Law of Contract

This is where the relationship between the principal and the agent is expressly agreed. In other words, the principal expressly invests in the agent the extent of the authority upon which the agent may act on the principal’s behalf. The extent of the authority given to the agent will of course depend upon the construction of the agreement. Where the relationship is created orally or in writing, the usual rules of construction of the Law of Contract apply. The court must establish the extent of authority by considering the words used and the surrounding circumstances. If the principal has not expressed himself clearly he must accept the consequences of any actions of the agent which are consistent with a reasonable interpretation of the authority given. Examples of clear instructions and otherwise are typified in the difference between the precise authority given by the principal to a broker in chartering or sale & purchase negotiations as against the expectation that the agent should act as the principal’s ‘extended right arm’ which is the essence of a port agent’s function. If one person by words or conduct holds out another as having authority to make contracts on his behalf, he will be bound by such contracts as if he had expressly authorised them. Whether or not an agent has implied authority will depend upon a consideration of all the circumstances. There may be, for example, an implied authority where express authority has been given for a particular purpose and the court finds that there is an implied authority to do everything necessary to achieve that purpose. Likewise, authority may be implied from trade usage. Agency of necessity occurs when a person is entrusted with another’s property and it becomes necessary to do something to preserve that property. In such a case, although the person who is entrusted with the property has no express authority to do the act necessary to preserve it, because of the necessity, such an authority is implied.