Agency and Contract Law Scenarios

This assignment explores the complexities of contract law within the context of agency relationships. It presents two distinct scenarios: one involving an employee (Gemma) who misrepresents information to her employer (Frank), leading to a contract at a lower price with a relative. The second scenario deals with a suspended agent (Bob) who continues to enter contracts with customers unaware of his termination, ultimately defrauding them. Students are tasked with analyzing these scenarios through the lens of agency principles, including apparent authority and the responsibilities of both principals and agents.

Running head: BUSINESS LAWS
Business Laws
Name of the student
Name of the university
Author note

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Question 1
As per the facts of the case the prima facie issue which has been indentified is that whether a
there is a contract between the parties Qantas Airlines Ltd and Airbus Corporation Ltd and
whether a claim can be made for damages by Qantas against Airbus for the breach of contract.
Rule
There must be a compelling offer which has to be followed by an appropriate acceptance
in relation to the formation of a legally enforceable agreement. Moreover along with the
elements of offer and acceptance the parties to the contract also require convincing intention to
enforce the contract legally as stated in the case of Harvey v Facey [1893].
The parties are legally bound to the each other in relation to the agreement when it is formed in
accordance to the appropriate procedure. In addition it had been ruled in the case of L’Estange v
Graucob (1923) 2KB 394 that where a party ignores to read the content of the contract and signs
it, even if they did not intend to accept the terms of the contract their signature would make the
parties bound to the terms of the contract where there is no kind of fraud or misrepresentation
which have been made by the other party.
At common law the terms of the offer have to be accepted by the person to whom it has
been directed unequivocally. This means that the acceptance made by the other party has to be a
mirror image of the offer presented by the offeree. In case any other additional or inconsistent
term is provided through the acceptance the original offer stands rejected and the acceptance
itself becomes a counter offer.

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The parties to a contract have a legitimate right to incorporate a term in the contract which can
restrict any liability or damages arising out of the breach of contract as provided in the case of
Riches v Hogben [1986] 1 Qd R 315
However it has been stated in the landmark case of Thornton v Shoe Lane Parking Ltd
[1971] that in case any such term is incorporated by a part to the contract into it , it is the duty of
such party to duly communicate the existence or presence of such term in the contract to the
other party in order to ensure that they are aware of it.
Moreover another important principle had been provided by the case of Causer v Browne [1952]
according to which a party who wants to incorporate an exclusion clause into the contract has to
ensure that such clause is incorporated before the contract is made. In case the clause is
attempted to be incorporated into the contract after the contract has been formed between the
parties the clause cannot be regarded as a part of the contract if the party expressly does not give
consent to it.
In the case of Poussard v Spiers (1876) 1 QBD 410 it was ruled by the court that the terms of
the contract can be classified into warranties and conditions. The judge provided that the term
forming the foundation of the contract is regarded as a condition of the contract. The condition is
therefore the most significant term of the contract which means that if such term is violated it
would account to the fundamental breach of the contact. In case a party to the contract breaches a
condition of the contract it gives the other party the power to end the contract through the
process of repudiation. However as provided through the case of Bettini v Gye 1876 QBD 183
if a warranty is not complied with by the party it would result in mere damages no right of
repudiation as a warranty does not form a fundamental part of the contract.

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Application
In this case it has been provided that both Qantas and Airbus entered upon into a legally binding
agreement. As per the terms of the agreement the Qantas was to take aircrafts for Airbus which
would provide it with a certain amount of profit per day in addition a specific term of the
contract stated that airbus was supposed to install video software which would provide the
customers access to 36 entertainment channels. However Airbus was not able to provide Qantas
with the specific entertainment system and instead provided them with entertainment system
which only had 34 channels which in addition required a period of one week to be rectified.
As per the above discussed principles of contract the terms of the agreement are binding legally
on both the parties and the violation of any term would result in a kind of contractual remedy.
The remedies in relation to a contractual breach are determined in relation to the kind of term
which has been violated.
The basic term which sets the foundation of the contract between Qantas and Airbus was that
airbus was to supply aircrafts to Qantas which would be able to fly according to the demands of
Qantas. The term violated in relation to the entertainment system can thus be said not to form the
fundamental of the contract and be considered as a warranty. Thus as a warranty is breach
Qantas can claim compensation for the loss of business in relation to the seven days required to
fix the system.
It had been provided in the situation that after the contract had been formed between the parties,
Airbus sent a number of papers to Qantas which also included the contract which has been
formed between the parties. The papers also included a tem which stated that the liability of
Qantas is only restricted to $300000 in relation to the contract.

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As per the case of Thon parking the cause is not valid as it was not brought to the attention of
Qantas with all reasonable steps, in addition as per the case of brown the clause was attempted to
be incorporated into the contract after the contract had been formed so it cannot be regarded as a
part of the contract. therefore the exclusion clause to limit the liability of Airbus is not valid.
Conclusion
Airbus is liable for damages as they have violated the warranty of the contract and they cannot
rely on the exclusion clause as it is not valid legally.

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Question2
Issue
As per the facts of the case the prima facie issue which has been indentified is that whether
1. Frank can take a legal action against Gemma in relation to misrepresentation
2. Frank is bound by the actions committed by Bob in relation to the law of agency
Rule
It is a fact that consent provided by the parties to the contract has to be free. However in common
law as well as statutory provisions a consent is not considered to be free in case it if found that
any of the party to the contract indulged into an act of Misrepresentation, Undue influence,
Fraud, Duress or coercion.
As defined by the case of Edgington v Fitzmaurice (1885) 29 Ch D 459 any statement which is
not true and have been made by one person to another so that the other party may rely on or use
such statement to get into a contract accounts to misrepresentation. A misrepresentation cannot
be accounted out of a statement of opinion or a future contingency.
In case of misrepresentation through the application of the objective test it has to be determined
that a reasonable person would use such statement or rely on it to get induced into a contract with
the other party which signifies that misrepresentation has to be differentiated from puffery as per
the case of Dimmock v Hallett (1866) LR 2
.
In the case of Hill v Rose [1990] VR 129 in order to establish a claim for misrepresentation when
the party who had been induced in the contract was not aware of the misrepresentation and the

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lies contained in the statement. Therefore if a person would have gone into a the contract even if
the misrepresentation was not made than a claim for misrepresentation cannot be established.
As per the case of Derry v. Peek (1889) 14 App Cas 33 a misrepresentation is said to be
fraudulent in case it is found that a party to the contract intentionally committed the
misrepresentation. In case of normal misrepresentation the aggrieved party has the right to
rescind the contract, however when a party in case of fraudulent misrepresentation can not only
rescind the contract but also claim damages in relation to the contract.
In the famous case of Pioneer Mortgage Services Pty Ltd v Columbus Capital Pty Ltd - [2016]
FCAFC 78 the judges used a well discussed principle in relation to the law of agency which
states that an employer has inherit liability in relation to any act or omission conducted by the
employee when they are working in the course of employment. In addition the employer does not
have the defense of stating that the employee was not acting within the authority provided by the
employer.
In the case of Dimmock v Hallett (1866) LR 2 the judge ruling in favor of the plaintiff stated
that where the employment of an employee had been terminated by the employer such
termination was not known to a their party associated with caring out business with the employee
as an agent of the employer, the employer can still by bound to the actions of the agent with such
third party even after termination of employment.
In the case of Cropper v Cook [1867] the facts the court ruled that an apparent authority which
would cause the third party to believe that there is a relationship between the agent and the
principal the authority would be enough to make the principal liable to the actions of the agent in
relation to the third party.

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In the case of Watteau v Fenwick [1983] 1 QB 346 the court stated that where the relationship
between the principal and the agent has ended and a third party is not aware of such end than the
principal would be liable for the acts of the agent if the third party entered upon a contract with
the agent relying upon the agency
Application
In the given situation Gemma work for Frank as a saleswomen for his shop which deals with
electronic appliances. The shop has a dishwasher which is priced at $350. Tom after inspecting
the dishwasher provides Frank that he is ready to buy it subjected to space available in his
apartment. Gemma mean while wanting to sell the washer to her relative tells frank that there is
no chance that the washer would sell for $350. Relying on the advice of Gemma frank gives her
authority to sell it for $300. Gemma used such authority to sell the washer to her relative. Frank
latter got to know that the Tom would have easily paid $350 for the washer. Here as per the
principles of misrepresentation Gemma has induced frank to get into a contract for lower price
by providing alse facts. Frank has a right to make a claim against Gemma. However as per the
principles of agency Frank is bound to the contract with Frances as Gemma entered it upon
authority provided by Frank.
In case of Bob the former agent of the shop who has been suspended by Frank as he used to
come to work Drunk and late, the law of agency would also been applicable. This is because the
Bob had a continues dealing relationship with Angela with respect to washing machines. Angela
had no idea that Frank had ended the agency of Bob and therefore she entered into a deal with
Bob for the purchase of washing machines. Bon flees with the money transferred by Angela to
the account which she used for regular dealing with the shop. As per the rules of agency
discussed in the above case Frank being the principal of Bob would be bound to the contract with

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Angela as she did not know about thee termination of agency and got into the contract by relying
upon it.
Conclusion
Frank can claim misrepresentation against Gemma but is bound to the contract with Frances.
Frank is also bound to the contract Bob got into with Angela.

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References
Causer v Browne (1952) VLR 1
Derry v. Peek (1889) 14 App Cas 33
Edgington v Fitzmaurice (1885) 29 Ch D 459.
Hill v Rose [1990] VR 129
L’Estange v Graucob (1923) 2KB 394
Riches v Hogben [1986] 1 Qd R 315
Thornton v Shoe Lane Parking Ltd (1971) 2 QB 163
Wakeling v Ripley (1951) 51 SR (NSW) 183
Watteau v Fenwick [1983] 1 QB 346