Law of Contract and Law of Agency
Formation under the Contracts Act 1950
A contract needs offer, absolute and unqualified acceptance which is communicated, consideration, intention to create legal relations, capacity, free consent and a lawful object. Section 2(d) defines consideration widely: it may be past, and it need not be adequate, only sufficient in law. Capacity: a person reaches majority at 18 under the Age of Majority Act 1971, so an agreement with a minor is generally void. Section 14 defines free consent; sections 15 to 18 deal with coercion, undue influence, fraud and misrepresentation, and section 19 makes such agreements voidable at the innocent party's option.
Agency
Agency arises by express appointment, implication from conduct, ratification, necessity, or estoppel by holding out. An agent must obey lawful instructions, exercise reasonable care and skill, perform personally, keep proper accounts, avoid secret profits, and disclose any conflict. The principal must pay the agreed commission and indemnify the agent for authorised acts.
Traps
- Assuming an oral agreement is unenforceable. It usually is enforceable, but section 206 of the National Land Code requires contracts for dealings in land to be in writing and signed.
- Confusing void and voidable: unlawful or minor's contracts are void; misrepresentation makes a contract voidable.
- Assuming commission is due merely because a buyer appeared. It is due when the agent is the effective cause of the transaction, on the terms of the appointment.
- Overlooking that an agent who acts for both sides without full disclosure breaches his duty.
Rule of thumb
No written authority, no commission claim - get the appointment in writing, with the rate, the term and the trigger for payment.