Question Tag: Agency Law

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  • 1 Marks

BL – May 2015 – L1 – SA – Q15 – Agency Law

Identify the parties involved in an agency relationship.

An agency relationship involves the
A. Agent alone
B. Principal alone
C. Third party alone
D. Agent, principal, and the third party
E. Third party and the principal

Answer: D

Explanation:
The correct answer is “D. Agent, principal, and the third party.” An agency relationship is typically a triangular relationship involving an agent, a principal who grants authority, and a third party with whom the agent interacts on behalf of the principal.
  • 5 Marks

BCL – May 2016 – L1 – Q2c – Agency

State five ways by which an agency may be terminated.

State FIVE ways by which an agency may be terminated. (5 marks)

  • By mutual agreement: Both the principal and the agent may agree to terminate the agency at any time they wish.
  • By revocation of the agent’s authority: The principal may revoke the authority given to the agent and prevent them from making binding contracts with third parties. The agent may have the right of action for breach of contract against the principal if the revocation is unjustified.
  • By death of the principal or agent: The agency is terminated upon the death of either the principal or the agent, except in some exceptional cases.
  • By bankruptcy or insanity of the principal or agent: The agency may be terminated if either party becomes bankrupt or insane, except in some exceptional cases.
  • By frustration: The agency may be terminated due to unforeseen events that make the fulfillment of the contract impossible.
  • By intervening illegality: Legislation passed to nullify such types of agency may terminate the agency.
  • By completion of the performance of the agency: The agency terminates when the agent completes the tasks assigned under the agency.
  • By the expiration of time: If the agency was created for a limited time, it ends when that time expires.
  • By the principal becoming an alien enemy: The agency may be terminated if the principal becomes an enemy of the state.
  • By renunciation: The agent may renounce the agency.

[Any 5 points at 1 mark each for a total of 5 marks]

  • 10 Marks

BCL – May 2016 – L1 – Q2b – Agency

State and explain five exceptions to the rule that an agent has no right or obligation on a contract unless acting on behalf of the principal.

An agent has no right or obligation on a contract unless he/she enters into it on behalf of his/her principal. State and explain FIVE exceptions to this statement. (10 marks)

  • Where the agent agrees to accept personal liability: The agent may personally assume liability under the contract.
  • When the agent is not appointed by deed and signs the deed: The agent becomes personally liable if they sign a deed without clear indication they are acting as an agent.
  • Where the agent signs a bill of exchange in his own name: If the agent signs without indicating their agency status, they may be personally liable.
  • Where trade custom makes the agent personally liable: In some trades, agents are customarily held liable regardless of the principal.
  • Where the supposed agent is actually the principal: If the agent is the principal but purports to contract as an agent, they are personally liable.
  • Where an agent acts for an undisclosed principal: If the agent does not disclose that they are acting for a principal, they may be personally liable.

[Any 5 points at 2 marks each for a total of 10 marks]

  • 20 Marks

BCL – May 2019 – L1 – Q5 – Agency, Sale of goods/hire purchase

Discusses the object of a sale of goods, legal advice for parties in a sale involving stolen property, and the duties of an agent.

Yaa Konadu purchased a car from Kofi Apenteng. Two months later, it was discovered that the car was stolen property before it was acquired by Apenteng, and both parties were innocent. Konadu had to give back the car through the police. Apenteng had no title to pass on, so Konadu sued him for the refund of the whole of her money despite the fact that she had used the car for two months.

Required: a) Explain if the object of the sale of the car was met for either Yaa Konadu or Kofi Apenteng.
(4 marks)

b) Advise the parties.
(6 marks)

c) Explain FOUR (4) duties of an agent to his principal.
(10 marks)

a) Object of the Sale:

  • The object of a sale of goods is to transfer the property from the seller to the buyer. In this case, no property was legally transferred to any of the parties because the car was stolen.
  • Legal Reference: Section 1(1) of the Sale of Goods Act, 1962 (Act 137) states that a contract of sale of goods is a contract whereby the seller agrees to transfer the property in goods to the buyer for a consideration called the price, consisting wholly or partly of money.
  • Conclusion: The object of the sale was not met, as Kofi Apenteng did not have the title to pass on to Yaa Konadu.

(4 marks)

b) Advice to the Parties:

  • Advice to Yaa Konadu: Under Section 8 of the Sale of Goods Act, 1962 (Act 137), the fundamental obligation of the seller is to deliver goods to the buyer after the sale. Since Apenteng had no title to the car, Konadu is entitled to a refund of her money. She is also entitled to damages for breach of condition.

    (3 marks)

  • Advice to Kofi Apenteng: The legal maxim “nemo dat quod non habet” applies, meaning no one can transfer a better title than they possess. Apenteng failed to confirm the legal ownership of the car and must repay Konadu her entitlements. He may then sue the person from whom he acquired the vehicle to recover his money.

    (3 marks)

c) Duties of an Agent: The duties of an agent to their principal include:

  • Acting on behalf of and being subject to the control of the principal.
  • Acting in good faith and not making undisclosed profits.
  • Acting within the scope of authority or power delegated by the principal.
  • Discharging duties with appropriate care and diligence.
  • Avoiding conflicts between personal interests and those of the principal.
  • Promptly handing over to the principal all monies collected on the principal’s behalf.

(4 points @ 2.5 marks each = 10 marks)

  • 7 Marks

BCL – Nov 2018 – L1 – Q2b – Agency Law

Determine if a principal has the right to step into a contract between an agent and a third party.

Fiko in Cape Coast appointed Pinfa at Takoradi (Cape Coast and Takoradi all in the Republic of Ghana) as his agent. Pinfa had the authority to contract with farmers for the cultivation and supply of tiger nuts on his behalf. While the agency relationship exists, Pinfa contracted with Agya Anto for the supply of 10 bags of tiger nuts without disclosing the existence of the agency relationship with Agya Anto.

Required:
i) Has Fiko any right to step in the contract between Pinfa and Agya Anto? (4 marks)

ii) Has Agya Anto any available right in his contract with Pinfa while he (Pinfa’s) agency with Fiko exists? (3 marks)

 

ci)

  • This is a case of an undisclosed principal.
  • Fiko, as the principal of Pinfa, has the right to intervene in the contract between Pinfa and Agya Anto while the authority given to Pinfa lasts.
  • Fiko may make any claim on the contract and, if necessary, sue Agya Anto directly.
  • If Fiko makes use of this right, he will be personally liable to Agya Anto.

cii

Agya Anto has the option to either sue Fiko or Pinfa if he discovers that Fiko is the principal.

 

 

  • 4 Marks

BCL – May 2018 – L1 – Q3a – Agency

Explain the fiduciary duty of an agent in a scenario involving a secret profit.

a) Cho instructs his agent Duu to sell his car. Cho decided to pay GH¢5,000 as commission to Duu on completion of the sale. Duu sold the car and was accordingly paid the commission of GH¢5,000. Cho then immediately found that the purchaser of the car had also paid a bribe of GH¢2,500, which Duu did not disclose.

The law of agency provides for the rights and duties between the principal and agent. An agent owes various duties to his principal, and the foremost is fiduciary duty. This means that the agent must act in utmost good faith and be sincere and honest in his dealings with his principal. The agent does not have to make secret profit beyond the commission or other remuneration paid by his principal. Thus, the agent is accountable for every profit which he makes without the principal’s consent.

As the purchaser of the car had paid Duu a commission, Duu is in breach of his fiduciary duty that he owes to Cho. Cho stands to recover the GH¢5,000 he paid to Duu and the GH¢2,500 received as a bribe paid by the purchaser. (4 marks)

  • 20 Marks

BCL – Nov 2015 – L1 – Q2 – Agency

Analyze Bertha's liability to Crunch Ltd and Drinkit Ltd due to Eddie's actions as an agent.

Eddie is the manager of A-LIFE shopping mall owned by Bertha. In January he is told by Bertha not to buy biscuit from a new company called Crunch Ltd, because she has heard that their products are of poor quality.

On 18th February, Christa, a representative of Crunch Ltd, visits the A-LIFE shopping mall, and as a result, Eddie orders 10,000 cedis worth of biscuits. Christa is unaware of Bertha’s instructions.

When later in the day Bertha discovers what Eddie has done, they have arguments, and Eddie resigns. The following day Eddie goes to Drinkit Ltd, Bertha’s regular supplier of wine and spirit, and purchases 10 cases of whisky on credit in Bertha’s name. He then absconds with the whisky.

Bertha comes to seek your advice as to her liability to:
a. Crunch Ltd; (10 marks)
b. Drinkit Ltd. (10 marks)
(Total=20 marks)

a. Liability to Crunch Ltd:
i) The relationship between Eddie and Bertha is an Agency Relationship. (3 Marks)
ii) Eddie has authority to buy goods for the shop as his normal course of duty. (2 Marks)
iii) The instruction to Eddie not to buy from Crunch Ltd is not known to Crunch. (2 Marks)
iv) Therefore, Bertha is liable for the payment of the goods to Crunch Ltd. (3 Marks)

b. Liability to Drinkit Ltd:
i) The relationship between Eddie and Bertha is an Agency Relationship. (2 Marks)
ii) Eddie has authority to buy goods for the shop as his normal course of duty. (2 Marks)
iii) Being a regular supplier, Drinkit knows Eddie as the Manager of the shop. (2 Marks)
iv) The fact of Eddie’s resignation is not known to Drinkit or they were unaware. (2 Marks)
v) Bertha is therefore liable for the cost of the whisky. (2 Marks)

  • 20 Marks

BCL – Nov 2019 – L1 – Q5 – Company directors and other officers

Analysis of whether a company can deny the authority of an individual acting as a director who was not formally appointed.

Prime Company Ltd, traders in frozen fish, entered into an oral agreement for the supply and sale on credit basis, of all its frozen fish to Addae Company Ltd. The affairs and the business of Prime Company Ltd were undertaken by its Managing Director and one Maxwell Mensah. Maxwell Mensah was never appointed by the Company as a director, but he transacted business on behalf of Prime Company Ltd with Addae Company Ltd, as if he were a director and the Chief Executive Officer of the Company. Maxwell Mensah acted on behalf of the Company by signing the applications for the Company to be registered as an importer, apart from financially assisting the Company to start business. The name of Maxwell Mensah also appeared on the Company’s letter-head as one of its directors.

Prime Company Ltd allowed Maxwell Mensah to share in its profits by allocating to him fifty percent (50%) of the last consignment of fish. Maxwell Mensah entrusted the sale of the consignment allocated to him for his benefit to Addae Company Ltd and directed that the proceeds of the sale should be paid by Addae Company Ltd into the account of his private firm, Asanko Ventures Ltd. In the course of the transaction, Addae Company Ltd paid various sums of money being proceeds of the sale of fish supplied to Prime Company Ltd to both the Managing Director of Prime Company Ltd and Maxwell Mensah. No valid receipts were given for those payments. At the close of business, the trading account of Prime Company Ltd showed a debit balance of over GH¢ 16,000.00 against Addae Company Ltd. Prime Company Ltd subsequently demanded that this amount be paid. Addae Company Ltd resisted settlement on the grounds that it had already accounted fully for the cost of the fish sold to it on credit.

Required:

In the light of the above facts, explain whether Prime Company Ltd would be justified in denying Maxwell Mensah as an Officer of the Company.    (20 marks)

Analysis:

  • Estoppel: The issue to be determined is whether Prime Company Ltd. is estopped from denying that Maxwell Mensah held himself out as a director of the Company, even though he was not appointed a director. (3 marks)
  • Authority Implied by Company Actions: The Company allowed Maxwell Mensah to transact the fish business with Addae Company Ltd. and third parties, on its behalf, and also received payments. This indicates that the Company necessarily conferred an implied authority on Maxwell. (3 marks)
  • Profit Sharing: The Company allowed Maxwell Mensah to share in its profits, further demonstrating the kind and nature of the authority exercisable by Maxwell as a director held out by the Company. (3 marks)
  • Legal Requirements under the Companies Act: Section 198(1) of the Companies Act, 1963, (Act 179) provides that every company shall, in all trade circulars and business letters on or in which the company’s name appears, state in legible characters with respect to every director. Prime Company Ltd printed the names of its directors on all its letterheads, and among the directors was Maxwell Mensah, even though he was never formally appointed. (3 marks)
  • Binding Acts: As between outsiders such as Addae Company Ltd. and Prime Company Ltd., the Company was bound by all the acts done by Maxwell Mensah in relation to Addae Co. Ltd., including receiving payments on behalf of Prime Company Ltd, so far as the transaction is within the scope of his office as director. (3 marks)
  • Case Law: The Rule in Royal British Bank Vrs Turquand (1856) 6 E 1& BI. 327 supports the notion that a person who enters into a contract with a company and deals in good faith with that company has the right to assume that acts within the Constitution and powers of the company have been duly and properly performed. (2 marks)
  • Conclusion: In the circumstances of this case, the acts of Maxwell Mensah, though an improper director, were binding on Prime Company Ltd. because no steps were taken by the company to remove him or prevent him from acting as a director. Therefore, Prime Company Ltd would not be justified in denying Maxwell Mensah as a director of the Company, as the Company itself held him out as such. (3 marks)

Professional Presentation: (2 marks)

(Total: 20 marks)

  • 12 Marks

BCL – Dec2022 – Q2a – Tort, Agency

Discuss the legal implications of a negligent misstatement and the effects of an agent acting without authority.

A firm of chartered accountants prepared the financial statements of Highskies Ltd knowing that the company was going to use the report to persuade Dr. Kwesi Antwi, a prospective investor, to invest money in Highskies Ltd. Relying on the accounts, Dr. Kwesi Antwi invested two million Ghana Cedis (GH¢2,000,000) in the company. However, a year later, the company collapsed. Dr. Kwesi Antwi, therefore, decided to take legal action against the firm of chartered accountants.

Required:
i) Advise whether Dr. Kwesi Antwi’s legal action in court will be successful. (3 marks)
ii) State THREE (3) effects of an agent acting without authority. (6 marks)
iii) Explain the phrase “term of Contract.” (3 marks)

i) Success of Legal Action:
The rule is that for a party to succeed in the tort of negligent misstatement there must be a relationship. That relationship must be a professional or special relationship between the person making the statement and the party receiving it. This relationship is the means of establishing to whom a duty is owed. The maker of the statement should know the purpose for which it is to be used and that the recipient/party will rely on the statement and act upon it without making any other inquiries.

In the present case, in preparing the financial statement for Dr. Kwesi Antwi, the firm of chartered accountants of Highskies knew that Dr. Antwi would rely on it, and he indeed did rely on it. The resulting effect was financial loss to Dr. Kwesi Antwi. Thus, Highskies Ltd owed a duty of care to Dr. Antwi. Dr. Antwi therefore succeeds in his legal action. (3 marks)

ii) Effects of an Agent Acting Without Authority:

  • The alleged principal will not be bound by the contract unless the principal ratifies it, either expressly or implied through his conduct.
  • There is no contract between the agent and the third party because the third party did not intend to deal with the agent personally.
  • The agent will have impliedly guaranteed or warranted to the third party that:
    1. The principal exists
    2. The principal has the contractual capacity to make the contract
    3. He has the authority to make the contract.
  • If the agent is acting outside his authority, he will be liable to the third party for breach of warranty of authority. (6 marks)

iii) Explanation of “Term of Contract”:
The terms of a contract define the scope and extent of the obligations undertaken by the parties to the contract. After a contract has been made, it is necessary to examine the contents of the contract to determine what the terms of the contract are. Generally, a contract may be wholly oral, wholly in writing, or partly oral and partly in writing. In exceptional circumstances, a statute may demand that a particular kind of contract must be in writing to be enforceable. A statement made in the negotiations leading up to the making of a contract, which does not qualify as a contractual term, is said to be a mere representation.

A mere representation is one which induces the other party to enter into the contract but does not form part of the contract itself. The terms of a contract, therefore, are the statements, promises, or propositions that form part of the contract and which define the respective rights and obligations assumed by the parties under the contract.

Even though all terms of a contract have to be performed, they do not have equal significance. Some terms are of more significance than others, especially when it comes to the consequences of their breach. Some terms are considered to be of major significance to the contract, such that when they are breached by one party, the innocent party is entitled to terminate the contract altogether. Thus, after ascertaining the terms of the contract, there is a need to consider their relative importance, and in this regard, the law classifies the terms of the contract into conditions, warranties, and innominate terms. (3 marks)

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