Corporation Law: Liability of Agents and Lifting of Corporate Veil

Running head: CORPORATION LAW
Corporation Law
Name of the Student
Name of the University
Author Note

1CORPORATION LAW
Answer 1:
Issue:
The issue is that whether there was a contract between Gabby and Terrance. The issue is
also regarding the fact that whether Mary and Peter had authority. Whether there is a liability on
the part of Peter to Gordon.
Law:
The law of agency states that an agreement is formed when an individual authorizes his
right to another person for the purpose of negotiating on his behalf with the third parties. The
individual authorizing the right can be termed as the principal and the right entrusted on another
person is his agent. In this regard, it is noteworthy to mention here that, under the law of agency
the agent acts according to the interest of the principal. The principal, in certain cases, is liable
for the actions of his agent. However, it is essential to have knowledge of the fact that whether
the agent has an authority to act. Therefore authority under law of agency can be categorized
into-
1) Actual authority.
2) Implied authority.
3) Ostensible authority.
Actual authority:
An authority is entrusted by the principal to his agent, however if the agent acts in excess
of his authority then the principle shall not be held accountable for the action of the agent. An
actual authority can be made orally and in writing. The agent in some cases shall be personally

2CORPORATION LAW
accountable to the third party for breach of warranty. It can be observed in Watteau v Fenwick
[1893] 1 QB 346, that the manager of the pub was directed by the owner not to buy cigarettes.
Such an authority was given by way of express or actual authority. However, it can be noted that
in this case was not held liable for the purchase of cigars because it formed an important part of
authority of the pub managers in England during that time.
Implied Authority:
An agency can arise as a result of implied authority. However, implied authority may not
be mentioned in the contract. Therefore, in some cases it may happen that the principal has
authorized the agent to work on his behalf for the purpose of ordering specific goods and
thereafter pays the agent for the same. In such cases an implied authority can be formed which
was noticed in the landmark case of Chan Yin Tee v William Jacks and Co. [1964] MLJ 290.
Ostensible Authority:
Apparent or ostensible authority can be formed in situations does not intend to give the
agent his authority and therefore authorizes the agent to believe that he has an authority to make
decisions in the absence of the plaintiff with the third parties. However, in most of the cases, an
authority lies upon the agents to act on behalf of the principal. In such cases, it can be observed
that when the prior authority was vested with the agent and such authority was terminated
without informing the agent then an ostensible authority is formed. In case of ostensible
authority, there is an intention on the part of the principal not to entrust an authority to the agent
however; he pretends to do so. Such representation on the part of the principal can be in the form
of inaction, as the principal was aware of the circumstances that how the agent would have acted
if was given the authority. It was observed in Freeman & Lockyer v Buckhurst Park Properties