Facts
The present case scenario can be divided into two parts. There are three individuals identified here. The first scenario shows that Tina has appointed Brad as checkout operator for her independent garage. She acts as a sole trader. In this scenario it is seen that Tina contracts with a fever which makes her stay off work for four months. She gives Brad the authority to order petrol while she is off work. During this time, Brad orders for supplies of petrol from Caltex (Lan and Heracleous, 2010). Fuel gets ordered in every two weeks from Caltex. When Tina returns to work, she informs Brad that he is relieved from ordering petrol and the operations will be controlled by her like before. Brad does not follow her instructions and continues to exercise his earlier delegated powers. He contacts Caltex and places an order for 30,000 litres of fuel. Tina does not agree with this transaction as she had already engaged herself in a more lucrative arrangement with BP. She cancels the contract between her and Caltex stating that the order had been placed by Brad contrary to her instructions (Sitkoff, 2011).
In the second scenario Paul has been employed by Tina as a salesman for the used car business. From the scenario it is understood that Paul is well versed with the second hand vehicle market. There is a vehicle in her car display which she had quoted at $ 19,000. However as per market price she could fetch a price as high as $25,000 (Frankel, 2010). Paul had this knowledge and had arranged for a customer. He buys the vehicle from Tina at the lower price and sells the car to Fred for $ 25,000.
Certain issues arise from the above mentioned scenarios. The kind of relationship between Tina and her employees has to be determined. Moreover the remedies and legal position to be exercised by Tina has to be determined in the two separate cases.
From the nature of duties exercised by Brad in the current case scenario it may be discerned to be that of an agent. Thus in the case of Tina and Brad, the relation of principal and agent is applicable. It is important to analyse the rules of agency and the kinds of rights and duties exercised by the principal and the agent (Leib et al., 2013). Thus agency is a legal relationship which is present in various forms and is present in commercial transactions. It refers to a contract between the principal and agent. Herein the agent is given the authority to act and negotiate on the behalf of the principle. The rule of agency enables businesses to appoint others to represent them on behalf of them in negotiations. However the role of an agent is very different from that of an employee, trustee or an independent contractor. Thus the liability of the principal towards the third party can be determined from the authority exercised by the agent. The authority given can be express, implied and apparent. There are certain duties that have to be exercised by the agent towards the principal (Richardson, 2013). The relation between the principal and the agent is both of contractual as well as of fiduciary nature. These duties either arise from common law or from statutory provisions conducive to law of agency. The agent is supposed to follow the instructions of the principal. The agent should act in person. It is the duty of the agent to act diligently and exercise due care. Most importantly an agent should work in good faith.
Issue
In the subsequent scenario, the aspect of fiduciary relationship between an employer and employee is of essence. Fiduciary duty involves a person to make decisions in the best interest of the individual towards whom he or she owes the duty. Fiduciary duty is created especially with respect to employees who have managerial or senior position (Kershaw, 2011). These people have a major role in the profitability of the business. Thus fiduciary duties may be breached when an employee does not serve an employer faithfully and lacks loyalty. This includes creating profits secretly by deceiving the employer. This also includes not bringing business opportunities to the notice of the employer and using the opportunity for themselves. It also involves carrying out a rival business while still being employed.
In the first scenario there is a relation of principle and agent between Tina and Brad. Brad was authorised to act as per the instructions of Tina. He had failed to do so. He continued to act beyond his authority thus breaking the fiduciary duty existing between a principal and an agent (Chodos, 2011). Brad would not have been involved in a contractual liability had there been a direct contractual relation between Tina and Caltex. However in the present case he is liable to Caltex since he had continued to transact with them without express authority. He had exercised power beyond his delegated responsibilities. Tina will not be held liable if she is able to prove before the court that Brad had acted in complete contravention of his authority and she had no role in the transaction.
In the second scenario there seems to be breach of fiduciary duties on the part of Paul that were owed towards Tina (Casey, 2010). He had worked in a deceitful manner and failed to disclose the potential price of the vehicle from Tina. He failed to bring business opportunities to Tina and used the instant opportunity for his own benefit.
Conclusion
In the case of Brad, Tina has the right to terminate his position since he had breached the fiduciary relation. His act was ultra vires from his duties. In the case of Paul, Tina can claim remedies in the court for breach of fiduciary duty. She has to prove that she faced losses due to the breach. In Australia, penalties can range up to $ 200,000 if the contravention of the duty is of serious nature.
Four friends worked in an IT company, later they made agreement to form a business. A partnership agreement was done between all the friends George, Simon, Mary and Sara. In the agreement a condition was drawn that on the behalf of the IT farm, Computer Solutions each partner can draw $ 10,000 but with the approval of other partners (Rowan, 2012). In this case two transactions have done by Simon without taking the approval of other partners. The transaction was $12000 which is more than $10,000. He did the transaction without taking the permission of other partners which is the breach of the term which may create trouble for the other business partners in the organization.
Law
As partnership contract for the business has done between all the partners George, Simon, Mary and Sara, so some terms and conditions for the business was made. Firstly, more $10,000 should not be drawn by any partner. Secondly, the transactions should only be done on behalf of the organizations Computer Solutions. Thirdly, before transaction the concern or advice should be discuss between all the partners. In the mentioned case issues arise because Simon has done two transactions which cost $ 12,000 and $ 9000. So, two of the terms of the contract were breached. Firstly he did transaction more than $10,000 which is against the terms and secondly he did not take advice of the other partners before making such transaction. Question arises, that can the other partners terminate the contract with Simon? Can they sue Simon for breaching the terms and conditions of the contract?
For any valid contract, it is necessary that the elements of the contract should be fulfilled such as offer, acceptance, and intention to create a contract, mutual obligation and capacity. In this contract or business agreement has done between four of them (Latimer, 2014).
There are some specific terms mentioned in the contract. Firstly, it was mentioned that without the meeting or advice of all the friends any transactions cannot be done by any of the friend which is more than $10,000. The first rule of the contract is breached by Simon because he had done two transactions, one of $12000 to buy 500 TB storage drive and the second transaction he did was for buying second hand Ute at $9000. Both transactions were done for Computer Solutions. One condition was fulfilled by Simon because he bought the materials for the organization. The second term was breached when because Simon bought the products without taking permission from any parties.
Some breach of condition is done in this case which has cause monetary loss to the other parties in the team. When the agreement or partnership was done all the conditions was statutory mentioned which was approved and signed by all the members of the business but conflict arise because Simon have did breach of contract (Burnham, 2014). In the case of the contractual law breach of the term of the contract is severe mistake done by one. In this case Simon has performed such mistake without taking the permission of anyone. According to section 5 (a) of contract law of Australia, penalty can be taken by the other partners of the business from Simon because he breached the duty. In this case contract can be terminated by the other partners with Simon (Mann, 2011).
For a valid contract the rules of the contract is needed to be fulfilled by all the partners of the business which has been breached by Simon.
In this case several terms of the agreement has breached which is the reason that contract can be terminated with the defendant (Simon). It is agreed that Simon has did all the transactions because of the benefit of the company but other partners were in financial loss. In such case if they go to any legal advisor then, the legal advisor may advice that equitable remedy and liquidated remedy can be asked by George, Sara and Mary from Simon (Schmidt-Kessel, 2015). Financial loss is the main issue which is faced by George, Mary and Sara. As the contract was legally bound, so for the breach of the contract, penalty can be asked by three of them from Simon because for a single person the business rules cannot be considered. Consideration is the important element of the contract but that has not been done by Simon while forming the contract (McKendrick, 2014).
In such perspective it can be advised that if a business is needed to maintain in a smooth way then written form of contract should always be maintained (Fitzgerald, 2011). The legal advisor can guide the business partners in several ways. It is necessary that all the rules of business contract should be fulfilled and if the terms and conditions cannot be fulfilled then penalty can be asked by the person who breached the contract. George, Mary and Sara refused to accept the products because of Sunstar Computer Hardware Ltd and You Beaut Ute Ltd because their approval was not taken before forming the contract.
Conclusion
After the case study and consequences the conclusion can be drawn that because of the breach of the contract by Simon the contract is cancelled with Simon (Schaffer, 2011). Many, Sara and George has maintained the conditions and terms of the contract, so the contract is valid for them but as Simon breached the contract so he can be terminated from the contract and penalty can be charged from him in a financial way.
References
Burnham, S. J. (2014). Are You Free to Contract away from Your Right to Bring a Negligence Claim. Chi.-Kent L. Rev., 89, 379.
Casey, L. L. (2010). Twenty-Eight Words: Enforcing Corporate Fiduciary Duties Through Criminal Prosecution of Honest Services Fraud. Del. J. Corp. L., 35, 1.
Chodos, R. (2011). The Nature of Fiduciary Law and Its Relationship to Other Legal Doctrines and Categories: Fiduciary Law: Why Now-Amending the Law School Curriculum. BUL Rev., 91, 837.
Fitzgerald, A. M., Fitzgerald, B. F., Middleton, G., Clark, E., & Lim, Y. F. (2011). Internet and e-commerce law, business and policy. Thomson Reuters (Professional) Australia Ltd.
Frankel, T. T. (2010). Fiduciary law. Oxford University Press.
Kershaw, D. (2011). The path of corporate fiduciary law. NYUJL & Bus., 8, 395.
Lan, L. L., & Heracleous, L. (2010). Rethinking agency theory: The view from law. Academy of Management Review, 35(2), 294-314.
Latimer, P. (2014). Essential Australian Business Law.
Leib, E. J., Ponet, D. L., & Serota, M. (2013). Translating Fiduciary Principles into Public Law.
Mann, R. A., & Roberts, B. S. (2011). Smith and Roberson’s business law. Cengage Learning.
McKendrick, E. (2014). Contract law: text, cases, and materials. Oxford University Press (UK).
Richardson, B. J. (2013). Fiduciary law and responsible investing: In nature’s trust. Routledge.
Rowan, S. (2012). Remedies for breach of contract: a comparative analysis of the protection of performance. Oxford University Press on Demand.
Schaffer, R., Agusti, F., Dhooge, L. J., & Earle, B. (2011). International business law and its environment. Cengage Learning.
Schmidt-Kessel, M., & Silkens, E. (2015). Breach of Contract. In European Perspectives on the Common European Sales Law (pp. 111-135). Springer International Publishing.
Sitkoff, R. H. (2011). The economic structure of fiduciary law.
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