Contract and Corporation Law Issues and Rules

Business and
Corporations Law
Contract and Partnership

Contract Law Issue
• Whether Swimmingpool Co is liable for Martin's actions.
• Whether the company can claim they are not liable for Martin
because he has not followed instructions.
• Whether Martin is liable to his employer for any of his actions.
• Whether Martin has breached any law if he is planning to set up his
business.

Contract Law Rule
• Agency depicts an arrangement under which a person is delegated by another
person to represent him in dealings with a third person.
• An agent who has been acting in furtherance of and under the scope of the
authority that has been extended to him by virtue of the agency will bind the
principal liable for such acts or transaction of the agent to that effect.
• Any wrongful acts that has been committed by the agent in that furtherance will
also be treated to be the liability of the principal. However, such act needs to be
committed within the scope of his authority under the agency of relationship.
• The principal, in certain cases may avoid liability of the acts committed by the
agent. However, for making such avoidance of liability, the principal must
establish that the act of the agent has been committed in excess of the authority
that has been extended to him under the contract of agency.

Contract Law Rule
• The agent owes a fiduciary duty towards the principal and is required to act
ensuring the best interest of the principal.
• The performance of the task delegated upon the agent needs to be carried out
in accordance with the directions of the principal and the agent will incur
personal liability for the such, acts which has been performed by him in
contravention of the instructions provided by the principal.
• In the case of Regal (Hastings) Ltd v Gulliver [1942] UKHL 1, it has been held by
the court that the agent is restricted from making any personal profit from the
transactions on behalf of the principal unless he has been authorised to do so.
• The agent is under an obligation to refrain from establishing a competing
business with that of the firm.