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Agency Law in the Scottish Courts: Time for a Broader Approach?

Document Cited authorities 3 Cited in Related
Vincent
Pages94-100
Published date01 January 2019
Author
Date01 January 2019
DOI10.3366/elr.2019.0528
INTRODUCTION

Given the small flow of case law in Scotland, it is not surprising that certain issues in agency law remain unresolved. The recent Outer House case of Gray v Baird Logistics (UK) Ltd 1 provided Lord Bannatyne with an important opportunity to consider unresolved issues in the law of ratification in Scotland. Whilst the decision has provided welcome clarity, the method used to reach the decision is perhaps more controversial.

 LEGAL LANDSCAPE

Essentially, this Outer House case allowed the court to consider and apply a classic and controversial English case, Bolton Partners v Lambert.2 Before now, Bolton had, as far as the author can tell, only been discussed in two Scottish cases.3 In neither was the Scottish court willing to accept or reject it as an authority to be applied in Scotland.

In Bolton a third party, (T), made an offer to the agent, (A), where A was acting for a principal, (P). The offer was accepted by A, but at that time A had no authority to accept the offer. T was not aware of A's lack of authority. T later withdrew his offer. It is worth pausing here to note that, in theory, there was nothing to prevent T from withdrawing his offer at this stage. A, as an unauthorised agent, had no power to conclude a binding contract between T and P. After T had purported to withdraw his offer, P ratified A's previously unauthorised acceptance of T's offer. When the principal raised an action for specific performance the Court of Appeal held that, because ratification is retrospective in effect, P's ratification of A's acceptance validated that acceptance with effect from the date that A had purported to make the acceptance. Essentially, ratification had fully retrospective effect, rendering T's earlier ‘withdrawal’ nugatory. P's successful ratification created a binding contract between T and P.

It is easy to see why this decision is controversial. Ratification, because it is retrospective, prevents T from withdrawing an offer which, at the time of withdrawal, he was perfectly free to withdraw. The outcome fails to respect contract law's adherence to consensus in idem. At no point in this sequence of events does consensus exist between T and P. Arguably it is unfair to T, holding him to a contract which he did not want, and which he finds he is bound to because of a later ratification. It allows P to ‘play the market’, observing whether prices increase or decrease, and making his decision whether or not to ratify depending upon fluctuations in price. The balance of power seems to lie in P's favour and against T.

Bolton has been “severely criticised”.4 Peter Watts and Francis Reynolds, writing about English law,5 and Gino Dal Pont, writing about Australian law6 adopt a similar approach, identifying the difficulties with the case and focussing on applying limits to ratification. The difficulties raised by the case have been recognised by the Privy Council,7 and it was rejected by the authors of the U.S. Restatement (Third) Agency.8 Professor Tan, whose book, The Law of Agency, is reviewed in this issue, stated “[i]f the issue should arise for determination in Singapore, it is suggested that a Singapore court should consider not following Bolton Partners v Lambert”.9 The current author reached the same conclusion in relation to Scots law in The Law of Agency in Scotland. 10 Analysis of the Outer House decision in Gray should be made against this backdrop of collective concern over Bolton.

THE FACTS

The pursuer, Mr Gray, was the managing director of Braid Logistics (UK) Ltd, the defenders, under a contract of employment. The defenders are a wholly owned subsidiary of a parent company now known as “Braid Group (Holdings) Limited”. The pursuer averred that certain other directors concocted a scheme to...

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