Nature of Agency
Agency arises where a person has authority to act on behalf of another. The key characteristic of agency is the ability of the agent to enter obligations, most commonly contracts, which are binding on his principal.
An agent must exercise his authority in accordance with the principal’s lawful instructions. The agent may bind his principal in accordance with the terms of the authority given to him.
Any person who is legally competent to do an act himself may generally undertake it through an agent. Conversely, a person who is not competent to do an act such as a minor or person of unsound mind, may not ordinarily do so through an agent.
An agency arrangement may arise by the grant of authority by the principal to the agent. Most agents acquire authority to act without any formal appointment as such. There are some classes of agent for whom a formal appointment is required.
An agent may be granted authority in a number of ways. Actual authority arises where the principal gives the agent powers in writing or verbally, to bind him generally, or in relation to particular transactions and matters. The agent’s authority is the source of his powers to bind the principal. This will generally arise by an express contract or another act of the principal which authorises the agent.
Where the principal “holds out” an apparent agent as having authority on his behalf, he may be bound by the latter’s acts. Holding out arises where the principal expressly or by implication represents to a third party that the apparent agent has authority on his behalf,
A person in a particular position will commonly have the authority which is usual and customary in that position. Custom and practice may determine the position in particular sectors. Although the authority may not be implied, it may be customary in the business concerned and may apply on that basis in the circumstance,
In most cases, the appointment of a person as an agent may be undertaken formally or informally, verbally or in writing. It is usually desirable that the appointment should be made in writing from the perspective of certainty and ease of proof.
Powers of Attorney
Certain legal acts must be done by deed. A deed is a document executed, witnessed and delivered as a deed. A power of attorney is a formal instrument, by which an attorney, who is a type of agent, is appointed.
The Powers of Attorney Act modified the rules on the execution of powers. The requirements are more formal than those required for the ordinary appointment of an agent, which may be verbal. A witness is required to the signature of the grantor (the donor of the power), who enters and makes the instrument.
In the case of a company, a power of attorney must be executed using the company seal. The seal shall be used only by the authority of its directors, or of a committee of its directors authorised by its directors in that behalf.
There are protections for third parties who act in reliance on a power of attorney, where they have no knowledge of it being revoked. The donee of a power who does not know of the revocation is not liable by reason of it. If he knows of an event which legally causes revocation (e.g. death of the donor), he is deemed to be aware of it, irrespective of whether he knows the legal consequence of the event.