Actual Authority

Actual Authority may arise from three circumstances, impliedly, expressly and Agency of Necessity.

Express authority is pretty straight forward; it is an authority which is expressly conferred by an agreement or by words depending on the construction of words of appointment. However, it might get tricky when one trying to interpret an oral agreement. If any ambiguity were to occure, an agent must interpret in a manner which is reasonable.

Implied authority may arise from 3 circumstances and they are Incidental authority, by contrast and usual authority. Incidental authority simply means an agent has the implied authority to do everything necessary for the ordinarty incident to the express authority in the usual way. For example, an agent is instructed to sell a house was held to have an incidental authority to sign the agreement of sale. Case on point, Rosenbaum v belson. Secondly, an incidental authority can arise by contrast. For example in the case of Earner v Sharp, apparently an agent who was instructed to find a purchaser but was not told to sell the house by contrast does have an incidental authority to sign the contract. Lastly, a usual authority means an agent has implied actual authority to do whatever that is usual in his trade or profession, for the purpose of carrying out his authority or anything necessary or incidental to it. For example a managing director is impliedly to have all the authority as an agent to make contract on behalf of the company because it is the duty of a managing director to run the company. Case on point will be the case of Hely-Hutchison v Brayhead Ltd.

Lastly, Agency of Necessity may arise from an emergency. If it is necessary for the agent to contract with a third party in an emergency to protect or preserve the interest of the principal, then the agent with have an actual authority in making a contract. For example in the case of China Pacific SA, the captain has authorized a salvage operation in order to lighten the ship; the salvors unloaded some of the wheat and put it in storage. The salvors then sue for the storage. The court held that such emergency has created an agent of necessity and the captain will have the authority to make a contract. However, the necessity must be an actual and definite commercial necessity. There are basically four requirements to fulfill; firstly, it must be an emergency. Secondly, as a result of the emergency, it is practically impossible to obtain instruction. Thirdly, it must be bona fide in the agency’s interest not the agent’s personal interest and lastly, the agent must act reasonably.