General principle of agency law
As per the general principle of agency law, the principal can be held responsible for the actions of his/her agent. However, it does not mean that the principal will be held liable for unauthorised actions of the agent. Various remedies are given to the principal in order to set the boundaries on agents to not perform certain actions in required manner. The principal has the right to ratify the act or refuse them. If the actions are not ratified by the agent, then the agent becomes personally liable for the actions.
In the given case study, Daphne had to hide the identity of her principal; however, she failed to do so. Moreover, a budget of $300,000 was approved by Lupe; however, Daphne spends $320,000 instead. Therefore, Daphne acted outside the boundaries set by Lupe, and she acted without any authority. As per the principle of agency law, Lupe has the right to hold Daphne liable for $20,000. On the other hand, the size of the ring is also an issue. Lupe specified to Daphne that he wanted a rock which is in the form of a ring. But, a pink diamond ring is purchased by Daphne instead. However, this is not an issue in the agency law because Lupe had given the authority to Daphne to finalise the ring by herself.
Based on the above analyses, Lupe has the remedy to refuse the purchase made by Daphne since she acted outside the boundary of her authority specified by Lupe. The balance amount of $20,000 can be demanded by Lupe. However, the size of the ring was not a condition; thus, Lupe cannot hold Daphne liable for the ring she chooses.
Under agency relationship, the third party has the right towards the principal because the principal gives the authority to the agent. If a third party has any reason to believe that the authority exists, then such party has the right to hold the principal liable. The third party rights are saved in a contract because the principal owed the ultimate responsibility in the contract. The right of the third party remains secure even if the agent acted outside the scope of the authority. In such case, the dispute arises between the agent and the principal; however, the rights of the third party are secured. A contract is considered as valid if all the elements are fulfilled by the party. In Chappell & Co Ltd v Nestle Co Ltd case, the court provided that a contract cannot become ineffective if the consideration is not sufficient.
Remedies for the principal
In the given case study, authority was given by Lupe to Daphne to purchase the ring for per fiancée. Although Daphne acted outside her authority, however, the right of Lafayette is secured since he is the third party. The dispute has arisen between Daphne and Lupe. A contract was formed for the pink ring when Lafayette did not know that it was an antique. Lafayette did not have the right to consider the contract invalid or demand further consideration since a valid contract has formed between the parties. Moreover, the contract cannot be terminated by Lafayette by relying on the fact that Daphne acted outside her authority while purchasing the ring. He also cannot rely on the fact that the consideration was not sufficient in the contract.
A partnership is governed by the partnership agreement which is formed between the partners. The provisions given under this agreement resolves the issues which arise between partners. Although it is not possible for parties to include every term in the partnership agreement, however, their rights and liabilities are decided on equality basis. The partners have to perform their promises as per the provision of equality. Moreover, the rights of the partners are divided equally in case no specific provision is given regardless of the profit sharing ratio of the parties.
In the given case study, a partnership is formed between Lupe and Fred for a period of five years. Moreover, the parties decided that after termination of the partnership, Lupe will give a small parcel of land to Fred. Moreover, Fred will be entitled to receive ten percent of profits of the business. No other provisions established by the parties in the partnership. In this case, the issue is raised based on three properties which include the vineyard, land in bright and the additional property purchased by the partnership. Fred is entitled to receive the land in bright; however, he is not liable to take any share in the vineyard as decided by the parties. Moreover, Fred has the right to get half of the share in the additional land purchased by the parties during the course of their business since no provision was included in the partnership agreement.
Conclusion
Based on the above analysis, Fred as the right to demand half share in the property which was purchased by the business during its course and the rest of the rights are given under the partnership agreement.
As discussed above, the partnership rights are not limited to the agreement which is formed between the parties. The provisions which are included in the partnership agreement by the parties define their rights and liabilities in the business. However, in case no provisions are included in the agreement, then the parties have the right to divide their assets and liabilities equally between themselves. Unless provided otherwise, the partners have equal right in an asset of the business which is purchased during the course of the business by the partners.
In the given case study, both partners have defined their rights and liabilities regarding the properties in the partnership agreement. The rights of the vineyard and the land in bright are clearly defined between the parties. The right of Fred regarding these properties are clear. However, the key issue raised is regarding the third property. The property is purchased by the partners during the course of the business, and they did not specify their rights regarding the property. Since no rights are defined by the parties in the partnership agreement formed between them, all partners have equal rights on the property. Thus, Fred has the right to claim half of the property which is purchased by the parties during the course of the business. The property will be divided equally between both partners.
Based on the above analysis, no provision for the additional property is included by the partners into their partnership agreement. Therefore, the property will be divided equally between the partners since Fred has equal right in the property.
Twigg-Flesner C, Consumer product guarantees (Routledge, 2017).
Morse G, Partnership Law(Oxford University Press, 2010).
Fletcher KL, Higgins and Fletcher the Law of Partnership in Australia and New Zealand (LBC Information Services, 2001).
Munday R, Agency: law and principles (Oxford University Press, 2010).
Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87
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