Liability of Principal and Agent under Australian Agency Law

Running head: LAW
Law
Name of the Student
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Author note

1LAW
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

2LAW
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