Case Law
The Great Australian Railway Company enters a written contract allowing them to transport cucumbers from Perth to Adelaide via rail and then from Adelaide to Melbourne via truck through an affiliate company Big Trucks Australia on behalf of Roger. Roger intends to sell the cucumber at the Victorian Fruit and Vegetable Market to which effect he has rent a stall at the market. However the truck from BTA that was supposed to ferry the produce from Adelaide to Melbourne is delayed due to bad weather and by the time the truck crossed the border between South Australia and Victoria, a substantial amount of the cucumber was spoilt. Consequently, GARC unilaterally decided to sell the remaining good cucumbers as it felt that the entire consignment would be unsaleable by the time it arrived in Melbourne. BTA organised for the disposal and sale of the cucumbers. Despite the failure to use the rented room since non-of the cucumber destined for sale made it to the destination, Rodger still has to pay for the space he let, subsequently he claims damages from GARC.
Australian law of agency
Australia does not have any legislation that offers an all-encompassing explanation of the agency relationship. Rather, the law of agency recognizes it as a legal relationship expounded primarily by the courts over a period of several decades. The general idea behind an agency relationship signals an agent as a person or organization who acts on behalf of, or represents, another person. The body or person represented by the agent is referred to as the principal. The Great Australian Railway Company is the agent in this relationship whilst Rodger is the principal (Agency agreements, 2013).
The legal relationship of an agency is brought about through several ways; an expressed or oblique agreement amongst two parties that one will act on behalf of the other. It can also be brought about by a principal approving or ratifying action done on their behalf after it has occurred, or through an operational law such as legislations. The dogma, created by the courts, holds that, “where one person leads a second person to consider some third person an authorised agent, and the second person relies on this, the first person is ‘estopped’ from denying that that third person is their agent.” The Australian law further classifies that it is not enough for two parties to claim either through writing or otherwise to be in an agency relationship. The relationship of agency is brought about by the nature of the underlying association.
Australian Law of Agency
The agency relationship empowers the agent with the power to act in a given way; the authority however is not unlimited. An agency relationship established through an agency relationship will highlight the obligations and the rights of both the principal and agent. Where the duties of the agent are not stated then the conduct of the agent will amount to their responsibility. Moreover, there are certain obligations of both parties that are created from the principles of common law and equity (Law Quarter, 2017).
A fiduciary relationship is a lawful or ethical affiliation that is based on trust between two or more parties. An agency relationship as per the Australian law would be considered, as a fiduciary relationship where both the principal and agent have several duties, which include the agent, must at always act in the greatest interest of the principal. Moreover, as an agent one is not expected to prioritize their interests before those of the principal, this way conflicts of interests are avoided. The agent is also prohibited from disclosing any personal information pertaining the principal unless they are expressly sanctioned to do so. The Agent must not misuse any of the Principal’s money or property in its capacity as Agent.
A principal is bound to a contract entered by the agent with a third party regardless of whether the principal wishes to proceed with the contract or not. In case the principal is not in a position to execute their obligations as indicated in the contract, the principal will be held liable and will face a range of legal remedies such as damages or specific performance. Furthermore if a principal is not in a position to settle its financial obligations resulting from the contract entered on its behalf by the agent, the principal faces a statutory demand for payment of debt failure to which bankruptcy or winding up proceedings are effected (Australian Capital Territory, 2017).
The relationship between the Great Australian Railway Company and Rodgers satisfies the agency relationship. The obligation of Great Australian Railway Company as per the written contract was transporting the cucumber via rail from Perth to Adelaide via rail and then from Adelaide to Melbourne via truck through an affiliate company Big Trucks Australia. Big Trucks Australia was the third party in this relationship. For whatever reason and in this case weather, the produce never reached its destination and as a result, the principal incurred losses (Pont, 2015). The agent at all times is expected to act in the best interest of the principal, and by opting to make arrangements to sell the remaining cucumber before they went bad satisfies this obligation. The assumption here is that the funds collected from the sale were remitted to Rodgers, the principal in this relationship (Australian Government , 2018).
Fiduciary Relationship in Agency
The delay however was because of what would be considered an act of God. Nevertheless, there are instances where despite the act of God, an agent is still held liable for any loss emanating from the act of God. In the case, Transco plc v Stockport Metropolitan Borough Council, Transco Plc litigated the council for repairs valued at £ 93,681.55 below one of its pipes in Brinnington claiming that the ground beneath the gas had eroded away after the gas pipe was swept away because of the council water pipe leakage. The Lords held that, “the quantity of water from an ordinary pipe is not dangerous or unnatural in the course of things, the council was not liable.” Nevertheless, the agent must take relevant precautions against acts of God otherwise, the agent will be held liable. Big Trucks Australia acting on behalf of the Great Australian Railway Company should have taken precautions against the weather and leave early enough to account for any misdemeanour along the way. They should have factored in the weather in their schedule and as such bad weather should have not being an issue. Secondly, in acting in the best interest of the principal, the moment the Great Australian Railway Company realized that Big Trucks Australia was stuck across the border and that the delay would cause destruction and loss of property in its jurisdiction they should have sold them then and not later when part of the consignment was already spoilt. This way the Great Australian Railway Company failed in its duty as an agent making them legally liable to the damages incurred by Rodgers who had already fulfilled part of his obligations as per the contractual agreement.
Organizations are not human hence; they lack the capacity to enter into contracts independently without any human intervention. However, the human element provide the organization with both a solution and a problem. The company who acts as a principal has an n option to deny any contractual liability based on its agent lacking the necessary authorization to commit the organization at the time of the contract. To manage its affair an organization relies on agency relationship with its employees by designating various positions across the company, which vary with the authority of each position held (Oliver & Schoff, 2017).
When engaged in negotiations it is important to pay attention to the requisite authority issued to the agent by the principle otherwise one risk the contract being void. The powers of execution granted to an agent may be either actual or ostensible. However, the commonwealth legislation safeguards parties up to a certain degree by permitting them to proceed with the assumption that the organization they are involved in negotiations with has fulfilled certain issues unless there is a hint of the contrary. In regards to the law of agency, the most difficult aspect relates to authority of the agent and the rules governing undisclosed agency (Pont, 2015).
Liability for Loss Resulting from Act of God
Actual authority is enacted the moment when the agent is specifically or through implication is issues with the authority by the principal to proceed on their behalf; for instance, when shareholders of a company pass a resolution allowing an agent to act on its behalf in pursuit of various deals. The implied actual authority takes effect because of the position held by an agent, the agent is anticipated to bear the power allowing them to pursue and to have a legally binding deal. Regardless, the implied actual authority of an agent is dependent upon the position held by an agent and the nature of the contract being pursued. For instance, based on the title of managing director, the holder of the title have the implied actual authority to pursue a binding major supply deal. The same authority does not apply to a secretary whose implied authority allows her to pursue minor binding administrative contracts for instance hiring vehicles or letting event spaces to host company functions (Pont, 2015).
In a situation where the agent does not have actual authority, a third party who may have entered into a contract with the agent can still enforce the obligations stipulated in the contract if they can prove that the agent had implied authority. The manner in which the principal refers to or addresses the agent to the third party can be interpreted as implied authority. In cases of actual authority, the principal is expressly bound to the contract, in implied authority this may not always be the case. Nevertheless, an agent with implied authority through proxy or by their necessity to fulfil a certain role, in as much it may not be straightforward, the contract is till binding to the principal (Agency agreements, 2013).
The advantage provided by the actual authority is that the obligations of the agent are clearly stated and the latitude of their power clearly defined making it relatively easy to detect situations where the agent is clearly overstepping their boundaries. Implied actual authority is not clearly defined as it does rely on a specific document. Implied authority can be interpreted from how the organizations conducts itself in reference to the agent. In Australia, it is believed that an executive holds implied authority to perform all the duties associated with a certain position similarly, to what a person in that particular position customarily has (Australian Capital Territory, 2017).
Based on the above analogy, implied actual authority can extend to actual authority. For instance, directors ought to be aware that their position has a significant role in limiting the situations that can be assumed as having implied actual authority, particularly relating to appointments. Should the director fail to review and control the actions of lower level employees, the law assumes that the director granted an implied actual authority to act on its behalf. This issue is prevalent in large size companies where it may difficult to maintain frequent oversight (Australian Capital Territory, 2017).
The liability in actual and implied authority is dependent on the scope of the relationship between the agent and the principal as outlined in the contractual agreement as such both the agent and their respective agencies may be independently held liable for their actions. However when the actions of the agent are on implied authority, the liability of the agent is greatly diminished. The principal may claim that the actions of the agent are rather self-driven acting outside the scope of their authority (Pont, 2015).
References
Agency agreements, 2013. Agency agreements. [Online]
Available at: https://www.artslaw.com.au/info-sheets/info-sheet/agency-agreements/
Australian Capital Territory, 2017. Agents Act 2003. 31 Auagust .
Australian Government , 2018. Commonwealth Numbered Regulations – Explanatory Statements. [Online]
Available at: https://www5.austlii.edu.au/au/legis/cth/num_reg_es/cogbsr19981998n174332.html
[Accessed 24 August 2018].
High Court of Australia , 1982. Koowarta v Bjelke-Petersen [1982] HCA 27; (1982) 153 CLR 168 (11 May 1982). [Online]
Available at: https://www8.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/HCA/1982/27.html
[Accessed 23 May 2018].
Law Quarter, 2017. Who represents your business? Agency law in Australia (Part One). [Online]
Available at: https://lawquarter.com.au/represents-business-agency-law-australia-part-one/
[Accessed 7 September 2018].
Oliver, J. & Schoff, &. P., 2017. Agency and Competition Law in Australia Following ACCC v Flight Centre Travel Group. Journal of European Competition Law & Practice, 8(5), p. 321–328.
Pont, G. E. D., 2015. Law of Agency. 3rd Edition ed. s.l.:LexisNexis .
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