Agency Does Exist Between Limelight and Grant

Lord Hoffman affirms, the reason of commercial law is to assist businesses function, not hinder them in doing so, and make sure that commerce works effectively. [1]

Agency does exist between Limelight and Grant, because Grant has authority from limelight, the principal. A judicial definition was stated in Towel v White (1873) [2] :

‘… (an agent) is a person invested with a legal power to alter his principal’s legal relations with third parties.’

Grant is an agent for limelight, as he also a three years irrevocable contract. Nevertheless, an agency can be created without a contract, but all agency is consensual. [3] Also Grant would be receiving 20% of the profit made by Limelight when they sold stock he had bought in, this is another indication that he is an agent for limelight, as he will be making business for them and will be receiving a payment.

Grant was appointed seemingly expressly, as Limelight provided a letter of introduction described him as being their “associate for Northern England”. The appointment may have been created in writing or orally. Grant is most likely to be a special agent, as he had restriction imposed under his appointment. He was clearly told not to buy any French film posters as these are often forged.

All these points are an indication that Grant is a valid agent for Limelight.

However, there are problems in this scenario which concern both parties and also the third parties, who will be discussed later.

For a systematic presentation of this problem scenario, Grant’s rights and liabilities will be discussed first. It was specifically stated that Grant was not to buy French film posters; however he did not follow his principal’s instructions, and bought an acclaimed work of the French cinema for £5,000, from Silver Screen Images. By doing, Grant has broken his appointment with Limelight. However, Limelight may still be liable to the third party. This is because the law is anxious to protect innocent third parties. In Watteau v Fenwick (1893) [4] .-change.

Subsequently, it is not possible to regard the purchase under the doctrine of implied actual authority, because Grant was prohibited from doing the act, in the agreement. [5] However, there is another category of agent authority which is more compatible with Grant’s position; this is ‘apparent authority’, which was established in Freeman & Lockyer v Buckhurst Park Properties [6] . Lord Diplock stated that apparent authority is formed by ‘… a representation made to the third party intended to be and in fact acted by the third party, that the agent has authority’. [7] – delete?

In Rama Corporation Ltd v Proved Tin and General Investments Ltd (1952) [8] Slade J observed that there were three ingredients which must be satisfied before Principal can be bound by A’s apparent authority, these are: representation; a reliance on the representation, and; and representation must come from someone with authority. [9] In this scenario, Grant is a representative, who has also been given a letter of introduction, as mentioned above. His job to acquire stock from various sources, so it is part of his job to buy film posters, so there was no reason for the third party namely Silver Screen Images, to believe that Grant did not have the authority. So, therefore the third party may use apparent authority to make the principal honour the contract. However, in this case, the third party does not want to continue with the transaction, reason being that they believe they sold the posters for too cheap.

However, the notion of ratification is in order in this scenario. Ratification can occur if the agent acts without authority, or exceeds his authority; his actions can bind the principal on whose behalf he purports to act. [10] Limelight has adopted the transaction as being a valid one, so therefore they can ratify it.

However, in order for the Limelight to ratify Grants act, they must meet these conditions stated in Bolton Partners v Lambert [11] . One of the condition is Agent must have purported to be acting for a principal, so therefore an undisclosed principal can therefore never ratify a contract. [12] It seems that Grant did clarify to the third party he was an agent, however he did not name the principal, but did give a description of the company being based in London. The illustration of this requirement can be found in Keighley, Maxsted & Co v Durant (1901) [13] , where it was stated that an undisclosed was not able to ratify an act. The second condition that has been met by Limelight is that they were in existence and had the capacity to contract when Grant committed the act. [14] A key case in relation to this condition is of Kelner v Baxter (1866) [15] , where the company’s legal existence was formed after the act, therefore there was no contract, and the promoter was held liable. It is assumed that Limelight is a legal company, and Grant has a 3 year contract with them, so therefore ratification is still an option for them.

Also, an act which is void ‘ab initio’ cannot be ratified by the principal [16] as stated in Bedford Ins CO v Instituto Resserguros [17] The act committed by Grant was not unlawful therefore Limelight is still able to ratify this act. In Brook v Hook (1871) [18] , it was stated that a principal could not ratify a forged signature on a cheque, as this was unlawful. [19] Conversely, in Danish Mercantile v Beaumont (1951) [20] , the solicitor issued legal proceedings against third party without the principal’s permission; later the principal ratified the solicitors act, and the court held it was a voidable act. This case relates to the case of Limelight also. Subsequently, the principal must ratify in time [21] for it to be valid. In Metropolitan Asylum Board v Kingham (1890) [22] , ratification took place after 10 days and this was held to be too long. Limelight have managed to ratify the act within 9 days, which has not passed the 10 days, therefore ratification is still in order. It is important to note that the reasonable will depend on the circumstances.

Another condition is that Limelight must have a free choice as to whether to ratify or not [23] , it seems that Limelight accepted the act open handed, therefore this requirement has also been satisfied.

All these conditions have been met by Limelight; therefore the effects of ratification would take place.

The effect of ratification in this scenario would mean that Grant will be deemed to had have authority as stated by Lord Lindley in Keighley that ‘ratification when it exists is equivalent to a previous authority’ [24] . Consequently, Limelight can sue, or be sued by Silver Screen Images on the contract made by Grant; any liability Grant may have towards SSI will be extinguished; also Grant cannot be liable to Limelight for exceeding his authority [25] . Also Grant may obtain rights from principal such as; right to commission, and can indemnified against any costs incurred by him. [26] If for some reason ratification does not take effect, then Grant may be liable to SSI, if SSI can provide that they incurred cost due to Grant’s unauthorized act, then these maybe redeemable under the agent’s warrant of authority. [27]

Ratification may be expressed or implied, it is clear that Limelight’s method will be expressed as they told SSI of them accepting the contract made by their agent. In Waithman v Wakefield (1807) [28] , it was considered that the husband’s conduct of keeping the unnecessary goods his wife had bought was an implied ratification; therefore he was compelled to pay for them. If ratification had not taken effect then Grant may have been liable to Limelight, for the breach of contract, a principle of Turpin v Bilton. [29] Grants intentionally breached the term of contract, though, if the term had been ambiguous and Grant acted reasonable he would not be liable, as illustrated in Ireland v Livingstone and European Asian Bank [30]

It is clear that SSI will have to deliver the posters on the scheduled date and hence will receive payment from Limelight.

Limelight repudiated Grant’s contract, however they now refuse to accept. Hence, Grant may still remain to be an agent, as his contract is of 3 years which is irrevocable.

Above all this, the duty and the rights of the principal and agent will explain the relationship in a better format.

Limelight cannot keep the 2,500 profit, if Grant refutes, as limelight were a udisclosed principal and the Sean did not know about them, so the contract was between them two. So limelight could sue Grant in this act. Also in this Grant has acted of actual authority, he did not have authority to sell the posters, however Sean did not know of the principal