Agency in Banking Law
UNIT 6 6.0 AGENCY 6.1 AN AGENT An agent is one who acts on behalf of another called the principal, with the express or implied authority of that person. Hence an agent incurs neither rights nor liabilities on contracts made on behalf of the principal. Also an agent need not be of full contractual capacity meaning that even a minor could be appointed as such, even though he principal has to be of full contractual capacity. 6.2 TYPES OF AGENTS Universal: appointed to handle the entire principal’s affairs General: acts in all businesses of a certain kind, e.g. a partner in a partnership Special: appointed to effect a particular transaction not part of their normal business activities Factors: A mercantile agent who buys and sells goods on behalf of the principal for a commission Brokers: A mercantile agent who is essentially a middle man between buyer and seller Del Credere: Agent in a foreign jurisdiction who introduces customers and indemnifies the principal against non-payment/default. 6.3 CREATION OF AN AGENCY 6.3.1 Express Appointment Express appointment is the actual authority given to an agent to act on behalf of the principal, given verbally or in writing or implied. The banker-customer relationship gives the bank implied authority to collect cheques on behalf of the customer. 6.3.2 By ratification The Agency by ratification occurs when the principle adopts a contract entered into by the agent. E.g. A bank’s actions may be ratified in the following circumstances: Pays a company cheque on an unauthorised signature where the company can ratify the cheque. Ratification will only be possible where:- i) The principal is fully aware of the material facts ii) The principal ratifies he entire contract iii) The agents identifies the principal iv) Ratification takes place within a reasonable time v) The principle had legal existence and contractual capacity when the contract was made. An
References: Hedley Byrne v Heller & Partners Limited (1963) HL London Association for Protection of Trade v Greenlands Limited (1916) 2 AC 15 A bank has a duty to maintain accurate records of its customers’ transactions on their account. However, as noted in the case of Tai Hing (1985), the customer does not need to check the statements or their accuracy. Lloyds Bank Limited v Brooks (1951) Yourell v Hibernian Bank Limited (1918) AC 372