Chapter 3: Agency Does the Earl of Somerset’s action amount to ratification of the contract?

A Yes
B No
1 Arthur worked for Lady Grey and part of his job was to buy plants, ornaments and furniture for the Is the artist able to insist on the return of the watercolour paintings?
gardens of her country manor house. When her son, Harry, was due to retire from the services, she
advised Arthur that Harry would be taking on his responsibilities. A few weeks later, Arthur ordered C Yes
some very expensive roses and marble statues from Lady Grey’s main supplier and collected the D No
goods the next day for his own garden. The invoice was delivered to Lady Grey. LO 1c
Is there an agency relationship between Arthur and Lady Grey in respect of the contract for the roses
and statues?
A Yes 5 Are the following statements true or false?

B No On ratification of an agent’s contract by a principal, the third party may then choose whether to
enforce the contract against the agent or the principal.
Is Lady Grey bound to settle the invoice?
A True
C Yes
B False
D No
Ratification can only validate an agent’s past acts and will not endow any future authority.
LO 1c
C True
D False
2 Stephen lives near an isolated headland in Cornwall. One day, he sees a Rolls Royce parked on the LO 1c
beach. No one is in sight but the tide is coming in rapidly. Stephen calls his neighbour and arranges
for him to come and tow the Rolls Royce up the beach to safety. The neighbour is happy to oblige
but wants payment for what he has done. When the owner, Anthony, returns, he refuses to pay 6 Frank acts as an agent for Marilyn, purchasing silk nightwear from a number of different suppliers.
because he says the action was not necessary. Sometimes the suppliers pay a commission on orders placed with them by Frank on behalf of
Which of the following best describes the legal position? Marilyn. Frank regards the commissions as a perk of the job and keeps them. Which of the following
A An agency of necessity has arisen because Stephen is unable to contact Anthony. best describes the legal position?

B An agency of necessity has arisen because there is an emergency situation and a pressing need A The commissions are regarded as bribes and Marilyn should report Frank to the police.
for action. B Marilyn may dismiss Frank and recover the amount of commissions retained by him.
C No agency of necessity has arisen because the Rolls Royce is not a perishable good and C Commissions are customarily retained by an agent as part of his remuneration and so Frank has
Stephen’s action was not reasonable. no liability in respect of them.
D No agency of necessity has arisen because there is no pre-existing contractual relationship D Marilyn can take action against the suppliers for directing the commissions to Frank instead of
between Stephen and Anthony. her.
LO 1c Sample Exam, LO 1c

3 Preparing for her 40th birthday party, Scarlett went into Choice Wines and ordered three cases of 7 With regard to the duties owed by an agent:
pinot noir, saying that she was buying them in her capacity as agent for Dame Hilda, a well-known Is an agent entitled to delegate the tasks that they are appointed to undertake, as they see fit?
celebrity who lived in the same village and who was planning a summer ball in the grounds of her
country house. Choice Wines supplied the wine and then invoiced Dame Hilda. A Yes
Is there an agency by holding out or estoppel? B No
A Yes Is an agent at liberty to reveal details about their principal discovered during the course of the
agency relationship, once that relationship has ended?
B No
C Yes
Can Choice Wines demand payment from Dame Hilda?
D No
C Yes
LO 1c
D No
LO 1c
8 Brian has just terminated his appointment of Livvi, who has been his agent for the past six months.
The written contract of agency did not mention anything about remuneration and Brian relies on this
4 Andrea purchases 10 watercolour paintings from an artist, Ross, for her employer, the Earl of when he refuses to pay her in respect of her services. He does, however, accept that he must
Somerset, even though he has told her not to buy any more watercolours on his behalf but to reimburse her for £5,000 expenses that she has paid along the way.
concentrate on pastels. When the artist learns this, he demands their return as he had no wish for his Can Brian rely on the written contract to claim that no remuneration is payable to Livvi?
work to hang in Andrea’s terraced home in Bridgwater. However, the Earl of Somerset had come to
like them after seeing them on Andrea’s walls and refused the artist’s demand for their return, A Yes
sending him a cheque instead. B No

ICAEW 2021 3: Agency 17 18 Law ICAEW 2021

 Is Livvi entitled to retain the goods belonging to Brian that she has in her possession until he pays Which of the following best describes the legal position?
her the sums owed to her? A Suresend is not bound because it provided written revocation of the authority given to Barry.
C Yes B Suresend is not bound because Barry did not have actual authority.
D No C Suresend is bound because Barry had ostensible authority.
Sample Exam, LO 1c
D Suresend is bound because Fastfleet relied on Barry’s representations.
LO 1c
9 Barnaby is a partner in Brown & Co, a dentists’ practice. He orders four filing cabinets, one for
reception and one for each of the surgeries, from Office Gear. The other two dentists in the practice
think that this is an unnecessary expense and ask Office Gear to cancel the order. Office Gear is not 12 Are the following statements true or false in connection with agency by estoppel?
prepared to do so and demands payment. The third party must show that they have relied on a representation that the contracting party was
Which of the following best describes the legal position as to whether or not Brown & Co is bound acting as agent for their principal.
by the contract? A True
A It is bound because the contract is within the implied usual authority of the dentist, Barnaby. B False
B It is bound because Office Gear knew that Barnaby was buying the cabinets for Brown & Co. It is not necessary to show that the claimant’s loss was caused by their reliance on the representation.
C It is not bound because Barnaby had authority to buy dentistry tools and equipment but not C True
office supplies. D False
D It is not bound because the majority of partners do not wish to buy the cabinets. LO 1c
LO 1d

13 Are the following statements true or false?

10 Amanda, Sophia and Nadia are in partnership, in the name of InStyle, providing interior design For an agency by estoppel to arise, there must be a pre-existing agency relationship between the
services to commercial clients. Sophia is a keen gardener and has advertised garden design and
principal and the agent.
landscaping services, also in the name of InStyle. She has even carried out some gardening work and
always puts up an InStyle sign at the entrance to the premises where she is working and Amanda and A True
Nadia have not objected to Sophia putting up the sign and have not tried to stop her. In fact, they B False
have welcomed the extra income for the partnership. When Sophia damages a valuable statuette
When an individual revokes the authority of their agent they should inform the third parties, who
while carrying out some landscaping works, the owner threatens to sue the partnership.
regularly deal with the agent, of the change in circumstances in order to prevent the former agent
Which of the following best describes the legal position? having any continuing authority to act on their behalf.
A InStyle is not liable because Sophia’s implied usual authority relates to the interior design work C True
only.
D False
B InStyle is not liable because Sophia is wrongly using the partnership name for what is effectively LO 1c
her own business.
C InStyle is liable because Sophia has ostensible authority to carry out gardening services on
behalf of InStyle. 14 Roz works in the accounts department of Bizzy Lizzy, a successful florist’s business. The principal
D InStyle is not liable because ostensible authority cannot arise without active representation on owner of the business, Vincent, was due to visit a specialist rose grower on the Isles of Scilly but was
the principal’s part; inactivity is not enough. unable to go due to illness. Vincent asked Roz to go along instead. He telephoned the rose grower to
Sample Exam, LO 1d say that his buying partner would be taking his place. Roz ordered 500 roses for Bizzy Lizzy.
Which of the following best describes the legal position?
A Roz had ostensible authority to order the roses.
11 Barry, Kelvin and Oscar were the directors of Suresend Ltd. No managing director had been
B Roz had implied authority to order the roses.
appointed but Kelvin and Oscar were well aware that Barry behaved as if he were Suresend Ltd’s
managing director. In particular Kelvin and Oscar knew that Barry entered into contracts on behalf of C Roz had express authority to order the roses.
the company, including regularly hiring cars and requiring valeting services from Fastfleet Ltd. Kevin D Roz had no authority to order the roses.
and Oscar have now discovered that Barry has just entered into a contract with Fastfleet Ltd to LO 1c
service all Suresend’s delivery vans and lorries. Kelvin and Barry do not wish Suresend Ltd to proceed
with this contract with Fastfleet Ltd and claim that Barry had no authority to enter into the contract
and have written to Fastfleet Ltd to this effect.
15 Annabel is Phil’s agent. She enters into a contract with Tim, within her authority, expressly describing
herself as an agent for Phil.
Can Annabel be liable on this contract with Tim?
A Yes
B No

ICAEW 2021 3: Agency 19 20 Law ICAEW 2021

 If Annabel enters into a contract, saying that she is acting as agent but without actually naming Phil as Ratification
her principal, does that mean that Phil will not be liable on the contract? C Yes
C Yes D No
D No LO 1c
LO 1c

20 Dennis was a partner in Doolittle Solicitors. He retires from the partnership and the firm’s existing
16 Ashley is Phyllis’s agent and enters into a contract for the purchase of a vintage car from Vince, as clients and suppliers are informed of this fact; the firm amends its stationery so that Dennis’s name
instructed by Phyllis. Vince does not know that Ashley is buying the car for Phyllis, at the time of no longer appears on it. A short time later, Dennis orders goods using old stationery which still has
entering into the contract, but discovers this to be the case one week later. his name on it and asks for the bill to be sent to Doolittle Solicitors.
If Vince then defaults on the sale, can Phyllis take action on the contract? Which of the following statements is correct?
A Yes A There is a binding contract between Dennis and the firm which supplied the goods.
B No B No binding contract has been created between the supplier and Doolittle Solicitors because
If Phyllis defaults on the purchase, can Vince take action on the contract? Dennis was not authorised to act on behalf of the firm.

C Yes C There is a binding contract between Doolittle Solicitors and the firm which supplied the goods.

D No D No binding contract has been created because the partnership shown on the stationery had
ceased to exist.
LO 1c
Sample Exam, LO 1d

17 Walter enters into a contract for the purchase of a barge from Barney. He is actually buying it for
Natalie, although Barney does not know that Walter is buying it for anybody else (not that it would 21 An agent’s authority to act on behalf of their principal can arise:
have made any difference to him). When the date for payment arrives, Walter is unable to pay for the Where express authority is explicitly granted by the principal to the agent
barge and tells Barney that he was actually buying it for Natalie anyway. A Yes
Is the contract enforceable against Natalie? B No
A Yes Where a person with actual authority makes a representation to a third party that a particular person
B No has the authority to act as their agent without actually appointing the agent
Is the contract enforceable against Walter? C Yes
C Yes D No
D No Sample Exam, LO 1c
LO 1c

22 Kit and Lin are partners in a takeaway pizza business. One of their employees, Jeff, decides to try to
18 Martha tells John that she wants to buy one of his horse sculptures on behalf of her grandmother, improve the business’s profits by setting up a parcel delivery operation, using the same business
Lady Reynolds. In fact, Lady Reynolds has not asked her to do so. Three months later, John contacts name, that uses the pizza delivery vehicles to deliver the parcels. Kit and Lin do not prevent Jeff
Lady Reynolds to say that he has completed a bronze stallion and it is ready for collection on the doing this and are happy with the extra money the parcel delivery service is making.
payment of £10,000. Lady Reynolds denies all knowledge of it and refuses to pay. Which type of authority does Jeff have in regard to the parcel delivery service?
Can John sue Lady Reynolds on the contract? A Actual express authority
A Yes B Implied usual authority
B No C Ostensible authority
Can John sue Martha under the tort of deceit? D Actual implied authority
C Yes LO 1c
D No
LO 1c
23 Alice, acting as Petra’s agent, contracts with Toni to purchase Toni’s car.
Under agency law, who may sue and be sued on the contract?
19 A valid agency relationship can be created by: A Alice and Toni
Express appointment B Petra and Toni
A Yes C Alice and Petra
B No D Alice, Toni and Petra
LO 1c

ICAEW 2021 3: Agency 21 22 Law ICAEW 2021

24 Are the following statements regarding agency law true or false?
The duties of an agent are limited to what was agreed and incorporated into the agency contract
between agent and the principal.
A True
B False
An agent and their principal have a fiduciary relationship between them.
C True
D False
LO 1c

ICAEW 2021 3: Agency 23 24 Law ICAEW 2021