Business Law Assignment: Agency, Contracts, Authority and Liability

This business law assignment examines a scenario involving Amy, a purchasing agent for Aurum Supply Company, and Dan, a property owner. The core issue revolves around Amy's authority to purchase land on behalf of Aurum, given her limited role as a purchasing agent for gold. The assignment utilizes the IRAC method (Issue, Rule, Application, Conclusion) to analyze the case. The rules of agency law, including actual and ostensible authority (express and implied), are applied, with specific reference to the case of Watteau v Fenwick. The application considers whether Dan reasonably believed Amy had the authority to purchase the land, considering her ID card and the nature of Aurum's business. The conclusion determines whether Aurum is liable for the contract Amy signed, ultimately finding that Aurum is not liable due to Dan's potential awareness of Amy exceeding her authority. The solution references relevant legal texts and cases to support the analysis.

Running Head: BUSINESS AND CORPORATION LAW 0
Business Law assignment
4/16/2020
Student’s Name

“Business Law”
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Contents
Issue.................................................................................................................................................1
Rules................................................................................................................................................1
Application......................................................................................................................................2
Conclusion.......................................................................................................................................2
References........................................................................................................................................3

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Issue
What are the rights of Dan and Aurum under the land contract entered into by Amy?
Rules
In day-to-day business activities, the owner of the business cannot do all the activities by
him/herself. In such a situation to reduce the work burden, they often delicate some authorities to
other people who are known as an agent. The person who gives such authority is known as
principal and is liable for the acts of an agent towards the third party. Mainly two types of
authority can be granted to the agent namely actual authority and ostensible authority (Cahn &
Donald, 2010). Actual authority has further two types namely express authority and implied
authority. Under the express authority, a principal states the power of agent clearly in oral or
written form. On the different side, implied authority is the one, which seems necessary to
perform express authority. When a person is employed at a particular post then the law takes a
presumption that the same is authorized to do all those tasks which fall in the scope of general
activities of that person. It can be stated that the application of implied authority safeguard the
interest of the third party, which cannot check that whether a person has express authority to do a
certain task, or not as a grant of authority is a mutual matter of agent and the principal. It was
given in the case of “Watteau v Fenwick [1893] 1 QB 346”, that any limitation on the authority
of an agent cannot prevent an outsider from believing in the normal scope of that authority
(Smith, Lawson & Painter, 2012). In such a situation, the third party may held the principal liable
even for those acts where the agent did not have express authority.

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Nevertheless, the third party cannot rely on the assumption confirmed by the implied authority
where he/she knew about the limitation of the authority of the agent or could check the same. In
such a situation, the third party may sue the agent and not the principal.
Application
In the case given hereby Amy was acting as a purchasing agent and had the authority to purchase
gold on behalf of his principal, Aurum. The third party i.e. Dan offered land to Amy whereby she
signed the purchase contract on behalf of Aurum. Here applying the provisions of agency law,
this is to state that due to identity card wore by Amy, it was implied to Dan that she had all those
authorities as a purchasing agent has applying Watteau v Fenwick.
Nevertheless, Dan might know that Aurum was not involved in the property business and
therefore buying a property for business does not fall in the ordinary authority of Amy where she
is a purchasing agent for goods of the firm, which was gold, and not the property. It had reason
to believe in the lack of authority of Amy yet he pursued the action.
Conclusion
As Dan was on mistake understanding, the authority of Amy hence can only held liable Amy for
the contract and has no right against Aurum. It means Aurum has no liability to Dan for the land
contract entered into with Amy.

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References
Cahn, A. & Donald, D., C. (2010). Comparative Company Law: Text and Cases on the Laws
Governing Corporations in Germany, the UK and the USA. UK: Cambridge University Press.
Smith, D., Lawson, R., D. & Painter, A. (2012). Business Law. Oxon: Routledge.
Watteau v Fenwick [1893] 1 QB 346