e-business law chpter 08

BAEB 301: BASIC LAW FOR E-BUSINESS

CHAPTER 8: LAW OF AGENCY

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Chapter 8: Law of Agency

Topic Outlines

8.0 Introduction

8.1 Principal and Agent 8.1.1 The Agent

8.1.2 The Principal

8.2 Creation of Agency 8.1.1 Express Appointment 8.1.2 Implied Appointment 8.1.3 By Ratification 8.1.4 By Necessity 8.1.5 By Estoppel

8.3 Duties of a Principal to his Agent

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Topic Outlines

8.4 Rights of the Agent

8.5 Duties of an Agent to his Principal

8.6 Rights of the Principal

8.7 The Authority of the Agent

8.7.1 Actual Authority 8.7.2 Apparent/Ostensible Authority 8.8 Agent who acts for a Disclosed/Undisclosed Principal

8.9 Termination of Agency

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Topic Outlines

8.10 Impact of Virtual Agents For Online Transactions

8.10.1 Definition of a Virtual Agent 8.10.2 Advantages of Using a Virtual Agent 8.10.3 Unanswered Questions

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Learning Outcomes

At the end of this chapter, students should be able to: Understand the role of the Agent in bringing a conventional contract into

effect on behalf of the principal Understand the role of the Virtual Agents For Online Transactions. Understand the Duties and Rights of the Agent and the Principal and how

an agency can be terminated.

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8.0 Introduction

It is normal in running a small business businessmen employ agents to handle contracts with third parties including customers.

The agents act as the 3rd party to bring into effect a contract between the businessman and his customer including negotiating with the customers on the principal’s behalf.

The agents are not the parties to the contract between the principal and the customer.

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8.1 The Principal and the Agent

An agent is defined as 'a person employed to do any act for another or to represent another in dealings with third persons' S.135 Contracts Act.

Any person may become an agent; but persons of unsound mind and who are below eighteen years of age are not liable towards their principals for acts done by them as agents - s137

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8.1.1 The Agent

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8.1 The Principal and the Agent

Principal: The person for whom such act is done, or who is so represented, by the Agent.

A Principal must be at least eighteen years old or above and of sound mind - S136 Contracts Act

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8.1.2 The Principal

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8.2 Creation of Agency

Generally, an agency can be created in 5 ways:

i. by express appointment by the principal

ii. by implied appointment by the principal

iii. by ratification by the principal

iv. by necessity, i.e. by operation of law in certain circumstances

v. by the doctrine of estoppel or 'holding out'.

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Express appointment may be in a written or oral form. E.g. a letter of power of attorney or words spoken.

8.2.1 Express Appointment

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Implied appointment of an agent occurs when a person by his words or conduct holds out another person as having authority to act for him.

E.g. Ali allows Ismail to book a room on his behalf and habitually pays for the room, Ismail is therefore Ali’s agent by implied appointment

8.2.2 Implied Appointment

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Ratification occurs where: (i) an agent who was duly appointed has

exceeded his authority, (ii) Person who has no authority to act for the

principal has acted as if he has the authority.

In any of the above situations the principal can either reject or accept the contract made by this agent. Acceptance of this contract is called ratification.

8.2.3 Appointment by Ratification

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Agent by necessity arises in the following situations:

1. It is impossible for the agent to get the principal's instruction.

2. The agent's action is necessary, in the circumstances, in order to prevent loss to the principal. E.g. agent sells perishable goods before they rot.

3. The agent of necessity must have acted in good faith.

4. In an emergency, an agent has authority to do all such acts for the purpose of protecting his principal from loss.

8.2.4 Appointment by Necessity

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Agent by estoppel arises where:

1. If the principal by his words and conduct allows third parties to believe that a particular person is his agent when he is not, and

2. If the third party relies on it to his detriment, the principal will be estopped from denying the existence of that person’ s authority to act on his behalf.

8.2.5 Appointment by Estoppel

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e.g. Agent by estoppel :

If Mahmud tells Samy in Tay’s presence that Mahmud is Tay’s agent and Tay does not deny this statement, Tay cannot later deny that Mahmud is his agent if Samy has provided a room for Mahmud in his hotel for business purpose and when he later demands payment from Tay.

8.2.5 Appointment by Estoppel

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8.3 Duties of a Principal to his Agent

1. To pay the agent the commission or other remuneration agreed unless the agency relationship is gratuitous.

2. Not to willfully prevent or hinder the agent from earning his commission.

3. To indemnify the agent for acts done in the exercise of his authority

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8.4 Rights of the Agent

1. Agent’s right to get paid once his job is completed satisfactorily.

2. Agent has a right to impose a lien on Principal’s property until he gets paid.

3. Agent is to be compensated for injury suffered caused by the principal’s neglect.

4. Agent is to be indemnified against consequences of lawful acts.

5. Agent is to be indemnified against consequences of acts done in good faith.

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8.5 Duties of an Agent to his Principal

1. To obey the principal's instructions2. To exercise skill and diligence when carrying

our duties3. To render proper accounts to his principal4. To communicate with the principal.5. To pay sums received for principal. 6. Not to let his personal interest conflict with

his duty. (This is called the agent’s fiduciary’s duty).

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8.6 Rights of the Principal

1. To ask the agent to account for any secret profits earned by him while acting on his behalf

2. Not liable for any criminal act committed by the agent.

3. To terminate the agency.

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8.7 Authority of the Agent

An agent's acts are binding on the principal if they are done within the agent's authority.

If an agent does an act which exceeds that authority so given, the principal is not bound unless he adopts and ratifies the unauthorized act.

An agent’s authority can be:

i. Actual or implied

ii. Ostensible/apparent

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Actual authority is authority expressly given by the principal (orally or in writing), or implied from the express authority given, from the circumstances of the case, custom or usage of trade, and the conduct of parties.

8.7.1 Actual/Implied Authority of the Agent

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An agent is treated by the law as having apparent or ostensible authority to bind his principal if he enters into an UNAUTHORISED transaction which is related to the principal’s business.

It is irrelevant that the Principal did not know about the transaction nor did he give any consent to the agent.

An innocent third party who did not know of the agent’s lack of authority at the time of the contract has the right to assume the agent has authority to enter into the transaction to bind his principal.

8.7.2 Apparent/Ostensible Authority of the Agent

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Chapter 8: Law of Agency8.8 Enforceability of Contract Made by Agent

If the Agent is acting for :-

1. Named principal – then agent incurs no liability

2. Disclosed principal (not named) – then Agent personally liable

3. Undisclosed Principal – then the agent will be liable and he can sue on the contract.

4. Third party can sue choose either to sue agent or principal

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8.9 Termination of an Agency

An agency may be terminated by: 1. The act of the parties, or 2. By operation of law e.g. death of either

party; bankruptcy

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8.10 Impact of Virtual Agents

In the business world a virtual agent can be two types:

1. an automated representative, called an intelligent virtual agent, virtual rep or v-rep and it is a chatterbot program that serves as an online customer service representative for an organization.

2. a human agent who works over the Internet at some distance from the employer's organization.

Topics

8.10.1 Definition of a Virtual Agent

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Virtual agents are increasingly used in CRM to help people perform tasks such as locating information or placing orders and making reservations.

In the case of an automated virtual agent, he has a human appearance and responds appropriately to customer questions and he lends automated interactions a semblance of personal service.

Virtual agents are usually scripted to respond to a wide variety of questions and remarks

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Virtual agents are usually scripted to respond to a wide variety of routine questions and they are programmed to issue scripted remarks to such questions if asked.

Virtual agents would not be able to answer complex questions.

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A virtual agent will be able to :

1. Provide immediate responses to client questions

2. Provide consistent responses

3. Provide ability to escalate unanswered questions to e-mail or phone if needed, and integrate with other customer service knowledge bases

4. Increase clients’ service options

5. Reduce service cost over time

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8.10.2 Advantages of Using a Virtual Agent to provide Online Customer Service

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1. Provide immediate responses to client questions and encourage self service

2. Provide consistent responses and encourage customer loyalty

3. Provide ability to escalate unanswered questions to e-mail or phone if needed, and integrate with other customer service knowledge bases

4. Increase clients’ service options

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5. deliver information to customers on their mobile phones while the principal will then build a mobile lead base that will serve as a foundation for a new way of prospecting.

6. reduce the time which human agents spend on repetitive questions thereby freeing the human agents to tend to higher duties and thereby cost-effective.

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Unanswered questions are reviewed daily. If appropriate, the answers are scripted. Questions that are answered incorrectly

usually result in reprogramming and debugging.

In this way the automated agent “learns” and grows.

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8.10.3 Unanswered Questions

e-business law chpter 08

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