Issues
Is Brad capable to make a contractual relationship amid the Supplier (Caltex) and Tina?
Is Paul is in violation of his duties as an agent and is he liable to pay back the profits to Tina?
The law of agency, authorities and the relationship amid an agent-principal must be analyzed to resolve the raised issues.
When any person appoints any employee then the employee must act as per the directions of his employer. The relationship that is shared by them is of a principal and an agent wherein the employer is the principal and the employee is an agent and the principal defines the acts which the agent is authored to act on his behalf. Any acts which an agent undertakes within his authority are binding upon the principal (Maynegrain Pty Ltd v Compafina Bank , [1982] ). (Gillies, 2004)
Broadly, in any principal – agent relationship, there are two kinds of authorities that are furnished by a principal to an agent.
First, the authority which is granted by the principal to an agent directly then such authority is called actual authority. This can be provided by the principal either expressly, that is, by making the same as part of the contract or can be provided to an agent impliedly, that is by implications or actions or conduct. This is a direct kind of authority and is held in (Bell v Australian Eagle Insurance Co. Ltd , (1990)). (Tarr, 2001)
Second, when a representation is made by the principal in front of third parties who made the third party to believe that the agent does have some kind of authority to bind the principal then it is called apparent authority. The agent can bind the principal only for such acts for which apparent authority is provided and is held in (Ogden & Co Pty Ltd v Reliance Fire Sprinkler Co Pty Ltd, 1973). But, if the third party knows that the agent has no apparent authority the no binding contract can be made amid the third party and the principal. (Greig, N, & Borrie, 1988)
Further, it is not only that an agent is empowered to bind the principal by his actions which are carried out by him within his authority. With power comes the responsibility. Thus, every agent must be responsible enough to cater his acts with utmost care and diligence (Breen v. Williams, 1996). No agent must act in such manner so that he makes secret profits for himself (Jones v. Canavan , (1972)). Also, if at time there is a conflicting situation, then, he must gave paramount importance to the interest of his principal as against his own interest (Daniels v Anderson , (1995)). The information which is sought by an agent during the term of his agency must not be miscued by him in his favor. (Thampapillai, Tan, Bozzi, & Matthew, 2015)
Applicable Law
The laws are now applied to the facts.
The present issue is resolved by the application of actual and apparent authority.
Tina and Brad are in employer –employee relationship as Tina has appointed Brad as her checkout operator. Brad must act within the instructions and guidance of Tina. Tina is guiding the actions of Brad and has given him the power that he has the capacity to order petrol from her supplier (Caltex) till the time she is not coming for work. Tina remained absent from work for a period of four months as she was sick.
So, Tina has mainly granted Brad an actual authority which is limited to the functions wherein Brad can order petrol from the supplier. So, Brad is mainly the agent of Tina who was working with the actual authority provided to him and any contract that is entered by him during these four months is binding upon Tina.
But, the actual authority was withdrawn by Tina when she returned from the work. But the supplier was not aware of the same as no communication was made to the supplier. So, for supplier Brad still holds an authority to bind Tina. Tina has acted in such manner which depicts to supplier that Brad has the capacity to bind her. Thus, a representation is portrayed (by non communicating the fact that Brad no longer holds any authority to order petrol) by Tina that Brad is still authorized to make order on behalf of Tina.
Thus, when Brad ordered 30 000 liters of fuel from the supplier, then, supplier of the view that Brad is still authorized to bind Tina and thus the contract that is made by Brad within his apparent authority is valid and has the capacity to bind Tina and Caltex as Brad is acting as if he is the agent of Tina.
But, the contract holds valid only provided supplier has no reason to believe that Brad is now not holding the authority to purchase petrol from him on behalf of Tina. If the supplier is aware of the discrepancy then the contract would have been invalid.
Tina appointed Paul for the sake is his used vehicle. Tina intends to sell one of his vehicle @ $ 19 000. Paul is aware that the coast of the vehicle is actually $ 25 000. In order to gain profit for himself, he buys the vehicle from Tina @ $ 19 000 and resold the same to his friend @ $ 25 000, thereby making huge profits.
Application of Law
It is submitted that Paul is in violation of his duties as an agent. He must act diligently and with honesty and mist has told Tina about the actual worth of the vehicle. However, he misused his position and brought unfair fain to himself and loss to Tina.
Conclusion
It is thus concluded that the relationship amid Tina and Brad is of a principal and an agent wherein Brad has acted within hi apparent authority and has ordered petrol from the supplier. Such contract is binding upon Tina as Brad has acted within his apparent authority.
Since the actions of Paul are in violation of his duties as an agent, thus, Tina can sue paul and recover the profits that are sustained by him.
Whether there is a valid contract amid computer Solutions and You Beaut Ute Ltd for a contract worth $ 9,000?
Whether there is a valid contract amid computer Solutions and Sunstar Computer Hardware Ltd for a contract worth $ 12,000?
To establish a partnership, two or more person come together with an intention to earn profits by carrying on a business with common objective which is of continuous nature. Once a partnership is staled then the persons who are part of the partnership are called the partners of the firm. The partners of the firm are agents of each other and have the capacity to bind each other with their actions. Thus they are governed by the rule of agency. (Fletcher, 2007)
The main essentials of a partnership are: (EGERT, (2007) )
It can only be formed by two or more persons (Hurst v Bryk and Others , [2000])
The partners are governed by the rule of agency, that is, every act carried don by the partner will bind all the other partners and vice versa(Newstead v Frost , [1979]);
The partners must carry out their actions within the framework of the partnership agreement (The Duke Group Ltd (in liq) v Pilmer , (1998))
The liability of the partnership is joint and several (Thames Cruises Ltd v George Wheeler Launches & Another , [2003])
Further, every partner must carry out their action as per the provisions of the partnership agreement that is entered amid the partners, any act which is outside the scope of the partnership firm is not binding provided the act does not fall within the rule of Indoor management.
It is submitted that normally, when any partner exceed is authority, either express or implied, then any contract that is made beyond the power of the partner is not binning upon in the partnership firm. But, if any outsider deals with the partner on the hope that the partner has power to bind the firm by his actions may face consequences if such transactions are set aside on the basis of lack of authority, especially when the outsider is dealing in good faith and here there are no chances to know the internal proceedings of the partnership firm (Equiticorp Finance Limited (in liq) v Bank of New Zealand , (1993) ).
Conclusion
In such cases, in order to protect the interest of the outsiders the rule of indoor management is established. As per the rule, if any outsider who is dealing with the partner of the firm on the belief that the partner has the requisite authority , then, any transaction that is entered amid such outsider and the partner is binding upon the firm. The same cannot be shed away on the ground that the partner has no requisite authority to bind the form. However, if the outsider is aware of the incapacity of the partner, that is, when he is not dealing in good faith, then, any contract entered amid such partner and the third party is not binding upon the partnership firm (Bank of NSW v Vale Corp (Management) Ltd, 1981). (P, 2012)
The law is now applied to the facts of the case.
The facts reveal that Simon, George, Sara and Mary desire to establish a partnership and thus they pool in cash and establish a partnership business for themselves called Computer solutions. As per the agreement, every partner of the firm was authorized to enter into any transaction on behalf of the form and the said transaction will be binding upon the form. If any contract is made by any partner than a limit of $ 10 000 is set and if any contract beyond the said limit is to be established then approval of all the partners is required.
Now, it is submitted that since a partnership is established that all the partners are agents of each other and are jointly and severally liable to the liabilities of the firm.
The partnership agreement has provided an actual authority wherein Simon, George, Sara and Mary can enter contract up to $ 10,000 without seeking the approval of any other person and such contract will be binding upon the parties.
Thus, Simon without any consultation of the other three partners purchased a second-hand ute worth $ 9,000 from You Beaut Ute Ltd. Since the act falls within the actual authority of Simon and as per the partnership agreement, thus, the contract is binding amid Computer solution and You Beaut Ute Ltd.
Also, Simon on behalf of Computer Solutions ordered one 500TB storage drive @ $ 12, 000 from Sunstar Computer Hardware Ltd, costing $ 12 000.
Now, this transaction by Simon is contrary to the express provisions of the partnership agreement. Before entering into the transaction Simon should have consulted with the other three partners. Thus, Computer Solutions may deny the contact with Sunstar Computer Hardware Ltd.
However, Sunstar Computer Hardware Ltd may rely on the principle of Indoor management rule and must state that he is of the belief that Simon is the partner of the firm who has the capacity to bind the firm. He has no reasons to suspect that there is some kind of internal proceedings to be carried out before a contract above $ 10,000 requires approval of other partners.
Thus, Sunstar Computer Hardware Ltd can sue Computers solutions for the breach of the contract.
Conclusion
Since the contract entered by Simon on behalf of Computer solution with You Beaut Ute Ltd for a worth $ 9,000 is within his actual authority and as per the partnership agreement, thus, the same is binding upon the parties.
Also, Sunstar Computer Hardware Ltd can sue Computer Solution by relying on the principle of Indoor Management.
Bank of NSW v Vale Corp (Management) Ltd (1981).
Bell v Australian Eagle Insurance Co. Ltd ((1990)).
Breen v. Williams (1996).
Commissioner, F.?A. I. ((1992)).
Daniels v Anderson ((1995)).
EGERT, G. ((2007) ). DEFINING A PARTNERSHIP: THE TRADITIONAL APPROACH VERSUS AN INNOVATIVE DEPARTURE ? DO QUEENSLAND APPEAL COURT DECISIONS POINT TO THE NEED FOR A REVIEW OF THE TRADITIONAL APPROACH TO INTERPRETATION ADOPTED BY AUSTRALIAN COURTS? 19.1 BOND LAW REVIEW .
Equiticorp Finance Limited (in liq) v Bank of New Zealand ((1993) ).
Fletcher, K. L. (2007). The Law of Partnership in Australia. Lawbook Company.
Gillies, P. (2004). Business Law. Federation Press.
Greig, D. W., N, G., & Borrie, G. J. (1988). Commercial law. Butterworths.
Hurst v Bryk and Others ([2000]).
Jones v. Canavan ((1972)).
L, F. K. (2007). The Law of Partnership in Australia. Lawbook Company.
Maynegrain Pty Ltd v Compafina Bank ([1982] ).
Newstead v Frost ([1979]).
Ogden & Co Pty Ltd v Reliance Fire Sprinkler Co Pty Ltd (1973).
P, H. (2012). Principles of Lender Liability. OUP Oxford.
Tarr, J. A. (2001). Information Disclosure: Consumers, Insurers and the Insurance Contracting Process. iUniverse.
Thames Cruises Ltd v George Wheeler Launches & Another ([2003]).
Thampapillai, D., Tan, V., Bozzi, C., & Matthew, A. (2015). Australian Commercial Law. Cambridge University.
The Duke Group Ltd (in liq) v Pilmer ((1998)).
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