Agency Law and Contractual Obligations

This assignment examines two legal scenarios involving agency law and contractual obligations. The first case focuses on Gemma, an agent who breaches her fiduciary duty to Frank, leading to financial damages. The second case explores Bob's actions as a salesperson for Frank's shop. Bob fraudulently enters into a contract with Angela despite being fired by Frank. The assignment requires analysis of the legal principles involved, identification of relevant case law, and assessment of potential remedies for all parties.

Business Law
Assessment
[Pick the date]
Student Name, Id

Question 1
Issue
The issue is to offer a legal advice to Qantas Airlines on the account of the delivery of the
ordered air plane’s entertainment system which contains only 34 channels instead of 36 channels.
Law
At the pre-contractual stage, both the parties are involved in the negotiation of the contractual
terms and duties. Also, one party has extended various representation related to the contract and
the other party relies on these representation and decide whether to enter into the contractual
relation. Those representations which are mentioned into the contract are termed as terms and
breach of these kinds of terms would result violation of contract. In this case, the innocent party
can sue the defended and recover the damages1
Further, the breach of term would be based on the fact that whether the term is a warranty or
condition of the contract. Condition is an imperative clause of the contract. As per the judgment
given in Poussard v Spiers2 case, the plaintiff can revoke the contract only when the condition
has been breached by defended. However, it is essential to note that in case of warranty this is
not feasible. It means the party can sue the other party on the account of breach of warranty but
cannot revoke the contract under Bettini v Gye3 case.
According to the exclusion clause, the liability of the defended would be minimized on the
account of breach of any term only in the following aspects.
 When the defendant has notified the plaintiff in relation to the exclusion term. Further, it is
noteworthy that exclusion clause that one party has made after the enactment of the contract
1 Andy Gibson, Douglas Fraser, Business Law (Pearson Publications., 8th e, 2014)
2 Poussard v Spiers (1876) 1 QBD 410
3 Bettini v Gye (1876) 1 QBD 183
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would not be considered as valid clause as evident from Thornton v Shoe Lane Parking4and
Olley v Marlborough Court5 case.
 It is imperative that the respective exclusion clause must not be used against the plaintiff
especially when the defendant has made false claim or misrepresentation.
 It is the essential that defendant communicates to the other party regarding the inserted
exclusion clause. However, if the party has informed related to the exclusion clauses to other
party and the party does not read the clauses due to negligence, then also the exclusion
clauses would be valid. Therefore, it limits the liability of defended party.
Application
It is apparent from the case facts that Airbus Corporation Ltd and Qantas Airlines have enacted a
contract regarding the purchase of an airplane. The contract contains 545 terms and some of the
terms are highlighted below:
 Term 56 – Plane must be in position to travel for 10,000 km with a rate of 800 kmph
 Term 455 – Aircraft must have entertainment section with 36 channels
Further, after the enacted of the contract, Airbus Corporation Ltd has sent number of documents
along with the contractual form to Qantas Airlines. One of the documents also contains
limitation of liability regarding the breach of contract. However, due to confusion, wrong
software has been installed in the entertainment system and hence, it shows only 34 channels. It
is apparent that term of contract (the system should has 36 channels) is a warranty considering
the underlying importance. Hence, Qantas can sue Airbus Corporation Ltd for breach of
warranty. Qantas has the legal rights to claim for the damages but cannot cancel the contract. In
regards to the defendant liability, it is apparent that exclusion clause would not be applicable
here because Airbus Corporation Ltd has provided the exclusion clause after the enactment of the
contract. Hence, the clause would not be enforceable as per the judgment of Olley v
Marlborough Court [1949] 1KB 532. Therefore, Qantas has the legal rights to recover the
damages from Airbus Ltd.
Conclusion
4 Thornton v Shoe Lane Parking [1971] 1 All ER 686
5 Olley v Marlborough Court [1949] 1KB 532
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It can be concluded from the above analysis that exclusion clause is not applicable in this case
and hence, Qantas Airlines can recover the damages from Airbus Corporation Ltd. Further,
Qantas cannot sue or revoke the contract because it a case of breach of warranty.
Question 2
Issue
The issue in the given case is to offer legal advice to Frank (principal) for the two situations
where
 Agent Gemma has performed a work for personal interest
 Agent Bob has fraudulently made contract with Angela and taken the contractual amount
Law
Agency law would be applicable when one party known as principal has issued the set of
authority to another party known as agent to make legal contracts with the third party on the part
of principal. The main aspects of agency law are as furnished below:
1. Principal must inform the third party about the level of authorization given to the agent.
2. If the principal has withdrawn the authorization, then it is essential that same must be
communicated to the third party.
3. Contract enacted by the agent with the third party would be enforceable on the principal only
when the agent has below highlighted authority.6
When principal has given authority the agent either by written mode or orally, then this is
called as express actual authority. Further, when the principal has appointed the agent for
certain profit/ job position, then also the implied actual authority is present. The Watteau
v Fenwick7 case is the testimony of this scenario.
6 Shayne Davenport, Business and Law in Australia (Thomson Reuters, 4th ed, 2012)
7 Watteau v Fenwick [1893] 1 QB 346
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When agent has made legal agreement in regards to satisfy the interest of the principal,
then it is termed as authority of necessity as highlighted in Northern Railway Co.
v Swaffield8 case.
In apparent authority, the principal does not provide any authority to the agent but due to
his/her course of action, it is assumed on the part of third party that the agent has
authority for enacting contract. Hence, in such circumstance also the principal is bound to
complete the contractual obligation. The leading case is Freeman & Lockyer v Buckhurst
Park Properties9.
It is noteworthy that if the agent does not have any of the above highlighted authority, then the
third party cannot force the principal to satisfy the contractual liabilities10.
It is essential that agent would perform the work as per the instruction given by principal by
considering the fiduciary duty.
The set of fiduciary duty of the agent are listed below:
 Agent must not derive secret profit on the account of principal’s name as given in Bentley v
Craven11 case.
 Agent must not perform any set of work for his private interest as given in Christie v
Harcourt12 case.
 Agent does not have authority to use the imperative information of principal to fulfill
personal interest work. The Robb v Green13 case is the witnessed of this scenario.
When any of the above listed fiduciary duties would be breached by the agent, then principal can
sue the agent and recover the damages. Further, the principal would not be liable to complete the
contract obligation when the third party is aware about the fact that agent does not has
8 Northern Railway Co. v Swaffield (1874) LR 9 Ex 132
9 Freeman & Lockyer v Buckhurst Park Properties [1964] 1 All ER 630
10 Callie Harvey, Foundations of Australian law (Tilde University Press, 3rd ed, 2009)
11 Bentley v Craven (1853) 52 ER 29
12 Christie v Harcourt [1973] 2 NZLR 139
13 Robb v Green [1895] 2 QB 315
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authorization. Also, when third party has entered into contract in good faith and is ignorant about
that the agent lacking authority to make contract, then also the principal is accountable14.
Application
Frank & Gemma
Gemma is salesperson who is working in Frank’s appliance shop. Her main work is to sell the
appliances to customers. Tom who was looking for a dishwasher has agreed to pay $350 for a
second hand dishwasher. He has informed Gemma that he will pay $350 for dishwasher but first
he has to find a suitable space of the dishwasher. Meanwhile, Gemma has called her niece and
has sold the dishwasher for $300. Tom has informed Frank that he was ready to pay $350 for the
dishwasher. Hence, it can be said that Gemma is working as an agent for Frank and to perform
work for Frank’s interest is her fiduciary duty. However, she has done a work for her private
interest by selling the dishwasher to her niece at cheaper rate. Therefore, Frank can recover the
damages of $50 from Gemma on the account of breach of fiduciary duty.
Frank & Bob
Bob is working as salesperson for Frank’s shop. Frank has given him authority to sell large
amounts of washing machines to laundries. Also, Bob has negotiated with Angela multiple times
regarding the sale. However, due to misconduct of Bob i.e. late coming and drinking habits¸
Frank has fired Bob from the job. However, he does not inform Angela that Bob would not be
able to sell washing machine because he has no more an employee. Further, Bob has asked
Angela to sell 10 washing machines for $10,000. Angela is ready to purchase and also made the
payment of $10,000. It can be said that Bob has acted fraudulently and hence, Frank can sue Bob
and would be in the position to recover the amount of $10,000. Also, as Frank does not inform
Angela, hence Frank is liable to complete the contract obligation and he has to provide 10
14 Robert Bryan Vermeesch, Kevin Edmund Lindgren, Business Law of Australia (Butterworths, 12th ed. 2011)
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washing machines to Angela at the agreed price. Otherwise, Angela can sue Frank and claim for
the damages.
Conclusion
Frank can sue and recover the damages from agents Gemma and Bob. Further, Bob has made a
contract with Angela that is binding on Frank and hence, Frank has to complete the contractual
obligations
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Bibliography
Books
Bryan Robert, Vermeesch, Lindgren Kevin Edmund, Business Law of Australia (Butterworths, 12th
ed. 2011)
Davenport Shayne, Business and Law in Australia (Thomson Reuters, 4th ed, 2012)
Gibson Andy, Fraser Douglas, Business Law (Pearson Publications., 8th e, 2014)
Harvey Callie, Foundations of Australian law (Tilde University Press, 3rd ed, 2009)
Case Law
Bentley v Craven (1853) 52 ER 29
Bettini v Gye (1876) 1 QBD 183
Christie v Harcourt [1973] 2 NZLR 139
Freeman & Lockyer v Buckhurst Park Properties [1964] 1 All ER 630
Northern Railway Co. v Swaffield (1874) LR 9 Ex 132
Olley v Marlborough Court [1949] 1KB 532
Poussard v Spiers (1876) 1 QBD 410
Robb v Green [1895] 2 QB 315
Thornton v Shoe Lane Parking [1971] 1 All ER 686
Watteau v Fenwick [1893] 1 QB 346
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