I.

Introduction
 Aim of the appointment of an agent is the performance of a service for a
principal: that which the principal finds it impracticable, inconvenient or difficult to
do for him- or herself, he or she engages another to do.

 Juristic persons lack the ability to ‘act’, so the juristic person must be
represented by a natural person who has some authority to act on the juristic
person’s behalf.

o Classic example is when the Pick n Pay cashiers enter into

contracts of sales with you on behalf of the Organisation – they
act as agents.

Agent: someone who possesses authority to perform any legal act, unless
it is prohibited by law, on behalf of a principal so that the latter acquires
the rights and/or duties that arise from such act

Principal: a person who gives authority to an agent to perform certain

legal acts with the effect that the principal directly acquires the rights
and/or duties that arise from the legal act.

II. Defining Characteristics of Agency

Due to the complexity of the concept of agency, there isn’t a one-
dimensional definition of easily available. Instead, we identify the
defining characteristics of agency to establish the existence of such a
relationship.

Definition: Agency can be described as the contractual situation where

one person, that is, the agent, acting with authority arising from a
contract of mandate, an employment contract, estoppel, ratification or by
operation of law, performs a juristic act on behalf of another, the principal,
causing the latter directly to acquire all rights and duties flowing from
such legal act.

 Agency is the fiduciary relationship that arises when one person

(a ‘principal’) manifests assent to another person (an ‘agent’) that
the agent shall act on the principal's behalf and subject to the
principal's control, and the agent manifests assent or otherwise
consents so to act
 A. Parties

 Agency is based upon a tripartite relationship consisting of:

o A Principal
o An agent
o Third Parties

 There are internal and external aspects to agency

o The internal aspect relates to the relationship between the

principal and the agent, how it arises and the duties that
attach to either party in the circumstances.

o The external aspect focuses on the agent’s power to affect a

principal’s legal position with a third party, and the consequences for
principal and third party of the agent exercising this power by an act of
representation.

 Only the principal and the third party (the other party to the
contract) acquire rights and duties in terms of the contract, even
though the contract was concluded by the agent and the third party

o As such the agent and third party are not liable or entitled to
claim against each other.

 Agency is founded on an internal relationship

o Voluntary relationship

B. Fiduciary Relationship
A fiduciary duty (from Latin fiduciarius, meaning "(holding) in trust";
from fides, meaning "faith", and fiducia, meaning "trust") is a legal or
ethical relationship of confidence or trust between two or more parties.
Typically, a fiduciary prudently takes care of money for another person.

“A fiduciary is someone who has undertaken to act for and on behalf of

another in a particular matter in circumstances which give rise to a
relationship of trust and confidence.” —Bristol & West Building
Society v Mothew [1998] Ch 1 at 18 per Lord Millett

BRISTOL & WEST BUILDING SOCIETY V MATHEW:

  In a fiduciary relationship, one person, in a position of vulnerability,
justifiably vests confidence, good faith, reliance and trust in another
whose aid, advice or protection is sought in some matter.
 In such a relation good conscience requires the fiduciary to act at all
times for the sole benefit and interest of the one who trusts.

C. Authority
Authority: can be described as the power (consent) given by a principal
to the representative in terms of which the representative may perform
certain legal acts on behalf of the principal so that the rights and duties
stemming from the legal act accrue to the principal and the third party.

 An agency relationship is established when the principal gives

someone (the agent) authority

1. Authorisation is a unilateral process

2. Manifestation

o Objective inquiry – determined by observation of the principal’s conduct,

and how that would be perceived.

o conduct could occur by a written directive (including a formal power of

attorney), spoken words, or any other conduct indicative of authorisation.

3. Ways of identifying that authority exists

Actual authority is conferred either expressly or impliedly by the principal to an

agent to act on the principal’s behalf.

This usually happens expressly: the principal expresses his will that the agent act
for him, and the agent acts in terms of that responsibility and proceeds to
represent the principal

Apparent Authority is conferred to an agent if the principal has indicated to a third

party that an agent has the authority to act on their behalf, despite the fact that the
agent doesn't have the actual authority to do so.

4. Agency is not a contract

 In most cases the nature and scope of the authority will be captured in a contract of
some kind, but this is not strictly necessary. Any contract that there may be is
secondary to the existence of agency authority

 Although most cases of actual authority are underpinned by a contract,

the agency relationship may arise in a number of ways.

o A contract is established through an offer and acceptance mechanism while

authority is unilaterally conferred by the principal to the agent – consent is not
vital.

o Capacity is a contractual requirement while parties with limited capacity may

act as agents

Bowstead & Reynolds para 1-006 (an English-law text – the world’s
leading work on agency) summarises this subtle but important point very
clearly:

‘The basic justification for the agent’s authority … seems to be the idea of
a unilateral manifestation by the principal of the willingness to have his
legal position changed by the agent. To this any contract between
principal and agent is secondary, though there will usually be
one, which often provides the reason for the conferral and indeed may
contain it.’

Prof Ker

‘It seems to me to be beyond doubt that the usual, or the ordinary, way in
which actual authority is given to, or conferred upon, another is by
contract.’

Joel Melamed and Hurwitz v Cleveland Estates (Pty) Ltd; Joel Melamed
and Hurwitz v Vorner Investments (Pty) Ltd

“An act of representation needs to be authorised by the principal. Such

authorisation is usually contained in a contract”

Two classic types of contracts through which authority can arise

o Contract of mandate
o Contract of employment
 D. Agency power
 Usual individual powers to control our personal relations may be allocated to
another.
‘The essential characteristic of an agent is that he is invested with a legal power to
alter his principal’s legal relations with third persons: the principal is under a
correlative duty to have his legal relations altered.’

 Power is therefore a neutral concept which describes the result or consequence

of their being authority

o It focuses on the external aspect of agency and the outward

consequences that arise when authority exists

 Authorisation empowers the agent to perform juristic acts which will alter the
principal’s legal position – Empowered agents

E. Representation
 Representation is therefore the performance aspect of the agency relationship.

 The agent exercises that power by actually going out and representing the
principal in dealing with third persons

 Although some representatives are often referred to loosely as agents, the

current tendency is to reserve the term ‘agent’ to denote a representative
who is bound by contract with a principal to carry out a mandate and who
is also authorised to create, alter or discharge legal relations for the
principal

F. The qualifier: unempowered agency

Unempowered Agents

 In the same field, an unempowered agent is one whose service

contributes to bringing about an opportunity for the principal to enter
into, vary or terminate a contract or a contractual obligation, but who
does not himself do so on the principal’s behalf

 Examples of unempowered agents are estate agents and certain

insurance agents with whom no special arrangements have been made
 If power is conferred on an unempowered agent, he will become an
empowered agent

De Villiers & Macintosh at 39-40 is very firm on the point:

‘The specific characteristic of agency in the legal sense is the authority

conferred on the agent to make binding contracts on behalf of his
principal. An agent is sometimes defined as one who has authority
to act for another, but while such a definition may describe persons who
do not possess the distinguishing characteristic referred to and are
nevertheless popularly terms “agents” (such as, for example, the “estate”
or “house agent”), it is for legal purposes inexact. A person who has
authority to act for another cannot be regarded in law as an agent
unless that authority covers the creation of contractual
obligations between his principal and the third party.’

 While such a person does not have the external powers associated with agency
in its strict sense, in almost every respect the internal features of agency apply to
them

o There is a manifestation of an authority to act, and it is normally

encapsulated in a secondary contract of some kind. The person acts in a
form of representative capacity

o These persons are appointed because they have particular skills and
abilities, and they are able to assist the principal with something that the
principal has neither the expertise to carry out, nor the time and energy to
devote to it.

o the nature of the internal relationship between the parties is fiduciary in the
same sense as in paradigm forms of agency.

In addition to the paradigm, a fiduciary relationship of agency may also emerge in a wider
sense where the agent is authorised to assist the principal as a representative, but the agent
has no power to affect the principal’s relationship with third parties.
III. Some Preliminary Issues Relating To
Agency Power

A. Capacity
 An agent who has the power to enter into a contract for and on behalf of the
principal is not a party to the contract which results.

o Therefore, the agent’s contractual capacity is not relevant unless the

agent cannot appreciate what they are doing at all.

o Persons with limited capacity may act as agents – Parent

may get their child to conclude a contract on his or her behalf

 In some situations, agents will be appointed to act on behalf of a principal

who is no longer capable of arranging their affairs.

o Here, the acts of the act do bind the principal, despite the principal not
being capable of appreciating the transaction

B. Legality
 An agent may be appointed to do anything which a principal may do, unless
performance by a principal is required.

 Delegatus delegare non potest. - A person to whom something has been

delegated cannot delegate further.

o Examples - various government officials at all levels, managing directors

of companies, and so forth.)

 Additionally, the service which the agent is appointed to perform must comply
with the general requirements of legality and public policy.
 C. Possibility of Performance

 The act which the agent is empowered to fulfil must be possible of

performance, and not objectively absolutely impossible.

D. Formalities
 The general rule is that power to act may be granted informally.

o However, written authority needed:

(1) where the power relates to certain aspect of actions or of appeals in

the courts

(2) where the power relates to certain actions of conveyancers in the

deeds registry and

(3) where the power relates to the sale of land. (Focus of course)

1. Power to Buy and Sell Land

Section 2(1) of the Alienation of Land Act reads: “no alienation of
land shall… be of any force or effect unless it is contained in a deed of
alienation signed by the parties thereto or by their agents acting on
their written authority”

 The identity of the agent must be certain or ascertainable.

Nature of the written authority

Three key aspects of the requirement of “written authority”.

(i) the grant of authority must be in writing;

(ii) the writing must be authenticated as that of the principal; and

(iii) the agent must be aware that the written authority exists.
The provisions of the writing

 An agent who holds a general power of attorney has sufficient written

authority and so has one who holds a special power of attorney

 But there is not requirement that authority be evidenced by such

formal documents

o Letters and telegrams, e-mails and even texts and other

forms of short message could suffice if they are clear.

Authentication

 The object of the requirement of written authority is to minimize the risk of

subsequent disputes concerning the authority of the agent who signed by having
the extra degree of certainty which a written document affords

 This leads to the proposition that the writing must be authenticated as that of
the principal as if it is not authenticated, one cannot say the principal himself
has giving such authority.

 Hence, the fact that the authority is indeed that of “the principal” is a fact
that must be shown.

o Signature is one, but the Act does not require a signature.

Awareness of the power to act

 That the agent acts “on the principal’s authority”, and that is not possible unless
the agent knows it exists.

 But what if the principal prepares and signs the authorisation, and then
telephones the agent and says “I’ve signed your letter – go ahead”?

Sugden v Beaconhurst Dairies (Pty) Ltd,

O’Hagan J said: “If written authority has come into being, I can see no reason why
the communication of that authority to the agent in any manner should not suffice.”
IV. The Origin and Extent Of Agency Power

If an ‘agent’ has not been authorised to act on behalf of the principal, the ‘agent’ has
no power to bind the principal

ESTABLISHING THE INTERNAL RELATIONSHIP: AUTHORITY

(RECAPPING PAGES 10 AND 11)

A. Actual Authority
N.B with actual authority its about the internal relationship between the
agent and the principal

 Actual authority can arise in three potential ways:

(a) expressly
(b) tacitly
(c) by operation of law

 Associated with actual authority is ratification of authority

1. Actual Express Authority

Express authority: Except in certain exceptional cases, the principal’s
express authorisation is not required to be in writing. Authority can
therefore be granted or orally or in writing

 If authority is written, its most commonly a power of attorney

o A power of attorney is a document which sets out the powers to be

conferred upon the agent
 o Only needed where an agent is to represent a principal in the sale
of land; where a conveyancer must pass transfer in the Deeds
Registry; and where an attorney must be authorised to file an
appeal to the High Court.

a) The contract of mandate

 Mandate is a contract in which one person (‘the mandatary’) undertakes to
perform a task (known as the ‘mandate’) for another (the mandator’).

 A contract of mandate may be entered into by one who is not an agent at all

 Nb!! Agency authority must not be confused with mandate! While cases
of agency and mandate can overlap, they do not always do so.

o Sometimes the mandate (task) has nothing to do with agency. But

at other times, it may involve an authorisation to act in an
unempowered or empowered agency capacity.

In SA law, agency and mandate are frequently confused and even

regarded as one and the same concept.

Agency, an agent has authority to perform juristic acts on behalf of his

principal as against a third person

vs.

Mandate = a contract between a mandator and a mandatary where the

mandator requests the mandatary to perform a specific task.

EXAMPLE

 A lawyer
- giving advice: mandatary, but not an agent (no engagement with a
third party)
- recover damages: mandatary, and unempowered
representative agent
- To run a person’s business: mandate and empowered agent

The contract of mandate only creates rights and duties between the parties to it. It
may, however, be combined with an authority given by the mandator to the
mandatary to represent the mandator, and to bind the mandator contractually to a
third party.

b) Contract of employment
 Often agency authority derives from an employment contract.

 But not all employees have agency authority – again, it depends

on their role and function! They may:

o Have no authority at all. – Gardeners and Cleaners

o Be authorised to represent in an unempowered capacity. –

can’t enter into contract but can act in some representative manner

o Be empowered agents. – Faculty administrators who can appoint

caterers and courier services ect.

c) Independent agents [the

extended form of agency]
 Whereas mandataries and employees are obliged to do what they are
instructed, some agents have no obligation, but only an incentive
to do so – usually the carrot of a commission. (ie they cannot be sued
for breach if they do not act – as is the case with mandate.)

o These are independent agents, and are usually

unempowered.

o Eg: travel agents, insurance agents, and especially estate agents

(see egs on p 15/16).

o For example, an insurance broker/agent usually acts on behalf of a

variety of principals. Their responsibility is not to advance the interests of
each and every principal [customer] at all times (for this would be
impossible) but to advise the principal on which insurance arrangement
would be the best for the principal in the particular circumstances, and to
facilitate the conclusion of that contract between principal and third person
[insurance company].

 These are not mandataries, even though they are often described in
such language!
See eg the eileen louvet real estate case (p 20)
 EILEEN LOUVET REAL ESTATE CASE (P 20):

There is an obligation on the part of a mandatary to carry out the

mandate. In circumstances where the contracting party does not have to
perform the obligation, they cannot properly be called a mandatary. This
is relevant particularly in the context of estate agents.

-the appellant entered into a contract with the owner of a farm, which
contract was headed ‘Mandate to sell’.
The court pointed out that it was common cause that the contract
was in reality a normal estate agency one under which the agent
was neither entitled to enter into contracts on his principal’s
behalf nor obliged to further his principal’s interest. It was
therefore not a ‘mandate’ in the strict sense; and it was not ‘to sell’, but to
obtain offers for the principal to consider.

(An estate agent is therefore normally a form of independent

unempowered agent

2. Actual Tacit Authority

 Usual test of the hypothetical bystander: it is a question of fact
which depends on how the principal’s intentions may be inferred
from the principal’s conduct and the surrounding circumstances.

o No evidence of express authority; but can it be said, from

the nature of their relationship, the principal’s conduct, and
the surrounding circumstances, that authority can be said to
exist by inference?

o Ie: the two parties, if asked, would say: “of course – it goes
without saying.”

 See coetzer v mosenthals ltd

Coetzer v Mosenthals Ltd 1963 (4) SA 22 (A)

C had a credit account with M under which he bought goods under credit
for his business. The business was later transferred to his wife and son but
the account wasn’t closed and they continued taking goods for credit
under the account but failed to pay. M then took C to court to claim
performance. Court found that even though C had not expressly
authorised his wife and son to obtain credit under his account, there was a
tacit authority to do so. The bystander test was applied to determine this.
Remember that tacit authority is a form of actual authority, and is
not to be confused with apparent authority.

“Where a person knowingly suffers another to do acts in his own name,

without any opposition or objection, he is presumed to have given
authority to do those acts. Appellant's son and a woman, who were
carrying on business in partnership, had, to the knowledge of appellant,
purchased goods from the respondent on appellant's account and in his
name. After appellant knew that this was being done he took no steps to
prevent such state of affairs continuing. In an appeal from a decision in a
Provincial Division giving judgment for respondent and against appellant
for the purchase price of the goods so sold and delivered,
Held that the appellant had impliedly authorised the purchases
made on his account. Once the facts are so found, it follows, in my
judgment, that defendant is in law liable to plaintiff. The basis of that
liability is a mandate conferred by defendant upon the
partnership to purchase goods from plaintiff on his account. The
existence of such a mandate arises as a matter of necessary
inference from the essential facts of the case summarised in the
passage from the learned trial Judge's reasons last F cited above. The
present is a case of an actual mandate arising by implication from the
defendant's conduct. In this connection reference may appositely be
made to the remarks of DE VILLIERS, C.J., in Faure v Louw, 1 S.C. 3,
where, alluding to certain general rules of the Roman Law. Appeal
accordingly dismissed

Tacit authority can also be said to cover those circumstances where an

agent exercises any necessary, usual or emergency powers associated
with that sort of agent’s work in the circumstances. This refers to tasks or
duties which come with one’s employment but are not expressly
articulated in a contract

 Includes: necessary, usual or emergency powers associated with

an express authority – see nel v sar & h)

Nel v SAR&H 1924 AD 30)

Headnote

An agent who consigns goods by rail has no implied authority to insure the goods at
railway risk, and so render the consignee liable for the payment of the insurance or
extra rate of frieght by rail thereby incurred, in the absence of proof that it is usual
and ordinary or necessary so to insure the class of goods consigned.

F at Kimberly advertised for sale certain motor cars then at Port Elizabeth upon the
terms "in their original cases for and consigned to any part of South Africa."
Defendant bought one of the cars, and instructed F to rail it to Potchefstroom. F
thereupon telegraphed to his agents to despatch the car to Potchefstroom. On
receipt of this telegram the agents trucked the car and sent the consignment note to
defendant, but subsequently, acting upon further telegraphic instructions from F, they
added upon the consignment note in the possession of plaintiff Administration the
words "at railway risk." These words did not appear upon the consignment note sent
to defendant. Upon arrival of the car at Potchefstroom delivery was taken by
defendant's agent C., from whom the railway clerk demanded the sum of £38 7s. 9d.
railage, being the correct amount "at railway risk." Upon objection by C that the
charge was too high, the clerk, failing to notice that the car was consigned "at railway
risk," reduced the amount to £25 12s. 3d, the proper charge "at owner's risk."

On appeal from a decision of the Transvaal Provincial Division confirming a

judgment of a magistrate in favour of plaintiff Administration for £12 15s. 6d,
the difference between the railage "at railway risk" and "at owner's risk."

Held, that upon a true construction of the contract between F and the
defendant, F had authority to consign the car on behalf of defendant from Port
Elizabeth to Potchefstroom and to employ a sub-agent for that purpose.

Held, further, that in the absence of proof that to send the car "at railway risk"
was the necessary and usual method of sending cars in cases, or was justified
by custom or trade usage, F had no authority to send the car "at railway risk,"
and that defendant was accordingly not liable for the additional railage. Eg: a
company hired to provide printing material, would include hiring a courier to
transport the materials.

3. Actual Authority By Operation Of

Law
 Sometimes authority to act arises by operation of law, without
the need for any express authorization.

Examples:

• Partners in a partnership
• A board of directors and a company
• a prodigal under his curatorship

4. Ratification
 A practical exception to the rule that one person may not act for
another without authority.

 If “A” acts without authority, it is possible for P subsequently to ratify

that act, and clothe it with authority after the fact.

 Full discussion, and case law, on pages 22 and 23.

 Is considered to be an ex post facto form of actual authority

with retrospective effect.

 If the principal or purported principal ratifies what was done in his

name, then, if certain conditions are fulfilled, the resulting situation is
the same as if power had been granted beforehand

 Ratification is retrospective in effect, i.e. the contract which comes into

being dates from the time the agent acted

B. Apparent Authority
Ostensible authority: The doctrine may be applicable where the
existing legal relationship between principal and agent is terminated e.g.
where an agent continues to take orders from clients on behalf of his
principal with the clients not having received notice of the termination of
the relationship, the principal will be liable towards the third party (client)
because he will not be allowed to show that the authority had expired.

 Therefore, if somebody through his actions or words creates

the impression that someone is his agent and a third person
contracts with the alleged agent on the strength of such impression,
the person who created the impression cannot later allege that the
agent did not have the necessary authority.
IT IS AUTHORITY AS IDENTIFIED FROM THE REPRESENTATIONS OF
A PRINCIPAL AND THE PERCEPTIONS OF A THIRD PARTY, WHERE
NO ACTUAL AUTHORITY IN FACT EXISTED

Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 at 583:

‘ostensible or apparent authority is the authority of an agent as it appears

to others’.

Monzali v Smith 1929 AD 382 at 385:

‘Where any person, by words or conduct, represents or permits it to be

represented that another person has authority to act on his behalf, he is
bound by the acts of such other person with respect to any one dealing
with him as an agent on the faith of any such representation, to the same
extent as if such other person had the authority which he was so
represented to have.’

IE: Authority held against P By a ‘fiction’ [definitely not a contractual

basis!]

 Apparent authority (ostensible authority) focuses on the

principal’s “representation” in relation to the agent’s
power, and the third party’s perceptions

1. Is apparent authority the same thing

as estoppel (ie “agency by estoppel”?)
YES!!!

NBS Bank Ltd v Cape Produce Co Ltd 2002 (1) SA 296 (SCA) para
25:

‘Ostensible authority flows from the appearances of authority created by

the principal. … Our law has borrowed an expression, estoppel, to
describe a situation where a representor may be held accountable when
he has created an impression in another’s mind, even though he may not
have intended to do so and even though the impression is in fact wrong.
Where a principal is held liable because of the ostensible authority of an
agent, agency by estoppel is said to arise.’
Reaffirmed in South African Eagle Insurance Co Ltd v NBS Bank
Ltd 2002 (1) SA 560 (SCA) and Glofinco v Absa Bank 2002 (6) SA
470 (SCA).

2. Estoppel

Estopel: If someone, through his words or conduct, intimates or creates

the pretence that someone else is acting as his agent, and a third person,
to his prejudice, contracts with the alleged agent by virtue of the
pretence, the person who created the pretence cannot later allege that
the agent did not have the necessary authority. As far as the position of
the third person and the principal is concerned, the situation is treated as
if the agent had the necessary authority.

 Traditionally – a defence to a claim by a claimant. “you are not

entitled to make that claim/assertion against me.”

Ie: “estoppel is a shield, not a sword”

Requirements?
(a) the other party was misled
(b) by a representation (incl. Silence)
(c) at least negligently made (fault)
(d) the other party acted reasonably upon that belief
(e) to his/her detriment (change of position)

eg: united cape fisheries v silverman 1951 (2) sa 612 (t)

EG: UNITED CAPE FISHERIES v SILVERMAN 1951 (2) SA 612 (T)

Silverman went along to a person who operated a sales business where the person
would attempt to sell the fridge subject to specific authority. Tanner did not have
empowered authority as he had to put the offers to Silverman. Tanner did not honor
this and United Cape Fisheries bought the fridge. Silverman claimed a
reivindicatio to get fridge and United Cape pleaded the estoppel defense. This
shows that estoppel is a shield rather than a sword.

3. Estoppel: The “Agency Exception”

  According to the trio of SCA cases, this would be the one case where
estoppel is a legal basis to establish a claim to performance, often
in replication (ie not a defence)

 Requirements? (monzali)

o The third party is misled

o By a representation by the principal that the agent had authority
to bind the principal
o The third party upon “the faith” of that representation in entering
an agreement

But with the one unusual feature that while the estoppel
argument can be used as usual as a defence (silverman case) it
can also (unusually) be used as an argument to establish a claim
by a plaintiff.

Makate v Vodacom (Pty) Ltd 2016 4 SA 121 (CC)

FACTS

Makate, an employee of Vodacom, had the idea of “please call me”

messages on cell phones. He submitted this to Vodacom’s Director of
Product Development and Management (Geissler). Geissler gave an
undertaking that Makate would receive remuneration for his idea if it
resulted in a viable product for Vodacom. The extent of this remuneration
would be negotiated with the CEO.

When Makate sought a court order to force Vodacom to negotiate

reasonable remuneration, Vodacom argued that Geissler did not
have authority to give the undertaking on its behalf. Makate
argued that Geissler had ostensible authority.

ISSUES

Whether ostensible authority is a form of estoppel. If it was a form of

estoppel, a procedural question followed: Can someone reply on estoppel
to establish his case that a company is bound to a contract or can
estoppel only be pleaded in replication (ie to prevent the company
from denying authority).

COURT
MAJORITY

Held that estoppel is used when authority is alleged by a plaintiff and

denied by defendant. The plaintiff must then raise estoppel in replication
against the denial of authority – ie it cannot be used by the plaintiff in
making out a case in the first place. Accordingly, Makate could not
rely on estoppel in founding/establishing his case.

Majority then relied on an English case to conclude that

ostensible authority is not a form of estoppel. The majority
ignored a long line of English and commonwealth cases - including a
more recent House of Lord decision - saying the opposite of the
case relied on by the majority.] It found that two South African
cases that also held ostensible authority to be a form of estoppel
were wrong.

Majority held that ostensible authority is the authority of an agent “as it

appears to others” and that it was a form of actual authority.

The majority said that the only requirement for ostensible

authority is that the company must create the appearance
that the agent has the power to act on its behalf. It continued:
“Nothing more is required. The means by which that appearance is
represented need not be directed at any person. In other words the
principal need not make the representation to the person claiming that
the agent had apparent authority.”

The majority also said that the other contract party need not
prove reliance or prejudice. {Both of these are elements of
estoppel, ofcourse.]

The majority held that Geissler had ostensible authority because

Vodacom created the impression that he was authorised.

MINORITY

The minority relied on different grounds. It explained that ostensible

authority is based on estoppel by representation, as was held in a long
line of cases.

Held that the procedural obstacle – that estoppel can only be pleaded in
replication – does not form part of our law. It found that the
requirements of estoppel had been satisfied on the facts.

It did not agree with the majority that ostensible authority

can be a form of actual authority.
The majority judgment has been widely criticised by academics.
The following extract comes from a paper that Professor Natania Locke
delivered at the Annual Banking Law Update in 2016:

“It is one thing to say that a company must be kept bound to the acts of a
purported agent because the company created an atmosphere of
regularity about the extent of the powers of a particular individual that the
company must have reasonably foreseen would be relied upon by others,
potentially to their detriment. It is completely different to say that when a
company created an atmosphere of regularity about the extent of an
individual’s powers, that the person actually had those powers.

I submit that it extends the potential liability of companies to such

an extent that many of the fraudulent acts of their employees
may now be placed before their doors.”

Despite this criticism, the majority judgment will obviously have to be

followed until overruled by the Constitutional Court.

4. PROBLEMS WITH ESTOPPEL

APPROACH

(1) The problematic assessment of what a ‘representation’ is in this

context (Glofinco being a classic example)

(2) How the evidence that courts accept of a ‘representation’ giving

rise to ‘agency by estoppel’ tends to be extremely weak in
comparison to other forms of estoppel (any of the three mentioned SCA
cases illustrate this)

(3) That a finding of prejudice or detriment is often contrived, or irrelevant

(4) The debate in SA about the vexed fault requirement. Does

negligence have to be proved on the part of the principal? Why
relevant to an authority scenario?

5. UK AND AMERICAN COMMENTATORS

Professor Francis Reynolds: ‘It seems likely that … the use of estoppel by
representation is a transitional stage in the reasoning around apparent
authority.’

FIRST ALTERNATIVE: THE RELIANCE THEORY

Smith v Hughes [1871] 6 QB 597 at 607:

‘If, whatever a man’s real intention may be, he conducts himself that a
reasonable man would believe that he was assenting to the terms
proposed by the other party, and that other party upon that belief enters
into the contract with him, the man thus conducting himself would be
equally bound as if he had intended to agree to that other party’s terms.’

SECOND ALTERNATIVE: VICARIOUS LIABILITY

6. WHERE ARE WE?

 No-one is too sure! But the outcome seems to be that apparent
authority is a form of authority identified by the basic requirements of
monzali (but not the full requirements of estoppel). It is only where
the issue is raised as a defence or in replication that it is a true
estoppel argument (see diagram on p 25).

 Academic commentary so far uniformly says the cc “lost the plot”.

 Have been no cases since – everyone too scared to try.

 You: must be aware of the debate and to consider for yourselves how
you would tackle such a case and justify it.
V. Obligations of the Agent

The agent’s residual obligations are:

1) to do what he or she has been instructed to do;

2) to exercise care, skill and diligence;
3) to impart information;
4) to advise;
5) to act in good faith;
6) to account.

A. Perform his Mandate

 An agent who does not do what he or she has undertaken to do is not entitled
to any remuneration.
 If the Agent acts outside the scope of his authority and the principal
suffers a loss

o Agent will have to make good the loss and the principal will not
be bound.

1. Delegation of performance

Strydom v Roodeval Management Committee 1958 (1) SA 272 (O) at 273G)

If the principal has appointed the agent because of that particular person’s
skill and expertise, then the agent may not delegate the duty

There are a number of ways in which performance may be

delegated:

1. Sub-agency

o Second agent being contracted by the first in a form of sub-contract.

o Agent cannot, of course, delegate greater powers than the original agent
was given by the principal.
o Principal’s knowledge or permission is not necessary.
o But the sub-agent does have at least a fiduciary duty to act in the
principal’s interest
o Sub-agent must seek remuneration from the agent

2. Substitution
o One agent may be “substituted” for another.
o Substituted agent takes the place of the original agent, and is contractually
tied to the principal by substitution.
o Requires agreement of all the parties.

3. Agent to be appointed to find another agent.

2. To exercise care, skill and diligence

 Pothier: “the mandator has the right to demand that of the mandatary … not
only his good faith, but also the care and skills required in the execution of the
mandate”.

S v Heller 1971 (2) SA 29 (A) at 44C

“the principal bargains for the exercise of the disinterested skills, diligence and zeal
of the agent”.

 Although the general requirement is that the agent should show the care and
diligence of the “ordinary prudent person” the degree of care required may vary
depending on the nature of the tasks.

Story Agency para 183

agent is understood to contract that he will exercise the skill “ordinarily possessed
and employed by persons of common capacity, engaged in the same trade,
business, or employment”.

Perform the Mandate with the Necessary Knowledge, Care and

Skill

If the Agent fails to do so, he will be liable for any damage suffered by
his Principal
The degree of knowledge, care and skill required will depend on
the duties and circumstances

If the duties cannot be determined, it must be asked how a

reasonable man would have acted in the circumstances.

3. To impart information

 Second, Agency para 381(a) reads:

“An agent who is appointed to sell a property at a fixed price to a particular

person may learn that another person is willing to pay a higher price.
 Unless the agent has a reason to believe the principal desires to sell at a fixed
price to the particular person, it is the agent’s duty to inform the principal of the
facts relating to the other person’s interest.”

 If an Agent acquires or possesses secret information concerning his

Principal, he may not disclose it to third parties or use it for his own
purposes

 An Agent must also inform his Principal of all the actions taken
by him in the execution of his authority

4. To advise
 If a principal employs a skilled agent, particularly one who has skills the
principal lacks, the agent is bound to advise the principal of the probable
consequences of any course of action to be followed.

5. To act in good faith

 Agent is obliged to carry out his or her duties in good faith.

 This requires the agent to conduct the principal’s affairs in the principal’s
interests, and not for the agent’s benefit.

 The agent has a fiduciary duty to a principal.

Robinson v Randfontein Estates Gold Mining Co 1921 AD 168 at 180:

“Where one man stands to another in a position of confidence involving a duty to

protect the interests of that other, he is not allowed to make a secret profit at the
other’s expense or place himself in a position where his interests conflict with his
duty. The principal underlies an extensive field of legal relationship. A guardian to his
ward, a solicitor to his client, an agent to his principal afford examples of
persons occupying such a position.

As was pointed out in The Aberdeen Railway Company v Blaikie Bros (1

Macqueen 474), the doctrine is to be found in the civil law (Digest 18.1.34.7), and
must of necessity form part of every civilized system of jurisprudence. It prevents an
agent from properly entering into any transaction which would cause his
interests and his duty to clash. If employed to buy, he cannot sell his own
property; if employed to sell, he cannot buy his own property; nor can he make any
profit from his agency save the agreed remuneration; all such profit belongs not to
him, but to his principal. There is only one way by which such transactions can be
validated, and that is by the free consent of the principal following upon a full
disclosure by the agent.”

Three common examples of the duty to act in good faith:

a) Secret Profits
b) Duty and Interest conflicting
c) Misuse of confidential information

a) Secret Profits
 Any profit an agent makes in connection with a transaction negotiated on behalf
of the principal may be claimed by the principal.

 The exception is where the principal, with full knowledge of the facts, permits the
agent to benefit himself

Leading Statement Robinson v Randfontein Estates Gold Mining Co at 229:

“It is no doubt well settled that in equity an agent cannot, without the consent of
his principal given with full knowledge of the material facts and under circumstances
which rebut any presumption of undue influence, retain any profit acquired by him
in transactions within the scope of the agency. The principal can always in such
a case treat the profit as acquired on his own behalf and insist on its being
accounted for to him.

For the same reasons an agent whose duty it is to acquire property on behalf of his
principal cannot without the like consent acquire it on his own behalf and
subsequently re-sell it to his principal at an enhanced price. In such a case the
principal can treat the property as originally acquired for him and the re-sale as
nugatory, and may, therefore, recover from the agent the money paid on such re-
sale less the original price and the expenses incurred by the agent in acquiring the
property.”

Determining whether a Profit is Secret:

1.Was the profit made without the knowledge of the Principal?
2.Did the Principal give permission for the profits to be made?
3.Was there a causal link between the profit and the act of
representation?
 Robinson v Randfontein Estates Gold Mining Co

FACTS

Robinson a director and chairperson of the board of directors of the

plaintiff
company, had purchased a farm for himself through a agent when the
company , which had been keen to purchase the far, , could not reach
finality
with the sellers . Robinson then sold the farm to the company at a
massive
profit.

ISSUE

Was the company entitled to claim the profit back from the Director?

COURT

Held that where one man stands to another in a position of confidence

involving a duty to protect the interests of that other, he is not permitted
to make a secret profit, other's expense or to place himself in a position
where his interests conflict with his duty.

Held that a principal who discovers that he has purchased his

agent's own property may elect either to repudiate the contract or
confirm it. If he wishes it to stand, and also claims the resulting profit, he
must show that such profit arises from transactions completely covered
by the prohibitive operation of the relationship between him and the
agent.

Held, that the company was entitled to claim from the director the profit
made by him.

b) Duty and interest conflicting

Transvaal Cold Storage Co Ltd v Palmer 1904 TS 4 at 33

Mason J, in said: “no agent may place himself in any position where his interest and
his duty may conflict”.
Hargreaves v Anderson 1915 AD 519 at 522

Solomon JA said: “An agent, employed to sell, cannot legally purchase the property
entrusted to him for sale and his principal, on discovery of the fact, is entitled to
repudiate the sale. That is an independent rule which is quite independent of fraud or
of the fact that the agent has gained any advantage by the transaction. Nor does it
make any difference whether the agent is the sole purchaser or is jointly interested
with others in the purchase.”

 If the principal gets to hear of the breach, the principal may choose to
adopt or cancel the transaction, but does not have to pay the agent a
commission.

c) Misuse of confidential
information

leading case: Jones v East Rand Extension Gold Mining Co Ltd 1903

“The principle is that an agent (including a servant [ie employee])

cannot exploit anything (including information which can be used
for the purposes of the principal’s business) which belongs to his
principal and which the agent possesses merely in a fiduciary
capacity.

It seems to me that the information which the plaintiff made use of for the
purpose of obtaining the contract in question in this case fell within this
principle. It was obtained by him in the course of his employment, and
was therefore covered by the fiduciary relation between himself and the
defendant company, and it was information the utilization of which was
within the scope of the defendant’s company’s business. Accordingly I
hold that the defendant company is entitled to the contract.”

 Principal can, upon hearing of the misuse, terminate the agency

relationship, and in addition may claim transfer of any rights the agent
may have acquired in his or her own name.

6. To account
 Duty to account for everything done on behalf of the principal in good faith

Story on Agency para 203 expounds on this obligation as follows:

“Where the business in which he is employed admits of it, or requires it, to keep
regular accounts of all his transactions on behalf of his principal, not only of his
payments and disbursements, but also of his receipts; and to render such accounts
to his principal at all reasonable times, without any suppression, concealment, or
overcharge.”

The Agent must record all transactions, payments, expenses and receipts
in connection with the execution of his authority in order to give a proper
account to the Principal

The Principal is entitled to peruse or inspect the records held by the Agent

What can the Principal do if the Agent does not allow him to
inspect? Obtain an order of court forcing the Agent to allow him to do so

VI. Obligations of the Principal

The principal’s residual obligations are:

(1) to pay the agreed remuneration, if any;
(2) to account; and
(3) if the agent is a mandatary, to indemnify the agent in certain instances.
 A. To pay the agreed remuneration, if any

 The principal must pay the agent the agreed, usual, or reasonable
remuneration.

o Except where the agency relationship is gratuitous or where

the agency arises from a contract of employment

Ways in which the amount of remuneration may be determined (see Barnabas

Plein & Co v Sol Jacobson & Son 1928 AD 25):

1. The amount may be fixed in the agreement, expressly or impliedly.

 This could be time based, a definite sum, or even a percentage of the value of
the subject matter of the transaction.
 Possible for the parties to agree expressly on payment of “the usual” or “the
customary” fee/commission, and this will be valid provided that is readily
ascertainable.

2. In the absence of express or implied agreement, the agreement is

commonly regulated by the trade usage applicable in the relevant
profession

 Here, the remuneration is determined residually, by operation of law.

 In many agency-related professions, such as auctioneering, estate agency,
brokering and factoring, there are consistent trade usages that have been
established.
 Estate agents – 5 to 7.5% of price; Rental agents 10-12% of monthly rent

3. If remuneration is not fixed, nor subject to regular trade usage or tariff,

the agent is entitled to recover an amount that is “reasonable in the
circumstances”. The technical Latin term for this is quantum meruit.

Barnabas Plein & Co v Sol Jacobson & Son 1928 AD 25):

Headnote

Applicant, an estate agent, had, on the instructions of respondents, found a purchaser for their
business and stock in trade. A discussion took place between applicant and J., a member of
respondent firm, as to the amount of commission to be charged by applicant. At that time B, the
purchaser, was not prepared to pay the price which was eventually obtained from him, and
applicant was asked to charge a small commission in view of the price then contemplated.
Applicant told J that his ordinary commission on the figures mentioned would be approximately
£700, but he agreed to charge less in view of the circumstances. J offered £100, and applicant
eventually agreed to accept £250. On subsequent negotiations between B and respondents,
unknown to applicant, the purchase price of the business and stock in trade was increased. When
applicant heard of this increase, be contended that the basis of the agreement as to commission
had fallen away, and demanded his full commission based on a tariff framed by the Real Estate
Agents Institute, of which applicant was a member. That Institute had a limited membership and a
very large number of its members in a great number of cases departed from their own tariff, and
there were a number of estate agents who were not members of the Institute. The respondent
tendered £40 as additional commission calculated on the same basis as the commission originally
agreed upon. Applicant, in an action for

1928 AD at Page 26

increased commission in a magistrate's court, contended that he was entitled to the full amount of
commission under the tariff on the whole of the purchase price, and alternatively claimed the
balance of commission on the amount by which the purchase price had been increased at the rate
laid down in the tariff. The magistrate gave judgement for the defendant, this decision was upheld
on appeal to the Transvaal Provincial Division. In an application for leave to appeal.

Held, that on the assumption that the agreement as to commission was not applicable to the sale
actually concluded, the fact that the agreement was made preceding it and the reasons for making
it were all pertinent to the enquiry as to whether or not an implied term to pay commission in
accordance with trade usage was to be imported into the contract of employment and that under
the circumstances an agreement to pay the tariff rate of commission could not he implied.

Held, further, that applicant was entitled to reasonable remuneration for his services; that, though
the existence of a tariff rate could be invoked as evidence in deciding what is a reasonable
remuneration, the evidence as to the tariff was not strong enough to justify its being invoked in the
present case; that, as the only guide as to what would be a reasonable reward for applicant's
services was the agreement, there was no sound reason for saying that the court below had erred
in fixing the amount of the commission at £290, and that the application should accordingly be
refused.

1. Remuneration on a commission basis

 A percentage of the value of the subject matter of the transaction.

 Earned upon the happening of a specified event, which involves the

rendering of the agent’s agreed service.

 NB: estate agents usually independent and unempowered agents

Gluckman v Landau & Co 1944 TPD 261 at 267

Commission agreement: “one in which the principal promises to pay a sum of

money upon the happening of a specified event, which involves the rendering of
some service by the agent”.
 Most common with agency and mandate is in the context of the purchase and
sale of immovable property, where estate agents are involved in facilitating the
transaction.

a) Estate Agent’s commission

 Parties are entitled to agree between them what service is required, and on
the occurrence of what event a commission could be earned.

In a nutshell: the service is to the introduction of someone ready, willing and able to
purchase on the seller’s terms and conditions (not merely to introduce someone
at all); the event which earns the commission is the conclusion of a binding contract.

 In so far as the service is concerned,

o may be an unempowered performance of a service to find a buyer

(remember, not a mandate – see pages 11-12 and Eileen Louvet case),
or

o It may be the agreement to give the power to the agent to conclude a

sale.

 As far as the event is concerned, They could, for example, agree

o that the agent should introduce a person who makes an

adequate offer;
o introduce a person who is willing and able to sell;
o introduce a person who is able to pay;
o that there must be a conclusion of a final contract; or
o there must be contract and an instalment paid; or a contract and
the payment of the whole price.

 In the circumstances, the contract determines both the service

and the event.

General rule: In the absence of express agreement, estate agents are

unempowered.

 Their obligation is usually to introduce to the seller/principal a buyer who

is ready, willing and able to buy on the stipulated terms or other terms
as are acceptable to the seller/principal.

Commercial Business Brokers v Hassen 1985 (3) SA 583 (N)

“The general rule is that an agent such as the appellant who is employed to sell or
find a purchaser for a property or business only becomes entitled to payment of
his commission upon the conclusion of a binding contract of sale between the
seller and a willing and able purchaser introduced by the agent.”

2. Requirements To Earn the

Commission

a) Complete or Substantial
Performance
 The agent will be entitled to the commission only if the task/service as specified
has been completed, or substantially performed.

 The principle in BK Tooling about complete performance can be relaxed.

BK Tooling v Scope Precision Engineering 1979 (1) SA 379 (A))

"The general rule applicable to cases of this sort undoubtedly is that a

contractor cannot sue for the remuneration stipulated for by him until he has
completed the work he has undertaken to do"

 The case law seems to indicate that substantial performance will be found where
the transaction which results is not the precise one which was envisaged under
the mandate, but which has almost the same effect.

o For example, if an agent employed to sell finalises a 99-year lease, that

would most likely be substantial performance.

Sammel v Jacobs & Co 1928 AD 353.)

Plaintiff claimed a commission of 1 per centum from the defendant on the

ground that the latter had requested him to raise a loan of £27,500,
subsequently increased to £35,000, not on behalf of the defendant but on
behalf of one Flederman. Flederman personally raised on his own behalf a loan
of £35,000

Held, on the facts, that the commission of 1 per cent. was promised to plaintiff
by defendant if the former was instrumental in obtaining a loan of £27,500 from
the insurance company to Flederman.
Held, further, that in view of the application for amendment, which should
have been granted, it was unnecessary to consider whether plaintiff was
entitled to commission on the whole sum advanced, and that as on the facts it
was clear that the sum of £27,500 would have been advanced on the property
alone, the fact that £35,000 had been lent upon the property, together with
additional security, did not debar the plaintiff from recovering commission on
the sum of £27,500.

Here the performance was substantial and not complete and he could still
make a claim for that.

 However, there is no substantial performance if a sale is subsequently voided

for public policy reasons (eg the buyer is prohibited from buying it)

o commission is earned only on the conclusion of a valid sale contract:

b) Causation
 The agent must have been the proximate or effective cause of bringing the
principal and the third person together in a transaction

 The test is not merely one of factual causation/conditio sine qua non
but also requires there to be legal causation

 The Principal’s decision to accept the third party’s offer is the

ultimate cause of the event … so the question we ask is:

“Was the agent the proximate and effective cause of

bringing the Principal and the third Party together?”

In other words, did the agents service lead to the causing of the
event (conclusion of the sale).

Aida Real Estate v Lipshitz 1971 (3) SA 871 (W) at 873-4)

 Empowered agents the causation would be directed towards concluding the
contract on the principal’s behalf;

 Unempowered agents, question is whether the agent has causally contributed

to bringing the parties together to negotiate a contract.

(1) Problem: Multiple causal factors or

breaks in chain
 It can be noted that usually the “finding” and “introduction” of a
willing and able buyer is key and the “agent’s instrumentality’’ in
facilitating the ultimate transaction. Most cases there is one agent,
and either there is success (commission earned) or failure (no
commission). These are the easy cases

 The problem comes where different factors relating to

(i) the actions of the principal;
(ii) the actions of the agent; and
(iii) the actions of another agent, come into play – the classic situation involving
multiple causal factors.

 Where there are competing claims by different agents to the commission

 Here … factual causation (conditio sine qua non) not

enough. Must in addition apply common sense and policy factors
relating to legal causation.

Leading statement - Aida Real Estate v Lipshitz 1971 (3) SA 871

(W).

“If a new factor intervenes causing or contributing to the conclusion of the

sale and the new factor is not of the making of the agent, the final
decision depends on the result of a further enquiry … did the new factor
outweigh the effect of the introduction by being more than or equally
conducive to the bringing about of the sale as the introduction was, or
was the introduction still overridingly operative?”

“the agent’s instrumentality must have been in all the phases from the
introduction to the sale consistent, uninterrupted and a major
positive force working towards the successful conclusion of the
transaction.”
 (2) Multiple Causal Factors
NB: Remember that the party who claims must prove!

1. The efforts are primarily the seller’s not the agents. Eg

when you get an estate agent and they do nothing but
the seller ends up getting the buyer themselves

2. Time, and agent falling away.

See Doyle v Gibbon 1919 TPD 220;

A commission agent gave G an intending purchaser a card to view certain

property which he had for sale. After inspection G decided not to buy as the
price was too high. Some months later G saw a "for sale" notice on the
property which reminded him that he had previously inspected the property.
He then, without further communication with the agent, negotiated with the
owner direct and purchased for a smaller amount.

Held, that under the circumstances the causa causans of the sale was the
previous introduction through the agent who was, therefore, entitled to his
commission on the lower purchase price.

Essentially, the agent earned the commission because he was the proximate
cause.

3. The Purchase’s efforts in making the necessary

financial arrangements.

Aida Real Estate v Lipshitz 1971 (3) SA 871 (W)

In this case the agent’s efforts at effecting a sale are by common

consent confined to the introduction. What happened thereafter
occurred without his assistance, even without his knowledge.
From what has been said before, however, it is clear that this
cessation of activity on his part does not necessarily deprive him
of his claim. The introduction might still be the overriding factor
inducing the sale.

It would be a mistake to say that the occurrence of these financial

obstacles and their removal without the assistance of the agent
necessarily go to show that the agent’s introduction was not
effective in bringing about the ultimate sale. A commission agent
is paid by results and not by good intentions or even hard work.

In these circumstances, despite the break that occurred late

January /early February in the negotiations and despite the fact
that Mr. Geffen dropped out of the negotiations, it was his
introduction and therefore his efforts on behalf of the plaintiff
company which were the effective causes of this sale going
through.

Court found that the initial introduction and the agent’s initial
efforts were the reason for the sale. So regardless of the other
factors the agent had still earned its commission.

4. Competing Claims by different agents famous one

Eschini v Jones 1929 CPD 18; - no commission – no causal action – was

interrupted – no consistency

Where more than one agent is concerned with negotiating a sale between a principal
and a particular third party, the agent entitled to remuneration is not necessarily the
agent who first finds the purchaser, but the agent who is the effective cause of the
sale being completed.

Jones did not bring the parties together; he introduced the property to the buyer, but
he did not enable the buyer to purchase, for he did not disclose the name of the
seller. Jones was not an agent for an undisclosed principal, authorised himself to
sell, and without knowing who the owner was, Blusger could not have bought. In my
opinion it cannot be said that plaintiff's introduction of the property effected the sale.

It may be argued that but for the introduction through plaintiff's advertisement and his
letter of the 6th October Penny would not have effected the sale. This is true. But in
the first place we are not considering what claim Penny had to brokerage. Secondly,
in order that a broker may claim commission, it is not necessary that he should have
brought the property to the notice of the buyer. Cases often occur where the buyer
knows the property and knows who the owner is, but he chooses to treat for the
purchase through the owner's broker. In such cases, if the broker brings about the
sale, he is entitled to commission, even though he did not introduce the property.

Even if performance by the plaintiff was prevented by the neglect of the defendant,
this would not suffice to give the plaintiff a claim even for damages --- he must prove
not merely negligence but dolus.

Essentially, there were discussions but Jones never put the introduction in place so
the eventual purchaser went to his own accord to the Pennys and they facilitated
negotiations leading to the conclusion of the contract.
The court found that jones had not earned the commission even though he
advertised the property.

5. Time, Further Factors, And Competing Claims By

Different Agents

Very important cases – in the textbook!!!

Basil Elk Estates v Curzon 1990 (2) SA 1 (T); p167

The first agent had shown the eventual purchasers the house at the end of
1984. At the time the latter were “impressed with the property, as it suited their
requirements.” Shortly thereafter their family circumstances changed and they
ceased to look for a new residence. In February and March 1985 the owner
renewed his instructions to the agent to find a buyer, ie somebody else; but no
buyer could be found. Thereafter, following a change in her own family
circumstances the owner took the house off the market. In September 1985 the
owner again decided to sell and instructed a different firm of estate agents to
find a buyer. That firm’s advertisement was seen by the eventual purchasers
who recalled their earlier visit to the property. Their financial circumstances
and their family circumstances had changed and they bought the property.

The first agent’s claim for commission failed, absolution from the instance
being given.

Gordon v Slotar 1973 (3) SA 765 (A)

G initially appointed S, who was a part time agent to find a purchaser for a
certain house and the price was to be R75 000. In May 1971 S found Mr and
Mrs L and twice showed them over the house. Mrs L then made a written offer
of R62 500 which G refused. Further oral negotiations in June 1971 came to
nothing. G asked Currie’s, a firm of auctioneers and estate agents, to sell the
property by public auction and granted the firm sole selling rights for 14 days
after the auction. It was understood that the price would be about R60 000. At
the auction Mr and Mrs L made no bid. A member of Currie’s staff then
contacted Mr L saying that if he offered R56 000 he stood a good chance of
getting the property. Arrangements to have the house inspected by a qualified
architect were made by Currie’s and, after his advice had been obtained, Mrs L
signed an offer for R56 000 which was subject to a bond of R28 000 being
obtained. Currie’s conveyed the offer to G who rejected it and asked for R57
500. Mrs L then increased her offer to R57 000 and this was accepted. The
court held that S was not entitled to commission.

The court said that the fact that plaintiff initially introduced Lourandos as a
prospective purchaser, and the fact that both Lourandos and his wife were
keen on buying the property, are, of course, very important considerations.
But, as indicated, Lourandos, though keen, was not prepared to buy at any
price. The negotiations between defendant and Lourandos during the early
part of June, 1971, through the agency of plaintiff, broke down precisely
because of the fact that these two persons were too far apart in their
respective views as to the value of the property. And plaintiff, so it appears,
was unable to do or suggest anything to bridge the gap between them and he
in fact, on his own testimony, did nothing more thereafter than keep in touch
periodically with both of them over the months that followed. The position
being as stated above, something had to be done in order to bring about a
situation in which the parties could negotiate on a realistic basis. And it was
the intervention and efforts of Currie’s that brought about such a situation,
and it was Currie’s who then negotiated for a price on which the parties could,
and in fact did, agree.

(3) Equal Causal Factor

What would happen in circumstances where two agent’s
contributions are equal, or virtually equal, in performance? See
Kerr Agency 171.

 No case yet in SA law which has had to face this issue squarely…

Either:

(a) no-one can meet burden of proof

Or

(b) claim a share of the commission (seems to occur by settlement)

3. Forfeiture of Commission

In Levin v Levy 1917 TPD 702 at 705, Curlewis J said:

“It is well established that where an agent has acted improperly and unfaithfully
in the performance of his duty towards his principal, he will forfeit any
remuneration or commission to which he would otherwise have been entitled if
his improper or unfaithful conduct is connected with the duty he had to perform.”

 Forfeiture of commission :
  Failure to introduce a willing buyer( in the case of an independent
agent)
 Breach of obligations under section E: (1) to do what he or she has
been instructed to do; (2) to exercise care, skill and diligence; (3) to
impart information; (4) to advise; (5) to act in good faith; (6) to
account.
 Disentitled by law (see esp s26 and 34A of the Estate Agency Affairs
Act on p35)
 The rule reflects the usual rules regarding contractual performance and breach of
the agent’s obligations.

 Failure by an agent to comply with the obligations is considered to be

“improper or unfaithful” conduct within the meaning of the rule.

 If the agent acts negligently in fulfilling the mandate, and this causes the principal
loss, but the event justifying the commission is fulfilled, the law states that the
agent does not forfeit the commission; however, the agent will face an
action for damages. Claim for delict.

Estate Agency Affairs Act 112 of 1976

An estate agent will also forfeit the commission if the agent is not entitled by
law to the commission.

 Section 26 reads:

‘No person shall perform any act as an estate agent unless a valid fidelity fund
certificate has been issued to him or her and to every person employed by him or
her as an estate agent and, if such person is -
(a) a company, to every director of that company; or
(b) a close corporation, to every member referred to in paragraph (b) of the
definition of “estate agent” of that corporation.’

 And section 34A reads:

‘(1) No estate agent shall be entitled to any remuneration or other payment in

respect of or arising from the performance of any act referred to in subparagraph
(i), (ii), (iii) or (iv) of paragraph (a) of the definition of “estate agent”, unless at the
time of the performance of the act a valid fidelity fund certificate has been issued
–
(a) to such estate agent; and
(b) if such estate agent is a company, to every director of such
company or, if such estate agent is a close corporation, to every
member referred to in paragraph (b) of the definition of “estate
agent” of such corporation.

(2) No person referred to in paragraph (c)(ii) of the definition of “estate agent”,

and no estate agent who employs such person, shall be entitled to any
remuneration or other payment in respect of or arising from the performance by
 such person of any act referred to in that paragraph, unless at the time of the
performance of the act a valid fidelity fund certificate has been issued to such
person.’

B. To Account
 The principal must account to the agent.

o For example, where the agent can only determine the amount
of his commission by examining the books kept by the principal
because the orders are placed directly with the principal.

o Principal must allow the agent to inspect the books of account.

C. To indemnify the agent

 While acting for the principal, the agent may incur certain
liabilities or make payments on behalf of the principal.

o In such circumstances the agent will be entitled by common

law principles to be indemnified against such liabilities or
to recover any amounts so paid.

 Classic situations:

o An agent who has been instructed to buy something for his principal may
sometimes use his or her own money to buy it;

o A sales agent may incur travelling expenses to carry out the mandate; or

o A custodian of goods may have to spend money on securing or looking

after or transporting the thing.

1. The requirements for

indemnification:
1. The mandatary must have acted in terms of the mandate.

Meikle and Co Ltd v Van Eyssen

held that an auctioneer who has instructed to sell for cash but
accepted a cheque which was dishonoured cannot claim compensation
from the owner of the goods. He must bear the loss as he acted
contrary to his mandate.

2. The mandatary must have incurred expenses, or suffered loss.

 Principal must refund the agent for all expenses reasonably and
properly incurred in carrying out the mandate, including any interest on
outlays or advances necessarily made in the execution of the task

 The agent must account to the Principal in making the claim.

 The principal must refund the agent for any damages or loss suffered
as a result of executing the mandate.

o Example, if a person incurs medical expenses in travelling or

carrying out the mandate, or is hijacked, robbed or suffers
similar loss, the agent may be indemnified.

2. Exceptions to the rule

There are circumstances where the principal will not be able to indemnify
the agent as aforesaid and those are:

1. Where the agent has assumed the responsibility for the

expenses or loss or damage.

 An agent may expressly assume or from his conduct be

deemed to have assumed responsibility for expenses or
liability of any kind.
o An express assumption of responsibility may take the
form of an exemption clause in the agreement where
principal excludes his liability and the agent agrees
thereto.

o Estates agents do not bill for vehicle and petrol costs, nor do
auctioneers – they assume responsibility for such costs.
2. Where the agent’s own fault is the cause of the expenses or
liabilities being incurred or loss or damage being suffered.

 An agent has no claim to be indemnified if his own fault is the

cause of the loss or damage being suffered.

 For example an agent cannot claim to be indemnified for cost of

the action if he defends an action which the exercise of
reasonable care and diligence in his part would have shown to be
indefensible.

 Include circumstances where the expenditure is so excessive as to be

unreasonable.

D. Variation of Obligations

 The residual obligations of agent and principal may be varied by the parties

 In unusual cases, the variation may result in the contract no longer being one of
mandate or agency, but another type of contract, whatever the parties may have
described the contract to be.

o In such cases, the rule is that the true intention behind the contract must
be recognised, not the name which it is given and the language in which
the obligations are described.

VII. Relations between the

Principal and third parties

 Since a contract exists between the principal and the third party, the agent is
simply the instrument for concluding that contract.

o The agent acquires no benefits or liabilities under that contract.

o However, there may be some complexities to this ostensibly obvious

point, depending on the nature and identity of the principal.

A. Types of Principals
Our focus is on the third category, its effect on any contract concluded
with a third party, and the scope and application of the doctrine of the
undisclosed principal.

1. Named principals

o no doubt about the name and identity of the principal

2. Unnamed principals

o The principal may be disclosed but unnamed for various reasons.

 Example: The seller might want a higher price due to the
profile of the principal.

o the agent may say no more to the third person than that he is “acting for a
client” or “for a principal

3. Undisclosed principals

o The agent does not disclose that they are acting for a principal,
entirely.

o Both the existence and name are kept secret.

B. Effect of the types of principal

1. Named and Unnamed Principals

 The validity or effect of the contract between principal and third party will
depend on whether the agent:

(i) acted within the scope of his or her authority;

(ii) exceeded the authority; or
(iii) acted corruptly.

i. Acted within the scope of his or her authority

 The agent discloses that they act for a principal + acts within their authority

 The contract between the principal and third party is binding

 ii. Agents exceeding authority

 Where the agent exceeds his or her express or implied authority, the
principal is not bound by the transaction.

 However, the principal will be liable in terms of the law of unjustified

enrichment if he has benefited from the transaction at the expense of
the third party.

 However, where the agent has acted within what is his or her apparent
authority, but has, unbeknown to the third party, acted contrary to a
private instruction or limitation on his or her authority, the principal may
be liable on the basis of apparent authority

iii. Agents acting corruptly

 If the agent was influenced into concluding a contract with a third parties
through a bribe, upon discovering of the information, the Principal has an
election to cancel contract, or to affirm it and claim any damages as may be
proven.

2. Doctrine of the undisclosed principal

A contract entered into by an agent with a third party on behalf of an
undisclosed principal may be binding on the agent.

a) Third Party
 If no action has yet been taken on the contract
 The third person has a choice/election to sue either the agent or the
principal.

 May treat the contract as binding upon the agent or the undisclosed
principal

o The third person may enforce the contract against the agent
because, owing to the agent’s failure to disclose the existence of the
principal. The third person entered into the contract believing he was
contracting directly with the agent.

o The third person may enforce it against the principal because it

was negotiated on the principal’s behalf by the principal’s agent.

 But … if the third person has commenced performance/taken

action against the “agent” or sued
 o that party is barred from making a claim against the other (is
essentially locked in), even if he acts against the agent before
becoming aware of the undisclosed principal

b) Undisclosed principal:
 May choose to adopt the contract, or not. [the principal has the
preferential right.]
 May as a result sue the third party

Leading statement - Natal Trading And Milling Co V Inglis At 727:

“the rights and obligations of agent and undisclosed principal are co-
relative …

when the undisclosed principal is discovered, the [third] party has

the right either to sue the agent with whom he contracted, believing him
to be the principal, or the actual principal. And if he … elects to sue either
one, he is debarred from subsequently proceeding against the other.”

 Analogy with ‘piercing the veil’

CONFIRMED IN

AVIS v HIGHVELD SUPPLY STORES 1925 AD 410

The estate of J. C. Avis, a brother of the appellant, was

sequestrated in January 1922. To enable him to effect a
composition with his creditors the appellant paid the trustee an
amount of £1,750. Avis passed a bond for £1,500 over his
property in favour of the appellant in security of the money which
he had paid to the trustee.

The older brother went over seas and made the African Shipping
Company his agent. The younger brother stopped paying his loan.
As an empowered business agent they brought up the security so
they told the J.C to sell the wagon to offset some of his
instalments he has not paid. J. C. Avis brought to the
respondent’s store a wagon at the end of July or beginning of
August, 1922, and offered it to him for sale. On his refusing to
buy, Avis suggested that he should take charge of the wagon and
try to sell it for him. This the respondent agreed to do. Avis then
asked him to supply him with goods on security of the wagon, and
upon his consenting ran up an account to the amount of £20 19s.
Throughout the interview no mention was made by J. C. Avis of
the appellant, and the respondent understood that he was acting
entirely on his own account. This meant that the respondent
thought that J.C was the principal yet he was the agent of the
bigger brother.

The older brother came back and found out about this and when
he discovered that the store had sold the wagon he alluded that
the person that they entered into the contract with was the agent
and he was the principal thus he wanted his money. The court
said the doctrine of undisclosed agent applies and he could get
his claim.

CULLINAN v NOORDKAAPLANDSE AARTAPPEL-

KERNMOERKWEKERS KOÖPERASIE BPK 1972 (1) SA 761 (A) AT
771
[NOTE: CULLINAN LISTED ON SAFLII AS [1971] ZAENGTR 1
…] in africaans

SEE TOO KARSTEIN v MORIBE 1982 (2) SA 282 (T)

The case involved Section 1(2) of the Black Land Act No. 27 of
1913 provides that: "From and after the commencement of this
Act, no person other than a Black shall purchase, hire or in any
other manner whatever acquire any land in a scheduled Black
area or enter into any agreement or transaction for the purchase,
hire or other acquisition, direct or indirect, of any such land or of
any right thereto or interest therein or servitude there over,
except with the approval of the Minister of Plural Relations and
Development". The two parties were in a partnership and they
wanted to take up some land. Instead of the partnership entering
into the contract Moribe entered into the contract because the
Apartheid laws allowed for black people to own land on that area.
Evidently, Moribe was acting for the partnership as an agent.
Karstein therefore wanted to reveal the partnership as the true
principal and the court agreed demonstrating that you are
entitled to reveal yourself and enter the contract.

c) Limitations of the Doctrine

On the basis of equity, the doctrine will not apply …

 where the identity of the “agent” was critical to the 3p. (delectus
personae)

 where the contract is one to perform a service of a personal nature.

Because of the personal service aspect.

 where the application of the doctrine would result in prejudice to the

third party.
see Cullinan : in this case they recognized the validity of the
doctrine but it could not apply it as the court alluded that the English law
doctrine of the undisclosed principal is part of the law of South Africa but
it should not be extended so as to permit of an agent validly contracting
with a third party on behalf of more than one principal.

They had sold 3 000 boxes of seed potato seeds at a purchase price of R7
500 to Cullinan and because he was not paying they sued. He said in his
counter claim that you cannot sued for everything because he in fact
acted on behalf of himself and on behalf of two undisclosed principals, a
certain Strydom and a certain de Lange. He avers that he bought 2
500 cases on behalf of Strydom and on behalf of himself and- de Lange
250 cases each. Because of a disease affecting the seed potatoes which
had been delivered, all three of them have suffered damage and the two
undisclosed principals have each ceded their right to claim damages from
plaintiff to defendant.

The court said if there is more than one principal but there is a bunch of
them you no longer have a claim because he will have to claim from a lot
of people which has cost implications or if the seeds have a problems he
will be sued by many parties thus the doctrine does not apply to multiple
principals.
VIII. Relations between the agent and third persons
 Sometimes third persons are unable to rely on the agent’s word that
they indeed have authority to act on behalf of a principal, so the
agents warrant the existence of an agency relationship and that they
have authority.
 Express and tacit warranty especially relevant if the agent had neither
actual nor apparent authority, and the 3 rd party cannot bind the
principal.
 The agent can indeed be bound to a warranty of authority

A. Express Warranty

 The third party enters into a contract of warranty with the agent, where
that agent warrants that he does indeed have authority to bind his
principal.

 If the warranty is breached, the third party may sue the agent for any
losses they may have incurred.

 The claim is for damages arising from a breach of contract between the
third party.

B. Tacit Warranty

 If an agent who regularly acts for a principal subject to express

authority negotiates and enters into an agreement with a third party,
the authority may be implied from previous conduct.

 Especially relevant if the agent had neither actual nor apparent

authority, and the 3p cannot bind the principal.

 Determined through the officious bystander test.

C. Residual Warranty
 Beyond express or tacit warranties, is there in law a further,
residual warranty of authority?

o YES … In circumstances where an express or implied warranty is not

obvious, the law may impose upon an agent an obligation that he
guarantees he has authority to bind the principal.

Nebendahl v Schroeder 1937 SWA 48 at 57 Voss A J said: not part of SA’s

jurisdiction so its validity is tenuous .old South West Africa division

“Ordinarily … when a person signs as agent, it is reasonable to infer a representation

that he is duly authorised to make a contract.”

1. The Requirements for residual

warranties
(a) A representation of authority by the agent
(b) Inducement (a “causal relationship between the agent’s
representation of authority and the conclusion of the contract has to
be established”.)
(c) Absence of ANY authority in fact.
(d) Loss suffered.
(e) Fault? (It is undecided whether the claim requires proof of fault
[intention or negligence] or whether a bona fide but mistaken agent
is also in breach.)

BLOWER v VAN NOORDEN

 Beyond express or tacit warranties, is there in law a further,

residual warranty of authority? Yes but this was obiter because
did not justify a claim

Van Noorden had instructions to sell a farm but had no authority to let it.
Blower did not want to buy but he wanted to let so Van Noorden tried to
find some head way on this by asking the owner in the United Kingdom.
They sent a cable to ask if there was authority. The response was unclear
to the interpreter so they thought that there was warrant given and they
went on and the tenement moved in. A letter came from London to say
they had made a mistake and they were not supposed to make a move as
they had to wait for further authority meaning there was no authority in
the first place. The tenant sued van Noorden and unfortunately the claim
could not stand because it could not be said that the agent had somehow
induced the tenant with the information Bowler did not have. They took a
collective decision so there was no misrepresentation.
 CLAUDE NEON LIGHTS
The SCA had a civil procedure case and it did not discuss a full
argument on the residual warranty. The court however suggested
in principle that the residual warranty exists although it was not
finally decided. Not clear whether it’s a claim in delict or breach
of contract

Court said there was a claim but did not investigate it. In
principle the court said there was such a claim. What had
happened was that Daniel who claimed on paper and verbally to
be an agent for a hotel entered into a transaction on behalf of the
hotel. The transaction was concluded and the bill was sent to the
hotel. The hotel said the guy did not have authority to represent
the hotel. Also there was no apparent authority, Daniel was doing
his own thing so the hotel said they were not recognizing the
contract so they turned to Daniel. They said they have a claim of
damages from him. The court said yes in principle but what the
elements are and its juristic requirements is not for us to decide
so we are only dealing with absolution from the instance so go
and deal with this in the trial court and that was the last of it. So
it seems like the residual warranty exists.

IX. TERMINATION OF THE POWER TO

ACT AS AGENT

• PERFORMANCE
• EFFLUXION OF TIME
• SUPERVENING IMPOSSIBILITY
• AGREEMENT (BILATERAL)
• REVOCATION OF POWER (UNILATERAL)
• RENUNCIATION (UNILATERAL)