Global Technology and Modern Commercial Agency of Necessity

• Author: Tim Vollans
• Position: Principal Lecturer in Law Coventry University Law School Priory Street, Coventry, UK
• Pages: 188-196

Page 188

1. Introduction

Agency is based upon consensual obligations between the agent and the principal, but the emergent Georgian commercial community required judicial intervention to assist in achieving some desired commercial objectives. As McCardie J. explained in Prager v. Blatspiel, Stamp and Heacock Ltd [1924] 1 K.B. 566 at 570:

'The object of the common law is to solve difficulties and adjust relations in social and commercial life. It must meet, so far as it can, sets of fact abnormal as well as usual. It must grow with the development of the nation. It must face and deal with changing or novel circumstances. Unless it can do that it fails in its function and declines in its dignity and value. An expanding society demands an expanding common law.'

Agency of necessity addressed the problem articulated by Lynskey J. in Munro v. Willmott [1949] 1 K.B. 295 at 297: 'masters of ships who found themselves in foreign parts and unable to get immediate instructions from their owners when they needed money for expenses which had not been provided for' Other jurisdictions have addressed the need merely by extending implied authority in an emergency (Reynolds, 1990 referring to Mechem, 1914) but English law plugged the gap by the doctrine of 'agency of necessity', a cousin of the law of salvage, permitting the sale of cargo or the pledging of a vessel to raise funds expressly to allow the voyage to continue - Arthur v. Barton (1840) 6 M & W 138. It curiously lacks coherence (Bowstead and Reynolds, at 4-002) and in Re Banque Des Marchands De Moscou [1952] 1 All ER 1269 (at 1277), Vaisey J. spoke of 'this strange notion of an agency of necessity'. Over the years, the courts have adapted it, and until August 1^st 1970 it extended even into matrimonial relations (41(1) Matrimonial Proceedings and Property Act 1970). Whilst the courts normally seek some pre-existing contractual relationship between the principal and the agent, and evidence that the goods are perishable, there are instances where the doctrine has been applied notwithstanding the absence of either (or both). It enables one party (the agent) to bind another (the principal) in a contract with a stranger (the third party who consequentially acquires good title to property) where the agent lacks any other right to do so. The consequential devil is that the third party can be confident of the application of the doctrine only through satisfaction of all the criteria: but the third party lacks the means of ascertaining the satisfaction of those criteria - a problem epitomised in the requirement of the impossibility of the 'agent' to secure instructions. Whilst the third party may not know what steps the agent has taken to secure authority, he cannot rely on the agent's own assertions as to his authority (Armagas Ltd v. Mundogas SA (The Page 189 Ocean Frost) [1986] A.C. 717). The consequential paradox is that the doctrine denies the parties the immediate certainty that the doctrine sought to provide.

This article summarises and distinguishes the basic principles applicable to the 'full' doctrine of agency of necessity and the 'more limited' doctrine relating to reimbursement of agent's expense. Through examination of some recent cases, it will then locate and analyse the current application of the doctrine in the age of ubiquitous mobile phones, synchronous internet communications, email, and immediate money transfers. By way of conclusion it will suggest that the principal bar to the further application of the doctrine is not the existence of enhanced communication through advanced technology, but the strict and narrow test applied to identify the "necessity" of action.

2. The Consensual Nature of Agency

The received view is that the operation of the law of agency is usually based on some element of consensus between the principal and the agent or some representation by the principal. According to Bowstead and Reynolds (at 4-002), it is: "the fiduciary relationship which exists between two persons, one of whom expressly or impliedly manifestly assents that the other should act on his behalf so as to affect his relations with third parties, and the other of whom similarly manifestly assents so to act or so acts" Professor Fridman prefers to identify agency through its legal consequences: "the relationship which exists between two persons ... in such a way as to be able to affect the principal's legal position in respect of strangers to the relationship".

This dichotomy of approach reflects the courts' traditional reluctance to impose any obligation unwillingly or unknowingly incurred. Bowen L.J. explained in Falcke v. Scottish Imperial Insurance (1886) 34 Ch D 234 at 248:

"The general principle is, beyond all question, that work and labour done or money expended by one man to preserve or benefit the property of another do not according to English law create any lien upon the property saved or benefited, nor, even if standing alone, create any obligation to repay the expenditure. Liabilities are not to be forced upon people behind their backs any more than you can confer a benefit upon a man against his will."

Accordingly, the supposed doctrine of "agency of necessity" is a curiously rare exception; and fragmentally and imperfectly developed for several reasons of policy. It ranks as one of the three exceptions (the others are salvage and acceptance of a bill for honour supra protest) to the general rule that unrequested work will create no legally enforceable right to remuneration. Nevertheless it seeks to accommodate commercial realism within the constraints of a strict legal doctrine; and consequently the doctrine has, over the years, enwrapped a number of separate (and disparate) sub doctrines, some of which, such as the wife's agency of necessity, have been abolished. A ship's Master now has implied authority to enter salvage agreements for the cargo (The Choko Star [1990] 1 Lloyds's Rep 516); but, as Lynskey J. observed in Munro v. Willmott [1949] 1 K.B. 295 at 297,: "The master the always had power to sell or hypothecate the ship, in some cases to dispose of the cargo, and so forth as an agent of necessity."

Agency of necessity imputes to one party (the agent) the principal's authority to bind the principal in a contract with a stranger (the third party) though the 'agent' lacks any other right to so contract. As a consequence, one unusual characteristic of agency of necessity is that it operates without the knowledge or will of the principal or any representation by him; and whilst the courts will usually prefer evidence of some preexisting contractual relationship between the principal and the agent, the doctrine is not conditional upon such a relationship.

Establishing the doctrine consequently validates the otherwise unauthorised acts of the agent, and thrusts the validity of the agent's actions upon the principal; and thereby creates two separate results in two separate Page 190 relationships as Lord Diplock explained in China-Pacific SA v. Food Corpn of India. The Winson [1982] AC 939 (at 958): "the effect of conferring on [the agent] authority to create contractual rights and obligations between that other person and a third party that are directly enforceable by each against the...