The issue in the case is to check whether the AFS Grocery Wholesalers Co. Pty. Ltd. has any legal right to claim the payment worth $45000 for the delivery of goods to John’s Supermarket. If yes, then what right this is?
In the current scenario, where lives are busy, it is very general that people enter into a contract with the help of other. These other people are known as agent and the person to whose behalf they enter into a contract is termed as principal. The relationship between agent and principal is commonly known as an agency. As an agent, do the act on behalf of the principal, therefore the same gain equal right alike principal against the third party. In addition to rights, the principal becomes responsible for every deed and act of the agent, the agent does within the given authority.
Under agency law, some of the aspects such as nature of agency, the mode of agency and relationship among principal, agent, and third party are significant to study. Firstly as per the discussion is given in the case of Carnac Grain Co Inc v HMF Faure & Fairclough Ltd & Bunge Corp [1967] 2 All ER 35 it was held that in an agency relationship, there must be a consent of both agent and the principal. Such consent can be expressed or implied (swarb.co.uk, 2017). Further, an agency can be created and developed in many ways such as by express mean, by operation of law, by implied mean or by estoppel. This is also to state that an agent can also have some other relationship with a principal such as an employee. The fact that an employee is an agent of an employer or not depends on the position of the employee. For instance, a sale manager who sells the goods of his employer and takes the necessary decision is often termed as an agent of the employer (Kearns, 2017).
An implied actual authority exists where a person takes an action that is necessary to take in order to meet the requirement of expressed authority (Legal Dictionary, 2018). Ostensible authority is a type of authority given under agency where a person principal) act in a manner which provides belief to another (agent) that such another person has requisite authority. Later on, the principal cannot deny from such authority shown to an agent. In such cases, principal get bound with the act of agent irrespective of the fact that no actual authority has provided by the principal to the agent (Lindgren, 2011).
In the given case, Linda is a manager of John’s supermarket. She is an employee who is employed in a higher position and who takes all the necessary actions related to the sale of the supermarket. The practice which Linda and the owner of the supermarket, John were following was to place the order for sale during John’s visit. As John was not a regular part of the supermarket but often visit the store instead, it was Linda only who was looking after sale and supply from the store. Once when John left for the country, Linda was required to contact him as in case of not doing so, John’s supermarket could lose the customers. As John left no contact details, Linda has entered into a contract with AFS Grocery Wholesalers Co Pty Ltd to sell a particular kind of goods which was not available in the store. Therefore to sale the goods, Linda has purchased them for $45000. Linda here was acting as an agent of John. No express authority was given to Linda for this purchase, however, the cause of nature of her position and work she was carrying, it can be assumed that she had an implied authority. In addition to this, Restaurant was named as John’s restaurant but John was used to visiting the same sometimes, John had limited interference on day to day sale of the store. Hence, an apparent authority was also there.
Applying the provisions of Carnac Grain Co Inc v HMF Faure & Fairclough Ltd & Bunge Corp, Linda and John both consented for the expressed authority granted to Linda to make the sale on behalf of the store. When it comes to purchasing, Linda has an implied authority, as she was the only person who was looking after sale and supply and in order to manage the same, it became necessary for her to place the purchase order. The party who seek to advice i.e. AFS Grocery Wholesalers Co Pty Ltd had reason to believe that Linda has enough authority to purchase the goods and John will be liable to make the payment of invoice generate by AFS Grocery Wholesalers Co. Pty. Ltd. irrespective of the fact that he had no knowledge of such purchase. Or he has not granted any authority to Linda.
As the rule of agency, the principal becomes liable for the deeds of his/her agent, John seems to be liable for the purchase made by Linda. Expressed authority needs not to be there always. By reviewing the nature of the act of Linda, it is to be stated that she had an implied and apparent authority and therefore AFS Grocery Wholesalers Co. Pty. Ltd. can sue the John to make the payment of the invoice.
Whether John will be held liable to make the payment of invoice raised by AFS Grocery Wholesalers Co. Pty. Ltd. even if has already informed the company that Linda has no authority to purchase the goods.
In commercial contracts, many of the times agents do the transaction on behalf of the principal (who actually is a party of such transaction). A third party cannot know the facts and authority level between an agent and his/her principal, therefore in cases of implied and apparent authority, principal held responsible for the act of agents. This is to mention that principal would only be held responsible in those cases where agent act in the ordinary course of business and other party has reason to believe that agent is acting on behalf of his/her principal. It was sentenced in the case of Tooth & Co v Laws (1888) 9 LR (NSW) 154 that if principal indicates to the third party about no authority or no agency, then the doctrine of estoppel will not be applicable and principal will able to denies to take the liability of agent’s act (Gibson and Fraser, 2013).
In the given situation, the third party i.e. AFS Grocery Wholesalers Co Pty Ltd was aware of the fact that Linda is not authorized to make this purchase. Here, this company had no reason to believe that Linda is acting as an agent of John and John will ratify the purchase made by Linda. Applying the Tooth & Co v Laws, John will not be held liable as he already has expressed that Linda is not authorized for the purchase and in such circumstance, the company should not be confused about the authority level of Linda.
By expressing the fact that Linda is not authorized for this purchase, John can create a safeguard for himself and will not be held liable to make out payment of invoice raised by the company for the purchase of goods made by Linda.
The issue in the provided case is to give advise to Bruno as he wants to get rid of a contract made with Moreslybo Pty Ltd. in relation to sell of the farm to this company.
Legality of a contract is far significant to decide that whether the same can be enforced or not. Consent is an important element of a contract. Only existence of consent is not enough, such consent must be valid consent (Legal Contract, 2018). Now the question is to know that what a valid consent is. This is to state that a valid consent is the one, which is free from the factors such as undue influence, Misrepresentation, mistakes, and fraud (Ayebarebruno.blogspot.com, 2016). The absence of a valid contract can make a contract unenforceable. Undue Influence is a circumstance where a person who makes an offer (offeror) guide the other person to whom the offer was made in an unfair manner. The offeror does so to receive acceptance of offeree. In the cases of undue influences, the position of the offeror is of nature that he/she can influence the consent of offeree (E-law Resources, 2018). It can say that under undue influence, the ascendant party influences the consent of the weaker party.
Many of the relationships are defined under common law, where it is clear that a person is in a position to influence the decision of others. These relationships are those where a level of trust and dependence exist between the parties such as parent-child, doctor-patient, solicitor-client and so on (Findlaw Australia, 2018). It was held in the case of Allcard v Skinner (1887) 36 Ch D 145 that where it is presumed that the undue influence exists in a contract, the defendant will be held liable to prove the absence of this factor. Further sometimes in addition to defined and recognized the relationship, undue influence exists in some other circumstance. In such a situation, it will be the responsibility of the plaintiff to prove that such influence does exist in a particular contract and therefore the consent is not a valid one. According to the decision of the case of Lloyds Bank v Bundy [1975] QB 326, an elderly person will assumed to be a victim of undue influence where such person enters into a contract with the one to whom he can rely upon. In this area of contract law, the case of Johnson v Buttress (1936) 56 CLR 113 is also an important one. In this case, the plaintiff was an old illiterate man who was dependent on the defendant for the day-to-day help. He has created a will in which he expressed his wish to give his property to the defendant as a gift. Later on, the son of the plaintiff has brought out a claim that his father is doing so under influence of defendant. The court held that the factor of undue influence existed there as the defendant was in a position to influence the decision of the elderly (Australina Contract Law, 2018). A contract becomes voidable on the part of the weaker party in the cases of undue influence (Mau, 2011). The weaker party can breach the contract on the basis of the existence of undue influence and the other party cannot force the first one to perform the promise made under a contract. No damages will be required to pay by the party who breaches the contract cause of undue influence.
The given case introduces two of the person mainly that are parties to the case. One is Bruno and another one is Moreslybo Pty Ltd (by the way of it is managing director Slybo). In the given case, Bruno was an illiterate farmer who was living in Italy. He left this country with his wife and move to NSW Australia. He has purchased a farm in NSW for the worth $220,000. Later on, in early 2012, his wife left him as she did not want to be in Australia and therefore she went back to Italy. This incident has put an adverse impact on his mental condition and he was suffered from prolonged depression. Bruno has consumed a lot of alcohol. In the middle of the same year i.e. 2012, the managing director of a company named Moreslybo Pty Ltd, has approached Bruno to purchase his farm for $160,000. The managing director, Slybo was aware of the past incidents of Bruno’s life. He knew that Bruno’s wife left him cause she did not want to reside in Australia.
Slybo here advised Bruno that he must sale his farm to Moreslybo Pty Ltd so that he could go back to Italy and live with his wife again. As Bruno was under depression, he accepted the proposal of Slybo, yet the same was not a beneficial one for him because the company was only offering $160,000 for a property, which Bruno purchased for $220,000. Applying the provision of Lloyds Bank v Bundy and Johnson v Buttress, Slybo has used the undue Influence over Bruno. Slybo was aware that Bruno is worried about his wife and cause of over-consumption of alcohol; he was no more able to take a reasonable decision for himself. Slybo had an interest in the purchase of Bruno’s farm; hence, he has given wrong advice to him.
Later on, when Bruno’s wife has returned to Australia and becomes ready to do the work of the farm, Bruno wants to breach the contract with Moreslybo Pty Ltd. As consent given by Bruno to sell his farm to Moreslybo Pty Ltd was influenced by Slybo, therefore this consent was not a valid one. The contract was voidable at the desecration of Bruno and hence Bruno can say no to the performance of this contract.
Conclusion
Breach of a valid contract brings civil liability. In the studied case, the valid contract did not exist between Bruno and Moreslybo Pty Ltd in the absence of a valid consent. The contract is voidable on part of Bruno, and for the reason, he can deny performing the obligation i.e. sell of farm to Moreslybo Pty Ltd. In conclusion, this is to be stated that Bruno may be released from his liability under this contract as he has the legal right to held this contract voidable cause of undue influence on the part of Slybo.
References
Allcard v Skinner (1887) 36 Ch D 145
Australina Contract Law. (2018) Johnson v Buttress. [online] Available from: https://www.australiancontractlaw.com/cases/johnson.html [Accessed on 03/09/2018]
Ayebarebruno.blogspot.com. (2016) Free Consent – Contract Law. [online] Available from: https://ayebarebruno.blogspot.com/2016/06/free-consent-contract-law.html [Accessed on 03/09/2018]
Carnac Grain Co Inc v HMF Faure & Fairclough Ltd & Bunge Corp [1967] 2 All ER 35
E-law Resources. (2018) Undue influence. [online] Available from: https://e-lawresources.co.uk/Undue-Influence.php [Accessed on 03/09/2018]
Findlaw Australia. (2018) Undue Influence and equity: what happens if one patty is stronger than the other? [online] Available from: https://www.findlaw.com.au/articles/5500/undue-influence-and-equity-what-happens-if-one-par.aspx [Accessed on 03/09/2018]
Gibson, A., and Fraser, D. (2013) Business Law 2014. Australia: Pearson Higher Education AU.
Johnson v Buttress (1936) 56 CLR 113
Kearns, S. (2017) Legal Studies. NSW : Southern Cross University.
Legal Contract. (2018) Legal Contract, Legal Agreements, Contracts And Forms. [online] Available from: https://legalcontract.wordpress.com/2010/05/11/fundamental-principles-of-contract-law/ [Accessed on 03/09/2018]
Legal Dictionary. (2018) Implied Authority. [online] Available from: https://legaldictionary.net/implied-authority/ [Accessed on 03/09/2018]
Lindgren, K., E. (2011). Vermeesch and Lindgren’s Business Law of Australia. Australia: LexisNexis Butterworths.
Lloyds Bank v Bundy [1975] QB 326
Mau, S., D. (2011) Contract Law in Hong Kong : Introductory Guide: An Introductory Guide. Hong Kong: Hong Kong University Press.
swarb.co.uk. (2017) Garnac Grain Co Inc V Hmf Faure And Fairclough: Pc 1967 [online] Available from: https://swarb.co.uk/garnac-grain-co-inc-v-hmf-faure-and-fairclough-pc-1967/ [Accessed on 03/09/2018]
Tooth & Co v Laws (1888) 9 LR (NSW) 154
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