Company and Corporation Law

RUNNING HEAD: COMMERCIAL AND CORPORATION LAW
Company and
Corporation Law

COMMERCIAL AND CORPORATION LAW
Issue
The main issue in the given scenario is what will be the liability of Bill if the car yard had no
knowledge of Willy being his agent.
Rule
Agency is lawful relationship that takes a variety of forms and is common to business and
trade transactions.1 A contract between the principal and the agent is at the centre of the
official partnership by which the officer is authorizes to behave and perform duties on behalf
of the principal.2 In other words, an agency agreement is lawful contract that creates a
fiduciary connection by which the first party agrees that a second party’s actions bind the
principle to subsequent contractsmade by the agent as if the principal had made the
subsequent agreements himself. In the case of Peterson v Moloney3, it was stated by court
that an agent is an individual who by means of the power on him, is capable of establishing or
affecting legal freedoms and responsibilities as between another individual called his main
and third party.
In the case of Beazley v Seed & Grain4, the main issue in this case was whether there was
enforceable contract. In this case, an agent was approved to sell some property provided a
published register of a verbal agreement among seller and buyer and sent records to both
buyer and seller. Venders asserted the published document as written note signed by them. It
was held by the court that it is never enough to tell that an individual is an agent. One must
always confirm for what reason the person concerned was appointed as an agent, and one
must always look to see if the agent as an agent or in some other capacity was doing the
particular act.
In common laws of Australia, under agency, agent has various authorities. Under agency
principal is bound by the act of agent up to the extent of authority of agent. Relationship of
agency can be established by; ratified authority, actual authority and apparent authority.
1 M.A. Clarke, R.J.A.Hooley, R.J.C. Munday, L.S. Sealy, A.M Tettenborn and P.G.Turner, Commercial Law:
Text,Cases, and Materials (Oxford University Press, 2017) 1200
2 Justin Malborn and Bernard Bishop, Australian Export (Cambridge University Press, 2014) 352
3 (1951) 84 CLR 91
4 (1988) 4 BPR 952
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COMMERCIAL AND CORPORATION LAW
Ratification means confirmation of the conduct that has not been previously approved and
may not have been authorised, generally by principal, adopting the conduct of his agent.
Once the acts of agent are being ratified by the principal then both are become bound as if
principal had authority. In the case of Hagedorn v Oliverson5, the court held that agents
conduct could be ratified by the principal even though agent was not authorised at that time.
In the case of Firth v Staines6, it was held by the court that ratification applies in situations
where the authority is exceeded or had no authority to an agent.
There may be two types of actual authority. Either the principal could have specifically
granted authority to agent or the authority could be assumed.7 An agent shall, as a standard
principle, only be permitted to compensation from the principal if he has behaved within the
reach of his real power and if he acts outside that power, he may be responsible to a third
party for infringement of the implied authority guarantee.
Whereas apparent authority also known as fictitious authority exists where the words or
behaviour of the principle would lead a prudent person in the position of the third party to
consider that, the agent was authorised to act, although if such a connection had never been
discussed by the principal and the alleged agent.8 In the case of Watteau v Fenwick9, it was
held by the court that a third party was in position to hold principle personally liable for
whom he did not had knowledge that when his agent sold cigars to some other person outside
his authority. The court further held that the principal is responsible for all actions of the
agent normally entrusted to an agent of that nature, irrespective of the limitations placed on
that authority among the principal and the agent.
In several cases, agent and principal are both responsible for the acts done by the agent who
has actual or apparent authority. However, where the principal is not obliged because the
agent does not have any real or apparent authority, the alleged agent is responsible to the
third party for infringement of the implied authority guarantee.10 If the principal has directed
to not act in contrary and still the agent does so then in that case the principal shall not be
hold responsible.11
5 (1814) 2 M&S 485
6 (1897) 2 QB 70
7 Jon P. McConnell, Apparent Agency:Caught by illusion, Cornell Hotel and Restaurant Administration
Quarterly,26 (2) 28-33
8 Paul Latimer, Australian Business Law (CCH Australia Limited, 2012)
9 (1893) 1 QB 346
10 Dilan Thampapillai, Vivi Tan, Claudio Bozzi and Anne Matthew, Australian Commercial Law (Cambridge
University Press, 2015) 544
11 Fray v Voules (1859) 1 EL & EL 839
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