Transcript REPUBLIC BANK MORTGAGE WORKSHOP July 2011

Best Practices for Real Estate 2013 Seminar
15th May, 2013
PRESENTED BY:
STEVEN M. PAUL
J. D. Sellier + Co.
Nos. 129/131 Abercromby Street
Port of Spain
Tel. (868) 623 4283
©
Law of Agency - Overview

Definition

Nature

Purpose

Creation

Effects

Termination
Agency - Definition
Agency is a relationship which arises when one person
called “the Principal” authorizes another called “the
Agent” to act on his behalf and the other agrees to
do so.
Agency is a necessary commercial device.
Nature
It is the legal relationship rather than the name that
that matters.
Insurance Agents
Travel Agents
Real Estate Agents
Must look at the purpose of the relationship.
Nature
Normally, the Agent makes the contract for the
Principal and then drops out of the picture and the
rights and obligations in the contract continue with the
Principal and the Third Party. The Agent has no rights
or liabilities under that contract.
In law, however the relationship is far more
complicated.
Purpose
The purpose/function of an Agent is to act on behalf
of the Principal to establish a contractual relationship
between the Principal and the Third Party.
In certain situations an agency is the only way to do
business. Eg. Companies
Agency Distinguished
Real Estate Agents
Usually no power to make a contract on behalf of the
Principal
Acceptance of Deposits – on whose behalf
Agency Distinguished
Warranties…
Agents must be careful in making warranties on
behalf of the Principal which they may not be
authorized to make or which may be untrue.
Creation
Express Authority
An Agent’s authority is usually created by express
appointment. For example by contract.
Listing Agreement at Clause 2.00
Creation
Grant of Appointment
In consideration of the services to be rendered by you as set out overleaf, I
the
undersigned
…………………………………………
(“Seller/Landlord”) hereby authorize, instruct, and employ you (“Broker”)
exclusively to negotiate a Sale/Rental of the Property (“the Property”)
described above or the shares in a Company whose main asset is the
property for the price of $.............................. on the terms customary in the
real estate industry in Trinidad & Tobago and recommended by AREA (a
copy of the AREA-approved Sales and Rental Agreements being available
upon request) or such other price as the Seller/Landlord may from time to
time fix.
Creation
Express authority need not be in writing. An agency
can be effectively created by oral agreement.
Difficulties in proving and defining the scope and
extent of authority
Exceptions – Signing Deeds – Powers of Attorney
Creation
Apparent Authority
An agency may be created without written or oral
agreement where the Principal makes some
representation to the Third Party which makes the
Third Party reasonably believe that the Agent was
authorized.
Summers v. Solomon (1857)
Creation
Apparent Authority - Inducement
The Third Party must have relied on
representation in entering into the transaction.
the
In all cases the relationship must be consensual
although the consent may be expressed or implied.
Creation
Subsequent Conduct
Even if the requirements of Apparent Authority are
not satisfied a person may be precluded by his
subsequent conduct from denying an agency.
Spiro v. Lintern (1973)
Creation
Ratification
A Principal may acquire rights and liabilities as a
result of his agent’s unauthorized act by ratifying. The
effect of ratification is to put the Principal, Agent and
Third Party in the position they would have been in if
the Agent’s acts had been authorized from the start.
Effects
Where an Agent makes a contract on behalf of his
Principal with a Third Party the transaction gives rise
to legal issues between:
The Principal and the Third Party;
The Agent and the Third Party; and
The Principal and the Agent
Principal and Third Party Issues
Where the Principal is disclosed.
The Principal can sue the Third Party. The contract is
between the Principal and Third Party even if actually
made by the Agent.
Principal and Third Party Issues
Where the Principal is undisclosed.
The contract is made between the Agent and the
Third Party. Generally the Principal can still take
action on the contract as it is deemed to be made on
his behalf.
Agent and Third Party Issues
Normally the Agent makes the contract for the
Principal and then drops out of the picture and the
rights and obligations in the contract continue with the
Principal and the Third party the Agent has no rights
or liabilities under that contract.
Agent and Third Party Issues
Breach of Warranty. Where an Agent purports to have
authority to act for Principal but does not in fact have such
authority, the Agent can be sued by anyone who relies on his
representation and suffers loss if agent has no honest belief
in its truth.
Even where deceit cannot be proved the Agent can still be
sued in damages for breach of warranty of authority and
be liable personally to the Third Party.
Principal and Agent Issues
Rights of the Agent
Duties of the Agent
Rights of the Agent
Payment/Commission
The contract of agency would usually provide for
payment of a commission. However as a general rule
Agents are entitled to a commission even where the
contract is silent on this.
The commission is only payable in respect of a
transaction the agent was employed to bring about.
Toulman v. Millar (1887)
Rights of the Agent
The point at which the Agent’s commission accrues
depends on the terms of the contract and has given
rise to great difficulty in the case of Real Estate
Agents.
Luxor (Eastbourne) Ltd. v. Cooper (1941).
See Listing contract Clause 4.02
Rights of the Agent
The Commission will be payable based on the
Commission Rate set out above and on:
(a) A contract being entered into during the period of
this Agreement for the sale, exchange or rental of the
Property whether procured by the Broker, another
Member of AREA, the Seller/Landlord or any other
party.
Rights of the Agent
Damages
Even if the Agent is not entitled to a commission he
may have other rights against the Principal. He may
be entitled to damages where the sale goes off as a
result of the Principal’s default.
Dennis Reed Ltd v. Goody (1950)
Rights of the Agent
Indemnity
An Agent is entitled to an indemnity from the
Principal against all liabilities reasonably incurred or
discharged by him in the execution of his authority.
An Agent is not entitled to an indemnity for acts
done outside the scope of his authority.
Rights of the Agent
Lien
An agent is entitled to a lien on all property of the
Principal which has come into his possession in the
course of his agency.
Duties of Agent
To carry out the instructions of the Principal.
To act with due care and skill – especially where the
person holds himself out as having a special skill
Duties of Agents
Clause 6 Listing Agreement
In consideration of the grant of this Exclusive Listing, the Broker
agrees, as his sole obligations to:
(a) make diligent efforts to procure a buyer/tenant;
(b) advertise the Property as the Broker deems necessary in the local
newspapers;
(c) distribute a copy of the listing through AREA's Multiple Listing
Services to all eligible Members of AREA and on request provide
them with any assistance in closing a deal;
(d) keep the Seller/Landlord informed as to the progress being made
towards the consummation of a deal.
Duties of Agents
An Agent must not put himself in a position where his
interest and duty conflict.
An Agent employed to sell a house cannot buy it
himself or have someone do so on his behalf.
An Agent cannot act for both parties unless there is
full disclosure.
Duties of Agents
Bribes and Secret Profits
Agents must not make secret profits or takes bribes.
The contract can be set aside by the Principal and the
Agent will be liable to account to the Principal for all
profits received.
Duties of Agents
An Agent cannot delegate the performance of his
duties unless the Principal expressly or impliedly
authorizes him to do so.
Duties of Agents
To indemnify the Principal against any liability to third
parties for the Agent’s negligence.
Termination
Agency is a contract and therefore determined by
any event which would terminate a contract.
Time
Performance
Frustration
Recession
Breach
Notice
Death
Effects of Termination
Termination brings an end to the Agent’s authority to
act on behalf of the Principal even if the termination
was wrongful.
Termination brings an end to the relationship of
Principal and Agent.
Rights and liabilities which have accrued before
termination are not affected.