the
injuries suffered as a consequence or
wish of the ability of the principal. The
principal should create compensation to
his agent in respect of injury caused to
such agent by the principal’s neglect or
04.
As per section 219, the associate agent
incorporates a right to receive the in
agreement remuneration or absence of
agreement, an affordable remuneration for
rendering the services to the principal that
aren't voluntary or gratuitous. He becomes
eligible to receive the remuneration as
shortly as he completes the work that he
undertook.
Right to Remuneration
0
1. Right to be Indemnified
An agent represents his principal
to third parties. As per sections
222 and 223, the associate agent
incorporates a right to be
indemnified by his principal for all
charges, expenses, and liabilities
that he incurs throughout the
agency.
03.

18. A principal incorporates a right to sue his agent for damages just in case of breach of duty by the
agent. The duties of agents are:
1. As per section 211, an associate agent shall act at intervals the scope of authority that his
principal confers upon him. Also, he shall strictly follow the directions of his principal. However,
within the absence of specific directions from his principal, he shall follow the custom prevailing
at the place wherever he carries out his business, in an exceedingly similar form of business.
2. Section 212 states that he shall work with ability and diligence. Also, wherever the character of
the agent’s profession needs him to possess a special ability, he shall exercise the ability that a
member of that profession can exercise.
3. Associate agent shall disclose properly any material data to his information to the principal
which will influence the creation of the contract.
4. As per section 213, an associate agent shall is beneath the duty to not disclose any guidance
of his principal.
5. Section 215 states that the associate agent shall not vie together with his principal. In different
words, his interest shall not conflict together with his duty.
Duties of Agents

19. An agency relationship is created by the mutual, manifested agreement (often by a contract 1) between 2
parties that establishes that one party shall perform one or additional acts on behalf of the opposite. The
term "manifested" is employed as a result of associate objective take a look at is used to see the existence
of a place of a working relationship. That is, if the behaviour of the parties and also the specific
circumstances indicate that the parties have in agreement that one in all of them can act for the opposite,
then the place of the working relationship is going to be found by the court. Consequently, it's immaterial
whether or not the parties have expressly fashioned such a relationship, grasp that exists, or perhaps want
that it exists. Further, the parties even could have explicit expressly that such a relationship doesn't exist.
However, once the court has established the existence of a place of the working relationship, agency law is
introduced to see the rights and obligations of the parties. Some agency relationships arise as a result of
different agreements, like associate contract and a partnership agreement, marriage, by itself, typically
doesn't produce a place of the working relationship, though husband or partner will act because of the
agent for the opposite. Not all duties, obligations, or actions may be delegated through an associate
agency; as an example, the associate agent cannot substitute for a principal once ballot in an exceedingly
public election, language a can, or creating an announcement beneath oath. As noted in Chapter thirteen
(Contracts), a private services contract cannot be delegated once the performance by the first
(contracting) communicator is crucial to the particular performance of the duty.
The Formation of the Agency
Relationship

20. The higher than principle means a delegate cannot additional delegate. Therefore, an associate
agent cannot appoint a sub-agent. However, the subsequent exceptions to the current principle:
1. Once the principal permits delegation.
2. Wherever it's the custom or usage of trade to delegate.
3. Once delegation is important for correct and economic performance.
4. Wherever it becomes essential because of some emergency
5. Once the principal is aware of that the agent intends to delegate.
6. Wherever the work is ministerial.
Exceptions to the Principle of Delegatus
Non-Potest Delegare

21. PARTIES TO A
CONTRACT
OF AGENCY

22. There are two parties in the agency system one is the
principal and another the agent.
An agent is a person acting on behalf of his principal
as a connecting link between the principal and the
third party
“

23. Agency relationships are crucial to conducting business because of the
time and money that can be saved by a company. Often the decision
makers within the company are preoccupied with other major duties, and
an independent agent can handle special projects on behalf a principal in
an agency relationship
he principal grants authority to the agent to conduct business on their
behalf, usually with the understanding that the principal will compensate
the agent accordingly.
Reason for the Agents

24. Example of an Agency system
Principle
Mr. silvester who is the director
of a company, He would appoint
steven
Agent
Steven from an independent
company to contract a special
project,He would take the
contract of Marketing and
adverts
Third party
where he negotiates with
Advertisement companies(Third
parties) on the right price and
campaign.
So the agent worked and
entered in to an agreement on
behalf of the principal,with
consent and control of the
principle

25. Expectations of the agent;
Must have a duty of
loyalty to the
principal.
Behavior directly
reflects on the
principal.
Must act only for
the benefit of the
principal.
Must not divulge
sensitive
information.
Must give accurate
reporting of
information.

26. Essential Requirements of Agency
Principal Must
be Competent to
Contract
No
Consideration is
Necessary
Competence of
Agent is not
Mandatory
A B C

27. “The power and authority of architects are
determined by the general rules of agency law. In
most cases, unless the contract states otherwise,
architects are held to be agents with limited
authority.” Discuss the veracity of this statement
explaining the powers exercised by architects as
agents.
Ways of discharging
agency based on the topic

28. The agency relationship is governed by the terms of
contract created by the parties. Where a party
breaches any of the terms of the contract, he is liable
to the other party for such a breach. Beyond the
duties created by the terms of the agency contract,
the law imposes some duties upon the agent and the
principal.
This therefore means that as architects being the
agents there are certain laws imposed on them as
they make contracts with clients and other partners.
These rights may be terminated if any of the following
happens:

29. ● Termination by the Act of the parties
This is where the end of the Agency relationship is
occasioned by an overt act or something done by one or
both of the parties with the intent of bringing the agency
relationship to an end. Therefore, the architect and client or
other partners agree to terminate the contract.
● Termination by Revocation
This is by revocation of the agent’s authority by the
principal. For revocation to be effective, notice therefore
must be given to the agent and the third party. Where the
principal revokes the authority of the agent and such
revocation is not in accordance with the terms of the
agency agreement, the agent may sue the principal to
recover damages.
Therefore the client could revoke the agreement with the
architect but ought to give a notice to the architect.

30. ● Termination via Agreement
Where the agent (architect) and the principal (client)
mutually agree that the agency relationship should come to
an end when it is no longer beneficial to them or suits their
purpose.
● Termination by Death of Principal or Agent
Death of either the principal or the agent operates to
terminate an agency relationship. Where the principal has
died, the law considers the agency relationship he entered
into with his agent as having come to an end. If the agent
still acts on behalf of the dead principal, the contract
created by the agent with the third party is of no effect. The
situation will still be the same even where the agent had no
knowledge of the death of the principal. This is because the
obligation of agency are confidential and not transferable.

31. ● Termination by Performance
If the authority of an agent was given to achieve a specific
result or object, it is natural that such authority terminates
upon the object of the power being so accomplished or
achieved. If the authority of an agent was given to perform
a specific task or carry out a specific transaction, his
authority ceases automatically by the accomplishment or
completion of that task or transaction.
● Termination by Effluxion of Time
Where the agency contract gives a specific period of time
for the agent to act on behalf of the principal, the law
considers the agent’s authority to act to have come to an
end when the period of time to act expires. This will still be
the case even if the task to be performed by the agent has
been carried out or not.

32. ● Termination by 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 has authority is coupled with interest
● Termination due to frustration of contract
Agency related by agreement or contract comes to an end
when the contract is frustrated.This occurs when
performance of a contract is rendered impossible due to a
supervening event not caused by the fault of any party.

33. ● Termination due to insanity
The relationship between the agent and principal comes to an
end when the principal or agent becomes insane,for a person
of unsound mind cannot contract.Unsoundness of mind
causes the party to lose its contractual capacity.
● Termination due to destruction of subject matter
An agency is terminated when the subject matter in which
the agency was formed is destroyed.I.e If an agent tries to
sell a house and the house is destroyed by fire there is a
cessation of an agency.

34. ● Termination due to bankruptcy of the principal
The declaration of bankruptcy of the principal by a court of
competent jurisdiction terminates the agency relationship

35. references
● Constitution of kenya
https://www.findlaw.com/smallbusiness/business-contracts-forms/what-is-law-of-agency-.html
● Business law: Contract act, sale of goods act ... - toppr-guides. (n.d.). Retrieved November 23, 2022, from
https://www.toppr.com/guides/business-law/
● Parties in an Agency Relationship. (n.d.). Coursehero.com. Retrieved November 23, 2022, from
https://www.coursehero.com/sg/business-law/parties-in-an-agency-relationship/
● (N.d.). Indiafilings.com. Retrieved November 23, 2022, from https://www.indiafilings.com/learn/contract-of-agency/

36. THE END