Application of Law Assignment pdf

Contents
Solution 1....................................................................................................................................................2
Issues.......................................................................................................................................................2
Law..........................................................................................................................................................2
Application of Law..................................................................................................................................3
Conclusion...............................................................................................................................................5
Issue........................................................................................................................................................5
Law..........................................................................................................................................................5
Application of law...................................................................................................................................6
Conclusion...............................................................................................................................................8

Solution 1
Issues
i. Can Terence sue Gabby for the contract that is established by Sara with him?
ii. Can Mary and Gordan sue Terence for the contract established by Peter?
Law
In Australia, in any intending person who wants to commence business then the same can be
carried out in the form of sole traders, partnership or company. Whatever may be the form of
person; there are always requirements of employee who carry work on your behalf1.
An employee can be employed by undertaking contract of service wherein the employee acts on
behalf of the employer. This relationship is governed by the law of agency. Law of agency
implies that the principal appoints an agent and entrust with him the authority and an agent must
act within such authority to bind the principal with the outsiders. Thus the main elements to
establish agency are2:
i. There are two parties involved, a principal and an agent;
ii. The principal appoints and agent;
iii. The agent is granted or entrusted with authority;
iv. The agent must act within the authority so delegated;
v. The acts within the delegated authority is binding upon the principal;
vi. The principal must honor the contract entered by the agent with the third parties.
Now, a Principal may delegate authorities which can be3:
i. Actual express – An actual express authority is kind of authority that is delegated by
words, actions or in written form to an agent. An agent must act within the authority
so granted and is held in Consolo v Bennett4
1 Andy Gibson and Douglas Fraser. 2013. Business Law 2014, Pearson Higher Education AU.
2 Paul Latimer. 2011. Australian Business Law 2012. CCH Australia Limited.
3 Ibid.
4 Consolo v Bennett [2012] FCAFC 120.

ii. Actual implied – An implied express authority is the one which is granted to an agent
and which he is permitted to undertake to comply with his express authority and is
held in Hely-Hutchinson v Brayhead Ltd5.
iii. Ostensible – When no actual authority is granted to an agent, but, the principal, by
making any overt act in front of the third party makes the third party to believe that
the agent with whom he is dealing does possess authority to bind the principal. Such
kind of authority is ostensible and any act under taken by an agent within such
ostensible authority is binding upon the principal and is held in Freeman and Lockyer
v Buckhurst Park Properties (Mangal) Ltd 6 and Panorama
Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd 7.
Application of Law
Terence was the student of Charles Sturt University and has studies jeweler design. He
formulated a business called Terry Terrific Designs. There are two students, Peter and Sara, who
are employed by Terence.
It is now important to understand whether the transaction undertaken by Peter and Sara are
binding upon Terence after applying the law of agency.
Issue 1
Sara was employed as a designer in Terry Terrific Designs. She creates designs and shares the
same personally to Terence. Thus, the task that is allocated to Sara is only of designing.
Terence has made an express authority in favor of Sara wherein she is only permitted to create
designs for Terry Terrific Designs. Thus, as per Consolo v Bennett Sara cannot indulge herself
into any other work apart from designing and sharing the same with Terence.
Now, Sara had an interaction with Gabby who is willing that Sara must design a brooch for him.
after viewing several design executed by Sara, Gabby asks her to create a particular kind of
brooch for $1000.
5 Hely-Hutchinson v Brayhead Ltd [1967] 1 QB 549 .
6 Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd [1971] 2 QB 711
7 Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480.

But, during the entire communication, Sara forget to tell Gabby that she is working with Terence.
Thus, Gaby is under the impression that Sara is independent and is not an agent of Terence.
There was also no representation that was made by Terence which makes Gabby believe that
Sara is the agent of Terence.
Thus, when Terrence phones Gabby and submits that the order is received by him and is
delivered in 2 weeks, then, it is rightful for Gabby to submit that he has a contract with Sara and
not Terence.
Sara has exceeded her authority that is provided to her by Terence and thus the contract is not
binning upon Terence.
Issue 2
Peter was employed as a supplies purchaser. So, an actual express authority is granted to Peter
according to whom he can purchase metals on behalf of the business.
But, Terence has expressly has limited his authority and submitted that he must buy silver only
as the business has too much of gold.
Mary was one of the gold dealers who had already dealt with Peter many times and is aware that
Peter is authorized to buy the gold., But, Mary is not aware that this author is limited by Terence
as the same was not communicated to her either by Terence or by Peter. So, by not disclosing the
fact a representation is made to Mary that peter is still authorized to buy gold and is held in
Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd.
So, the contract amid Peter and Mary, that is, Peter buys 50 grams gold at $1500 is a valid
contract and is binding upon Terence under ostensible authority.
Also,
Terence fired Peter on Monday but does not shut off Peter’s access to the business’ email system
until Thursday. On Wednesday, Peter placed diamonds from Gordan against an order which is
received by Gordan on Tuesday from the Terence’s email system.

Thus, when Terence forgets to shut off Peter access to the system, then, Pater is actually making
a representation to his clients that Peter is still the part of the business. under such representation
Gordan has entered the contract with Peter under the said representation and on the belief that
Peter still possesses the required authority.
Thus, the contract with Peter and Gordan is binding upon Terence under ostensible authority.
Conclusion
There is no contract amid Terence and Gabby as Sara was not authorized to enter into contract
with Gabby.
Both, Mary and Gordan can sue Terence as the contract with them by Peter is valid under
ostensible authority.
Question 2
Issue
i. Whether the contract amid Industrial Machines Ltd and United Chemicals Pty Ltd
will make Roger personally liable?
i. Can the veil of Industrial Machines Ltd be lifted and Roger was held to be the owner
of the company thereby applying the Commonwealth provisions?
Law
A company is one of the businesses forms which are carried on by the persons in Australia. A
company acquires its legal status only when the same is incorporated as per the provisions of the
Corporation Act 2001.
When a company is registered then it is a non-natural person in law. A company has its own
personality and acquires all the powers and rights that are normally acquired by a living and
natural persons. In Salomon v A Salomon & Co Ltd8 the court held that a company is distinct and
has a personality of its own. The main elements of a company are9:
i. A company has a separate legal entity and has the capacity to enter into contract on its
own;
8 Salomon v A Salomon & Co Ltd [1896] UKHL 1
9 Stephen Bottomley, Kath Hall and Peta Spender. 2017. Contemporary Australian Corporate Law. Cambridge University Press.

ii. A company is distinct from its members and any act that is carried out by the
members are in the name of the company alone. The members cannot be held
accountable for the acts that are carried out in the name of the company. In Lee v
Lee's Air Farming Ltd10 the court held that once a company is incorporated then a
company has its own personality and no member or officer can be personally held
accountable for the contracts that are entered in the name of the company. This
Separate legal personality rile makes a company one of the best choices to carry
businesses.
iii. A company has perpetual succession.
Thus, a company formation is thus in of the most advantageous business formation as the
members are not associated with the conduct of the business and it is the company which is held
responsible for the same.
But, the separate legal personality of the company is disregard by the court many times and the
veil which brings a distinction amid the company and its members can be lifted and the company
and members are treated as one. In such situation, the acts of the members are not the acts of the
company and the members are held personally liable. The veil is lifted mainly because11:
i. When the company is formulated in order to incur fraud upon others, then, any
contract that is entered by such company is not regarded as separate and the veil is
lifted in order to consider the acts of the company and that of the members as one and
is held in Re Darby, ex parte Brougham12;
ii. When it is fair to lift the veil of the company in order to bring justice to the people;
iii. When a company is formed so that to hide itself from any legal provisions then the
veil is lifted
iv. When the shareholders of the company are controlling the company in such manner
that the acts of the company are mainly the acts of the shareholders then the veil can
be lifted and the acts of the company and shareholders are considered to be one and is
held in Smith, Stone & Knight Ltd v Birmingham Corporation13.
10 Lee v Lee's Air Farming Ltd [1960] UKPC 33.
11 Stephen Bottomley, Kath Hall and Peta Spender, n9.
12 Re Darby, ex parte Brougham [1911] 1 KB 95.
13 Smith, Stone & Knight Ltd v Birmingham Corporation [1939] 4 All ER 116.

Application of law
The facts submit that a company is formulated by Roger smith in the name of United Chemicals
Pty Ltd. Roger holds 92/100 shares and Mary (wife and company secretary) holds 8/100 shares.
The Managing Director of the company is Timothy Smith.
From Industrial Machines Ltd, the United Chemicals Pty Ltd purchased a phosphate processing
machine for $ 600 000, payable in three equal installments in 2015, 2016 and 2017. The contract
was signed by Timothy under the authority of the Managing Directors. The contract of 2015 and
2016 goes well. But a default is made in 2017.
It is settled as per Salomon v A Salomon & Co Ltd that a company has a separate legal entity in
law after incorporation.
So, when Roger establishes a company in the name of United Chemicals Pty Ltd, then, it is an
artificial person in law and thus can enter into contracts on its own behalf.
Thus, the contract of United Chemicals Pty Ltd with Industrial Machines Ltd is entered in its
individual capacity and not by Roger personally.
Thus, Industrial Machines Ltd cannot sue Roger as the contract was with United Chemicals Pty
Ltd and not with Roger.
Issue 2
The facts submitted that one of the portions of the Common wealth law was that no person is
permitted to grant with a license dealing with explosive manufacturing if the person has a
criminal convention.’
Roger was convicted on 2005 for theft and thus is restrained by the Commonwealth Provisions.
In order to defeat this common wealth provisions, Roger in 2016 in order to improve his business
fortune decided to make explosive. He incorporated a company, Explosive Industries Pty Ltd, in
which he holds 99/100 shares and Mary holds 1/100 shares.
It is submitted that the company that is incorporated by Roger was against the Common Wealth
provision. The company was formed to defeat the law and thus the veil of the company must be
lifted and the company and roger should be treated as one. By applying Re Darby, ex parte

Brougham , the company was a sham and an act of fraud on the part of Roger and thus the veil is
lifted and Roger must be held to be convicted and thus not capable of incorporating a company
that deals in explosive manufacturing.
Conclusion
Thus, the contract amid Industrial Machines Ltd and United Chemicals Pty Ltd will not make
Roger personally liable because the contract by United Chemicals Pty Ltd is an independent
contract on its own behalf and Roger is not associated with the company.
Further, the veil of Industrial Machines Ltd must be lifted and Roger was held to be the owner of
the company. So, the Common wealth provisions will apply and will restrain Roger from dealing
in explosive manufacturing.

Bibliography
Books/Articles/Journals
Bottomley, S; Hall, K and Spender, P. 2017. Contemporary Australian Corporate Law.
Cambridge University Press.
Gibson, A and Fraser, D. 2013. Business Law 2014, Pearson Higher Education AU.
Latimer, P. 2011. Australian Business Law 2012. CCH Australia Limited.
Case laws
Consolo v Bennett [2012] FCAFC 120.
Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480.
Hely-Hutchinson v Brayhead Ltd [1967] 1 QB 549 .
Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd [1971] 2 QB 711.
Re Darby, ex parte Brougham [1911] 1 KB 95.
Smith, Stone & Knight Ltd v Birmingham Corporation [1939] 4 All ER 116.
Salomon v A Salomon & Co Ltd [1896] UKHL 1.