Background
1.The issue in this question is if Roger can claim compensation from The Great Australian Railway Company (GARC). In this case, GARC decided to sell the remaining good numbers as the truck belonging to their affiliate company, Big Trucks Australia (BTA) was delayed due to bad weather and most of the cucumbers were bad.
In case of a lot of commercial agreements, there are already express provisions related with remedies, for instance, in case of a contract related with sale of goods, the buyer could be allowed to require the vendor to make good or to replace the faulty item. An assumption arises (which may be expressly mentioned in the contract) that all terms governing the contractual relationship between the parties have been added expressly in writing in the agreement itself. Consequently the parties intend to dislocate any rights and remedies that may be offered by the law (like the right enjoyed by the buyer to terminate the contract in case of fundamental breach) that have not been specifically mentioned in the agreement.
As against the equitable remedies like specific performance and injunction, damages awarded for the loss caused due to breach of the agreement are available as a matter of right. Therefore it is available for a blameless party to claim compensation from the party that has caused a breach of contract regarding all breaches of contract (Bradgate, 2000). In such a case, the damages can be substantial or nominal. The court awards, nominal damages were no loss has been suffered by the innocent party due to the beach by the other party. On the other hand, substantial damages are awarded by the court as monetary compensation in return of the loss that has been caused due to the breach by the other party (Brown, 1995). In order to receive substantial damages by an innocent party, such party is required to establish that it has suffered loss due to the breach (remoteness) and the amount of loss (measure) suffered by such party. The party in breach has to argue in the court that the innocent party has failed to take steps to mitigate the loss.
The law provides that damages for loss suffered due to the breach of agreement may be recovered by the innocent party only if such loss is not too remote. The purpose of damages is to place the guiltless party in the same place in which the party would have been if the agreement was performed properly by the other party. The principle related with remoteness of damages has been offered by court in the legendary case of Hadley vBaxendale (1854). In this case, it was stated by the court that the losses mentioned below can be recovered:
Remedies for Breaches of Commercial Agreements
- All the losses that are the natural result of the breach;
- All the loss that was in contemplation of the parties while entering into the contract as being the probable result of the breach.
On the other hand, if the loss suffered by the other party does not fall within the categories mentioned above, such laws will be considered as too remote, and it may not be recovered.
The rule provided by the court in Hadley v Baxendale has been interpreted by the courts as meaning that only the loss that was within the reasonable contemplation of the parties at the time of entering the contract may be recovered (The Heron II 1969).
Measure of damages is the way of calculating damages that need to be awarded to the innocent party. It includes loss of bargain or expectation loss. The general aim of the court is to place the innocent party in which it would have been if the other party has performed the contract properly (Robinson v Harman, 1848). The two methods that are generally used for evaluating the measure of damages are the difference in value or the cost of cure. Generally, the method that is most appropriate in a particular case is used by the courts.
Mitigation: the innocent party cannot be allowed to recover damages for loss that may be avoided if such party had taken reasonable steps. This is sometimes worth the duty to mitigate the loss. However, this is not applicable to the actions related with the price of goods delivered. Even if there is no duty to mitigate the loss before the actual breach of contract has taken place, the innocent party should not agree with the loss. However, the responsibility is of the defendant to establish that the plaintiff did not take steps to mitigate the loss (Pilkington v Wood, 1953).
In the present case, there was a written contract between Roger’s cucumbers and GARC. According to this contract, cucumbers were to be carried from Perth to Adelaide by rail and then to Melbourne by truck, which was to be provided by an affiliated company of GARC, Big Trucks Australia (BTA). Roger had hired a stall at the Victorian Fruit and Vegetable Market for selling the cucumbers. However, the truck of the company was delayed as a result of bad weather. The result was that most of the numbers that bad when the truck crossed the state border between South Australia and Victoria. Under these circumstances, it was unilaterally decided by GARC that the remaining cucumbers should be sold otherwise the whole consignment would become unassailable by the time it arrives at its destination in Melbourne. Therefore BTA organized for the disposal and the sale of the good cucumbers. On the other hand, Roger was still required to pay the fees for hiring the stall at the Victorian Fruit and Vegetable market. Under these circumstances, Roger wants to claim damages for the loss suffered by him. This loss is related with the value of cucumbers, and also the fees that has to be paid by Roger for hiring the stall at the market. However in the present case, it is available to GARC to claim that the cucumbers when that cucumbers went bad as a result of the delay that was caused by bad weather. In this way, GARC can claim that the loss was caused as a result of that weather or in other words, due to the reason that were beyond the control of GARC. Moreover, the company has done its best to save the rest of the cucumbers and to sell them before they also went bad.
Principles Related to Remoteness of Damages
Under the circumstances, it can be claimed that BTA was acting as an agent of GARC. On the other hand, GARC had the implied authority to act as an agent of Roger in order to save the rest of the cucumbers.
2.The law of agency provides that when the agent acts without authority or goes beyond the authority provided to the agent, the actions of the agent do not influence the legal relationships that are present among the principal and third party. Yet, when the principal has caused the third-party reasonably believed that the agent has been provided for you to act on behalf of principle and the agent is acting within the scope of such authority, the principle is not allowed to invoke the lack of authority of the agent against such third-party. Therefore it is provided by the law of agency that when the agent has acted devoid of authority, the acts of the agent are not binding for the principal and third party (Equiticorp v Bank of New Zealand, 1993). The same is applicable in cases where the authority has been provided by the agent is of limited scope and the acts exceed such authority. For example, principal B has authorized agent A to purchase specific quantity of grain on his behalf, but without exceeding a particular price (Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd., 1992). Therefore A contracts with the seller C. Regarding the purchase of more grain and at a higher price. Due to the lack of authority on part of A, the contract amid A and C is not binding for B. Similarly it is not effectual amid A and C.
Apparent authority: Two situations are present where the agent, even if acting without authority or exceeding the authority, may bind the principal and the third-party regarding the contract created by such an agent with the third-party. The first case takes place when the acts of the agent have been ratified by the principal. The second case is related with the so-called apparent authority of the agent. This provision provides that the principal, whose conduct had made the third-party reasonably believe that the agent had the authority to act on behalf of principle, and therefore the principle is bound by the acts of the agent.
The apparent authority is the use of general theory of good faith and the prohibition imposed on inconsistent behavior is particularly important in the principle is not an individual but an organization (Freeman & Lockyer v Buckhurst, 1964). While dealing with the company, partnership or the business association, it may be difficult for a third-party to decide if the persons acting on behalf of the organization as the real authority for do so and therefore may choose to rely on the apparent authority of such a person. Due to this reason, the third party is merely required to establish that the party reasonable believed that the person claiming to represent the business had the authority and this delay was the result of the conduct of the persons who actually had the authority to represent the organization (Pacific Carriers Ltd v BNP Paribas, 2004). These persons may include the board of directors, executive offices of incorporation or partners etc. However, it relies on the conditions of each case if the belief of third party candidacy did as reasonable or not. For this purpose factors like the position occupied by the apparent agent, the nature of transaction, acquiescence of the representatives of the organization in the past etc., have to be considered.
Measure of Damages and Mitigation
This point can be explained clearly with the help of following illustrations. For example, A the manager of the branch office of a company B creates a contract with a construction company C for redecorating the premises of the branch even if the manager does not have the authority to do so. As a result of the reality that generally branch managers have the authority to create this type contracts, B will be held to be bound by the contract with C as under the circumstances, it was reasonable for C to believe that the manager A had the power of entering such a contract for the company.
Another example of this situation is where A, the chief financial officer of the company B, with the acquiescence of company’s board, even without the actual authority to do so, repeatedly enters into monetary deals with the bank C for the company B. In case of one transaction will prove to be disadvantages for the company, the Board of Directors of company B raise an objection with the bank C regarding the lack of authority of A.. However, this objection can be defeated by the bank C by claiming that the company B is bound by the apparent authority of A to end their financial transactions on behalf of B.
Therefore, in the end, it can be stated that apparent or ostensible authority is provided the principle has made a representation that another person has the authority. In such a case the principle will be considered as being bound by the transaction with the third- by the acts of such person with the authority which the persons appear to possess even if the principal had not given such authority or restricted the authority regarding which information was not given to the third party
References
Bradgate, R. 2000, Commercial Law, 3rd Edition, Butterworths, London
Brown, I. 1995, The agent’s apparent authority: paradigm or paradox? Journal of Business Law
Brown, I. 2004, The significance of general and special authority in the development of the agent’s external authority in English law. Journal of Business Law
Case Law
Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd [1992] 2 VR 279
Equiticorp Finance Limited (in liq) v Bank of New Zealand (1993) 32 NSWLR 50
Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480
Hadley v Baxendale ([1854] 9 Exch. 341
Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451
Pilkington v Wood [1953] Ch 770
Robinson v Harman [1848] 18LJ Ex 202
The Heron II[1969] 1 AC 350
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