Legal Aspects of Business

This document discusses the legal aspects of business contracts, including types of agent's authority and the capacity of minors to enter into contracts. It provides an overview of the laws and regulations governing these areas and explores the rights and liabilities of principals, agents, and third parties. The document also includes case laws and examples to illustrate the concepts. Find study material and solved assignments on Desklib for a better understanding of these topics.

Legal Aspects of Business

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Types of agent's authority...........................................................................................................3
TASK 2............................................................................................................................................7
Capacity of minor to enter into a contract...................................................................................7
CONLUSION .................................................................................................................................9
REFERENCES .............................................................................................................................10

INTRODUCTION
Contract has been considered as one of the most important part as there are many
organisation which are intended to make a contract with the other organisation. Not only
organisation, there are many individual who also furnish contract. There are different kinds of
contract which is being formed by the parties depending upon the situation and the need of party.
In order to protect the same that is the interest of the person connected to the formation of a
contract, there are many laws which has been implemented by the government for an example
contract law is the act which deals with all the provision of contract and therefore protect the
rights and duties of an individual as well as group(Krutz, Vines, 2010). There are many types of
contract formed between that parties of which one involve is contract including agent. The
following project shall outline the knowledge of contract made between the principle, agent and
third party. The main objective of the project is to create a better understanding about all the
legal aspect of contract made between these parties.
TASK 1
Types of agent's authority
It is very well known fact that there are many organisation which deals in business that is
there are many companies which regulate the business activity. One of the most important
activity which is to be carried out by the business organisation is deal or making a contract with
another party. Such party could be an organisation, a group of may be an individual. Depending
upon the situation or the interest of the company which may enter into a contract(Chaffey,
White, 2010). Hence according to the situation, contract are being formed between the parties
and the individual. One of the form of making a contract between the parties or the organisation
is covered under law of agency. It is kind of area which will deal with all the commercial activity
that is there are certain laws which are implemented by government for commercial law and law
of agency is one of them. This area shall deal with the contractual relation, quasi contractual
relation or fiduciary relation which are meant in the formation of a contract. When the contract is
being formed between the principal, agent and the third party then such contract is known as
contract through agent. There are three kind of entity which is present in this type of contract that
is Principal, agent and the third party(Foresti, Mähönen, Regazzoni, 2012).

A principal is a kind of person who shall make the contract or possess an interest to enter into a
contract with third and have the intention to create a contract on any business proposal.
An agent is person who act on the behalf of principal to carry out the formalities of a contract. In
this a fiduciary relation that is the relation of trust is established between the principal and agent
that an agent shall act in a good faith to execute the provision of a contracting Third party is the
person to whom a contract has been formed(Bryman,Bell,2015).
When a contract is being formed and principal and agent are involved in it then agent shall work
on the behalf of principal to carry out a contract. In this, principal by expressing or by implied
form authorize the agent to carry out work. But such work shall be in control of principal. Hence
it is the duty of an gent to bring third party into contractual relationship and to negotiate on the
terms and condition of a contract. There are basically three kinds of relation formed when a
contract is being assigned between a principal, agent and the third party, that is :-
an internal relation which is going to establish between the agent and the principal. Such relation
is known as agent-Principal relation.
The relation which is established between a third party and an agent in which agent is bound to
perform on the behalf of principal. Such relation is known as external relationship between an
agent and the third party(Varnali, Toker, 2010).
When an agent is ought to deal with third part the a relation is also formed between principal and
third party.
In 1986, some of the directives regarding self employed commercial agents are describe in in
European communities. In UK such provisions are established under National Law in the
Commercial agent regulation 1993.
the concept behind formation if a contract between the principal and the third party through an
agent is reflecting the commercial and legal realities which will consist of reciprocal rights and
liabilities between a principal and an agent(Marston, Li, et.al., 2011. It is often seen in the
business scenario that a relation of principal, an agent and third party is formed. A principal is
bound to perform all the terms and condition of a contract as long as the agent is working in the
frame work of his agency. There are mainly three kinds of agent which are recognized by law
and those are:-

Universal agents- these are those agents which hold the broad authority to act on the behalf of
principal whenever the contract is being carried out between the principal, agent and the third
party
General Agents- these are those agents which will hold the limited authority against the principal
to for conducting a series of transaction over a continuous period of time.
Special agents- these are those agents who are allowed to conduct only a single series of
transaction which will be conducted over a limited period of time.
Whenever an agent has to carry out the contract on the behalf of principal then a authority is to
be granted to the agent in context to the contract. Without any prior authority given by the
principal, no agent is allowed to act on the behalf of the principals and to act accordingly. When
an authority is given by the principal then such authority shall be expressed or implied that is
such authority shall be expressed by the principal when the contract is being formed between the
parties or should be included in the terms and condition of a contract(Kolk, Van Tulder, 2010).
When an authority is given to agent then he is ought to perform that is certain obligation also
arises which is to be created against the third party who is bind in the contract. There are
basically 3 types of authority that is:-
 Actual Authority
 Apparent Authority Usual authority
Actual Authority
whenever the authority is being arises out of the agreement which is being constructed
between the parties then such authority is entitled as actual authority. An agent shall only be
indemnify by the principal if he works in the frame of authority that is if authority is being
granted to an agent then only he shall be entitled to indemnify otherwise not. If an agent works
out if the frame of actual authority then he shall be entitled for the breach of contract and liable
to the third party. In the breach of contract to third party, an agent is liable to fulfil all the claims
raised by the party and fulfil the damages occurred(Haselmann, Pistor, Vig, 2010). If the third
party puts any kind of claim on to the party then such claim shall be entrained by agent only if he
is working in the course of employment and if such agent is not not working in the course of
employment ten principal shall be entitled for entertaining the claim. There are mainly 2 kind of
actual authority which is granted by the principal to an agent when the contract is being formed.

Express authority- whenever a contract is being formed between the principal, agent and the
third party and the authority is being expressed to an agent then such shall be entitled as express
authority that is the agent has been expressly informed about the authority he is going to carry
out in the formation of a contract(Brown, Vaughn, 2011). In express authority, then agent has to
expressly informed about that he has to work or to carry out the contract on the behalf of
principal.
Case law:- Ireland v Livingstone [1872] LR 5 HL 395
Implied Authority:- when a contract is being formed between the parties that is the principal,
agent and the third party, then there are certain authority which is necessary to fulfil or to
perform by an agent. Such authority is known as implied authority. In this kind of authority, it is
necessary and important to carry out certain authority directed by principal. For an example
whenever a a partnership firm is being constructed then it is the duty of partner towards other
partner to bind them in various activities like making decision for the firm or scheduling a
meeting(Schaltegger, Burritt, 2010).
Case Law:- Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549
Apparent Authority
in this kind of authority, the third party has to believe that an agent has been given such
authority to act on he behalf of principal that is when ever a contract is being formed between the
principal, an gent and the third party comprising of apparent authority then the third party has to
believe that the an agent is the authoritative person to act on the behalf of principal and to carry
out the formalities of as contract. There are times when the principal and an agent need not have
to discuss their relation with third party in this situation also, the third party has to believe that an
agent is under an apparent authority to carry out the contractual relation between the principal
and third party and he has the right to bind the third party into contractual relation(Bushee, Core,
Guay, Hamm, 2010).
Case law: Rama corporation Ltd v Proved Tin and general Investment Ltd [1925]2 QB 147,
Slade J
Watteau v Fenwick
Usual Authority

such authority is equal to the implied authority. In this type of authority, an agent is under
an impression ton perform the contract given under authority that is he is under the authority by
principal to perform the contract.
types of liability which will occur in agent Principal relationship
Liability of agent to wards third party:- in case when the relation of agent and principal has not
been disclosed in an apparent or actual authority then the agent shall not be held liable for any
kind of breach in the contract(Oliveira, Martins, 2010). For the liability to shift, an agent doest
need to disclose the relation. When there is no such authority on agent and then breach has been
occurred then the agent shall be held liable for the same.
Liability of agent towards principal: when the agent has acted without any actual authority but
principal is not bound as apparent authority is applied on to the agent then agent shall be held
liable to protect or to indemnify principal from any kind of losses or damages which has
occurred due to the breach of contract.
Liability of principal towards agent:- if an agent has been working in the scope of actual
authority then the principal must ensure that he should indemnify agent for all the payment
which has to be made during the course of business.
TASK 2
Capacity of minor to enter into a contract
A capacity can be describe as the capability of a person to enter into a contract which
shall be legally bind. It refers to the ability of a person to establish a contractual relation with
another party. When a person is making an intention to form a contract with the other party then
kit is very much necessary that such person shall be legally capable to enter into a contract. If the
person is not legally capable or does not possess that capacity to involve into a contract the he
does not possess any right to do so and even without capacity any person enter into a contract
then such contract shall be entitled as void or invalid(Lan, eracleous, 2010). There are various
kinds of parties with whom a contract shall be formed of which the party can be an organisation,
a person or may be a minor.
According to the English law, a minor is an individual who belongs to age of 18 and below that
is any individual who has not attained the age of majority shall be entitled as minor. Such
provision of being minor of a person has been explained under Family Reform act 1969. in

general rule, it is established that a minor doest not possess any kind of right to enter into a
contract with any party that is whenever a minor wants to enter into a contract then with the
provision of law he is not entitled to enter any kind of contract(Zott, Amit, 2010). A minor is
doest not have the capacity to enter into a contract. But there are certain circumstances in which
law allows a minor to enter into a contract. Whenever a contract has been made by a minor and
such contract is regarding the necessaries then a minor is allowed to enter into a contract. Such
necessaries are described under sales of goods act 1979. section 3 of sales of goods act describe
that whenever a contract has been made by minor regarding the necessaries and delivery of such
item is furnished then the minor is entitled to pay the same. According to section2(3) of sale of
goods acts a necessary item can be described as the good which are used for the daily life . A
necessary good may include clothing, shelter food etc. so it is a very clear concept that a minor is
entitled to enter into a contract with any of the party if such contract has been made for the
delivery of necessary item(Sheng, Zhou, Li, 2011). A Minor shall not be called in capacity if he
is making a contract with the party in regard to necessary items. The famous case which has
established the golden rule for minors to enter into a contract is started with Chappel v. Copper.
This case has been considered as landmark case regarding the capacity of a minor to enter into a
contract. The facts of the case states that there was already who became widow. A proper funeral
function has been organised by the lady to give a final bye to her husband. In order to conducted
the same function some of the necessary item has been order by an online website. It has been
seen in this case that the delivery of the goods was not occurred on time by which widow has to
suffer embarrassment against her guest. A claim has been brought by the lady against the
company that they have breached the contract by not providing the delivery of the item on time.
Company replied that the contract which is being formed between the parties is not valid as the
other party is minor. It was held in this case that the contract formed between the parties is valid
as the contract made was regarding the necessaries that it it is regarding the necessary item and
according to contract law a minor has the capacity to enter into a contract which is being made
for the necessary items(Chen, Sun,Wu, 2010). Hence in this case, the company was held liable
for the breach of contract. When ever a contract has been formed by the minor, it must ensure
that such contract shall benefit the minor if a contract has been formed by the party with minor
which will not have any benefit over training, employment, education then such contract shall

not be entitled as valid. When ever a claim brought in front of court then such case will be
rejected as the contract made does not benefit the minor any more(Carroll, Shabana, 2010).
Another case which describe the capacity of a minor to enter into a contract is Doyle v white city
Stadium. In this case it was held that an agreement has been made in regard to train the boxer but
no payment has been made. But it has been seen that the contract was enforceable by the
operation of law in court of law as the contract made was beneficial to fulfil the purpose of
training.
All the provision regarding the rights and duties of a minor are explained under minor's act 1987
which describes that the minor has the capacity to enter into a contract if such contract has been
made with regard to the necessaries. Here necessaries are the important items which are used for
daily life(Sheth, Babiak, 2010). The act was introduced to protect the rights and duties of a minor
which shall be arising out of a contract. It shall provide guarantee to the minor when they forma
a contract with adult. Section 2 & 3 of the act shall outline the important provision regarding
making contract with minor.
Section 2 provided that a contract shall be enforced against the adult only where the adult shall
provide an grantee against the agreement which has been made between the minor and an adult.
In that case if minor breaches the contract due to any condition then the adult shall be held
responsible for the same. This section allow minor to provide guarantee by in a contract when
such contract has been made with adult.
Section 3 of the act provided that a minor has the right to refuse for the payment of the things
does not conclude in necessaries for an example if the property has been returned then minor has
no right to make any payment regarding the same(Sarkis, 2012).
CONLUSION
From the above project it can be concluded that a contract can be formed between the
principal, an agent and the third party. It has been further described in the project that certain
rules are established in terms of principal and an gent. It has been described that whenever an
agent carry out a contract on the behalf of a principal then certain authority shall be given. There
are 3 kinds of authority described in terms of an agent. The project has further described about
various kinds of liability. Another part of project has highlighted about the capacity of minor to
enter into a contract with regard to Minors' contract act.

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