Agency by Necessity Law

According to S142 Contract Act 1950, an agency may arise by necessity or in an emergency. Agency of necessity means a person may become the agent of another without being appointed as such under certain circumstances. For example, a deserted wife or a wife who is justified in leaving her husband and she has not working, can claim for the necessities of life from her husband according to the income and position of the husband even though her husband unwilling to fulfill this pledge. However, if she is has been given an adequate allowance and can support her own life either in money or in earning capacity, then there is no arise of agency by necessity as in case Biberfield v. Berens [1952] 2 All ER 237.

It is created when a person is entrusted with another’s property and it becomes necessary to do something to preserve that property although he has no express authority to do so. Besides, there must be already some existing contractual relationship between the principal and the person who acts on his behalf. For instance, relationship between the owner (principal) and the master of a ship (agent) and relationship between an owner (principal) and a carrier of goods (agent) are examples that show existing contractual relationship between principal and the person who acts on his behalf. This kind of relationship can be illustrated through the example as followed: Goods are sent by truck to A at Tanjung Malim with directions to send them immediately to B at Johor Bahru. A may sell goods at Tanjung Malim if the goods will not be able to bear the journey to Johor Bahru.

Conditions

However, to create an agency by necessity, there are three conditions have to be satisfied:

Overall, fulfillment of these three conditions can be illustrated in case Prager v. Blatspiel, Stamp and Heacock Ltd [1924] 1 KB 566 which was regarding there must be a genuine necessity and the agent must act bona fide. After the outbreak of First World War, the plaintiff who was from Romania contracted to buy a number of furs from defendant who was from London. Plaintiff was intended to wait and ask defendant to deliver the furs which were largely paid until the war was over. At that time, Romania was occupied by the Germans and communication between both parties became impossible. The furs that were stored were increasing in value. Towards the end of the war, defendant began to sell the furs locally with assumption that occupation of German will be continued. When the war ended, the plaintiff demanded delivery from defendant but the defendant only told the plaintiff that the furs had been sold off under agency of necessity. The court held that there was no agency of necessity because the plaintiff was willing to wait for goods which were appreciating in value and it is clear that defendant acted against bona fide when defendant sold off the furs which got higher value at that time.

a) It must be a situation that impossible for the agent to get the principal’s instruction.

In the case of Springer v. Great Western Railway Company [1921] 1 KB 257, Great Western Railway Company as defendant agreed to carry plaintiff’s tomatoes from Channels Island to London, by ship to Weymouth and by train to London. The ship was stopped at Channels Island for three days due to bad weather. Eventually, when the ship arrived at Weymouth, defendant’s employees were on strike, tomatoes were unloaded by casual laborers but it was delayed for two days. At that time, some of the tomatoes were found to be bad. So, defendant decided to sell the tomatoes as they felt that tomatoes could not arrive in Covent Garden market in a good and saleable condition. When plaintiff found out about this, plaintiff wanted to claim damages from defendant. The court was held that plaintiff was entitled to damages because defendant ought to have communicated with the plaintiff when the ship arrived at Weymouth to get instruction. As defendant has failed to communicate with plaintiff when they could have done so, thus, there was no agency of necessity.

b) The agent’s action is necessary

This can be said as the agent’s action is to prevent loss to the principal with respect of goods, such as perishable goods. However, agency of necessity does not arise when goods are merely sold because of inconvenience. In the case of Great Northern Railway Co. vs. Swaffield (1874) LR 9 Exch 132, the plaintiff railway company had transported a horse to a station on behalf of defendant. When the horse arrived, there was nobody to collect it. So, the plaintiff sent it to a stable. A number of months later, the plaintiff paid the stabling charges and then straight to recover what it had paid from the defendant. In this case, the court was held that the plaintiff’s claim succeeded even though he is involved in the extension of doctrine of agency of necessity to include carriers of goods by land. There was an agency of necessity because the plaintiff was found to have had no choice but to arrange for the proper care of the horse.

If there is no urgency and then goods are sold just because they are inconvenience to the agent, then agency of necessity does not arise. The agent who sells the goods may be liable in tort for conversion because those goods are not belongs to the agent. For example, in case of Sachs v. Miklos [1948] 2 KB 23, sale of furniture done by agent without urgency happened before it is sent to the destination or a car being sold by agent in case Munro v. Willmott and Co. [1948] 1 KB 295 under a condition which has no urgent thing happened .

c) Agent of necessity has acted in good faith (Bona fide)

Agent may arise by estoppels, a person cannot be bound by a contract made on his behalf without his authority generally. But, if he allows third party to believe that X is his agent by his words when X is not agent of him and the third party relies on it, he will be stopped or precluded from denying the existence of X’s authority. For example, if X tells B in the presence of C that he (X) is C’s agent and C does not deny this statement, C cannot later deny that X is his agent if B sells good to X believing him to be C’s agent and later sue for the price. Agency by estoppels can be illustrated through case of Povey v. Taylor (1966) 116 NLJ 1656. The defendant let a room in their premises to B, who conducted a similar kind of business to theirs from it. B had business leaflets printed by the plaintiffs and B acknowledged defendant about this. Invoices sent to defendant were not challenged by them. The plaintiffs then sued the defendant for payment. The court of appeal held that it was reasonable for the plaintiffs to infer that B was ordering the work with the defendant’s authority, so the defendants were stopped from denying that authority.

Citations:

Biberfield v. Berens [1952] 2 All ER 237

Prager v. Blatspiel, Stamp and Heacock Ltd [1924] 1 KB 566

Springer v. Great Western Railway Company [1921] 1 KB 257

Great Northern Railway Co. vs. Swaffield (1874) LR 9 Exch 132

Sachs v. Miklos [1948] 2 KB 23

Munro v. Willmott and Co. [1948] 1 KB 295

Povey v. Taylor (1966) 116 NLJ 1656

Sources:

Connolly, M, & LLB, . (1998). Briefcase in commercial law. London,

Sydney: Cavendish Publishing Limited.