The Assignment on Business and Corporation Law

Running Head: BUSINESS AND CORPORATION LAW
0
Law of Business
organization
4/6/2020
Student’s Name

“Law of Business organization”
1
Under different business structures, parties have different liability to their business as well as to
third parties. The objective of this essay is to understand these liabilities in the context of
partnership business structure as well as company structure. In addition to this, the principles of
agency law shall also be discussed. The subjective concepts and principles of different laws shall
be discussed in the context of the given case study where Gary, and Karen are working together
and Dan has been retired from the business.
Agency law keeps an important place in businesses where one party held liable for the conduct
of others. Due to large sizes and complexity of business and several business transactions, it does
not remain possible for a single person to manage all the activities and therefore the same
distribute some of his/her power to another person. Such another person is known as an agent
and the person who gives authority is known as an agent. To discuss the relationship of parties
under an agency structure this is to state that a principal may be held liable by the third party for
the authorized conduct of agents. The common law of agency prescribes two types of authorities
that an agent under an agency structure may have. The first kind of authority is the actual
authority that is further divided into two parts namely express authority and implied authority.
The other type of authority is ostensible authority. Express authority is the one where principal
clearly gives authority to the agent for performing a particular activity (webstroke.co.uk, 2020).
Such authority may be granted in an oral or written manner.

“Law of Business organization”
2
The second type of authority, which refers to implied authority, is is necessary for the
performance of implied authority. It means if a person is appointed on a certain position then
implied authority would be the one which falls in the normal scope of activities attached to that
role. The important point about this authority is that the same can be restricted through the
personal agreement between the agent and the principal, but will not affect the right of the third
party to rely on the normal scope of that authority. Implications of this agency can be understood
with the help of “Watteau v Fenwick [1893] 1 QB 346”. In this case, a person was working in the
capacity of a pub manager but the owner has restricted his authority to purchase a cigar on behalf
of the business. Even after this restriction, the person has purchased cigar and acted beyond the
express authority (Monaghan, 2015, p 95). Court held the principal liable for the conduct of the
pub manager due to the application of implied authority. It was given in the decision of this case
that the act of buying cigar falls under the usual authority of a pub manager and there for a third
party had reason to believe that being the manager of the pub, the person had the authority to do
so (Jones, 2017, p 324).
Further, the third party was not aware of the restriction that principal had imposed on the agent.
These principles of agency law have further been adopted under partnership law. Considering
provisions of agency law only, partnership firm that is Food'R' Deal seems to be liable as
ordering food is treated as an ordinary act for a catering business. Since this party did not know
limited authority, they could rely on the implied authority of Karen applying Watteau v Fenwick.

“Law of Business organization”
3
Further the other partners, Dan and Gray shall also be liable as Karen as also acting as their
agent.
Now to discuss partnership business structure this is to state that it consists of more than one
person as a partner where they all can operate the business or one or more do so on behalf of
others. As per legal definition of partnership, it refers to a relationship that subsits between
individual carrying a business with intention to earn profits in common. The rights and duties of
the partners are decided under a partnership agreement that can be oral or written. A written
partnership agreement is an internal document of the firm and third parties dealing with the firm
cannot access the same. In the United Kingdom, Partnership Act 1890 is the lead legislation,
which regulates partnership firms (hereinafter referred to as partnership act). Apart from what is
given under partnership agreement, other dealings of partnership firms are to be regulated by the
partnership act. Section 5 of this act states that every partner act works as an agent of the firm in
addition to the agent of other partners. This is the reason that each partner can bind the firm and
the other partners through his/her usual conduct. However, in those cases where a partner does
not have authority to do an act but still pursues the same, the firm and the other partners cannot
be held liable but for the same, the third party dealing with the partner must be aware of the
situation of his no authority or limited authority.