Business Law Assignment: Exploring Agency and Corporate Law Principles

This business law assignment delves into the complexities of agency and corporate law through the analysis of two distinct scenarios. The first scenario examines the application of agency law principles, including undisclosed principals, express and implied authority, and apparent authority, using cases like Hansen v Marco Engineering and Consolo v Bennett to illustrate key concepts. The second scenario explores the doctrine of separate legal entity, as established in Salomon v Salomon, and its implications for personal liability and corporate licensing, particularly concerning the Explosives Regulations 2013. The assignment addresses issues of contract formation, agent's authority, and the liability of principals for agent actions, as well as the limitations on individuals and corporations when applying for licenses under specific regulations. The analysis provides conclusions for each issue, summarizing the legal outcomes based on the presented facts and relevant case law.

Running head: BUSINESS CORPORATION
Business Corporation
Name of the Student
Name of the University
Author note

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Answer One:
Issue
The following are the issues that consist in this question. Firstly, a valid contract was
formed between Gaby and Sara. Secondly, whether Terrence was liable to pay for the price of
the gold that was ordered by Peter. Thirdly, Terence have to pay for the diamonds that Peter
had ordered after his period of termination.
Law
As per the Agency Law, it can be observed and stated that an agent is treated to be an
individual who is given the authority by the principal to act on his behalf when third parties
are associated. Therefore, generally an agent is the conferred authority by the principal so that
he can perform the duties on his behalf based on the agreement of agency. An agreement of
agency consists of the parties that is the principal who delegates the agent to carry out the
activities on his behalf. Thereafter, the principal should allot the authority in an implied or
expressed manner. Lastly, when the third party transacts with the agent in order to make him
believe that he would be acting on behalf of the principal. It was observed that in the
activities of agents form based on the principals especially if it is determined that the third
party had proper proof to make him believe that the agent was acting within the scope of
authority. However, the principal is usually not entrusted with such authority.
In accordance to the judgment of Hansen v Marco Engineering (Aust) Pty
Ltd [1948] VR 198, it was observed that it involved the process of undisclosed principals
where the agents can be sued by the principal. In other cases, it was noticed that when an
agent carries on a business with another party and fails to disclose that he was actually acting
within the authority that was allotted to him by the principal. The agent was barely

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representing the principal and the third party will therefore have the choice to demand
performance. The doctrine of election refers to a situation where it has been determined that
the authority can be segregated into the apparent and original authority. An authority that is
entrusted by the principal to the agent either orally or in writing is known as an express
authority. On the other hand, the theory of implied authority is also applicable in this case
study. When an authority is governed by the courts to have an implication in the agreement
of partnership is defined as an implied authority. The purpose of this authority is to execute
the duties that are allotted to the agent expressly. Such a situation was observed in ACCC v
Flight Centre Travel Group Ltd (2016) 339 ALR 242. This case chiefly dealt with the
implied authority. This case stated that the passenger had forbidden to purchase any kind of
product from the attendant. However, the passenger purchased the product and therefore it
was held by the Court that the flight attendant was held liable to compensate the same amount
as it was governed by the Courts that the activities of buying such products was included in
the original and normal authority of agent.
Apparent authority is usually governed by the courts where the third party believed
that the agent had carried out his given duties as directed by the principal. The agent did so
even when principal had not entrusted the original authority to the agent. Therefore, such
situations, the principal will be held liable for the activities of the agent. Consolo v Bennett
[2012] FCAFC 120 showed that it dealt with the concept of apparent theory. This case stated
that a test needs to be applicable to govern and decide whether it was considered to be
reasonable for the third party. It was believed that the agent was originally carrying out the
acts on behalf of the agent and the issue was whether the principal had taken proper measures
to prohibit the agent to act on his behalf.

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Application
By observing the facts, it can be stated that in the first stage Gaby saw the design of
Sara’s brooch. During then, she failed to state to Gaby that Terence was his principal as he
employed her. Designing the jewelry was Terence’s department. Gaby assumed and thought
that Sara acted on her own and believed that she had the skill to construct the jewelry and
deliver them accordingly with the order. Therefore, the theory of doctrine of election can be
applied in relation of the undisclosed principles. It can be said that Gaby had the right to ask
either Terence or Sara regarding the performance.
The next scenario states the fact that the gold was ordered by Peter from Mary when
he was the agent of Terence. Previously, in plenty of occasions, Mary had delivered to
Terence’s terrific jewelry. Thus, this application of the principal authority has been
determined in the case of Consolo v Bennett. It can be stated that Terence will be held liable
to Mary regarding the price of the old order, which was made by Peter. Therefore, it can be
concluded by stating that Peter was performing the activities within the usual authority when
the gold was ordered from Mary.
The third scenario explains that the diamonds were ordered by Peter with the help of
the email id of Terence. Terence thereafter fired Peter. Access to the email was available for
Peter to the terrific jewelry of Terence. Thus, it was not possible for Gordon to be aware of
the fact that Peter was acting beyond the authority he was asked to. It can be said that
Terence had not taken the necessary steps to prohibit Peter from carrying out the activities on
his behalf. Hence, Terence will be held liable to pay Gordon the gold that was ordered by
Peter.

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Conclusion
In the first issue, it can be concluded stating that there was no contract between
Terence and Gaby since Gaby did not give her approval. In the second issue, it can be
concluded stating that Terence will be liable to make the payment of the price of the gold that
was ordered to Mary as he was carrying out his authority. Thirdly, it can be concluded by
stating that Terence will be liable to clear the payment of the diamonds to Gordon.
Question 2
Issue
As per the facts, the issues state that whether the Industrial Machines Pty for the
failure of the company to clear off the debts can sue Roger personally. Secondly, the issue is
whether Industrial Explosive Pty Ltd. will be entitled to receive the license and on what
grounds it can be rejected.
Law
The doctrine of separate legal entity is clearly applicable in such a situation. This
doctrine of separate legal entity of a company was determined in the case of Solomon V
Solomon. In this most common case, the concept of corporate veil has been discussed. The
judgment of the case explained that the company was considered to be a separate legal entity
from the shareholders, liabilities and owners. It is treated to be different from the liabilities of
its owners. Generally, an individual who is a member of a company will not incur the
unlimited liability to clear of the debts of any company. It was observed in the case of
Solomon V Solomon, that the assets of the shop were transferred personally to the business to
receive the shares and debentures in return. Thereafter, the debentures were sold to a third
party that are succeeding to which the company had become insolvent. However, the

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conclusion of the case states that Solomon had the majority of the shareholders, managing
director of the company and he had acted as the third party who had transferred the assets of
the company.
According to the Explosive Regulations 2013, the law of Dangerous Goods Act 1985
of Victoria, Explosives Act 1936 of South Australia, Dangerous Goods Safety Act 2004 of
Western Australia, Explosives Act 1999 of Queensland and Dangerous Substances Act
2004 of the Australian Capital Territory are linked. Therefore, as per Part 3 of 17 as
mentioned above states that any individual who manages the exclusive precursor was suppose
to be authorized under this Act. The section 18 of the Act claims that a license can be handed
over to a natural citizen for handling the explosives where the force can be applied for
applying for the license of for taking care of the explosives. However, according to section
19, a company has power and authority to nominate a natural human being to hold the
security clearance for the license to handle explosive precursor. If a corporation ensures to
nominate a one responsible person.
Application
After reviewing the scenario of the case study, it can be observed that the scenario.
The first picture of the case scenario is that Rojer for of the company. Majority or maximum
number of shares of the United Chemicals Pty Ltd were held by Roger Smith. Therefore, with
the virtue of the existence of the separate legal entity of Roger Smith’s company, he will not
be held liable personally for the debts that have been incurred by the company. The
application of this principal of corporate veil was determined in the case of Solomon V
Solomon. He was held personally liable for the debts of the company as the recognition was
different as compared from that of the company. It was also observed that there was nonissue
of fraudulent intent on the part to swindle the shareholders.

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The second scenario of the case study explains the fact that Roger Smith was
prevented by the legislation of Commonwealth by applying for the license to manage the
explosives. He was convicted due to this reason five years back and the reason was theft.
According to the legislation of commonwealth, it prevents individuals from applying for a
license to produce the explosives that has a record of the criminal conviction. Therefore, the
intention of Roger was to create the Explosives Industries Pyt Ltd. and hence he asked Mary
to apply for the license of managing explosives on behalf of the company. As per Section 19
of the Explosives Regulations 2013, a company can apply for a license to handle the
explosives including the natural person who holds a security clearance. Hence, it can be
observed and stated that the application for Mary had refused the it since it did not include
the nomination of a natural person who held a security clearance.
Conclusion
It can be concluded from the above scenario that Industrial Machines cannot sue
Roger Smith personally. Secondly, the license application of Roger Smith of the Explosive
Industries Pty Ltd. was refused because of the criminal conviction.

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References:
Salomon V Salomon & Co Ltd [1897] AC 22
Hansen v Marco Engineering (Aust) Pty Ltd [1948] VR 198
ACCC v Flight Centre Travel Group Ltd (2016) 339 ALR 242
Consolo v Bennett [2012] FCAFC 120
Explosive Regulations 2013
Explosives Act 1999
Dangerous Substances Act 2004