Contracts and Agency Theory

This assignment delves into the fundamental legal concepts of contracts and agency theory. It requires students to analyze provided texts on topics such as contract formation, breach of contract, agency relationships, principal-agent conflicts, and the influence of psychological contracts. Students are expected to demonstrate their understanding by critically evaluating legal perspectives and applying these concepts to real-world scenarios.

LEGAL STUDIES

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
QUESTION 1...................................................................................................................................1
A..................................................................................................................................................1
B..................................................................................................................................................2
C..................................................................................................................................................3
QUESTION 2...................................................................................................................................4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Several types of rules and policies are mentioned under provision of laws which are
applicable on different situations. Individuals and companies are responsible to fulfil their legal
obligations which are imposed on them. Present report includes regulations which are related to
relationship in between the agent and principles (Lan and Heracleous, 2010). Minor is not able to
frame legal agreement with major if both parties can do so then entire legal agreement shall be
considered as null and void. It is because; minors are not able to come in contractual relationship
with other person but in case they do so then it must be considered as a voidable agreement.
QUESTION 1
As per the given scenario, there are two parties who come in legal contract in order to
fulfil consideration of each other. Vera and Siddo are two parties who come in contractual
relationship with each other. In such situation, principal and agents’ relationship has been created
among them. Siddo acts as an agent of Vera in order to sell this painting named Dawn (Shapiro,
Fisher and Wagner, 2012). Both are bound to fulfil their obligation which are imposed on them.
Agents are bound to follow instructions which are provided by their principals.
A.
According to the given scenario, Vera is the famous painter of landscape scenes. Her
latest painting called as Dawn and she wishes to sell the same in order to earn better profit (What
is the law of “agency”?, 2014). She wants to sell same painting for 40,000 dollars. For this
purpose, Vera told Siddo to sell that on same price to the person who was seeking for the best
painting. For a quick sale, she is ready to accept less than 40,000 dollars. But also she clears him
that if he sells the same less than 32,000 dollars then her written consent is necessary to be taken.
However, Siddo was not able to sell her painting below the last amount without her written
approval and sold the same to Queenie for 20,000 dollars (Hyman and Kovacic, 2012). Due to
this reason, Vera is able to file case against Siddo in order to recover the amount and comply
with rules as well.
According to section 182 of Contract Act 1872, agent is the person who is responsible to
represent another person known as principal. Their effective relationship is mentioned under
agency law.
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Agency is the legal term which is created by two members known as agent and
principals. They have to follow rules and regulations which are imposed on them. Both parties
are coming in contractual relationship with each other in order to fulfil their legal obligations.
Agents are the persons who act on the behalf of their principals. They both frame legal contract
with each other and sign the legal document. They have to follow terms and conditions which are
mentioned under written document. Thus, as per the given case, Vera acts as principal and Siddo
as her agent who wants to sell painting on the behalf of her (Ye and et.al, 2011). Thus, she
already told her that if he sells painting below the limit then he has to take written approval of
her. But, Siddo sold the same for 20,000 dollars without her approval. Due to this reason, she
was having right to file case against him for the purpose of recovering remaining amount. So,
Siddo failed according to terms and conditions which are framed by both the parties through
mutual consent.
Case: Watteau v Fenwick, in this case Will J has been held that principal are clearly liable for
any act performed by their agent. As they are responsible to pay amount amount of compensation
if any wrongful act con duct by agent.
B.
As per the given case, Siddo is the person who act as an agent of Vera. Also he is bound
to follow directions which are provided by his principal. Both parties have to fulfil their legal
obligations which are imposed on them as per rule of law. They must understand their own
responsibilities and duties in order to attain their target in stipulated time period. Law provide
rights to them for the purpose of protect their interest and maintain their performance as well.
As an agent he is not able to earn secret profit through her painting. In which he
purchased painting by himself on less price and sold the same to another person on high price in
order to earn secret profit (Segrestin and Hatchuel, 2011). But according to rule of law penalty
for further activity has not been mentioned. So that, Vera is well known about such activity but
not able to file suit against him.
In that case, Siddo purchase painting for 32,000 dollars and sold to his friend Elly for
38,000 dollars. Through such function he was able to earn secret profit which is against the terms
and condition of their legal relationship. Both parties need to use their collective efforts in order
maintain their relationship in effective manner. In which he earned secrete profit of 6000 dollars
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which is against the rule of law. But Vera is not able to file case against him because there is no
rule mentioned under law for that case. Siddo is able to clearly protect himself.
Case: Lonsdale v Howard and Hallam, in present case it has been defined that agents are able to
claims for compensation through termination of agency. Thus, agents having right to file case
against principal for termination of relationship or legal contract without any previous
intimation.
C.
On the behalf of Vera, Siddo sold painting to Isobel for 32,000 dollars. For this activities
he was not responsible to obtain written approval of principals in order to perform functions.
They have to follow rules and policies which are imposed on them. Isobel loves Vera's painting
so much. She was very happy to purchase such painting through this reason she paid 3000
dollars to Siddo. Because he provides best opportunity to her for bought such beautiful paintings.
So that, this the duty of Siddo to return such amount of Vera back in order to fulfil his legal
obligation because he only act on behalf of Vera and responsible to return amount which he
received from buyers. But he failed to do so then Vera having right to file case against and
recover such amount in order to earn profit (Koepfler, Brewster and Englert, 2012).
There are various types of rights and duties mentioned under law of both parties which
are as aligned below-
Rights and duties of Agents
 Agents are not able to earn secret profit. If he earns any profit, then responsible to
provide the same to his principals.
 Try to maintain effective leadership with each other.
 Responsible to follow instructions which are provided by his principals.
 As they are bound to comply with mentioned rules.
 Right to receive remuneration amount which is mutually decided by them.
 As per scenario, Siddo not able to earn secret profit and needs to follow instructions
which are provided by Vera who act as a role of principals.
 Siddo have to sell her painting up to the amount specified by his principal.
Rights and duties of principals
 They are responsible to provide proper instruction to their agents in order to maintain
their performance.
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 Try to fulfil demand of them for the purpose of keep them for long time.
 Provide proper remuneration to agents which decided by them through mutual consent.
 Siddo responsible to return money to Vera whenever he sold painting to any person.
As per the above mentioned rights and duties Siddo have to return additional amount
which is received from Isobel because she was overjoyed with the purchase of Vera's painting. In
case he failed to do so then principal having right to file case against agents in order to receive
such amount.
QUESTION 2
John is the person who is 17 years old girl and start small business of courier. She having
different skills and knowledge which are helpful for her to operated her business and provide
opportunities to earn better return (Bunni, 2013). She requires car for her personal as well as for
professional purpose. After three months she went into Frank's used Pvt. Ltd which is established
in Sydney. After that she bought Swift sedan for 49,000 dollars as well as she paid 4000 dollars
in advance for the same. Seller told her that car service has been free for twelve months without
any major repair. An agreement has been signed by both parties in which buyer have to pay
equal monthly instalments for twelve consecutive years with interest rate of 25%. But seller
required security of his amount and for this purpose John call her parents name called Karl and
Maria and they signed agreement on behalf of her (Slade, 2010). After six months from the date
of purchase of car buyer found major problems and stopped payments. Due to this Frank sent to
her parents Karl and Maria in order to threaten them. Seller forced to both that they have to
payment instalments with 7 days otherwise he will sue to John.
The person who not attain age of 18 years are called as minor. According to the rule of
contract law of Australia parties must comply with contractual capacity. This is the ability of
party to enter into legal contract (Can a child or a minor enter into a contract?, 2017). Such as
parties must be major, sound mind and competent to contract. In case of lack capacity agreement
should be considered as void. The person who attain the age of 18 years has been considered as
major in the eyes of law. Both common as well as statute law must restrict minors to enter into
legal contract. Different states must follow those rules which are framed by Australian
government. Legal agreement framed by minor considered as void agreement (Parzefall and
Coyle-Shapiro, 2011). This process is not enforceable by law. Parties who frame legal agreement
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must be competent to contract according to the rules of law. Parties needs to fulfil rules,
regulation and policies which are imposed on them. They have to comply with rules. Parents of
the minor can become guarantor in order to sign legal contract take risk if minor not able to made
payment then they can perform such function. For any default of minor another person can file
claim to his parents. In that case they are bound to pay such amount as per the legal agreement
otherwise opponent is able to file case against them for no payment of amount.
There is also seller and buyer relationship has been created among Frank and John. So
that seller is responsible to provide best quality of goods and services to buyer but in present
Frank is failed to provide the same (Astyk, Newton and Zimmerman, 2010). So that, John having
to file case against him and receive amount to compensation. In which Frank sell car to minor of
cheap quality which is not able to fit for the purpose of buyer. They both frame legal agreement
which is considered as null and void because agreement with minor is not enforceable by law.
Rights of and Liabilities John-
 Major is not able to lodge complaints against minor but can do so and receive amount of
compensation (Burke and Grube, 2011).
 John is able to take action against seller because he provides cheap quality of goods to
her.
 John is also able to lodge complaints against Frank because he gave guarantee that no
further major changes create in car till 1 year but unfortunately major changes create after
six months (Yavner, 2014).
 John is able to attain target and fulfil her obligation within stipulated time period.
 As per policies of contract, they are bound to pay equal instalments of car (Fried, 2015).
This is the specific liability which is created on them.
 Try to understand their responsibilities in order to attain their targets.
Rights of and Liabilities Karl and Maria-
 As per the terms and conditions of legal agreement Karl and Maria are responsible to pay
instalments amount which are imposed on them and mentioned under law.
 Frank is the seller who threat to both Karl and Maria for receiving amount of payment
according to the agreement. Otherwise, he can file claim against John who is the minor
(Runeson, Minör and Svenér, 2014).
 As per this case, both Karl and Maria are guarantor but responsible for the entire case.
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 Also, they are bound to maintain effective relationship with seller in order to comply with
the laws and maintain their performance as well.
 Have to fulfil requirements of law which are imposed on them (Fry, Higton and
Stephenson, 2012).
Case: Mohiri Bibi v Dharmodas Ghosh, it this case it is examined that contract which are
framed by minors are considered as void-ab-initio. Dharmodas Ghosh is the plaintiff who not
completed age of 18 years while comes in legal contract with Mohiri Bibi. He mortgage his
property to defendant who was play a role as moneylender and he was having full knowledge
about minors age. After plaintiff pay amount only 8000 and refused to pay rest amount. But his
mother in legal advisor and proved that at the time of framing of contract person not completed
age of years means he was minor. So that, contract becomes void and not bound to pay amount
for the same.
CONCLUSION
On the basis of above report, it can be concluded that different rules are mentioned under
law which are able to protect interest and rights of people. Agency has considered legal contract
which is framed by two parties’ named agent and principal. It has been assessed that before
conducting any activity, agents need to obtain written consent of principals. According to rules
of Contract Act 1872, minors are not able to come in contractual relationship with any person
because they are not competent to contract. It has been assessed from the report that agreement
framed by minors is considered as null and void and another person with whom they frame
agreement is not able to file case against them.
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REFERENCES
Books and Journals
Astyk, S., Newton, A. and Zimmerman, P. R., 2010. Vertical relationships and competition in
retail gasoline markets: Empirical evidence from contract changes in Southern California:
Comment. The American economic review. 100(3). pp.1269-1276.
Bunni, N. G., 2013. The FIDIC forms of contract. John Wiley & Sons.
Burke, D. D. and Grube, A. J., 2011. The NCAA letter of intent: A Voidable agreement for
minors. Miss. LJ. 81. p.265.
Fried, C., 2015. Contract as promise: A theory of contractual obligation. Oxford University
Press, USA.
Fry, J., Higton, I. and Stephenson, J., 2012. Colour atlas of minor surgery in general practice.
Springer Science & Business Media.
Hyman, D. A. and Kovacic, W. E., 2012. Institutional Design, Agency Life Cycle, and the Goals
of Competition Law. Fordham L. Rev.. 81. p.2163.
Koepfler, J., Brewster, J. and Englert, D., 2012. Characteristics of decredentialed agents in a
military law enforcement agency. Military Psychology. 24(4). p.347.
Lan, L. L. and Heracleous, L., 2010. Rethinking agency theory: The view from law. Academy of
Management Review. 35(2). pp.294-314.
Parzefall, M. R. and Coyle-Shapiro, J. A., 2011. Making sense of psychological contract
breach. Journal of Managerial Psychology. 26(1). pp.12-27.
Runeson, P., Minör, S. and Svenér, J., 2014, September. Get the cogs in synch: time horizon
aspects of industry--academia collaboration. In Proceedings of the 2014 international
workshop on Long-term industrial collaboration on software engineering (pp. 25-28).
ACM.
Segrestin, B. and Hatchuel, A., 2011. Beyond agency theory, a post‐crisis view of corporate
law. British Journal of Management. 22(3). pp.484-499.
Shapiro, S. A., Fisher, E. C. and Wagner, W. E., 2012. The Enlightenment of Administrative
Law: Looking Inside the Agency for Legitimacy.
Slade, V., 2010. The Infancy Defense in the Modern Contract Age: A Useful Vestige. Seattle UL
Rev.. 34. p.613.
Yavner, R., 2014. Minor League Baseball and the Competitive Balance: Examining the Effects
of Baseball's Antitrust Exemption. Harv. J. Sports & Ent. L.. 5. p.265.
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Ye, Q. and et. al., 2011. The influence of user-generated content on traveler behavior: An
empirical investigation on the effects of e-word-of-mouth to hotel online
bookings. Computers in Human Behavior. 27(2). pp.634-639.
Online
Can a child or a minor enter into a contract?. 2017. [Online]. Available through:
<https://www.netlawman.co.uk/ia/entering-contract-minor>. [Accessed on 8th September
2017].
What is the law of “agency”?. 2014. [Online]. Available through:
<http://www.rotlaw.com/legal-library/what-is-the-law-of-agency/>. [Accessed on 8th
September 2017].
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