Agency by Necessity

Introduction

The Doctrine of Agency comes into picture when there is emergency exist & where an agent goes beyond the authority of acting as an agent on behalf of the principal in a emergency situation. he courts also accept agency by necessity in case of  emergency or urgent circumstance when the beneficiary is unable to offer explicit authorisation. In such cases, people who have been granted agency must act only for the advantage of the beneficiary.

Historically, the Common law principles did not require pre-existing contractual relations for

the doctrine of

Historically, the doctrine of agency of necessity did not require the existence of pre-existing contractual relationships to be applicable. However, Indian law requires that the principle and agent have a contractual relationship in order for the doctrine to apply, as stated in Section 189 of The Indian Contract Act, 1872. As a result, if a person is acting on behalf of another person, even in an emergency, without a pre-existing contractual relationship, his or her act will not be protected by the doctrine of agency of necessity as this situation is in England[1], as evidenced by the Supreme Court’s decision in Serajuddinand Ors. v. The State of Orissa[2], which held that – “…there is no principal-agent relationship between both the petitioner & the Corporation, as well as the agency of necessity does not exist in the absence of such a relationship.”

However, in the case of Great Northern Railway Co. vs. Swaffield[3], a horse was delivered to a livery stable since its consignee was not present at the time of delivery. The plaintiff’s claim against the defendant was successful because the law of need was extended from transporters of goods by sea to carriers of goods by land. The claimant had no alternative but to arrange for the animal’s care on his own dime, establishing the agency of necessity. The fundamental concept is the principle of restitution, which allows the plaintiff to demand recompense from the defendant despite the parties’ lack of prior relationship.

Key Principles

When a person or entity is unable to expressly provide authority to act on behalf of another, agency is required[4].

These circumstances frequently develop as a result of urgent or emergency situations, but where the beneficiary’s requirements are prioritized[5].

Understanding Agency by Necessity

In the view of the court, emergency events frequently lead to agency by necessity. For example, if a person is unwell and unable to make important financial or retirement decisions, agency of necessity allows an attorney, parent, or spouse to act on behalf of the incapacitated person.

How does the Agency of Necessity Arise?

The term “agency by necessity” refers to an agency formed as a result of a circumstance that makes it necessary or proper for the agent to act without the principal’s approval or authorization in order to protect the principal. It occurs when a person is obligated to act on behalf of another without regard to contract in order to avoid irreparable harm. The courts acknowledge such an agency relationship6.

When the law authorises one person to act on behalf of another to protect a proprietary interest that is in risk, it is known as agency of necessity. The existence of agency of necessity in a specific case is a legal matter; the doctrine’s applicability does not rely on the parties’ express or implied consent. True agency varies from agency of necessity in this essential aspect; nonetheless, the two are identical in that they both result in similar rights and obligations between principal, agent, and third party.

The First Category: The Shipmaster

The first kind, often known as the shipmaster’s case, produces a full agency that includes both internal and exterior parts of the agency relationship. In terms of the agency’s external aspects, the master can form a legally binding contract & provide rights to his principal. It’s worth noting that in most of these situations, the person in question is already an agent, and it’s probable that the person had implied authority to act fairly and effectively in an emergency scenario[6]. Internally, he gets the right to repayment for any expenditures which he may have incurred as a result of his emergency activities.

Beldon v. Campbell [7]is an example of a case involving a ship’s master. There have been proposals from lawmakers in a variety of fields that the phrase “Agency of Necessity” be limited to this category & cases like this, when all of the severe requirements for the presence of an emergency apply. It’s worth noting that ‘Agency of Necessity’ is a subset of the salvage legislation, which was created particularly for ships on the high seas [8].

Second Category: The Acceptor for the honour

The second kind is an extension of the Agency of Necessity philosophy, and its ideas are based on the principles of restitution. In this category, an agent acting in an emergency demands only reimbursement or insurance from the principal, or defends herself/himself from any action taken against the agent by the principal for breach of contract (if one existed) or in tort (usually conversion). In this case, there can be no conflicts with 3rd parties, as well as the agents have no impact on their principals’ relationships with third parties[9].

What amount to the Doctrine of Agency by Necessity? 

Rules Determining Necessity

  1.  It must be impossible, or at the very least impractical, for the agent to communicate with the principal in any way. Initially, the conventional rule was that it had to be impossible, as determined in the case of Prager v. Blatspiel, Stamp & Heacock Ltd[10]. However, this was seen to be excessively severe, and it was eventually modified, most notably by BankesL.J., who accepted of the Doctrine’s use when communication was “practically impossible.” Scrutton L.J. expanded on this point in the same case, stating that “commercial possibilities” should be considered.
  1. The activity conducted by the agent must be both required and beneficial to the principal. The agent’s perspective on what is required is not important. What matters is that the circumstances were such that any reasonable person would have considered the acts taken to be necessary. As previously stated, merely being inconvenient does not establish that the Doctrine applies.
  1. The court must be convinced that the agent operated in the principal’s best interests &also in a bona fide way. Lord Diplock outlined this in The Winson once again. The principle must have been competent at the time the agent performed the act on behalf of the principal. The Choko Star verdict, which concerned with salvage agreements, strengthened these norms even further.

Conclusion

The Doctrine of Agency of Necessity is based on the concept that an agent overreaches his power by acting on behalf of the principal in an emergency circumstance. This happens when one party, the agent, is confronted with an emergency that poses an immediate harm to the interests or property of another party, the Principal, and the agent lacks the time or resources to seek the Principal’s instruction or authority on the subject. The idea is based on two sorts of circumstances that are analytically distinct. In some cases, the agent’s actions may entitle him to go so far as to affect the Principal’s legal relationships with 3rd  parties, while in others, he may only be entitled to an indemnity or compensation for any liabilities or expenses he may have incurred while acting for the Principal’s benefit[11].


[1] https://www.lawctopus.com/academike/review-doctrine-agency-necessity

[2] (1975 (2) SCC 47)

[3] (1874) LR 9 Ex 132

[4] https://www.lawctopus.com/academike/review-doctrine-agency-necessity

[5] https://www.investopedia.com/terms/a/agency-by-necessity.asp

[6] https://definitions.uslegal.com/a/agency-by-necessity/

[7] 115E.R. 805

[8]https://www.lawctopus.com/academike/review-doctrine-agency-necessity

[9] https://www.lawctopus.com/academike/review-doctrine-agency-necessity

[10] (1924) 1 KB 566.

[11] https://www.lawctopus.com/academike/review-doctrine-agency-necessity/

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