Can Tina be held responsible to Caltex for the order regarding purchase, which was made by Brad? Can actions be initiated against Paul by Tina, for the breach of agent’s duty?
Agency law is one of the laws in Australia, which provides the guidance to the relationship present between an agent and its principal. As per the agency law, any act which is undertaken by the agent, on behalf of the authority given to him, makes the principal liable for such acts to the other party, or the third party, which makes dealing with such an agent (Munday, 2010, p. 13). So, agency is the governing force to the relationship amid the agent and the principal, where the agent carries out things, on behalf of such a principal. The underlying principle behind this law is that the third party, with which the agent makes the dealing on behalf of the third party, has no idea about whether or not the individual has the authority to undertake the particular activity by being an agent. So, the principal has to be held accountable for the actions of its agent (Busch, Macgregor and Watts, 2016, p. 37).
Agency has two broad forms, i.e., the actual authority, and the ostensible/ apparent authority. Under the first one, the agent is given the authority in an express manner, which permits him to carry out activities on the principal’s behalf (Murdoch, 2014, p. 5). One more form of authority given to the agent is the apparent authority, which is also known as the ostensible authority. Under this form, the principal conducts in such a manner, which makes the such an impression on the third party, as per which it seems that the agent has the requisite authority to undertake the particular task. Though, in reality, such authority is never given to the agent in an express manner (Patterson Law, 2012).
Watteau v Fenwick [1893] 1 QB 346 is a prime case in the matter of agency law. Humble used to operate the beerhouse in this case and the cigar supplier was Watteau, i.e., the plaintiff. The defendant was assigned the interest by the plaintiff, i.e., by Fenwick to Watteau. The plaintiff continued to attain the cigars from Humble, even though Humble had no clue about the participation of Fenwick in this entire case. For the nonpayment, the plaintiff initiated legal action against the defendant. The court held that the defendant was indeed liable for the agent’s act, i.e., the acts of Humble. And the defendant was required to reimburse the amount claimed by the plaintiff (Smith, 2012).
A leading matter in this regard is the case of Hely-Hutchinson v Brayhead Ltd [1967] 1 QB 549. In this particular case, the plaintiff initiated legal action against the defendant, as the defendant failed to complete the takeover deal, which resulted in huge losses for the plaintiff. The plaintiff was the CEO (Chief Executive Officer) and the de facto MD (Managing Director) of the organization and a guarantee had been made for replaying the money. But, when the payment was claimed by the plaintiff, the same was denied stating that there was a lack in the required authority, which could provide such guarantee. The court held that in this matter, the authority was clearly present and so, the guarantee had to be honored by the defendant as the same was made by the agent of the defendant (Nanda, 2012).
Another noteworthy case in this regard is Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 4, the defendant was sued by the plaintiff, in addition to Shiv Kapoor, who was the company’s director, regarding the due payment of the architectural work fee. However, there was never an appointment of the director as an MD of the company, and it was also put forward as if he had the particular position. Moreover, the other directors also knew that such a position was being portrayed by him. And so, it was held in this case, that the ostensible authority was present and the defendant had to pay up the due amount to the plaintiff (PQ Magazine, 2017).
Through the agency law, the agents have been given the implied duty of acting in a manner which ensures fair dealing and is done in good faith, in each and every activity which is carried on by them (Jones, 2014). The agent has to fulfill a range of different duties towards the principal. One of such duties is to undertake the activities which show both care and diligence (US Legal, 2017).
A leading matter in this regard is Yam Seng Pte Ltd v International Trade Corporation Ltd [2013] EWHC 111. In this case, the defendant gave the exclusive distribution rights to the plaintiff in the year of 2009. These exclusive rights allowed Yam Seng to distribute the exclusively in Asia, Middle East, Australia and Africa the fragrances of Manchester United. The plaintiff initiated a case in 2010 against the defendant and made an allegation that there had been a breach of the implied terms of good faith as the false information was provided to the plaintiff. Upholding the claims made by the plaintiff, the defendant was held to have contravened his duty to act in good faith by being dishonest (Maughan and Wells, 2013).
In the first part of this case, Tina appointed Brad as his agent. Brad continued to order duel from Caltex on the basis of apparent authority. Even after the authority was revoked, Brad continued to act in the same authority. And Caltex was unaware regarding this continued use of authority. If the case of Watteau v Fenwick is applied here, Tina would be responsible for the orders made by Brad. This is because Caltex had no knowledge that Brad’s authority had been revoked. Applying the ostensible authority in this case, Tina would have to pay the contractual obligations to Caltex.
In the second part of this case, crucial information was withheld by Paul pertaining to the price of the vehicle, which was way higher than the perception of Tina. Paul failed in disclosing that the actual price which the vehicle could fetch was $25,000 and not $19,000. Further, he used this information for his personal benefit and sold it to his neighbor, Fred, and made a profit amounting to $6,000. Hence, the fiduciary duty of being Tina’s agent was clearly breached by Paul.
It was the duty of Paul to honestly tell the whole thing to Tina, pertaining to both the real price of the vehicle in the market and the interest of Fred. His dishonest acts, as per Yam Seng Pte Ltd v International Trade Corporation Ltd, will hold him accountable for the breach of duty of good faith. And hence, Paul would have to reimburse Tina for the breach of duty of agent and for the ensuing losses.
Conclusion
To conclude, Tina can be held responsible to Caltex for the order regarding purchase, which was made by Brad. And, the actions can be successfully initiated against Paul by Tina, for the breach of agent’s duty.
Can the actions be raised against the partnership firm in which Simon, George, Sara and Mary are the members, by Sunstar Computer Hardware Ltd, as well as, You Beaut Ute Ltd? Can the three partners commence legal action against Simon?
An arrangement, which takes place between certain parties, who are given the name of partners, is deemed as a partnership, in which, the partners agree to carry on a business to advance their mutual interest, for earning profits. In New South Wales, the Partnership Act, 1892 provides the governing provisions for the partnerships in the State. Section 1 of this act defines the partnership as a business being carried out for a common purpose and for achieving profits (NSW Legislation, 2012). The governing document of partnership is known as the partnership agreement or the partnership deed, and this document contains the terms of partnership (Commins Hendriks Solicitors, 2017).
Under this act, section 53B provides the governing provision for the partnership agreement. Through this very section, which describes the partnership agreement as a contract, the common law of contract can be made applicable over the partnership. Though, this act also provides that a partnership can be made, without a partnership agreement also (NSW Legislation, 2012).
The deed of partnership or the partnership agreement is actually a contract; where by the terms of the entire partnership are contained (Williams, 2011, p. 335). Hence, when one of the terms of this particular contract is contravened, the parties can raise a claim against the other party, under the governing principles of contract law. When a breach of contract is established, the breaching party can be sued by the aggrieved party for the monetary compensation in form of damages (Latimer, 2012, p. 469). In certain situations, the individuals can also apply for equitable remedies, through which the contract can be rescinded by opting for rescission; stop an individual from undertaking particular thing, by opting for an injunction; and lastly, by attaining an order for specific performance, stop the individual from doing something (Clarke, 2016).
Apart from the contract law, the agency law is also applied on the partnership act. As this law is applicable over the partnership act, the partners are liable to each other for the actions undertaken by them and also to the third party (Parisi, 2017, p. 415). So, the acts which are carried on by one partner, bind the complete partnership. Section 5 provides the same details, and binds the partnership and the other partners for the actions of the partners. Further, Section 9 makes the partners responsible for the debts and obligation of the firm, which are undertaken by the partners (NSW Legislation, 2012). The raison d’être for this stems from the notion that even an act is carried out by the partner during the course of business of the partnership, the individuals are deemed as partners of each other and this was famously established in Lang v James Morrison & Co Ltd (1911) 13 CLR 1 (Jade, 2011).
Another case in this regard is Phillips-Higgins v Harper [1954] 1 QB 411, in which the partners were held to have a fiduciary duty towards each other, specifically because the partners act as being the agent of the partnership firm. And so, the partner owed a duty towards the partners, and such partners owe a similar duty back to such a partner (Swarb, 2015a). In Mercantile Credit Co Ltd v Garrod [1962] 3 All ER 1103, the partners were held to be liable towards each other. The court held in this case that the sale undertaken here was as per the usual course of the trade and business of the partnership and so, the same would held to be binding over the others (Swarb, 2015b).
Though the case of National Commercial Banking Corporation of Australia Ltd v Batty (1986) 60 ALJR 379 presents another view. In this case, it was established that there would be no liability on part of the partnership firm in such cases where the partner undertook wrongful actions, which were not carried on as per the scope of the given apparent authority to such a partner. Furthermore, as the money, which was received by the firm was not found to be in the ordinary course of the firm’s business, the partnership firm would not be bound by the act of the partner (Jade, 2017).
The given case study reflects the formation of partnership between Mary, Sara, George and Simon. A partnership agreement was also drawn between them to form the partnership. Simon entered into two contracts, where one was with You Beaut Ute Ltd for the amount of $ 9,000. This was within the express terms of the partnership agreement and so, the partners and the firm would have to honor this agreement.
Regarding the contract drawn by Simon with Sunstar Computer Hardware Limited which had the value of $12,000; this was outside the scope of authority provided to Simon through the partnership act. Furthermore, undertaking such transactions was not as per the usual course of business in this case. Hence, Simon breached both the contract law and agency law. Applying the case of National Commercial Banking Corporation of Australia Ltd v Batty, the partnership firm would not be liable for the actions of Simon.
Further, there was a breach contract on part of Simon, as the partnership agreement is deemed as a contract. And for the breach of this contract, the other three partners can sue Simon and claim for injunction order, which would ensure that Simon is stopped from undertaking any more such actions.
Conclusion
To conclude, actions can be raised against the partnership firm by You Beaut Ute Ltd and the same would be successful. However, the actions against firm by Sunstar Computer Hardware Ltd would not be successful as the firm is not liable for the breach of authority by Simon. And, the three partners can successfully commence legal action against Simon.
References
Busch, D., Macgregor, L., and Watts, P. (2016). Agency Law in Commercial Practice. Oxford: Oxford University Press, p. 37.
Clarke, P. (2016). Remedies for Breach of Contract. Retrieved from: https://www.legalmatch.com/law-library/article/breach-of-contract-equitable-remedies.html
Commins Hendriks Solicitors. Written Partnership Agreements – Why All Partnerships Should Have One. Retrieved from: https://www.comminshendriks.com.au/written-partnership-agreements-%E2%80%93-why-all-partnerships-should-have-one
Jade. (2011). Lang v James Morrison and Company Ltd. Retrieved from: https://jade.io/j/?a=outline&id=62121
Jade. (2017). National Commercial Banking Corporation of Australia Ltd v Batty. Retrieved from: https://jade.io/j/?a=outline&id=67268
Jones, D. (2014). Implied duty of good faith – what is the current position for distributors?. Retrieved from: https://www.agentlaw.co.uk/site/briefing_notes/implied_duty_of_good_faith_what_is_the_current_position_for
Latimer, P. (2012). Australian Business Law 2012, 31st ed, Sydney, NSW: CCH Australia Limited p. 469.
Maughan, A., and Wells, S. (2013). UK: Good Faith Obligations In English Law. Retrieved from: https://www.mondaq.com/x/252158/Contract+Law/Good+Faith+Obligations+In+English+Law
Munday, R. (2010). Agency: Law and Principles. Oxford: Oxford University Press, p. 13.
Murdoch, J. (2014). Law of Estate Agency, 5th ed, London: Routledge, p. 5.
Nanda, P. (2012). Hely Hutchinson v. Brayhead Ltd. – The Authority on Actual and Ostensible Authority. Retrieved from: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2229158
NSW Legislation. (2012). Partnership Act 1892 No 12. Retrieved from: https://www.legislation.nsw.gov.au/inforce/f9dfc85e-8f91-e79f-99e5-8042677519f3/1892-12.pdf
Parisi, F. (2017). The Oxford Handbook of Law and Economics: Volume 2: Private and Commercial Law. Oxford: Oxford University Press, p. 415.
Patterson Law. (2012). The Doctrine of Ostensible Authority. Retrieved from: https://pattersonlaw.ca/NewsArticleView/tabid/179/ArticleId/169/The-Doctrine-of-Ostensible-Authority.aspx
PQ Magazine. (2017). A Quick Look At… Freeman & Lockyer V Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480. Retrieved from: https://www.aiaworldwide.com/international-accountant/editors-blog/quick-look-%E2%80%A6-freeman-lockyer-v-buckhurst-park-properties
Smith, J.C. (2012). Watteau v Fenwick. Retrieved from: https://h2o.law.harvard.edu/collages/1557
Swarb. (2015a). Phillips-Higgins v Harper: QBD 1954. Retrieved from: https://swarb.co.uk/phillips-higgins-v-harper-qbd-1954/
Swarb. (2015b). Mercantile Credit Co Ltd v Hamblin: CA 1964. Retrieved from:
https://swarb.co.uk/mercantile-credit-co-ltd-v-hamblin-ca-1964/
US Legal. (2017). Rights, Duties, and Liabilities Between Principal and Agent. Retrieved from: https://agency.uslegal.com/rights-duties-and-liabilities-between-principal-and-agent/
Williams, G. (2011). Corporations and Partnerships in New Zealand. The Netherlands: Kluwer Law International, p. 335.
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