Formation of Agency Contract
A person who does not have the legal capacity to act on his own behalf, e.g., an infant or a person who is insane, cannot act as an agent for another person. A person with limited capacity will, however, be able to act as an agent of another. Should parties enter into a contract on behalf of a company to be formed, the contract must be in writing and the provisions of section 21 of the Companies Act, Act Number 71 of 2008, will be applicable.
Rights and Duties of Principal and Agent
The rights and duties of the principal and that of the agent must be contained in the agency agreement. The principal will confer certain duties and rights on to the agent, and the agent will be acting outside his authority if he ignores the specified rights and/or duties.
Liability of Principal for Acts of Agent
In general, a principal can be held liable for the acts of the agent only insofar as the agent acted within his mandate. In the case of ostensible authority, the question is not what the mandate of the agent is, but what third parties reasonably believe the agent’s mandate is or was. In such an instance, the acts of the agent will still bind the principal (see Makate v. Vodacom (Pty.) Ltd. [2016] Z.A.C.C. 13). The agent will, in certain instances, be liable towards the principal for acting outside its mandate.
Types of Agency Permitted in Commercial Relationships
All types of agency are permitted in commercial relationships in South Africa.
Termination of Agency
The termination of agency can happen in various circumstances, such as the specific termination of the agreement or the basis for the agency falling away. Should the basis for the agency, for example, be the directorship of the agent, and the individual is no longer a director of the company then the right to act as an agent on behalf of the company falls away. Similarly, should the purpose of the agency agreement no longer be present then the agency will automatically be terminated, such as an agency agreement to buy a specific property. Should the property be destroyed or no longer be for sale, the agency agreement will automatically lapse.