Legal Analysis of Contractual Agreements and Agency Principles

This assignment delves into the intricacies of contract law, addressing two key questions. The first question examines whether a party can claim compensation from a company due to a breach of contract, analyzing issues like remoteness of damages and the measure of damages, using the case of Hadley v Baxendale as a cornerstone. It discusses the principles of mitigation and the potential for a party to argue that losses were beyond their control. The second question explores the law of agency, focusing on the implications of an agent acting without or beyond their authority, and the concept of apparent authority. It explains how a principal can be bound by an agent's actions based on the third party's reasonable belief in the agent's authority, considering factors such as the agent's position and the nature of the transaction. The assignment uses case examples to illustrate these principles, providing a comprehensive overview of contractual agreements and agency law.

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Title of the paper
Student’s name:
Institution:

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QUESTION 1:
The issue in this question is if Roger can claim compensation from The Great Australian
Railway Company (GARC). In this case, GARC decided to sell the remaining good numbers as
the truck belonging to their affiliate company, Big Trucks Australia (BTA) was delayed due to
bad weather and most of the cucumbers were bad.
In case of a lot of commercial agreements, there are already express provisions related with
remedies, for instance, in case of a contract related with sale of goods, the buyer could be
allowed to require the vendor to make good or to replace the faulty item. An assumption arises
(which may be expressly mentioned in the contract) that all terms governing the contractual
relationship between the parties have been added expressly in writing in the agreement itself.
Consequently the parties intend to dislocate any rights and remedies that may be offered by the
law (like the right enjoyed by the buyer to terminate the contract in case of fundamental breach)
that have not been specifically mentioned in the agreement.
As against the equitable remedies like specific performance and injunction, damages awarded for
the loss caused due to breach of the agreement are available as a matter of right. Therefore it is
available for a blameless party to claim compensation from the party that has caused a breach of
contract regarding all breaches of contract (Bradgate, 2000). In such a case, the damages can be
substantial or nominal. The court awards, nominal damages were no loss has been suffered by
the innocent party due to the beach by the other party. On the other hand, substantial damages
are awarded by the court as monetary compensation in return of the loss that has been caused due
to the breach by the other party (Brown, 1995). In order to receive substantial damages by an

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innocent party, such party is required to establish that it has suffered loss due to the breach
(remoteness) and the amount of loss (measure) suffered by such party. The party in breach has to
argue in the court that the innocent party has failed to take steps to mitigate the loss.
The law provides that damages for loss suffered due to the breach of agreement may be
recovered by the innocent party only if such loss is not too remote. The purpose of damages is to
place the guiltless party in the same place in which the party would have been if the agreement
was performed properly by the other party. The principle related with remoteness of damages has
been offered by court in the legendary case of Hadley vBaxendale (1854). In this case, it was
stated by the court that the losses mentioned below can be recovered:
 All the losses that are the natural result of the breach;
 All the loss that was in contemplation of the parties while entering into the contract as
being the probable result of the breach.
On the other hand, if the loss suffered by the other party does not fall within the categories
mentioned above, such laws will be considered as too remote, and it may not be recovered.
The rule provided by the court in Hadley v Baxendale has been interpreted by the courts as
meaning that only the loss that was within the reasonable contemplation of the parties at the time
of entering the contract may be recovered (The Heron II 1969).
Measure of damages is the way of calculating damages that need to be awarded to the innocent
party. It includes loss of bargain or expectation loss. The general aim of the court is to place the
innocent party in which it would have been if the other party has performed the contract properly
(Robinson v Harman, 1848). The two methods that are generally used for evaluating the measure

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of damages are the difference in value or the cost of cure. Generally, the method that is most
appropriate in a particular case is used by the courts.
Mitigation: the innocent party cannot be allowed to recover damages for loss that may be
avoided if such party had taken reasonable steps. This is sometimes worth the duty to mitigate
the loss. However, this is not applicable to the actions related with the price of goods delivered.
Even if there is no duty to mitigate the loss before the actual breach of contract has taken place,
the innocent party should not agree with the loss. However, the responsibility is of the defendant
to establish that the plaintiff did not take steps to mitigate the loss (Pilkington v Wood, 1953).
In the present case, there was a written contract between Roger's cucumbers and GARC.
According to this contract, cucumbers were to be carried from Perth to Adelaide by rail and then
to Melbourne by truck, which was to be provided by an affiliated company of GARC, Big
Trucks Australia (BTA). Roger had hired a stall at the Victorian Fruit and Vegetable Market for
selling the cucumbers. However, the truck of the company was delayed as a result of bad
weather. The result was that most of the numbers that bad when the truck crossed the state border
between South Australia and Victoria. Under these circumstances, it was unilaterally decided by
GARC that the remaining cucumbers should be sold otherwise the whole consignment would
become unassailable by the time it arrives at its destination in Melbourne. Therefore BTA
organized for the disposal and the sale of the good cucumbers. On the other hand, Roger was still
required to pay the fees for hiring the stall at the Victorian Fruit and Vegetable market. Under
these circumstances, Roger wants to claim damages for the loss suffered by him. This loss is
related with the value of cucumbers, and also the fees that has to be paid by Roger for hiring the
stall at the market. However in the present case, it is available to GARC to claim that the
cucumbers when that cucumbers went bad as a result of the delay that was caused by bad

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weather. In this way, GARC can claim that the loss was caused as a result of that weather or in
other words, due to the reason that were beyond the control of GARC. Moreover, the company
has done its best to save the rest of the cucumbers and to sell them before they also went bad.
Under the circumstances, it can be claimed that BTA was acting as an agent of GARC. On the
other hand, GARC had the implied authority to act as an agent of Roger in order to save the rest
of the cucumbers.

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QUESTION 2
The law of agency provides that when the agent acts without authority or goes beyond the
authority provided to the agent, the actions of the agent do not influence the legal relationships
that are present among the principal and third party. Yet, when the principal has caused the third-
party reasonably believed that the agent has been provided for you to act on behalf of principle
and the agent is acting within the scope of such authority, the principle is not allowed to invoke
the lack of authority of the agent against such third-party. Therefore it is provided by the law of
agency that when the agent has acted devoid of authority, the acts of the agent are not binding for
the principal and third party (Equiticorp v Bank of New Zealand, 1993). The same is applicable
in cases where the authority has been provided by the agent is of limited scope and the acts
exceed such authority. For example, principal B has authorized agent A to purchase specific
quantity of grain on his behalf, but without exceeding a particular price (Brick and Pipe
Industries Ltd v Occidental Life Nominees Pty Ltd., 1992). Therefore A contracts with the seller
C. Regarding the purchase of more grain and at a higher price. Due to the lack of authority on
part of A, the contract amid A and C is not binding for B. Similarly it is not effectual amid A and
C.
Apparent authority: Two situations are present where the agent, even if acting without authority
or exceeding the authority, may bind the principal and the third-party regarding the contract
created by such an agent with the third-party. The first case takes place when the acts of the
agent have been ratified by the principal. The second case is related with the so-called apparent
authority of the agent. This provision provides that the principal, whose conduct had made the
third-party reasonably believe that the agent had the authority to act on behalf of principle, and
therefore the principle is bound by the acts of the agent.

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The apparent authority is the use of general theory of good faith and the prohibition imposed on
inconsistent behavior is particularly important in the principle is not an individual but an
organization (Freeman & Lockyer v Buckhurst, 1964). While dealing with the company,
partnership or the business association, it may be difficult for a third-party to decide if the
persons acting on behalf of the organization as the real authority for do so and therefore may
choose to rely on the apparent authority of such a person. Due to this reason, the third party is
merely required to establish that the party reasonable believed that the person claiming to
represent the business had the authority and this delay was the result of the conduct of the
persons who actually had the authority to represent the organization (Pacific Carriers Ltd v BNP
Paribas, 2004). These persons may include the board of directors, executive offices of
incorporation or partners etc. However, it relies on the conditions of each case if the belief of
third party candidacy did as reasonable or not. For this purpose factors like the position occupied
by the apparent agent, the nature of transaction, acquiescence of the representatives of the
organization in the past etc., have to be considered.
This point can be explained clearly with the help of following illustrations. For example, A the
manager of the branch office of a company B creates a contract with a construction company C
for redecorating the premises of the branch even if the manager does not have the authority to do
so. As a result of the reality that generally branch managers have the authority to create this type
contracts, B will be held to be bound by the contract with C as under the circumstances, it was
reasonable for C to believe that the manager A had the power of entering such a contract for the
company.
Another example of this situation is where A, the chief financial officer of the company B, with
the acquiescence of company’s board, even without the actual authority to do so, repeatedly

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enters into monetary deals with the bank C for the company B. In case of one transaction will
prove to be disadvantages for the company, the Board of Directors of company B raise an
objection with the bank C regarding the lack of authority of A.. However, this objection can be
defeated by the bank C by claiming that the company B is bound by the apparent authority of A
to end their financial transactions on behalf of B.
Therefore, in the end, it can be stated that apparent or ostensible authority is provided the
principle has made a representation that another person has the authority. In such a case the
principle will be considered as being bound by the transaction with the third- by the acts of such
person with the authority which the persons appear to possess even if the principal had not given
such authority or restricted the authority regarding which information was not given to the third
party.

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References
Bradgate, R. 2000, Commercial Law, 3rd Edition, Butterworths, London
Brown, I. 1995, The agent's apparent authority: paradigm or paradox? Journal of Business Law
Brown, I. 2004, The significance of general and special authority in the development of the
agent's external authority in English law. Journal of Business Law
Case Law
Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd [1992] 2 VR 279
Equiticorp Finance Limited (in liq) v Bank of New Zealand (1993) 32 NSWLR 50
Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480
Hadley v Baxendale ([1854] 9 Exch. 341
Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451
Pilkington v Wood [1953] Ch 770
Robinson v Harman [1848] 18LJ Ex 202
The Heron II[1969] 1 AC 350