Remedies for Unauthorised Actions of an Agent in Agency Law

This article discusses the remedies available to principals for unauthorised actions of their agents in agency law. It also explains the rights and liabilities of parties in a partnership. The article provides expert answers on commercial law and is a valuable resource for students and professionals alike.

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Advanced Commercial Law

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Answer (A)
Issue
What remedies does Lupe have against Daphne?
Rule
As per the general principle of agency law, the principal can be held responsible for the
actions of his/her agent. However, it does not mean that the principal will be held liable for
unauthorised actions of the agent. Various remedies are given to the principal in order to set
the boundaries on agents to not perform certain actions in required manner1. The principal has
the right to ratify the act or refuse them. If the actions are not ratified by the agent, then the
agent becomes personally liable for the actions.
Application
In the given case study, Daphne had to hide the identity of her principal; however, she failed
to do so. Moreover, a budget of $300,000 was approved by Lupe; however, Daphne spends
$320,000 instead. Therefore, Daphne acted outside the boundaries set by Lupe, and she acted
without any authority. As per the principle of agency law, Lupe has the right to hold Daphne
liable for $20,000. On the other hand, the size of the ring is also an issue. Lupe specified to
Daphne that he wanted a rock which is in the form of a ring. But, a pink diamond ring is
purchased by Daphne instead. However, this is not an issue in the agency law because Lupe
had given the authority to Daphne to finalise the ring by herself.
Conclusion
Based on the above analyses, Lupe has the remedy to refuse the purchase made by Daphne
since she acted outside the boundary of her authority specified by Lupe. The balance amount
of $20,000 can be demanded by Lupe. However, the size of the ring was not a condition;
thus, Lupe cannot hold Daphne liable for the ring she chooses.
1 Roderick Munday, Agency: law and principles (Oxford University Press, 2010).

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Answer (C)
Issue
Whether Lafayette has the option to get the ring back by terminating the contract?
Rule
Under agency relationship, the third party has the right towards the principal because the
principal gives the authority to the agent. If a third party has any reason to believe that the
authority exists, then such party has the right to hold the principal liable. The third party
rights are saved in a contract because the principal owed the ultimate responsibility in the
contract. The right of the third party remains secure even if the agent acted outside the scope
of the authority. In such case, the dispute arises between the agent and the principal; however,
the rights of the third party are secured2. A contract is considered as valid if all the elements
are fulfilled by the party. In Chappell & Co Ltd v Nestle Co Ltd3 case, the court provided that
a contract cannot become ineffective if the consideration is not sufficient.
Application
In the given case study, authority was given by Lupe to Daphne to purchase the ring for per
fiancée. Although Daphne acted outside her authority, however, the right of Lafayette is
secured since he is the third party. The dispute has arisen between Daphne and Lupe. A
contract was formed for the pink ring when Lafayette did not know that it was an antique.
Lafayette did not have the right to consider the contract invalid or demand further
consideration since a valid contract has formed between the parties. Moreover, the contract
cannot be terminated by Lafayette by relying on the fact that Daphne acted outside her
authority while purchasing the ring. He also cannot rely on the fact that the consideration was
not sufficient in the contract.
Conclusion
Based on the above analysis, Lafayette did not have the right to terminate the contract and get
the ring back.
2 Christian Twigg-Flesner, Consumer product guarantees (Routledge, 2017).
3 [1960] AC 87

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Answer (D)
Issue
What are the rights and liabilities of the parties in the case?
Rule
A partnership is governed by the partnership agreement which is formed between the
partners. The provisions given under this agreement resolves the issues which arise between
partners. Although it is not possible for parties to include every term in the partnership
agreement, however, their rights and liabilities are decided on equality basis. The partners
have to perform their promises as per the provision of equality4. Moreover, the rights of the
partners are divided equally in case no specific provision is given regardless of the profit
sharing ratio of the parties.
Application
In the given case study, a partnership is formed between Lupe and Fred for a period of five
years. Moreover, the parties decided that after termination of the partnership, Lupe will give a
small parcel of land to Fred. Moreover, Fred will be entitled to receive ten percent of profits
of the business. No other provisions established by the parties in the partnership. In this case,
the issue is raised based on three properties which include the vineyard, land in bright and the
additional property purchased by the partnership. Fred is entitled to receive the land in bright;
however, he is not liable to take any share in the vineyard as decided by the parties.
Moreover, Fred has the right to get half of the share in the additional land purchased by the
parties during the course of their business since no provision was included in the partnership
agreement.
Conclusion
Based on the above analysis, Fred as the right to demand half share in the property which was
purchased by the business during its course and the rest of the rights are given under the
partnership agreement.
4 Keith Lloyd Fletcher, Higgins and Fletcher the Law of Partnership in Australia and New Zealand (LBC
Information Services, 2001).

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Answer (E)
Issue
The legal issue is to advise Lupe regarding whether Fred can claim half share in the property?
Rule
As discussed above, the partnership rights are not limited to the agreement which is formed
between the parties. The provisions which are included in the partnership agreement by the
parties define their rights and liabilities in the business. However, in case no provisions are
included in the agreement, then the parties have the right to divide their assets and liabilities
equally between themselves5. Unless provided otherwise, the partners have equal right in an
asset of the business which is purchased during the course of the business by the partners.
Application
In the given case study, both partners have defined their rights and liabilities regarding the
properties in the partnership agreement. The rights of the vineyard and the land in bright are
clearly defined between the parties. The right of Fred regarding these properties are clear.
However, the key issue raised is regarding the third property. The property is purchased by
the partners during the course of the business, and they did not specify their rights regarding
the property. Since no rights are defined by the parties in the partnership agreement formed
between them, all partners have equal rights on the property. Thus, Fred has the right to claim
half of the property which is purchased by the parties during the course of the business. The
property will be divided equally between both partners.
Conclusion
Based on the above analysis, no provision for the additional property is included by the
partners into their partnership agreement. Therefore, the property will be divided equally
between the partners since Fred has equal right in the property.
5 Geoffrey Morse, Partnership Law(Oxford University Press, 2010).

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Bibliography
Articles/Books/Reports
Twigg-Flesner C, Consumer product guarantees (Routledge, 2017).
Morse G, Partnership Law(Oxford University Press, 2010).
Fletcher KL, Higgins and Fletcher the Law of Partnership in Australia and New Zealand
(LBC Information Services, 2001).
Munday R, Agency: law and principles (Oxford University Press, 2010).
Cases
Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87