Special contract(commercial law)chapter four.pptx

Special contracts course for LLP LAW students Based on somaliland commercial law and civil law.

1. ALPHA UNIVERSITY BUROA FACULTY OF LAW Course: Special Contract Teaching material summary By: Abdiasiis H. Sahal Chapter four Contract of Agency

2. Learning outcome 1- Meaning of Contract Agency? 2- What are the essentials of Contract of Agency? 3- what are the Characteristics of an Agency? 4- how contract of agency formation Agency and Types of Agent? 5- What are the right’s and duties of the principle and Agent? 6- How to Terminate contract of agency?

3. Meaning Contract of Agency A contract of agency, at its core, is a legal agreement between two parties the principal and the agent. In this arrangement, the principal confers authority upon the agent to act on their behalf in specific transactions or tasks.  When a person employs another person to do any act for himself or to represent him in dealing with third persons, it is called a ‘Contract of Agency’ The person who is so represented is called the ‘principal’ and the representative so employed is called the ‘agent.

4. Count.... An Agency agreement establishes the legal relationship between the agent and its principal. It ensures that both parties understand their roles and responsibilities in a contract. The  Contract of Agency  also establishes the rights and obligations of an agent in a contract of agency, and it also defines the circumstances under which the agent shall be personally liable for his acts on behalf of the principal.

5. Count..... The agent, in turn, assumes the responsibility of representing the principal and executing the designated actions or decisions The contract of the  agency  is a  legal relationship , where one person appoints another to perform the transactions on his behalf. When a person employs another person to do any act for himself or to represent him in dealing with the third persons, it is called a  ‘Contract of Agency ’.

6. What are the essentials of ‘Contract of Agency’? Offer and Acceptance : The principal offers the agent the authority to act on their behalf, and the agent accepts this offer, Legal Capacity: Both parties must have the legal capacity to enter into a contract . Competency of the Principal: The requirement for the competency of the principal has been repeated.

7. Count.... Consideration not required: Contract of agency requires no consideration. It comes under the category of those contracts which law has declared to be valid without consideration, even consideration is not an essential element for the creation of an Agency hence no consideration is required to be presented while the formation of an agency.

8. Characteristics of an Agency Mutual Trust:  To maintain any relationship, good faith among parties to a contract shall exist between each other. The foundation of a good agency relationship between the agent and the principal lies in the foundation of good faith and mutual trust. The agent shall work in accordance with its authority and shall work for the benefit of the principal.

9. Count..... Capacity of Principal:  For the purpose of the Contract of Agency, the principal is required to be  competence to enter into a contract i.e ., he must be of the age of majority, must be of sound mind, and shall not be disqualified by law. Since in a contract of agency, the agent builds a contractual relationship between the principal and the third person it is necessary for the two parties to be competent to contract.

10. Count.... Consent :  The relationship of the principal and the agent can only be established by the consent of both the principal and the agent. The  consent  must have been given by each of them, either expressly or by implication from their words or act . Legally Binding:  The principal is legally bound by all the acts done by the agent in the same manner as he would have done that act by himself. 

11. Methods of Creating Agency Agency by Express Agreement : An agency is said to be “Express” when the agency is given by either word, spoken, or written When the agent is selected either by the words expressed or composed or direct of activities, in such cases an agency shall be “Express ”. Agency by Implied Agreement : An authority can be said to be implied when from certain circumstances of the cases, it can be inferred from the conduct of the parties and things spoken or written or during the ordinary course of dealing. 

12. Types of Agent Distinction based on Limit of Authority : 1- Specific Agent:  A specific agent is one who is designated to play out a specific act or to address some specific transactions.  For instance,  an agent is hired to purchase a specific house . 2- General Agent : An individual hired to carry on a series of transactions identifying with a specific business. He is the person who has the position to do all acts associated with a specific business or work.  For instance,  X is the chief of a firm.

13. Count.... Universal Agent : This agent is delegated to do all acts, and the authority of such agent is also limitless and can do everything that the principal legitimately does.

14. B. Distinction based on the Nature of the Act/Business Factor:  A person who is appointed to sell goods which are put in his possession or to buy goods for his principal. He is the evident owner of those goods in his custody and can thus sell them in his name and receive payment for those goods.   Brokers:  A broker is a person whose business is to make contracts with other parties for the sale and purchase of goods or securities in exchange for brokerage. Brokers do not have possession of the goods and act in the name of their principal. Also, they have no lien over goods as they have no possession of goods.

15. Count... Auctioneer : A salesperson who is an agent delegated by a principal to sell his merchandise by open closeout for commission. He makes the sale to the most elevated bidder in an open contest.

16. What are the right’s and duties of the principle and Agent: The relationship between agents and principals in business and legal transactions is governed by a set of rights and duties that ensure the smooth and lawful operation of their partnership. Agents have rights, including compensation, or reimbursement, access to information, and the right to terminate the relationship under specific conditions.

17. Count.... Their duties encompass loyalty, care, obedience, accountability, and confidentiality towards the principal. On the other hand, principals have rights such as expecting performance, receiving information, terminating the relationship, and seeking damages for breaches . The relationship between an agent and a principal is a fundamental aspect of business and legal transactions. Agents act on behalf of principals to carry out specific tasks.

18. Rights of Agents: Right to Compensation:  Agents have the right to receive compensation for their services as agreed upon in the agency agreement. This compensation can be a fee, commission, salary, or any other form as specified in the contract. Right to Information:  Agents have the right to access information necessary for the proper execution of their duties. This includes access to documents, records, and other relevant information held by the principal .

19. Count.... Right to Termination:  Agents have the right to terminate the agency relationship if it is stipulated in the agency agreement or if the principal breaches the contract. Termination may also be allowed for other valid reasons, depending on the applicable laws and regulations .

20. Duties of Agents: Duty of Loyalty:  Agents owe a duty of loyalty to their principals, which means they must act solely in the best interests of the principal. They cannot engage in self-dealing or take actions that would benefit themselves at the expense of the principal . Duty of Care:  Agents have a duty to exercise reasonable care, skill, and diligence in carrying out their duties They must use their expertise and knowledge to the best of their ability to achieve the goals of the agency.

21. Count.... Duty of Obedience:  Agents must follow the lawful instructions and directions provided by the principal within the scope of their authority. They cannot deviate from these instructions without the principal’s consent. Duty of Accountability:  Agents are accountable for their actions and must keep accurate records of their transactions and activities on behalf of the principal. Transparency and accountability are essential aspects of agency relationships.

22. Count..... Duty of Confidentiality:  Agents have a duty to maintain the confidentiality of any information or trade secrets provided by the principal They cannot disclose this information to third parties without the principal’s consent or unless required by law.

23. Rights of Principals: Right to Performance:  Principals have the right to expect that their agents will perform their duties as agreed upon in the agency agreement. This includes completing tasks, making decisions, and achieving the objectives set by the principal. Right to Information:  Principals have the right to request information and updates from their agents regarding the progress and status of the tasks or transactions entrusted to them.

24. Count.... Right to Termination:  Principals have the right to terminate the agency relationship for justifiable reasons, such as breach of contract or a change in circumstances However, termination must generally be done in accordance with the terms of the agency agreement or applicable laws . Right to Damages:  If the agent breaches their duties or causes harm to the principal through negligence or misconduct, the principal has the right to seek damages and compensation for their losses .

25. Duties of Principals: Duty to Compensate:  Principals have a duty to compensate agents for their services as agreed upon in the agency agreement. Failing to provide the agreed-upon compensation can lead to a breach of contract. Duty of Good Faith:  Principals have a duty to act in good faith and deal fairly with their agents. They should not engage in deceptive or unfair practices that could harm the agent’s interests .

26. How to Terminate of agency An agency terminates expressly by the terms of the agreement or mutual consent, or by the principal's revocation or the agent's renunciation. An agency terminates impliedly by any number of circumstances in which it is reasonable to assume one or both of the parties would not want the relationship to continue.

27. Count... A greement: On the basis that an agency relationship is created by agreement between the principal and the agent, such a relationship can also be brought to an end by mutual agreement between the parties, either in writing or orally. Performance by the agent: If an agent is appointed to accomplish a particular task or for a specific purpose, when the task is accomplished by the agent or the specific purpose is attained, the agency will terminate.

28. COUNT.... By operation of law: An agency may terminate by operation of law upon the occurrence of the following events  a. Where the party concerned is an individual death, insanity, bankruptcy. Termination for Breach of Contract: Principle or agent to Failure to fulfil its obligation or breach of contract is one of the termination’s of the contract, the breach of contract is the end of the contract or termination.