Agency Relationship and Legal Implications

The assignment content discusses the concept of agency and contract law in Australia. An agent is a person who works on behalf of another, known as the principal, and is subject to their control. The principal has the power to instruct the agent and hold them accountable for their actions. The content highlights the importance of fiduciary duties and general duties between an agent and a principal, which are governed by agency law. It also touches on the concept of independent contractors who work for themselves but may still be subject to certain obligations. The discussion concludes with an overview of contract law in Australia, emphasizing the country's influence by English contract law and its evolution over time.

Business Law
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Contents
Question 1...................................................................................................................................................3
Question 2...................................................................................................................................................4
Question 3...................................................................................................................................................5
Question 4...................................................................................................................................................6
Question 5...................................................................................................................................................8
References.................................................................................................................................................10
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Question 1
List and explain briefly each of the components required to demonstrate that a binding
contract exists.
A binding contract comprises of certain key elements that should be fulfilled to make it legally
valid. When persons approve in writing to allow the court to punish them if the defendant does
not follow their contractual obligations, is binding contract. A contract where two parties are
involved and takes promise to create a legal relationship.
Key elements of the contract are mutuality of obligation and includes
 An offer, and
 Acceptance
Basic elements of the binding contract
General elements of a contract involve proper terms or definite terms, consideration and
mutuality of obligation. Meeting in the mind also termed as Mutuality of obligation is verified
by an acceptance and an offer. An offer happens when an individual or party generally called
offeror proposes a type of exchange with another individual also known as the offeree.
Acceptance however takes place only when the offeree accepts the terms and conditions
explained and made in the offer (Elliott and Quinn, 2010).
Definite terms in the contract terms mean that the terms of the contract are proper and enable
the court to explore and evaluate if and when needed as per legal obligations.
Consideration on the other hand is about what the parties determined to exchange against the
offer made. It should have some value.
Thus, the elements and obligations mentioned in the contract paper should be legally valid so
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that legal steps could be taken in case of any dispute.
Parties need specific capacity in order to create a unique binding contract. Capacity is a unique
term that intimates about an individual’s ability to enter into a particular contract and the cover
mental issues or problems. A contract does not happen if there is mental impairment in one of
the parties and he fails to understand the terms of the contract. Mental incapacity hence plays a
significant role in business and contract based decision (McKendrick, 2011).
Question 2
Does a contract have to be in writing to be binding? In your answer explain whether this is
the case, and further whether it is a good idea to put an agreement in writing.
Contracts could be written or unwritten, also known as verbal and non-verbal contract
agreements and either way these are valid agreements. However in binding contracts it has been
studied that binding contracts should be in written and then only it is considered as a valid
contract agreement. Since oral contracts often lead to dispute originating from issues like lack of
clarity in the record maintenance of offer, consideration and acceptance. Such vagueness in deal
leads to confusion and hence it is advised that contract agreement should include written terms
to eliminate problems and dispute in future.
Generally binding contract is valid only when it is in the form of written and stamped legal
document. Though in general contracts, not all contracts are void or yet oral contracts are
voidable and often could be rejected by either party at any time. There are several Statures of
Fraud as per the present contract law. And in this respect the key aim of written contract is clear
that is to ensure that any type of fraud could be avoided by implementing written contract terms.
A verbal contract would lack in validation. As there are no records of terms or issues agreed
upon, it is difficult to validate the content if and when any dispute crops up (Finch and Fafinski,
2014).
Thus though there are different types of contract agreement and generally all forms are legally
valid, yet the oral contracts are often suggested to change it into writing so that both parties have
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clarity in thoughts, decision and obligations. It is easier to check signed contracts and evaluate
expectations of either party in case of a breach of contract. Breach of contract lawsuits are
expensive for any firm or an individual and are hence clarified under law only when there is a
valid and signed contract paper.
Thus creating a binding contract help in any sort of dispute, for example, when an individual is
entering into a type of relationship specifically with any customer, vendor or indulging into an
independent contract, one should take the much needed steps to turn it into a valid contract type
(Taylor and Taylor, 2016). In order to become a valid contract, it should comprise of following
elements;
 All participants should agree upon the offer given by one party and should be accepted
by another.
 Some item of value should be exchanges such as cash, goods or services
Some contracts are expected to be in the written format by the state law and these should be in
writing.
Question 3
What is a formal contract? Explain the ‘formalities’ of such a contract and give two
examples.
A formal contract is a type of contract in which two different parties have signed and sealed
agreement or papers and determined to work in a proper way as per the written or agreed terms.
On the other hand the informal contract is generally unsealed. A seal is a symbol of authorisation
and hence the document is valid under the law enforced by the State. While in a traditional set up
formal contracts were sealed with wax and then signed conveying that the parties are bound to
consider respective orders or intentions discussed in the paper.
Formal contracts are those that include a legally valid agreement in which two parties are
involved and are legally binding as well as enforced by the law. Formal contract should contain
an offer, acceptance as well as conditions regarding the payment as well as exchange of values or
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goods and services that should be delivered in the end. Thus any type of written contract is
identified as a formal contract agreement formality of the contract however includes work
contracts, automobile cases and signing credit card receipt on the purchase of the product or
agreeing upon formal contract. Formal contracts are common in Purchase Order, Security
Agreement and Bill of Sale (Duxbury, 2015).
Question 4
A group of friends meet for a regular drink at a hotel every Friday night. Each contributes
$2 towards a group lottery ticket, which is drawn over the weekend by Lotto company. One
of the group is given the role of actually buying the syndicate ticket. When in fact a
winning ticket is drawn for the group the purchaser of the ticket claims the arrangement is
purely social and there is no arrangement whereby he needs to share the prize. Analyse this
issue in terms of contract law.
Case evaluation:
In this certain case on playing lotto where friends meet on every Friday night and enjoy playing
lotto over drink and snacks is a regular phenomenon. The lotto company earns about $2 from
each player and they spend the amount to buy a ticket for the game and play on the weekend.
There are different groups and each group is responsible for buying the syndicate ticket in turns.
When the game ends the winner gets all money and it is his choice that if he wishes to share the
amount with others in the group or not. It is a social obligation that encourages the winner to
invest the money in the group members and share with them. There is no such rule regarding the
sharing amount claimed by the winner. It is strictly his decision. He can share the winning
amount with the group only if he decides (Halson, 2013).
Analysis of terms of contract law:
Before entering into a legal contract agreement the parties should have clear knowledge about
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respective terms and statement and understand the orders given by one party to the other while
entering into a contract.
Basic types of terms, such as
Terms of contract informs about the key duties of each party in relation to the particular
agreement.
Two types of terms;
i. Express terms
ii. Implied terms
Express terms are generally put forward by the parties, Implied terms are studied and mentioned
as per the parties intention regarding the contract and basis of law (TheFreeDictionary.com,
2017).
Terms of the contract could be wholly oral, wholly written, partly oral and partly written
Terms are different from statements which are two types in nature, representation on sate of
affair and promise on something that will happen.
Case analysis and proposed solution
After going through the contracts terms and specially on oral terms that says that it is to be first
judged if the statement became a promise or not. If it was not a promise then there lies no
obligation. In this scenario since there was no legal notice regarding the rule of sharing the prize
money and if it was even not promised or decided by the group members unanimously when the
game begun that whosoever wins will share the prize money with the team as a sign of good
gesture, it cannot be expected that every winner will share the money if he wins. It is a matter of
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choice and no promise made under the oral contract agreement terms (Lawteacher.net, 2017).
Question 5
Why is it important under law to distinguish between a party who is an agent for a
principal, from that of an independent contractor? In your answer explain the legal
implications of each relationship.
Agency comprise of a relationship triangle that includes a principal, an agent and a third party.
Generally the agency relationship takes place with the help of a contract. There are other small
groups and relationship that impacts on the overall networking within the agency.
An agent is a person who has agreed to work or act in the place of also in situations replacing the
principal and is subject to the principal’s control. For example an insurance agent is an agent.
Principal is that person who controls the activities of the agent. For instance the boss at work
In businesses however the principal and agent relationships are available in the form of
employee-employer relationship or like an independent contractor (Grundmann, 2011).
Agents work for the benefit of the principal who controls the situation or the contract. Agent
could easily replace the principal and introduce new contracts with 3rd parties when the principal
is not present. Thus, huge responsibility is given to the principal regarding the entire situation
management. In a company’s perspective employee receives command or orders from the boss
and is expected to follow the guidelines provided and complete work as per the deadline. This is
a classic example of agency relationship.
Agents duty to principal is unique and are categorised into two segments under law. These two
are the Fiduciary duty and a set of general duties implemented by the agency law. The duties are
though not unique for the agency, yet should be implemented and performed in a proper way by
an employee towards the employer. There are several other types of duty under the legal
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perspective that is to be followed to ensure proper agency management and confirms that the
agency performs in a smooth manner without facing any dispute or legal hassle (Harvey, 2009).
Independent contractor is an individual who generally works in order to receive payment from
the employer or the person who has assigned the work. However, the independent contractor
works in a professional way and enjoys flexibility such as the working condition as well as
methods are not controlled by the particular employer and for other issues the employer is
generally responsible. For instance, when a CPA gets paid by the client the CPA is however free
to maintain records as per their preference.
Contract is thus possible under different circumstances in Australia and following the law the
obligations could be met in a defined way. Australian low is influenced by the English contract
law, and thus they have several similarities is terms and statutes. With time however the statues
were modified to suite the need of the State and also help agencies and companies function in a
proper way (Lawteacher.net, 2017). Thus, in the entire discussion the legal issues and terns are
properly addressed to help in clear understanding of the topic.
References
Alexander, L. (2011). Contract law. Aldershot: Dartmouth.
Barker, D. (2007). Essential Australian law. Abingdon [u.a.]: Routledge/Cavendish.
Duxbury, R. (2015). Contract law. London: Sweet & Maxwell.
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Elliott, C. and Quinn, F. (2010). Contract law.
Finch, E. and Fafinski, S. (2014). Contract law.
Grundmann, S. (2011). The Future of Contract Law. European Review of Contract Law, 7(4).
Halson, R. (2013). Contract law. Harlow: Pearson.
Harvey, C. (2009). Cornerstones of Australian law. Prahran, Vic.: Tilde University Press.
Lawteacher.net. (2017). Powers And Liabilities Between Agent And Principal. [online] Available
at: https://www.lawteacher.net/free-law-essays/commercial-law/powers-and-liabilities-between-
agent-and-principal-commercial-law-essay.php [Accessed 14 Sep. 2017].
Lawteacher.net. (2017). Powers And Liabilities Between Agent And Principal. [online] Available
at: https://www.lawteacher.net/free-law-essays/commercial-law/powers-and-liabilities-between-
agent-and-principal-commercial-law-essay.php [Accessed 14 Sep. 2017].
McKendrick, E. (2011). Contract Law.
Parkinson, P. (2009). Tradition and change in Australian law.
Read, P. (2016). Contract law. London: HLT Publications.
Shsu.edu. (2017). AGENCY RELATIONSHIPS: OVERVIEW. [online] Available at:
https://www.shsu.edu/klett/agency%20et%20al.htm [Accessed 14 Sep. 2017].
Stone, R. (2013). Contract law.
Taylor, R. and Taylor, D. (2016). Contract law.
TheFreeDictionary.com. (2017). independent contractor. [online] Available at: http://legal-
dictionary.thefreedictionary.com/independent+contractor [Accessed 14 Sep. 2017].
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