CSU Business Law: Analyzing Agency, Authority, and Company Law

This case study delves into several business law issues, primarily focusing on agency law and company law principles. The first issue examines the doctrine of the undisclosed principal and the right of election, determining whether Gaby can demand performance from Terence or Sara. The second issue explores the concept of usual authority, assessing Terence's liability for Peter's gold purchase from Mary. The third issue investigates ostensible authority and whether Terence is responsible for diamonds fraudulently acquired by Peter after his agency termination. In the second part, the study addresses whether Roger can be held liable for United Chemicals Private Limited's debt, applying the doctrine of separate legal entity established in Salomon v Salomon. Finally, it evaluates the validity of Roger's license application for Explosive Industries Private Limited, considering his prior conviction and relevant provisions of the Corporations Act. The analysis uses the ILAC method to provide structured solutions, referencing relevant case law and statutory provisions.

Running Head: BUSINESS LAW
BUSINESS LAW
Name of the Student:
Name of the University:
Author Note

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ANSWER 1
RELATIVE ISSUE
The question in context is relating to the part with whom Gaby has entered into a contract.
Whether the party is Terence or Sara
THE LAW
In the scenario, the law which is related to the agency is applicable. Agency refers to a
relationship between two parties in which one is in total control of the other. It is an agreement,
in which principal pieces of advice the authority in relation to the dealings with added third
parties then demonstrating that principle by means of contract by those third parties towards the
agent.
It is specified that whether or not the principal was obligated by the behavior of the agents is
reliant on whether he has assigned the authorities to the agents. However, in regards to the
doctrine of an undisclosed principal, it is certain that third parties have the right to determine
from whom it can claim the achievements(Busch, Macgregor & Watts, 2016). Such Doctrine
regarding the election has been recognized in the case of Yin Kwan v, Eastern Insurance Co Ltd
[1994] 2 AC 199 It is declared that in those circumstances, where the third parties had no
knowledge regarding the agents that they were acting on the side of the company, the agents
have the right to choose from where they require requesting the performance. But, discussing

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regarding the applications of the above-mentioned doctrine, third parties need to be in a contract
accompanied by the agent itself assuming that he was performing on his own sides, on the point
that this agent had a specific expertise.
APPLICATION
It is brought up by the facts in relation to this case that Sara was selected by the Terrence as a
designer of the jewelry. It refers to that authority to perform on behalf of Terrance, which can be
believed to be indirect in the case. Sara showed her jewelry designs to Gaby. Gaby requested
Sara to design the brooch costing thousand dollars for her. Therefore, according to the
applications under the doctrine of election regarding the case of undisclosed principals as
believed in the case of Hugh Stevenson and Sons, Ltd v Aktiengesellschaft Für Cartonnagen
Industries [1918] UKHLJ0125-4, it is declared that Gaby has the right to demand action in
regards to the contract made between him and Sara, and she was unaware of the fact that Gaby
was working as an agent for Terence.
CONCLUSION
Hence completing this, it is mentioned that Gaby had the right to select the demand performance
from Terence or Sara. But, she has been given the honor to administer the contract created
against Sara and also demand performance by her.
SECOND ISSUE

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This issue states whether Terrance will have the liability of paying Mary
THE RULES
The principles regarding usual authorities are suitable in the scenario mentioned associate Peter,
Mary and Terrance. Typical authorities were held up for being identical with the implied
authorities likely in case of Hely-Hutchinson v Brayhead limited [1968]. It is also declared that
those implied authorities are appraised by the courts itself, to be consulted with the agent through
the principal as to satisfy the responsibilities which require being conferred over them by the
express authority. Such an example regarding the usual authority has been studied in case of
Watteau v Fenwick [1863] which stated that the bar owner was responsible for the payment of
the cigars, however, the manager of the bar was instructed by him not to purchase cigars
(Loewenstein & Hillman, 2018). It was declared that the principal will have to be responsible for
acts of the agents which takes place in the scope of the authorities which are normally consulted
nevertheless on how the limitations are.
APPLICATION
Therefore, after analyzing the facts in relation to this case it is identified that Peter assigned the
authorities to perform as the supply purchaser under Terence. Meanwhile, Terence had refused
Peter that he will not buy gold because they had the high supply of gold. But, a contract was
made between Peter and Mary who was the gold dealer responsible for the transactions with

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Terence earlier for a supply of 50 gms of gold for a sum of $1500. Therefore, by implementing
the principles related to usual authorities are held as mentioned in the case of Watteau v
Fenwick, it is declared that Terence is responsible to pay the amount to Peter for purchasing the
gold which is studied to be falling inside Usual Authority of Peter itself.
CONCLUSION
Therefore, in the end, it is to be stated that Terence was responsible to Mary a sum of $1500.
THIRD ISSUE
It is identified by the provided scenario, that whether or not Terence is responsible for the
payment with respect to the diamonds fraudulently taken away by peter after his agency
termination
THE RULE
The law in relation to ostensible of the apparent authorities is suitable in the provided scenario.
Ostensible authorities are defined as authorities which are not assigned by the principal,
however, it is affected by third parties (Allen, W.T & Kraakman, 2016). Thus, in the scenario
where it is believed by the sensible third party that the agent performed in authority which was
advised by the principal and such authorities were actually not been advised by the principal, he
still will be held responsible in regards to the actions which are performed by the agents. The law

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regarding the ostensible or apparent authority is based on the doctrine of estoppel. The third
party accomplished the work in affirmation the agent had, the authorities and yet relied on the
assurance and thus it will be not fair on the part of the principal if he denies the authority which
will be conferred by him to the agent. In the case of Freeman & Lockyer v Buckhurst Park
Properties a test has been studied by Lord Diplock to determine whether or not the principal will
be bound to the actions which are performed by the agent. This test also determines whether or
not it was sensible being the third party and believing on the fact that the agent was performing
within the provided authority, because of the actions are done by the principle itself or whether if
he permitted the agent to perform on behalf of the principal.
APPLICATION
Therefore, by analyzing the fact regarding this case the study says that it is sensible by Gordon to
conclude that Peter was being performed as the agent for Terrence, as Terence failed to abandon
the access of Peter's towards the email regarding the business. The mail which has been sent by
Peter from the Email id of business, and thus it was impossible for Gordon to identify that
whether or not Peter was working within his authority. Thus, the actions performed by Peter will
be conclusive on Terence.
CONCLUSION
Terrence is responsible for the payment to Gordon, the amount of the diamond which was
ordered.

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ANSWER 2
PART A
RELATIVE ISSUE
The identified issue states that whether or not the Industrial Machines Limited can directly
accuse Roger regarding the failure of United Chemicals Private Limited for paying the last
installment.
THE RULE
This case study is related to, the doctrine of the separate legal entity, which had been established
in the case of Salomon v Salomon. This doctrine states that the identity of the company is
different from that of the identity of its owners. Thus, the owners of this company cannot be
individually said to be responsible for the debts which the company has. Those owners only are
responsible for the payment of the shares they hold in the company. In the above-mentioned
scenario, Salomon had relocated the assets of his company (Chamon, 2016). That is the shoe
shop to the company and vice versa and paid them with debentures and shares. Salomon was
seen performing in three major categories including being a third party seller in relation to the
business towards the company, holding the majority number of shares of the company and
working as the managing director.

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Those debentures were sold by Salomon later on which made the company become bankrupt.
Therefore, regarding this case the conception of the separate legal entity in regards to the
company has been set up on the basis that the Company’s entity was said to be different from
that of the majority of the shareholder, Salomon, no such motive of deceiving the creditors or
fraud was present and the documents which were lodged publicly were presented to the creditor
for the determination of the debenture’s existence.
Thus, by setting up the above-mentioned facts the principal stating the corporate veil of the
company is established.
APPLICATION
Therefore, by considering the facts which are provided in this case it is said, Roger Smith being
the majority of the shareholder of United Chemicals Private Limited. But, this company had a
separate legal entity in regards to the owners of that business as mentioned in the case of
Salomon v Salomon. Therefore, in the above-mentioned case, Roger Smith just holds the
majority of shares in the company so he is not responsible for the debts which the company is
having. As no such intention from his part was present in the process of deceiving the
shareholders the corporate of the company is not raised.
CONCLUSION

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Therefore, Roger must not be responsible for the liabilities of the Company.
ISSUE
The application regarding the license of Explosive Industries Private Limited which was made
by Roger was valid or not.
RULE
It is certain regarding s. 117(1) of CA, that the determination of an individual for registering a
company, he requires embedding an application with the ASIC, which consists of the provisions
which are provided in s. 117(2) of CA (DeMott, 2018).
It is declared according to the s. 117(2) that the specific details must be there in an application
while registering including the description of the company which is expected to be built, name of
that company, the individuals who would become the member, their name and address need to be
mentioned, the present, as well as the names of the former family members of the directors, are
required, and also the date of birth of those directors are needed, address of those individuals
wishing for becoming the directors, the company secretary name, family name, and date of birth
and the address where the planned register office will be.
APPLICATION

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Therefore, by evaluating all the facts which are mentioned in this case, it is said that Roger
wanted to enlarge his business and make explosives. But, by the information which is analyzed,
we get to know regarding commonwealth legislation prohibits from providing any individual
with an explosive license who is having any conviction record. According to the provided case,
Roger was imprisoned for theft earlier.
It is stated in the s. 117(1) of CA, for registration of any company in Australia the license
application needs to be submitted under the ASIC. That application must also include all the
provisions mentioned under s. 117(2). Thus, in regards to the s. 117(2) D such application must
include the current and former names of family members who are willing to becoming the
directors. Therefore, in this case, the identification of Roger who wanted to become the director
has been given in the form.
CONCLUSION
Therefore to complete, it is declared that the application which was given for the license for the
Explosive Industries Private Limited Is Invalid.

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References
Allen, W. T., & Kraakman, R. (2016). Commentaries and cases on the law of business
organization. Wolters Kluwer law & business.
Busch, D., Macgregor, L., & Watts, P. (Eds.). (2016). Agency Law in Commercial Practice.
Oxford University Press.
Chamon, M. (2016). EU agencies: legal and political limits to the transformation of the EU
administration. Oxford University Press.
Yin Kwan v, Eastern Insurance Co Ltd [1994] 2 AC 199
DeMott, D. (2018). Fiduciary Principles in Agency Law.
Irvine & Co v Watson & Sons (1880) 5 QBD 414
Lee v Lee’s Air Farming [1960] UKPC 33
Loewenstein, M. J., & Hillman, R. W. (2018). Review Article. In Agency and Partnership Law.
Edward Elgar Publishing Limited.
Lonsdale v Howard & Hallam Ltd [2007] UKHL 32
Macaura v Northern Assurance Co Ltd [1925] AC 619
Salomon v Salomon & Co. (1897) AC 22
Watteau v Fenwick [1893] 1 QB 346
Hugh Stevenson and Sons, Ltd v Aktiengesellschaft Für Cartonnagen Industrie [1918]
UKHLJ0125-4