Case Study Of Business And Corporation Law

Running Head: BUSINESS AND CORPORATION LAW
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Commercial Law
8/8/2019
Student’s Name

COMMERCIAL LAW 1
Contents
Question 1........................................................................................................................................2
Issue 2
Rules 2
Application 5
Conclusion 6
Question 2........................................................................................................................................6
References........................................................................................................................................9

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Question 1
Issue
What are the legal obligations of LLA towards Glitz Cruisers under agency law?
Rules
In the world full of commerce, a business involves many people who act on its behalf.
These people may have a different role such as employees or partners in a business. An
agreement where one person (principal) confers authority on another (agent) to develop a
contract with outsiders (third party) is known as agency. An agency agreement can be in the
format of an employment contract or partnership agreement, where one party gives power to
another to do some acts on behalf of the same. The person who gives such authority is known as
principal and to whom the authority is given known as an agent (Artslaw, 2019). In conjunction
with this, an agency can also arise by operation of law.
Different types of authority are there that an agent can have under an agency agreement.
The first type of authority is the actual authority. As the name implies, it is the one where an
agent actually has authority to a particular act on behalf of the principal. The authority is further
divided into two types namely express authority and implied authority. Express authority is the
one where Principal states the authority of the agent clearly either in an oral way or in a written
way (Dundaslawyers, 2018). On the other hand, implied authority is the one, which is necessary
to perform an obligation to express authority. In those cases where no express authority is
provided but a person holds some position, then the implied authority assumes to be there for
those activities that generally fall within the scope of that position (Joyce, 2019). For instance,

COMMERCIAL LAW 3
for a managing director of a company, it can be assumed that being on this position, the same has
the authority to enter into major supply contracts for the company.
Watteau v Fenwick [1893] 1 QB 346 is a case developed on implied authority. In the
subjective case, a person was appointed on the position of pub manager and owner of the pub
clearly mentioned the authority of the manager. As per the express authority is given by the
owner, the manager was not appointed to buy cigars for the club. It was decided in the case, that
no matter whether an agent has limit authority in respect to his/her role but by the virtue of
position, he/she would have implied authority to do all the task that is associated with the role in
general (Jones, 2017). It was held that buying cigar comes under the role of pub manager and a
third party has reason to believe that manager had such authority and therefore the owner will be
held liable for the act of buying cigar even after restriction of the same where the third party does
not have knowledge of such limited authority. In such a situation, this is to state, that if a person
holds some position then he/she seems to have right attached to that position.
The third and one of the important types of authority is an ostensible authority. At
sometimes, the principal does not provide any express authority to the agent but do such acts,
which reflect the existence of such authority. In other words, this is to state that under ostensible
principal represent that a person (agent) has enough authority to do a specific task whereas in
actual agent do not have any such authority (Munday, 2010). Here this is necessary to state that
such representation must perform by the principal only and not the agent. Ostensible authority is
also called as an apparent authority. This authority has a distinct significance in the area of
agency law to determine whether the principal would be held liable for an act or not. The liability
of a principal under ostensible authority remains the same as per actual authority, which can be
understood with the example of case law. In the case of Freeman & Lockyer v Buckhurst Park