Federation University: Commercial Law Agency Law Assignment

This assignment delves into the intricacies of agency law, exploring the relationship between a principal and an agent within the framework of commercial law. The analysis encompasses key legal concepts such as actual and ostensible authority, drawing upon case law like Hely-Hutchinson v Brayhead Ltd and Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd, as well as the Partnership Act 1963. The assignment examines a case study involving a law firm, LLA, and a departing partner, Mike High, to determine the firm's liability for the partner's actions based on the principles of agency. The discussion covers the fiduciary duties of agents, the creation of agency relationships, and the implications of apparent authority when a principal fails to inform third parties of an agent's change in status. The assignment concludes by applying these legal principles to the case scenario to assess LLA's obligations towards Glitz Cruisers.

Running head: AGENCY LAW
AGENCY LAW
Name of the Student:
Name of the University:
Author Note:

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Question 1:
Issue:
The matter of dispute arising from the present case study is whether any obligation is
possessed by LLA for the payment to Glitz Cruisers.
Rules of law involved:
The concept of agency can be discussed in an elaborate manner under the principles of
agency law as well as Partnership Act 1963. In this assignment the relation of a principal with its
agent is going to be elaborated in the light of both the law of agency as well as the Partnership
Act.
Firstly it will be discussed by referring to the law of agency under common law. A
principal agent relationship occurs when one party gives authority and power to another to act
for him on his behalf such that the latter plays the role of the former while dealing with third
parties for making transactions or deals. This type of relation can be created by means of an
agreement under contract law partnership law and others. The agreement here contains the rights
and duties of the agent in relation to the principal and the third parties.
The basis of an agency relationship is laid in trust confidence and repose of one party
towards another. Here the agent has fiduciary duties as discussed in Re Agriculturist Insurance
Co (1870) LR 5 Ch App 725for the principal which are discussed below. Firstly the agent has
duty to be true and loyal to the principal and shall not act in a manner which will be e detrimental
to the interest of the principal. Secondly the agent has the duty to act according to the
instructions given by the principal. Thirdly the agent has the duty to act in a careful and diligent

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manner like a reasonable person in any situation. Fourthly a duty possessed by the agent is to
render actual account in relation to the business. Lastly the agent has the responsibility to give
information to the principal in the matters related to the business affairs.
The principal can authorize the agent to act on his behalf and perform transactions by
means of delegating any of the two types of authorities to him, the first being the actual authority
whereas the other one is the ostensible the Apparent authority.
A principal is said to authorize the agent with an actual authority if such delegation of
authority is done by means of any written or oral agreement. It can also be delegated by means of
any common custom or conduct of the parties towards each other as laid in Rosenbaum v Belson
[1900] 2 Ch. 267.
The Other category of authority that can be delegated by the principal towards an agent is
called ostensible authority where a party acts for another party without having any actual
authority and it appears to the outside world that the agent has been authorized by the principal
in order to act for him though in reality it is not. In this type of authority the principal is well
aware about the fact that he is being represented by another person called the agent in various
transactions made with third parties. Hear the principal is prohibited from denying later on the
authority of the agent who has acted for him. In addition to this the principal is also liable for the
transaction or act done by the agent while dealing with outsiders. The apparent authority occurs
in two situations mainly, firstly by the conduct or words of the principal and secondly due to the
presence of any previous relationship between the agent and the principal. In the first situation
because of the conduct or behaviour of the principal it can be assumed that the agent has been
authorised by him to act on behalf of him while dealing with third parties. But this type of

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authority will not have validity if the agent is found to act without the knowledge or notice of the
principal.
Second type of situation appears when previously there exists a relationship between the
agent and the principal which is known to the outsiders. But later on such relation has ceased to
exist and this was not notified to the outsiders. The third parties or the outsiders are not aware
that relationship between them does not exist anymore and the principal has not also taken any
initiative to let them know about it. If it is seen that the agent has made any transaction with the
third party claiming to be done under the authority of the principal, then the principal will be
liable for it to the third parties as in Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549.
In Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480,
Justice Diplock had recognised and discussed 4 conditions that are required to be satisfied in
order to claim relief from the principal for the act of the agent under the purview of the
ostensible authority . The first condition is that representation is made to third party that the
agent has the authority and the power to act for the principal and also to enter into contract or
make transaction on his behalf.
The second condition is that this representation is made by the principal himself or any
person who has the authority to delegate power and duty to the agent.
The third condition is that the outsider or the third party has believed such representation
and he was induced by it such that he got influenced to make agreement with the third party. The
third party or the outsider should rely on the representation like a innocent person while entering
in to contract law making transaction.

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Lastly the company or the principal with the aid of the articles of association or the
memorandum or any agreement must not be barred from giving authority to any agent for
making transactions or entering into contracts. When the conditions mentioned above have been
fully satisfied then a principal can be successfully made liable for the act committed by agent or
for any transaction made on his behalf even if the agent does not have any authority to do so.
As discussed above the agency relationship is also found in the partnership business
because here the partners have the authority to act for one another and also because of the
presence of the mutual rights duties and fiduciary relation between them. The partnership
relationship has been given a statutory effect by means of the said Partnership Act which is
related to the agency relationship among the partners. The main essence of a partnership business
is that the partners have the power and the authority to act for one another and also for the form
and one partner can be held liable for the act of the other as given in Smith v Anderson (1880).
Moreover, every partner of a partnership business or firm is depicted as the agent and
also the principal of another partner and this relation is supported by fiduciary duties that exist
between them. This has been enshrined under section 9 of the said Act. However if the partner is
not the partner of the firm any more then the existing partners cannot be held responsible for any
act or transaction made by the retired or non- existing partner. Moreover the act done by the
partner must be related to the business of partnership. If it appears to be outside the scope of
partnership business then also other partners of the firm cannot be held responsible. It is what
mentioning in this regard that the court has the duty of determining whether any partner has
acted according to the purpose of the business or beyond it on.

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However the outsider party who was involved in the transaction must not be aware that
the partner is acting beyond his authority or the person is not the partner of the business
anymore. If it is seen that the third party is well aware of these, then other partners cannot be
held responsible. In this respect the principle of ratification must be referred such that if it is seen
that a person without having any authority or right behaves or acts as an agent and such act has
not been denied or declined by the principal expressly or impliedly then the principal can be
made responsible for that act committed by that agent. The partner also has the duty not to use
credits of the the partnership business for his personal reasons. If it is done so then the business
will not be partnership business will not be made accountable for such credits. Section 11 of the
act enumerates this.
From the discussion it appears that under the law of agency as well as the partnership our
principal can be made responsible for the act of his agent while dealing with any third party if by
his conduct or behaviour it appears that the agent has been authorised by him to act for him else
not.
Application
The present case scenario can be analysed in reference to both the Partnership Act and
also the law of agency.
Here it is found that Mike High is a partner and a distinguished lawyer of the law firm
known as Leegal Lore Association or LLA. It is a famous firm where generous entitlement of
enjoyment and luxury benefits were provided by it to its eminent clients and its staffs. One such
entitlement includes Cruise trip in a luxury yacht called MV flash belonging to the Glitz cruisers
having all the amenities and such trip can be availed in the weekends during warm season of

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December. From this it can be resumed that a relationship of agency exists among the partners
such that the partners can be considered as the principal as well as the Agent of the partnership
company LLA. Thus one partner of LLA has the authority to act on behalf of another. Similarly
one partner can be made liable for the act of the other. Both of these are true for the firm. The
firm will be liable for the act of its partners.
From the case scenario it also appears that Mike planned to leave LLA when he got better
opportunity from World Leg. He accepted the new proposal made by World leg and placed
resignation to LLA. This showed that he is not the agent of the firm and has no actual authority
to act for the firm. His association ceased to exist with LLA.
But such resignation was not made public by the managing director of LLA, Jenn. He
thought that his resignation will cause negative impact on LLA as many client could it and join
World Leg by following the footsteps of Mike. Hence LLA kept his resignation secretly. Though
he had resigned from LLA, his information was not removed from the official website. This
provides an ostensible authority to Mike as LLA has not informed the outside world about
dissociation of Mike with it. To the world, he is still the partner of the firm. This is because he
was agent of LLA in the past and had the authority to act on its behalf and the news of his
resignation was hidden from public as laid in Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549.
Mike was not happy with it. So he planned to avail the cruise trip in the MV flash yaucht
though it was entitled for the staffs and clients of LLA. He joined the new firm after having good
time there. But 200,000 dollars bill was sent to LLA from Glitz cruisers which shocked LLA.
From the rules discussed above it is seen that an ostensible authority is created for Mike
by LLA which makes LLA liable for the act of Mike. The 4 conditions mentioned in the

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Freeman & Lockyer case were fully satisfied. In addition, as per the Partnership Act, the firm
and the partners are bound by the act by other partner. Here the outsider party allowed Mike for
the cruise considering him to be LLA partner. Although Mike used the trip for personal
refreshment and it is not related to the business of LLA but it was allowed as an entitlement by
LLA. Hence LLA is bound by the act of Mike.
Conclusion:
One can conclude that LLA is bound by Mike’s act and is also liable towards Glitz
Cruisers.
Answer 2:
The final report presented by ‘Royal Commission into Misconduct in the Banking,
Superannuation and Financial Services Industry’, also known as the ‘Banking Royal
Commission and the Hayne Royal Commission’ was made available to public on 04.02.2019
(Hayne, 2018). From the report it appears that 76 recommendations are done which modify as
well as change various sectors of Australia like the banking sector, financial advice sector, super
annuation sector together with insurance sectors.
Part 3.4 of the report is concerned with the insurance products related recommendations
(Hayne, 2018). Under this part, recommendation numbered 4.1 provides the provision of ‘no
hawking of insurance’. As per this recommendation, anti- hawking must be encouraged which is
according to the Recommendation 3.4. Recommendation 3.4 bars the hawking in relation with
the super annuation products. Under section 992A of the Corporations Act 2001 hawking of
financial category of products is prevented. But unsolicited calls for the products can be
permitted when certain criteria are satisfied. The Commissioner in this respect holds the view

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that the current provisions that exist in the Act are not suitable and enough for protecting and
ensuring the protection of the consumer’s interest. The reason behind this is that there lie some
exemptions under the said provisions that allows the ‘fraudulent or unscrupulous to prey upon
the unsuspecting’.
The Commissioner also highlighted the need of the incorporation of the valid definition
of the word ‘solicited’ in order to avoid any possibility of the discrepancies. In relation to this,
the RG 38 guidance by Hawking can be referred. ASIC has the opinion that an individual has an
option to solicit any kind of interaction from any consumer in case it is done in relation to a
request which is well- informed and clear. The insurers considering the provisions of hawking
exemptions shall prepare themselves for the new change which may also include criminal
prosecutions if any provisions related to hawking are breached.
But much confusion and turmoil can be created due to this in the insurance industry.
Finity, the largest analytic and a consulting firm, made an apprehension and a warning that some
serious issues can be resulted in case ‘cross selling’ is outlawed. Moreover if the existing anti-
hawking is considered along with the face value recommendations, many past practices and
policies will become illegal.
Further, this particular recommendation can result into undermining the capability of
Suncorp for making cross selling in respect of its insurance with financial products which may
be caused by removing minimum one key benefit that can cause the spinning off of the banking
arm. It is being further reported by The Australian Financial Review's Street Talk that about
17.67 billion $ financial service tycoon has called in the investment bankers from UBS for
analyzing the split of the business. As per the experienced analysts, this splitting may result

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positive results. This amounts to an indirect impact of the anti -hawking provision as advised
and suggested by the Commission in the said Report (Hayne, 2018)
.

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References:
Corporations Act 2001
Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480
Hayne, K. M. (2018). Royal Commission into Misconduct in the Banking, Superannuation and
Financial Services Industry. Interim report, Commonwealth of Australia, Canberra, ACT,
Australia.
Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549
Partnership Act 1963 (Cth)
Phillips-Higgins v Harper [1954]
Rosenbaum v Belson [1900] 2 Ch. 267
Smith v Anderson (1880)