Legal Aspect of Business

This document explores the legal aspects of business, focusing on the relationship between principal and agent. It discusses agency laws, the duties of an agent, and provides relevant case laws to illustrate these concepts.

LEGAL ASPECT OF
BUSINESS

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
CONCLUSION................................................................................................................................5
REFRENCES...................................................................................................................................6

INTRODUCTION
Legal aspect of business are those types of aspects that deal with formation of business
environment. These aspects are very much essential in order to provide growth to an
organisation. It helps in providing an concrete structure to give positive impact in achieving
goals and objectives for organisation. Aspects of such kind are very important as they ply major
role in building relationship between all the persons working in a organisation. Agency laws are
that type of laws which are very important in order to accomplish a task for an organisation.
Such laws deals with existence of fiduciary kind of relationship. Also agency law works over a
simple formula in which a principal hires a person to perform task upon his behalf. Tripartite
form of relations is present between agent and principal. In this file things that are going to be
deal with are agency and its key features. Various duties of agent towards principal is going to be
explained with case laws.
MAIN BODY
Agency laws are that kind of laws which helps in covering of those aspects that deal with
making relationship between an agent an principal better. Laws of such kind are required for full
filling of those objectives which helps in providing a sustainable environment within a business.
Basic elements of these laws is based upon principal of vicarious liability in which an principal
and agent relationship is explained. Also tripartite form of relationship is explained which talks
about employer and employee relationship (Frolova And et. al., 2018). Under these laws as per
there framework an agent is hired for performing task by principal on his behalf. Work assigned
to an agent is under a contract signed by both principal and agent. So, these are also known as
agreement of contractual nature. These agreement can be in written and oral form. An agency
acts as a medium that deals with task that has been given to it by an higher authority. Certain key
features are there which helps in forming of agency and they are legally binding contract are
those types of agreement which are there to provide a legal stability and makes both parties
legally bound towards smooth performing of task. Second characteristics is no mandatory
consideration in this support of principal and agent is not required which means that
consideration is important for forming a agreement. Age limit this means that age of the person
should be legalise and age of agent should be verified before forming a contract with him.
Authority to contract all necessary documentation should be done for formation of contract.
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A relevant case law to justify this is “ Shawn v Carter” in this case it was held by court
that an infant or a minor cannot be hire to come into an agreement and neither can hire any other
person to work for him (Lindström. and Hanken, 2018). Nor any power has been given to him
under any act to perform such act. If due to any reason such situation occurs then it is going to be
null void situation. It is also told by court that an guardian can hire a person to take care of
minor. In a tripartite form of relationship an authority is given by an superior to an employee to
perform a particular task given to him. In a fiduciary form of relationship an person who has
come into contract performs an legal and ethical form of relationship. An agency is formed in
expressed or implied manner which means that under expressed way there is written form and
under implied manner it can be formed as per oral form. There are certain general duties which
are there in to effect before starting of contract and certain fiduciary duties which are flowed
only at the time of forming an contract. These together form certain duties which are required to
be followed by agent. So, that task can be achieved in smother and faster manner. These duties
are mandatory to be followed by agent and they are as follows.
Very first duty that has to be flowed by agent towards principal for accomplishing of task
given to him is “ Duty to follow instructions given by principal”. Under this duty an agent has
to act according to the instructions given by principal to him. This can be better understood as an
agent has to act within the scope given to him by principal (Maresova. and Klimova, 2016). If
due to any reasons instructions has not been given to agent, then he should act according to rules
prescribed under contract signed by him. Under any circumstances if an agent is held liable for
breach of such duty. Then he is going to be liable for loss or damaged happened because of it.
No valid proof is there which proves that such breach has taken place then all loss occurred is to
be bear by principal himself. Further this duty can be better understood through this relevant
case law of “James v Martha” in this case facts are, driving test has been passed by James.
Despite of the fact that he does not know anything related to car. Due to this reason James asked
his friend Martha to help him out in purchasing the car. Before his friend started to search for
car, it has been mentioned by James that care should not be broken and neither should have met
with accident. Still after searching at various places and for many days a car was found by
Martha. As car's bonnet was damaged but condition of car was good as told to him by person
who was selling it (Maroušek. and et. al. 2016). After a long discussion between James and
Martha, she convinced him for buying the car. And the car was bought by him for five thousand
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euro. After using car for few weeks it was discovered that car was not in good condition. As it
was not repaired well and has also met with accident. In this case court held that as prior
information has been given that car should not be damaged or has met with accident. Agent has
not followed this an convinced him to buy the car that was damaged and has also met with with
accident.
So, Martha has done a breach of duty by not following instructions that were given to
her. As per this claim made by claimant is legal and loss has to be given by Martha. Due to
breach of duty of not following instructions given to her by James (Gordon, 2016)(Alexandru,
2016).
Another duty that is required to be followed by agent for helping out principal and that is
“ Duty of care and skill”. As per this duty an agent needs to carry out work given to him with
utmost care and is bound to utilise his skill in effective manner. Regarding this situation it is the
duty of agent, he should take all important steps and to follow them to bring best out of his
performance. Skill is going to be helpful in making an task easy to accomplish. Care is going to
increase efficiency in task. This can be understood with a example, an agent has been given
responsibility of performing business. He should utilise all his skills required for the purpose.
Also care should be taken as task is performed under his own name. In common law it is
required by an agent to act with due skill and care. Skills are required to be used in such manner
that no damaged has been caused in direct and indirect manner. If breach of this duty is done by
agent then he is going to be liable and also principal can held liable, if failure is done upon his
part (Amosova, 2016). In a simple manner principal is going to pay compensation for it. Case
law related to this duty is “ Karmon v White” in this case an agent is appointed for selling of
property. An offer was received by him which was disclosed to his principal. This offer was
accepted under clause “subject to contract”. After some time agent received higher offer and
did not disclose it to principal. So, court held agent liable for breach of duty of care and skill.
Another case that can clear the concept in better manner is “Pablo v Jonathan” in this case
agent was asked to take care of goods that has been kept under his surveillance in his shop. As
he does not used used proper methods to protect goods which caused damaged to them. In this
case it was held by the court that Pablo was given responsibility of handling good with care , till
the time it was under his surveillance. He did not took good care care of goods to protect it and
neither utilised his skills to preserve goods in better manner. Due to this loss occurred to
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principal. So, Jonathan is going to get compensation from agent as breach of duty of care and
skill has been done on the part of agent by not taking care of goods kept under his care.
All duties are not only limited to above situation. Some duties are there which are related
to conflict based upon interest. So, next duty to be followed by agent towards principal is “ Duty
to avoid conflict of interest”. It is one of the most important duty performed by agent for
avoiding any conflict related to interest. This means that he should not try an earn profit from
another principal without disclosing about it to principal who has given him task. In other sense
it means that a agent cannot acquire any kind of profit from third party out of business. Under the
condition that agent has disclosed interest that has to be gained to the principal. With the consent
of principal he can continue to earn profit over property.
If due to any reason this duty has been breached by agent then all loss happened due to
such a conduct. Agent has to bear loss and also consequences has to be faced by him. Case law
which can make the concept of duty to avoid conflict of interest more clear is “Richard v
Bruno”. Court held in this case that breach of conflict in interest has been taken place on behalf
of Richard because he made secret profit from his another friend without disclosing it to Bruno.
Another case regarding this duty is “Sheldon v P market Ltd” in this case Sheldon was
working for an company P market Ltd. As per the course of his employment he ran a business
to earn profit. At the time of joining the company it was disclosed under a clause in an agreement
that she is not going to earn any secret profit or cannot run a business. After few weeks of
employment the company discovered that she is running a separate business and is earning profit
from it. In this matter it was held by the court that breach of conflict of interest has been done on
part of Sheldon because she has breached clause mentioned under the contract. Sheldon was held
liable for breach of duty to avoid conflict of interest (Loc. And et. al., 2018).
Other duty that has to be followed by agent towards principal is “Duty to account”. This
means that it is the duty of agent to maintain proper accounts of property which belongs to
principal. It should also be disclosed to principal upon demand made by him and also over
periodical basis as agreed under contract. In a simple manner this can be understood as property
of principal has been given by principal to agent, then he has to keep it separate from his own
property. He cannot act as the owner of property and take rent by himself to generate profit
from property given to him. If he does this in any manner then he has to bear the consequences
or loss happened. Relevant case law related to this is “Jacob v Fran”. In this case it was held
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that Jacob is a agent who has been given authority of maintaining account and profit chart for
Fran. It was signed in an agreement that all accounts is going to be disclosed when asked and no
profit can be earned for satisfying personal interest. Jacob did follow the clause and started
earning profit out of accounts of Fran. In this case it was held by the court that breach of duty
has been done on part of Jacob. As he has violated the clause mentioned in the agreement and
earned secret profit out of Fran's account. So Jacob was held liable for breach of duty to account.
Last and final duty that has to be followed by agent towards principal is “ Duty not to
delegate authority”. Within this duty ban general rule is there which says that an agent does
not has any right to transfer the work to an sub agent. It is clear that agent has been given whole
and sole responsibility by the principal for accomplish task given to him. So, no other agent can
be hire by him to perform task over his behalf. Agent is not allowed to take any help from an sub
agent to get a particular task done. If under any circumstances any breach of duty takes place
then all the loss done by sub agent has to be taken care by agent. Over that profit gained out of
such breach is not going to be valid at all in under laws provided under agency law. Relevant
case law related to this duty that is going to make it more clear is “Maron and Sea Ltd v
Darvin”. In this case the facts are as follows Maron and Sea Ltd is an organisation running a
business from very long time. In order to provide better services to it customers. They decided to
delegate the authority of supplying there product to an agency name Darvin. An agreement was
signed which stated that no work of the company is going to be done by any other agency expect
Darvin. Darvin with the motive of earning more profit hired another agency to do work given by
the company to him. So it was held by court that breach of duty of not delegate authority has
been done by Darvin.
CONCLUSION
From the above file it is clear that agency laws are those types of laws which are there to
analyse relationship between principal and agent. Also gives power to principal of hiring a agent
to work on his behalf. Further agency is an medium that comes into an agreement with an higher
entity to perform a particular task. It is the duty of agent to follow instructions stated by principal
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and also he should not earn any type of secret profit. Then all work regarding task is to be
performed by him. Accounts should be made properly and proper skill should be shown with
care, at the time of performing task.
REFRENCES
Books and journals
Frolova, E. E. And et. al., 2018. Information security of Russia in the digital economy: the
economic and legal aspects. Journal of advanced research in law and economics. 9(1
(31)). pp.89-95.
Lindström, J. and Hanken, C., 2018. Wearable Computing: Security Challenges, BYOD,
Privacy, and Legal Aspects. In Wearable Technologies: Concepts, Methodologies,
Tools, and Applications (pp. 1043-1067). IGI Global.
Maresova, P. and Klimova, B., 2016. Economic and technological aspects of business
intelligence in European business sector. In Advanced Multimedia and Ubiquitous
Engineering (pp. 79-84). Springer, Singapore.
Maroušek, J. and et. al. 2016. Polemics on ethical aspects in the compost business. Science and
engineering ethics. 22(2). pp.581-590.
Gordon, D. G., 2016. Legal Aspects of Cloud Computing. Encyclopedia of Cloud Computing,
pp.462-475.
Alexandru, A. C., 2016. Information Security Aspects of Business Continuity
Management. International Journal of Information Security and Cybercrime (IJISC).
5(2). pp.17-24.
Amosova, J., 2016. Some aspects of criminal environment impact on sustainable
entrepreneurship activities. Entrepreneurship and Sustainability Issues. 4(1). pp.17-24.
Loc, H.H. And et. al., 2018. The legal aspects of Ecosystem Services in agricultural land pricing,
some implications from a case study in Vietnam's Mekong Delta. Ecosystem Services.
29. pp.360-369.
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