Business Law - RCD Ltd case study

It's a discussion for one page.

Running head: BUSINESS LAW
Business Law
Name of the Student
Name of the University
Authors Note

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Issue
In this paper, the issue to be discussed is whether RCD Ltd. is responsible for the contract
entered into by its agent or not.
Rule
The basis of the Canadian legal system is the common law practice of the UK. In Canada,
Article 2130 of the Civil Code deals with the principal-agent relationship. This relationship is
considered to be the fiduciary relationship under which the principal (also known as mandatory)
gives the authority to another person, usually known as the agent (the mandatary) to act on
behalf of it, while performing any judicial act, such as forming contracts or disposing of property
with a third party. Under this relationship, by accepting the offer of the principals the agents bind
themselves to implement the power (Lane, 2006). It is also the responsibility of the agent to act
in the best interest of the principal and must not act for his/her own interest. In Boma
Manufacturing Limited vs. Canadian Imperial Bank of Commerce [1996] 3 SCR 727 case the
Canadian Supreme Court stated that as per the common rule of agency a principal is bound by
the acts of an agent if the agent acts within the scope of his/her actual or apparent authority
(Geva, 2017).
Analysis
In this given scenario, the sales representative of the RCD Ltd. has the authority to make
contracts with the buyers not exceeding $ 100,000. However, going beyond to his authority, he
made a contract of more than $ 500,000 with BES Developers without informing its principal.
BES complained about the goods and asked for damages. RCD Ltd. rejected the claim of BES
developers by stating that the agent has no authority to bind RCD to this contract. By applying

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the rule of Boma Manufacturing Limited vs. Canadian Imperial Bank of Commerce [1996] 3
SCR 727 case it can be said that the agent cannot bind RCD Ltd. for his conduct.
Conclusion
Therefore, to conclude, it may be said that the argument of RCD Ltd. is justified and not
responsible to pay damages to BES.

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Reference
Geva, B. (2017). Banking, Payments and Negotiable Instruments.
Lane, J. E. (2006). Public administration & public management: The principal-agent
perspective. Routledge.