Issue: On the basis of the facts that have been provided in this question, it needs to be decided if Brad had entered into a valid contract with Caltex and if Tina is bound by such a contract. The reason behind this issue is that Tina expressly told Brad that we should not enter into a contract for the purchase of petrol in the future. At the same time, another issue that has to be decided if a secret profit had been made by Paul when he was acting as Tina’s agent.
Law: In order to decide the above-mentioned issues, the principles related to the law of agency are to be applied. In this context, the law of agency provides that an agency can be described as an agreement between a party called the principal and the other party called the agent. According to the agency agreement, it is provided that power has been granted to the agent to the contracts on behalf of the principal. The result of such a position is that the principle is considered by the law to be bound by such an agreement (Watteau v Fenwick, 1893).
In such a case, other than the relationship that arises between the agent and the principal, a relationship is also formed with the third-party. As a result of the actions of the agent, a legal relationship is created between the third-party and principal. The law of agency also provides that in such a case even if the contract was created by the agent, there is no relationship between the agent and that the third party (Harris, Hargovan and Adams, 2015).
The law of agency provides for the different kinds of authority that can be conferred on the agent by the principal (Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd., 1964). Therefore the law provides that actual authority, apparent authority or the authority of necessity can be conferred on the agent by the principal. Regarding the express authority of the agent, authority is conferred on the agent, orally or in writing. In case of implied authority, even if the principle has not expressly conferred authority on the agent, still due to the reason that the agent has been designated to his present position and some type of authority is related with the position, it can be said that the agent has this implied authority (Lipton, Herzberg and Welsh, 2016). Similarly it can be said that the agent had apparent authority in a case where no authority has been conferred on the agent had principle, but the principal has made a representation to the other parties that such an agent as the authority. It is worth mentioning that in context of the authority of the agent, it is not necessary that and live presentation should be made by the agent but it is required that the principal should have made the representation related with the authority of the agent (Christie and Another v Harcourt & Co, 1973). According to the law, such as a representation could also be made by the principal in the form of inaction especially when the principal is aware of the fact that on the grounds of the agent’s actions, it may be believed by the third parties that the agent has the authority. In such cases, it is provided by the law that the principal has the responsibility to inform the third parties that the agent in fact does not have any authority. If the principle fails to inform the third parties regarding the lack of authority of the agent, it can be presumed that the principal will be liable for the actions of the agent.
The law of agency also provides that an agent is under an obligation to strictly follow all directions given by the principal. In case the agent fails to follow the directions given by the principal, the law may consider that the agent as a liability towards the principal. The law also provides that in such a relationship, the agent is required to use its talent in a way that is beneficial for the principal. In the same way, it is also the duty of the agent that we should exercise due care while working for the principal. Similarly, the agent is also under a legal obligation to act in good faith. Another fiduciary obligation of the agent requires that the agent should consider the best interests of the principal, while acting on behalf of the principal. Therefore, the agent should avoid any conflicts of interest (Vermeesch and Lindgren, 2011). In case, such a conflict of interest arises, it is the duty of the agent to immediately inform the principal regarding the presence of such conflict. Another significant duty of the agent provides that the agent should not make any secret profit while acting on behalf of the principal (Harris, Hargovan and Adams, 2015). The Court had stated in Bentley v Craven (1853) that if it is found that the agent had made a secret profit, the principle is allowed by the law to recover the profit from the agent. It is also the duty of the agent that he should not withhold any vital information from the principal and similarly, the agent should not use such information for making a secret profit (Robb v. Green, 1895).
Application: on the grounds of the rules of law of agency, in this question. It can be said that in the past, Tina had given express authority to Brad to purchase patrol on her behalf. However, when Tina recovered from her illness, she withdrew this authority and told Brad that he should not order patrol in future. Even if this authority was withdrawn, Brad still ordered 30,000 L patrol. However, it needs to be to be noted that although Tina had withdrawn the authority to purchase petrol from Brad but the third parties including Caltex were not aware of this lack of authority. Under these circumstances, it can be reasonably presumed by Caltex that Brad had the authority to create a contract for the purchase of patrol and such contract will be binding on Tina.
Regarding the second issue present in this question, it can be said that Paul had made a secret profit while he was acting as Tina’s agent. Similarly, it was the duty of all to inform Tina that the real value of the car was much higher. There was a conflict of interest when it was decided by Paul that you purchase the car himself and sell it at a profit. As a result, in this case, the agent’s duties have been breached by Paul. Therefore the law provides that Tina can recover this amount from Paul.
Conclusion: In this case, the contract created by Brad for the purchase of patrol from Caltex can be enforced against Tina even if she had expressly told Brad that we should not order patrol in future. The reason is that in this case, Caltex did not know that authority has been withdrawn by Tina. Therefore, it was reasonable for Caltex to assume that Brad had the authority to bind Tina to the contract. On the other hand, a secret profit was made by Paul while he was working as the agent of Tina and therefore she can recover this amount from Paul.
Issue: In this question, the issue needs to be deciding if Simon’s contract binds the other partners of the firm, George, Sara and Mary, particularly as a result of the fact that the partnership agreement provides that the the partners have the authority to enter into a contract for $10,000, and in case of a contract beyond this amount, the partner is required to inform the other partners. Before entering into the contract. Another issue is if the partnership will be bound by the the contract to purchase the Ute, created by Simon, particularly when the partnership was not dealing in freight business.
Law: The above-mentioned issues can be decided by applying the rules provided by the Partnership Act. According to the Partnership Act, the parties enter into a partnership orally or in writing. All the powers that have been granted to the partners are mentioned in the partnership agreement (Graw and Whitford, 2015). In the same way, the partnership agreement also mentions the scope of authority conferred on the partners. Therefore it can be said that when a partner has created a contract that falls within the scope of authority of such a partner, it can be said that the content binds the other partners (Robb v Green, 1895). The Partnership Act also provides in this regard that a partner also has the implied authority of acting as the agent of the rest of the partners (Watteau v Fenwick, 1893). It is also worth mentioning that implied authority that is provided to the partners, is limited to the nature of business. As a result, if the actions of the partner does not comply with the nature of the business generally carried on by the firm, such an act cannot be considered as binding on the other partners.
Application: As a result of the rules of partnership that have been discussed above, in this question, it can be said that Simon at entering into a contract to purchase a wide variety the storage drive from SunStar Computer for $12,000. Although the present partnership agreement clearly provides the partners only have the authority to enter into a contract for less than $10,000, as a result of the rules mentioned above, it can be said that in this case the contract is binding on the partnership. The reason is that Sun Star computer was not aware of the restriction that has been placed on the authority of the partners while entering into the contracts. Therefore, Sun Star Computers can enforce this contract against the partnership.
In context of the contract created by Simon for the purchase of the secondhand Ute, as we mentioned that the partnership was generally into the business of information technology. On the other hand, Simon had entered into this contract because he wanted the partnership to enter the freight business. Under these circumstances, it cannot be said that the contract for the purchase of Ute was formed in the usual course of business of the partnership. The result is that this contract is not binding on the partnership.
Conclusion: On the above-mentioned grounds, it can be concluded that in this case, the contract created by Simon for purchasing 500 TB storage drive from SunStar Computer NBN goes against the other partners. The reason behind this position is that even if it has been mentioned in the partnership agreement that a partner can enter into a contract for less than $10,000 and needs to inform the other partners before entering into any contract more than this amount. However, Sun Star Computer did not know that such a limitation has been imposed by the partnership agreement. The effect is that the other partners will be treated by the law as being bound by the contract created by Simon for the purchase of 500 TB storage drive even if this contract was beyond the authority provided to the partners.
Regarding the contract created by Simon for purchasing a secondhand Ute at the price of $9000, it can be said that although this contract falls within the scope of authority of the partners, still this contract is not binding against the other partners. The reason is that the partnership business was related to information technology and freight business was not the general nature of business carried on by the partnership. As a result, this contract does not bind the other partners, George, Sara and Mary.
References
Graw, Parker, Whitford, Sangkuhl, (2015) Understanding Business Law 7th ed LexisNexis Butterworths
Harris, J. Hargovan, A. Adams, M. (2015) Australian Corporate Law LexisNexis Butterworths 5th edition
Lipton P, Herzberg A and Welsh, M, (2016) Understanding Company Law, 18th edition, Thomson Reuters
Vermeesch,R B, Lindgren, K E, (2011) Business Law of Australia Butterworths, 12th Edition
Case Law
Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480
Robb v Green, 1895, 2 Q. B. I AND 315
Watteau v Fenwick, [1893] 1 QB 346
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