In order to grow and maintain his business, a trader will not only require the services of employees to assist him, but also the services of other persons who can support him and place him in a legal relationship with third parties. This will require the trader to delegate a part of his authority to agents and mandatories. Although agency and mandate may be present in one and the same contract through which power is delegated, they are distinct in nature and in the manner in which they are regulated under Maltese law.
Agency is a contract whereby one person, the principal authorises another, the agent, to act in his name and on his behalf in a legal relationship between the principal and a third party. Whilst Maltese law does not define ‘agency’ per se, its proper juridical concept can be found in Article 50 of the Maltese Commercial Code (Chapter 13 of the Laws of Malta) which states that “all acts done by the agent on behalf of the principal, within the scope of his authority, produce directly their effect, whether in favour or against the principal”. Thus, the essential nature of agency is the right of the agent to decide and on personal initiative to conclude an act in the name and on behalf of the principal: whenever a person appoints another person as his agent, the former necessarily delegates part of his will to the latter. A commission agent or a broker, who merely promotes the business of his principal and transmits orders for the principal’s acceptance is not an agent in the sense intended under Maltese law.
As a general rule the law does not establish a special form for the constitution of agency, and therefore it may be constituted by word of mouth or in writing, with the obvious exception that “where the law requires that an act be expressed in writing, the authority given to an agent to do such act must be conferred in writing” (Article 52 of the Civil Code).
Article 1856 of the Maltese Civil Code (Chapter 16 of the Laws of Malta) states that a mandate “is a contract whereby a person gives to another the power to do something for him”. Someone appointed as an agent may therefore also be considered a mandatory. However, unlike the agent, who is bound to disclose the principal’s name and to make it clear that he acts in his name, the mandatory may or may not disclose the principal’s name and does not need to specify that he is acting in the name of his principal. Article 1871 of the Civil Code in fact provides that the mandatory may act in his own name, in which case, he would not be considered an agent, as he would be (by operation of the same provision of law), directly bound towards the person with whom he has contracted as if the matter were his own, saving his other obligation to render account to his mandator. All cases the acts done by the agent, on the other hand (if done within the limits of the authority delegated by the principal) bind the principal directly.
The Commercial Code lays down two specific duties of the agent:
- As mentioned above, the agent is bound to furnish to the third party every information as to the extent of the authority conferred on him by the principal and if the third party so requires, the agent is bound to deliver to such third party a declaration duly signed by him to the effect that a given transaction is comprised within the said authority (Article 54(1)). This is because the agent binds the principal only in so far as he acts within the scope of his authority.
- The agent to transact with himself a business of his principal, whether on his own behalf or on behalf of any other person, directly or through the medium of a third party, without the authority or ratification of the principal (Article 56). This duty arises out of the fiduciary character of the relationship of agency. The agent must look after the interests of his principal as if they were his own, and he is to give his principal the full benefit of the acts he has been authorised to do on his behalf.
Where the agent is also a mandatory, one would need to consider the additional duties which arise out of the contract of mandate under the Civil Code. In this respect, the mandatory:
- is bound to carry out the mandate so long as he is vested therewith, and in the case of non-performance he is answerable for damages and interest (Article1873(1));
- is also bound to conclude any matter, which he may have commenced before the death of the mandator, if delay might be prejudicial (Article1873(2));
- is answerable not only for fraud, but also for negligence in carrying out the mandate. A mandatory must exercise the diligence of a prudent trader (Article 1874(1));
- cannot substitute another person for himself, if he has not been empowered to do so by the mandator. If such power has been conferred upon him but without naming the person to be substituted, the mandatory is answerable for the person he has substituted if he has selected a person notoriously incompetent or insolvent or whom he otherwise knew to be such. In all cases, the mandator may act directly against the person whom the mandator has substituted (Article 1876); and
- is obliged to render to his principal an account of all he is doing Article 1875).