Liability of Principal and Agent under Australian Agency Law

This article discusses the liability of principal and agent under Australian Agency Law. It explains the rules and duties of the agent and principal, and applies them to a scenario where an alpaca carer incurred expenses for the operation of an alpaca. The conclusion states that the principal will be held liable to pay the amount of $3500 to the agent.

Running head: LAW
Law
Name of the Student
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Issue
The issue is whether Steve will be held liable for the amount of $3500
Rule
Australian Agency Law focuses on the equation between the principal and an agent
who are entitled to work together. As per the law, it is known as the quasi-contractual
relationship that associates a person called the agent who is requested to execute his actions
on behalf of another person. The other person being the principal must form legal relations
with a third party. Dillon v. Gange held that there must be a mutual consent between both the
principal and the agent. However, in a few cases such a relationship is known as an employer
and employee relationship (Robert 2013). An agent and principal form the first contract. Such
a contract gives authority to the agent to work on his behalf of his principal. Thereafter,
follows a second contract, which is created between the principal and the third party due to
the activities of the agent. A principal is mostly held liable for the acts committed by his or
her agent as observed in the case of Life Assurance Corp v. Pro Golf Association. Therefore,
the principal is said to have an additional obligation to guarantee the agent for any sort of
payments that have been incurred by the agent. The terms and clauses of the Agency Law
have been discussed majorly under the Common Law (Donald 2013). No statutory
requirements need to be produced in between the terms of the notice period. As observed
from the law an agent has a few specific duties towards the principal that should be carried
out. Firstly, an agent is bound to follow the instructions that are provided by the principal.
Secondly, an agent should be always be faithful to his or her principal. His work is to act for
the best interest of the principal and he should not make any kind of secret revenue from the
principal. Thirdly, his duty is to maintain and balance the account of the amounts that are
usually paid and received on behalf of the principal. Fourthly, an agent must make use of
reasonable skill and techniques to perform any kind of specific task when the principal is not
present. Therefore, an agent must always act in due care and negligence. Lastly, the principal
must get informed about all the matters and issue that comes to the knowledge of the agent
when linked to their agency relationship (Beaupert et al. 2017). For example, an owner of a
car may be held liable vicariously because of the negligence caused by an individual to whom
the car was loaned (Oliver, Justin and Paul Schoff 2017). Hence, if the owner was a principal
and the driver was the agent, he will be held liable for the actions of his agent. Consolo v
Bennett states that like an agent, even the principal is bound by certain duties towards his

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agents. The principal must be present to compensate the agent based on the liabilities that can
occur on part of the unauthorized activities of the agent. The principal is also bound to
indemnify the agent when services were completed by him on time. In case of a disbursement
committed by the agent, it is the duty of the principal to reimburse such an agent. The
principal should provide necessary cooperation to the agent while he is carrying out his
activities. However, the agent is also permitted to recover the expenses that were made
during the period of agency. These expenses generally include registration fees and travelling
expenses (Eric 2013). It can stated that according to the relationship of the principal and the
agent, employers are vicariously liable in relation to the theory of superior doctrine. This
concept is generally applicable when the employees in the course of their employment
commit negligent activities (Jonathan 2015). When both the employer and employee are in a
legal contract, they both have to fulfill their legal duties and act accordingly. The contract
formed between them will not be considered to be valid if one of the parties have not failed to
carry out his duties. According to the law, there are a few specific cases where the right of
indemnity cannot be vested on the agent. There are conditions based on this concept. Firstly,
an agent will be committing unauthorized act if he outbursts the functions that was entrusted
by the principal. The principal has the right to call the agent’s actions unauthorized if the
principal before did not ratify it. Secondly, the agent will have no right to reimburse if it was
an unlawful act, which was carried out by him. Although there are cases when the services
performed by the agent to the principal consists of an implied term (Enos, Ryan and Hersh
2015). The agent will not be in a situation to reimburse if such is the situation. However,
unlawful acts are not accepted. Thirdly, the agent will be committing a breach of his duties if
he acts negligently during the course of his employment. He services rendered by the agent to
its principal includes an implied term. Implied terms is present in the agreement where the
agent may not be in the situation to ask for remuneration that deserves from the incident.
Thus, these are the basic and general rules of the Agency Law that needs to be applied in the
given scenario.
Application
From the given scenario, it can be observed that the breeder and carer of an alpaca
was Steve. He used to charge $100 per week for taking care of them. Steve was hired by
Bianca to take care of her alpaca. Thereafter, formed an agent and principal relationship
between Steve and Bianca based on mutual consent. Steve had noticed that one of the
pregnant alpacas were not well and was having respiratory trouble. Steve was tensed in such

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a moment as he was the temporary care taker of the alpaca. He was invested with certain
duties that he had to carry out. There was a mutual consent between them and an employer-
employee relationship was created. By seeing the alpaca suffer Steve thought of calling
Bianca, the owner as it was his duty to inform the principal about the activities (Knapp et al.
2016). Bianca was unavailable and he could not have a word with her regarding the situation.
However, being an agent, Steve ensured to inform his principal about his duties so that he is
not held liable later. Seeing the condition of the alpaca getting worse, he took it to the veteran
and the doctor suggested that the alpaca needs to get operated (Persson, Sybille and
Wasieleski 2015). After hearing so, he tried contacting the principal, Bianca as he was
working under his instructions but could not reach her as. She was unavailable throughout the
time Steve tried contacting her, He had called at her home, her housekeeper received the call
but did not show much interest and attention to what Steve was saying. However, Steve had
no other option but to take the alpaca to the veteran as the condition was deteoriating. The
veterinarian took the permission from Steve for operating the alpaca and it was a complete
success that Steve carried out his duties being the carer of the alpaca. Once Steve’s principal
and the owner of the alpaca returned to take back she found about the operation of the alpaca.
Steve cleared and paid all the expenses that were incurred during the operation. When Bianca
had arrived to collect the alpaca, she was informed by Steve that an amount of $3500 was
paid by him for the operation of alpaca. Steve took all the responsibilities and carried out his
duties without committing any kind of unlawful and unauthorized act. Applying the Agency
Law, being the agent, Steve was loyal and faithful to the employer who had given him the
instructions and carried them out accordingly. The principal is bound to compensate the
agent, if there is no fault of the agent and he has carried out his duties within time. If the law
is applied in this scenario, Steve had performed his duties as an agent. It was because of
Steve’s sincerity and caring nature that Bianca’s alpaca got saved. Therefore, Bianca will be
held liable for the expenses that were incurred by her agent. She is bound to reimburse Steve.
The principal’s duty is to indemnify the agent based on the account that authorized and the
agent for keeping the best interests of the principal executed lawful acts.
Conclusion
In this regard, it can be concluded stating that the Agency Law needs to be followed
and applied in a situation where the relationship of Principal and Agents exist. As observed
from the above scenario, it is to be stated that an agent cannot be liable personally. The
principal will always be held liable for the activites of the agents. Therefore, it can be

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concluded by stating that Bianca, the principal will be held liable to pay the amount of $3500
to Steve his agent.

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