Ethiopian Law of Agency
Teaching Material
Developed By:
1) Awet Hailezgi (Mekelle University, Faculty of Law) 2) Addisu Damtie (LL.B, LL.M) (Bahir Dar University, Faculty of Law)
Sponsored by the Justice and Legal System Research Institute
2009
Table of contents
Chapter One
1. Concept of Agency: Preliminary considerations
Definition
Why law of agency
1.1 Genesis and Aevelopment of the Law of Agency
1.1.1 Theories and development of the law of agency under the common law legal
system
1.1.2 Theories and development of the law of agency under the civil law legal system.
1.2 Sources of Authority
A. Authority derived from a contract
i. Internal contract
ii. External contract
B. Authority by judicial act
C. Authority derived from the law
2. Authority by Virtue of Contractual Agency
2.1 The common law approach
2.2 The civil law approach
2.3 The Ethiopian approach
Chapter two
Agency by Virtue of Contract under Ethiopian Law.
Introduction
2.1 The internal contract
2.1.1 Formation requirements
2.1.2 Offer and acceptance for the formation of contract of agency
2.1.2 Scope of authority
2.1.2.1 General
2.1.2.2 Special
2.1.3 Authorities of an agent
2.1.3.1 Actual Authority
2.1.3.2 Apparent authority
2.1.4 Modes of representation
2.2 The External contract or contract of representation
A. Formation
B. Complete or actual authority
i. Express actual authority
ii. Implied actual authority
C. Unauthorized agency and ratification
Unauthorized agency or agency of necessity
Ratification
Chapter Three
Effects of Agency
3.1 Establishing a relationship between the principal and the third party
3.2 The obligations of agency relationship
3.2.1 Duties of the agent
3.2.2 Duties of the principal
3.3 The liability of the principal, agent and third party
3.3.1 Liability upon ratification of an act unauthorized
Chapter four
Agency in Trade (business and commerce)
4.1 Commission Agent
Commission to buy or to sell
Del Creder commission agent
Forwarding agent
Chapter Five
Extinction of Agency Relationship
Agreement of parties
Unilateral declaration by the parties
Revocation
Renunciation (Repudiation)
Termination by the operation of the law
Liability to one another and to a third party
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Course Introduction
One may not be able to perform a given task by oneself for several reasons. Or one may not be at
different places at the same moment to perform a certain deed, Hence if a task has to be carried
out in his absence or without his involvement, there has to be some other individual who can
undertake the task on his behalf.
This course is meant to Asses the agency law in two broad categories. That is, agency in non-
commercial activities and agency in trade (commerce) Accordingly, the first chapter provides the
preliminary concepts on the law of agency, introductory remarks, genesis and development of
the law of agency, and sources of authority.
The second chapter deals with the Ethiopian context, with great emphasis on the contractual
agency. This chapter is also categorized into two major topics that is the internal contract and
external contract. Under the former topic, the formation requirements for internal contract, scope
of authority and modes of representation are discussed, and then discussions on the external
contract follows.
Agency relationship has its own effect on parties, beyond establishing relationships between the
principal, agent and the third party. Hence the liabilities of the agent, principal and third party,
and the liabilities that exist upon the ratification of an unauthorized act are discussed under this
chapter.
The second part of this course deals with the agency in trade or commerce, hence the concepts of
commission, del creder agent and forwarding agent are discussed exhaustively.
Lastly, this course deals with the extinction of agency relationship. It also encapsulates summary
questions and short hypothetical examples in order to make the concepts clearer and visible for
students. Discussions on real and hypothetical cases are made in order to make the course more
practical and achieve its objectives.
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Chapter One
The Concept of Agency: Preliminary Considerations
After reading this chapter students will be able:
To define the law of agency from different perspectives
Analyze the problems in defining the law of agency
Discuss the rational behind the institution of the law of agency or representation
Appreciate the genesis and development of the law of agency in the common law and
civil law legal systems, as well as from the Ethiopian perspective
Discuss the different theories of representation adhered to by the common law and civil
law legal systems.
Definition
The Law of agency is in most cases defined as the relationship between two persons, where one
(the agent) may act on behalf of the other (principal) and bind the principal by words and actions
.It is also defined as the relationship in which one person acts for or represents another by the
latters authority, either in the relationship of principal and agent, master and servant, employer
or proprietor and independent contractor. The law of agency could also be defined as the
judiciary relation which results from the manifestation of consent by one person to another that
the other shall act on his behalf and subject to his control, and consent by the other so as to act.
(Blacks law dictionary, 1991)
Paul Mc Carthy has tried to partially capture the essence of agency by saying:
The law of agency deals with the ways in which one person, physical or juridical, can deal
with other persons through the medium of intermediary. Of course one person may deal
with another directly, without any assistance. However a person can perform only one
thing and be in only one place at one time. The complexity of modern life, particularly in
the commercial area, is such that the law must permit a person to make contracts and
perform other juridical acts by a means of the representative. (Paul Mc Carthy, Materials
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for the study of the law of Agency and Business organizations, Faculty of Law, Haileslase I
University, p.1)
In addition to the above, one writer, Mulgeta Mengist (2005 ) states the following; The concept
of Agency is recognized in all modern legal systems as an indispensable part of the existing
social order. It fulfills the most diverse functions in the public and private law of today; in
particular it assists in organizing the division of labor in the national and international economy,
by making it possible for a principal to extend his individual sphere of activity. By its aid
spanning space and time, he is able to have one or more persons act for him, on his behalf, if
necessary (the advantages of Agency) for the institution of modern life based on the division of
labor, predominate to an extent that agency is every where prevalent .An agent is appointed
when an individual is unable to act himself on account of his manifold occupations, absence,
illness, advanced age, etc. Or a representative may be designated in order to take advantage of
his special capacity, knowledge, and experience even for the mere desire, such as not to appear
personally in order to avoid hostility, controversy, etc or similar considerations.
With regard to the concept and significance of the law of agency, two other writers stated as
follows:
The purpose of the law of agency and the need to employ agents, to perform certain tasks which
their principals have neither time; nor knowledge nor experience to perform by themselves
scarcely requires explanation in the highly commercial and industrialized world. Commerce
would literally come to a standstill if businessmen and merchants could not employ the services
of factors, brokers, forwarding agents estate agents auctioneers and the like and were expected to
do everything by themselves. These specialized middle men, whose main purpose usually is to
make contracts on behalf of their principals or to dispose of their principals property, are to be
found in all advanced societies and, whether one accepts or deplores some of the economic
consequences of this phenomenon, the fact is that the agents activities are an inevitable feature
of a developed economy. Hence the growth of the law of agency, both in volume and
sophistication, has matched the growth in importance of commerce, as we know it today.
(Markesinis and Munday, pp.3-4)
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Defining the concepts in the law of agency in the above way may not be enough and
appropriately reflect the whole concept of the law. Two writers provide the inconveniences with
defining disciplines or concepts in very few words in the following manner:
They argue that definitions may be of use and, at times are quite necessary when contracts or
statutory en
