Business Law: Analysis of Agency, Authority, and Apparent Authority

This report analyzes key concepts in business law, focusing on agency, authority, and the liabilities of agents and principals. The first section examines the authority of an agent, Jevan, in a scenario involving a band and a guitar repair. It explores implied authority, the duties of an agent, and potential breaches of warranty, referencing landmark cases like Cropper v Smith and Watteau v Fenwick. The second section delves into the concept of apparent authority, outlining its meaning, the four essential elements for establishing it (as defined in Freeman and Lockyer v Buckhurst Park Properties), and its legal consequences. The report concludes by discussing available remedies, such as ratification, when apparent authority is established. The analysis incorporates relevant case law to illustrate the practical application of these legal principles. This assignment, available on Desklib, offers a comprehensive overview of agency law, providing valuable insights for students studying business law.

Running Head: BUSINESS LAW
Business Law
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Author Note

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Answer 1
Issue
 Whether there is authority of the part of Jevan to authorize the repair work
 What are the duties of Jevan in relation to the principals
 What are the liabilities of Jevan in relation to the situation?
 Has there been a breach of warranty of authority by Jevan
Rule
In the case of case of Cropper v Smith (1884) 26 Ch. D. 700 it had been stated by the court the
that a principal is bound to the agent’s action where a there is Actual or Apparent authority
An authority which is created in order to ensure that actual authority is appropriately executed,
where no express authority is provided but such authority falls within the scope of the position of
the agent is known as implied authority. The third party would not be disabled from making a
claim where the principal has limited the authority if the agent. These provisions had been
discussed in the landmark case of Watteau v Fenwick [1893] 1 QB 346. In this case a manager
has been appointed by pub owner. The role of the manager was being the pub manger and he had
been provided with all authority in the normal course as a manager. In this case the manager had
been expressly prohibited from purchasing cigars but this fact did not prevent the third party
from claiming damages under the contract to purchase of cigars. This was because the act had
been done in the usual course of usual authority. Only when the third party is notified about the
limitation can the limitation be effective.

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The duties which are owed by the agent to the principal includes the duty to avoid conflict of
interest as highlighted in Christie v Harcourt [1973] 2 NZLR 139, the duty of not making secret
profit as per Bently v Craven (1853) 52 ER 29 and not misusing confidential information gained
as an agent as discussed by Robb v Green [1895] 2 QB 315. It is also provided through the case
of Watteau v Fenwick that it is the duty of the agent to abide by the instructions provided by the
principle and act in compliance with the authority. In Bristol and West Building Society v
Mothew [1998] Ch 1 it was stated by the court that one of such duties is to ensure that the agents
exercise reasonable skill and care while doing their duties
In the case of Armstrong v Jackson [1917] 2 KB 822 it had been stated by the court that whether
an agent has been able to comply with such duty or not is determined objectively.
In the case of Parker v McKenna 1874 LR 10 Ch App 96 it had been ruled by the court that an
agent has the power to bind the principal to his acts and the third party can make a claim from
the principal. However the agent where he has acted outside the express authority can be made
liable by the principal to compensate for the loss faced by them.
In the case of P&P Property v Owen White & Catlin LLP [2016] EWHC 2276 (Ch) it had been
ruled by the court that where a person has created an impression of agency where in reality no
agency exists on behalf of principal with the third party warrants that such person is provided
the authority to do so. However where in reality no such authority is provided the warrant of
authority is breached and the third party can make a claim against the agent.
Application
In the given situation it has been provided that Jevan is the agent of ‘The Thin Heads’. He
regularly enters into contracts on behalf of the band with John for guitar servicing. He has been

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provided with the functions of a band manager. His activities for the band also include
organizing meals, booking instruments and maintenance and repairs of instruments. This is the
express authority which has been provided to Jevan. He has been provided with a duty by Jimbo
a member of the Band to get a highly collectable guitar serviced. He has got the guitar serviced
from John with whom he used to deal frequently. The guitar required a full rebuild which
amounted to $8800. In the given situation it has been provided that Jimbo has refused to pay the
amount. It has been stated in the above discussed case of Cropper v Smith that a principal is
bound to the agent’s action where a there is Actual or Apparent authority. In the circumstances
through the application of the case of Watteau v Fenwick it can be stated that Jeven had an
implied authority provided by Jimbo. An authority which is created in order to ensure that actual
authority is appropriately executed, where no express authority is provided but such authority
falls within the scope of the position of the agent is known as implied authority. Jevan being the
manager of the band has a normal authority to get the instruments repaired. There has been no
limitation imposed by the principal (Jimbo) on Jevan. The guitar has been reapired in the normal
course of authority which was owned by Jeevan. In addition John regularly dealt with Jevan as
the agent of the band. In the given situation it can be stated that Jeven had implied authority
provided by the Band to get the guitar repaired. Hence John being the third party can make the
band liable for payment of $8800.
In addition it has been provided through the case of Bristol and West Building Society v Mothew
that there are various duties which are imposed on the agents in relation to the principal through
the provisions of common law as the nature of their relationship is fiduciary. One of such duties
is to ensure that the agents exercise reasonable skill and care while doing their duties. In the case
of Armstrong v Jackson it had been stated by the court that whether an agent has been able to

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comply with such duty or not is determined objectively. Thus if a reasonable person would have
shown a higher degree of skill and care in the situation then the duty is breached. In the given
situation a reasonable man in the place of Jevan would have got the highly collectible guitar
repaired given its value. Thus he has not violated the duty owed Jimbo as an agent by getting the
guitar repaired.
Where there has been no breach on the part of Jevan in relation to the duties owed to the band as
an agent there is no liability which he owes under the provisions provided in the case of Parker v
McKenna.
There has further not been any breach in relation to warranty of authority which has been made
by Jevan in relation to the scenario. This is because where a person has created an impression of
agency where in reality no agency exists on behalf of principal with the third party warrants that
such person is provided the authority to do so. However where in reality no such authority is
provided the warrant of authority is breached and the third party can make a claim against the
agent. In the given situation an implied authority has been determined to be existing between
Jevan and the Band.
Conclusion
As analyzed above the actions of Jevan are within the implied authority provided to him by the
principal. In addition there is no proof that Jevan has breached his duties as an agent. Thus in the
given situation there is n liability which Jevan has in relation to the principal.
Answer 2
Meaning of apparent authority

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The concept of apparent authority is a famous doctrine with respect to the law of agency. This
Doctrine is applied by the court in situations where it would be understood by a reasonable third
party that the person who they are dealing with have authority provided by the principal. This
signifies that situation where apparent authority exist the principal would be found by the actions
of the agent even if no implied or expressed authority have been provided them. The doctrine of
promissory estoppel is invoked by an Apparent authority as a third party is provided assurance
on which it relies to get into the contract and it would be against the provisions of equity for the
principal to not accept the provided authority. Even in place where no actually authority has been
provided Apparent authority can be found. However for the authority to be present there has to
be an act or omission which has been committed on the part of the principal and in case where
the actions of the agent are based on false impression the principal would not be liable to the
contract. Therefore in situation where the act has been committed by the agent in the presence of
the principal and the principal has not prevented the agent or the third party from getting into the
transaction an Apparent authority would deemed to exist. The provisions of apparent authority
can also be invoked in situation where the principal has terminated the authority of the agent but
has not informed to third parties about the termination (DeMott, 2018).
Four elements of valid apparent authority
The elements of an apparent authority have been discussed through the provisions of the case of
Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480. In this case it
had been provided by the court and for the purpose of analysing whether a valid apparent
authority exists in the situation, four considerations have to be made. Firstly the principal has in
some way made a representation that the authority in context existed. Secondly a reasonable

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third party who acted in good faith had a belief that authority has been provided by the principal
to the agent. The third party must have relied on the authority which had been manifested by the
principal to get into the contract. Finally the third party must have undergone a change in
position such as incurring a loss or injury due to the reliance. In this case Apparent authority was
established because the principal had made a representation that the agent had an authority to get
into a contract on behalf of the company, the representation has been made by a person who had
actual authority, the contractor has relied on the authority and had been induced by it to get into
the contract and the contractor has suffered losses because of such reliance.
Legal consequence of apparent authority
Where an Apparent authority has been established by the courts through the identification of its
elements the principal becomes bound to the actions committed by the agent who had apparent
authority. The doctrine of estoppel intervenes to prevent the principal from denying authority of
the agent as the principal has permitted the appearance of authority with respect to the agent and
subsequently provided the right to the third party to rely on such appearance of authority in the
same way as it has been actually conferred on the agent. However such authority cannot come to
existence when the third party acted in bad faith and have the knowledge that the agent does not
have authority provided by the principal. These provisions had been provided by the famous
company law case of Royal British Bank v Turquand (1856) 6 E&B 327
Remedies available

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One of the primary remedies available in relation to apparent authority is that of ratification.
Under the principles of ratification the principal has the option to ratify and agreement which had
been entered upon into by the agent in unauthorized manners. The process of ratification can be
implied or express action of the principles with respect to agreeing with the unauthorized actions
which have been committed by the agents. When the principal ratifies the unauthorized activity
the transaction becomes binding on the third party. Where the transaction has not been ratified
third party will not be found to any unauthorized agreement with has been created by the agent
who did not have any apparent authority. On the other hand when it comes to apparent authority
the third party and the principal are bound as soon as the agreement has been entered upon
between the third party and the agent (Dewing, 2015).

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References
Armstrong v Jackson [1917] 2 KB 822
Bently v Craven (1853) 52 ER 29
Bristol and West Building Society v Mothew [1998] Ch
Cropper v Smith (1884) 26 Ch. D. 700
DeMott, D. (2018). Fiduciary Principles in Agency Law.
Dewing, J. (2015). Howard Bennett, Principles of the Law of Agency.
Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480
P&P Property v Owen White & Catlin LLP [2016] EWHC 2276 (Ch)
Parker v McKenna 1874 LR 10 Ch App 96
Robb v Green [1895] 2 QB 315
Royal British Bank v Turquand (1856) 6 E&B 327
Watteau v Fenwick [1893] 1 QB 346

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