(i) The principal must have been in existence when the contract was negotiated on his behalf. Ratification is only possible subject to certain conditions: if these are not complied with then the ratification will be ineffective. Where an agent acts without authority or beyond his authority, the principal may choose to adopt the contract by ratification. Even where the agent has specific authority to bind his principal, he/she may also have apparent authority and may be able to bind his principal beyond his actual authority. If he refuses to ratify the transaction the agent will be liable for damages for breach of warranty of authority to the third party. If he acts beyond his actual authority or without authority then the principal cannot be bound unless he adopts or ratifies the transaction. The agent can bind the principal in contracts within his actual authority. Generally there is no distinction between verbal and written authority except for specific occasions when written authority is required by the law. Authority can be verbal, in writing or by deed where the agent is required to contract on behalf of the principal by deed, when the agent will be the donee of a power of attorney and subject to the Powers of Attorney Act 1971. Normally the principal will authorize the agent to act on his behalf in advance of any exercise of the agent’s authority. The agent must have authority which can arise in the following ways: (i) prior consent of the principal (ii) subsequent consent of the principal – ratification (iii) operation of law – agency of necessity (iv) the doctrine of apparent authority. The best example is an advertising agency. Del credereagents, in return for a higher commission, are primarily responsible for payment in respect of contracts negotiated on behalf of the principal. Universal agents have unlimited authority to act for the principal. The principal can be bound by acts within the usual authority of the agent. The best example is a general partner in a firm who is a general agent and can bind the firm and the other partners in contracts in the ordinary course of the business. General agents have authority to act within certain limits. The principal is only bound where the agent has actual authority.

Special agents have authority on specific occasions or for a specific purpose, such as signing cheques. Estate agents are not normally agents in the legal sense since they have no authority to contract regarding properties which they are instructed to sell. Similarly, the granting of a ‘sole agency’ for products is not a strictly an agency agreement since it prevents the manufacturer from selling the goods personally, which is not true in a genuine agency agreement. Thus car dealers may be described as being a manufacturer’s agents but they sell cars as principals, and a buyer has no rights against the manufacturer arising simply out of the purchase contract.

There is a difference between the legal and the commercial use of the term and many cases where the term ‘agent’ or ‘agency’ is used are not true agency.

Agents can be employees of the principal or independent contractors supplying specialist skills companies may appoint other companies as their agents with responsibility for a particular market. An agent has authority to act on behalf of another (the principal) to affect the legal position of the principal and a third party and does not need contractual capacity.

Principal definition cars