Agency Law and Liability: A Case Study on Steve and Bianca

Running head: LAW
Law
Name of the Student
Name of the University
Author note

1LAW
Issue
The issue in this scenario is whether Steve will be able to argue to avoid the liability
of a bill worth $3500.
Law
The Law of Agency provides a set of contractual and quasi-contractual relationships
associating an individual called the agent who is directed to act on behalf of another
individual called the principal for creating legal relations with a third party. Therefore, in an
agency, two kinds of contracts exist. The first contract is formed between the agent and the
principal from where the agent extracts his authority to act on behalf of the principal. The
second contract is created between the third party and the principal because of the agent’s
activities. As per the Agency law, an agent cannot be personally liable for the contracts that
are entered into by him on behalf of the principal. The three necessary parts include the duties
of an agent, rights and relationship of the principal to third parties. A principal is generally
held liable for the acts of his agents. In this regard, Hansen v Marco Engineering (Aust) Pty
Ltd is referred to1. Such a situation has been discussed in this particular case. The concept of
vicarious liability arises in the context of such relationship. This kind of liability is based on
the common agency law. Generally, agents owe their duties of obedience, loyalty and care to
their principals. The principals also have obligations of the agents that are implied by law and
are supplemented by an agreement. According to the law, the principal is said to have an
extra obligation to assure the agent for any kind of payments or liabilities incurred by the
agent. In the case of NMFM Property Pty Ltd v Citibank Ltd, Dal Pont had stated that the
law of agency is never static2. He had referred to the present Australian decisions whose
effect cannot be considered in the first edition but was later dealt in the second edition. The
1 Hansen v Marco Engineering (Aust) Pty Ltd [1948] VR 198,
2 NMFM Property Pty Ltd v Citibank Ltd (No 10) [2000] FCA 1558

2LAW
Federal Court of Australia passed such decision. However, under Australian Law, the terms
principal and agents are defined under the concept of Common Law. The Australian Law
states that there is no statutory requirement in terms of notice period to be provided. The
termination of an agency arrangement generally establishes as per the terms of the significant
agency contract. An agency is defined as a legal relationship that takes different kinds of
forms and is common to transactions in commerce and business. Generally, employers will
be held liable vicariously as per the concept of respondent superior doctrine for committing
negligent acts during the course of employment. For instance, an owner of a car is held liable
vicariously for the negligence caused by a person to whom the car was loaned3. Therefore, if
the principal was the owner and the driver was his or her agent, the owner will be held
responsible for the activities of his or her agent. Consolo v Bennett is such a case where the
Federal Court Decision produced an overview on the laws of agency and aims at the
circumstances in which the actions of an agent can bind the principal4. However, both the
agents and principals have duties that they owe each other5. In a few certain circumstances,
this law is applicable in the states and territories of Australia despite the existence of the
provision in a contract of agency.
Application
It appears from the fact that that Steve was the breeder and carer of an alpaca. Steve
charges $100 per week from the alpaca owners to take care of them. His duty and job was to
secure, feed and provide fresh air to the alpacas every day. One fine day, Steve had observed
that one of the pregnant alpacas were not well as it was facing respiratory problems and
producing nasal secretions. Hence, Steve tried contacting the owner, Bianca but did not get
3 Hedges, Jasper, George Gilligan, and Ian Ramsay. "Banning orders: An empirical analysis of the dominant
mode of corporate law enforcement in Australia." Sydney L. Rev. 39 (2017): 501.
4 Consolo v Bennett [2012] FCAFC 120
5 Beekes, Wendy, et al. "Corporate governance, companies’ disclosure practices and market transparency: A
cross country study." Journal of Business Finance & Accounting 43.3-4 (2016): 263-297.