BSL165 Foundations of Business Law Assignment: Agency Law

This assignment analyzes the principles of agency law within a business context. The student explores the liabilities of principals and agents, focusing on implied and apparent authority. The assignment addresses two scenarios: the first examines whether a Relationships Manager exceeded her authority in establishing a divisional office, and the second evaluates whether the publishing house can enforce a lease agreement when the agent did not explicitly mention their representative role. The solution incorporates relevant case law, including Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd, Hely Hutchinson v Brayhead Ltd, Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd, Crabtree-Vickers PL v Australian Direct Mail Advertising & Addressing Co. Pty Ltd, and Panorama Developments v Fidelis Furnishing Fabrics Ltd, to support its arguments. The conclusion emphasizes the principal's responsibility for the agent's actions within the scope of their authority, while also acknowledging the potential for the principal to seek reimbursement from the agent for actions exceeding their authority. The assignment demonstrates a clear understanding of agency principles and their application to real-world business situations.

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

1BUSINESS LAW
Part (a)
Issue
The chief issue in relation to the given situation is that whether it is Anne or is it Wexis,
who is liable to make the payment for the expenses incurred.
Rule
A rule regarding the relationship of an agent and the principal was provided in the case of
Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd (1992) 10 ACLC 2531. When
an agent gives effect to a contract on behalf of the principal, the principal shall be bound by the
terms of that particular contract. However, it must be inside the range and possibility of either
implied or express actual authority of the agent. The actual authority in relation to an agent is
possible when the authority is derived when the principal expressly gives the authority to the
agent regarding the creation of contracts on behalf of the principal. An agent may also exercise
authority that may be implied. The authority that is implied might occur when there is a situation
where the agent has to act in a particular manner because the principal put the agent in such a
situation. In the mentioned case, a director had the authority of implied nature to act as the
organization itself because the director held a certain amount of shares which put him in a
controlling position in the organization. This controlling position or the authority was never
questioned by any individual in the organization. Hence, when the agents are allowed to function
with actual authority, then any contract made by such agents shall be considered to be valid.
The rule as provided in the case of Hely Hutchinson v Brayhead Ltd (1968) 1 QB 5492
states that any agent who is chosen and selected to administer a trade has the authority of implied
1 Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd (1992) 10 ACLC 253
2 Hely Hutchinson v Brayhead Ltd (1968) 1 QB 549

2BUSINESS LAW
nature to enter into all the contracts that the supervisor or a manager of the organization
generally has.
The rule in the case Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd
(1964) 2 QB 4803, states that a managing director of an organization may exercise the expected
authority to enter into contracts that is in relation to the regular or daily management of the
organization. It was mentioned that if the actions of a principal or the words said by a particular
principal hints an individual to consider that a selection of an agent is made by the principal to
perform functions on behalf of the organization, then usually the principal shall be prevented
from rejecting the authority of the agent. There may be no existence of actual agency, however,
the agent is considered to have an ostensible, seeming or apparent authority.
In the case of Armagas Ltd v Mundogas SA4, it was decided that in situations where the
agent do not have any universal authority to take part in dealings, however, agent misleadingly
characterized to the third party that precise authority was obtained by him from the principal in
relation to the handling of transactions, then the principal shall not be attached with any actions
of the agent.
Application
In the given situation, Anne held the position of Relationships Manager for a
publishing house named Wexis. Wexis planned on establishing a division office in the Central
part of the state of Queensland. Instructions were provide to Anne regarding the official visit to
the area, making investigations about the area and reverting a proper report to the apex office
along with proper commendations. However, Anne, after doing a proper scrutiny of the area,
3 Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd (1964) 2 QB 480
4 Armagas Ltd v Mundogas Ltd (1986) AC 717

3BUSINESS LAW
performed all the actions that is required to establish an office in the area. This was done by her
before any further instructions was send to her by the publishing house. She incurred further
expenses in relation to appropriate locations and sites, office furniture, advertisements and boat
for the purposes of the organization. Anne forwarded all the expenses to the main office of the
organization.
Applying the rule as provided in Brick and Pipe Industries Ltd v Occidental Life
Nominees Pty Ltd (1992) 10 ACLC 253, it can be said that when an agent gives effect to any
contract in favor of the organization, then that organization shall be bound by the terms of the
organization. Hence, in the given situation, the dealings that are done by Anne in relation to the
establishment of a divisional office shall bind Wexis publishing house as well.
Applying the rule as mentioned in the case of Hely Hutchinson v Brayhead Ltd (1968)
1 QB 549, it can be said that when an agent is chosen to make deals as a representative of the
organization, then that agent shall have the implied authorization to establish any deals or
transactions that the organization has. In the given situation, Anne was given the authority to do
a proper study of the area and report the same to the main office of the organization. Anne was
not given the authority to proceed with the establishment of the divisional office without the
permission of the organization. the concept of implied authority cannot be mentioned in this
situation because it was specified by the organization to send a report and it is presumed that the
proceeding measures shall be taken based on such reports.
Applying the rule of Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd
(1964) 2 QB 480, it can be said that when a managing director of an organization is responsible
for the daily operations of an organization then such individual may have the expected authority
to act accordingly. However, in the given situation the responsibility that was provided to Anne

4BUSINESS LAW
was not regarding any daily transaction. A specified responsibility was given to Anne in relation
to the establishment of a divisional office of the organization.
Conclusion
Therefore, to conclude, it can be said that the expenses that was incurred by Anne,
regarding the establishment of the divisional office, shall be paid duly by the organization. The
organization shall be bound to any contract that Anne may have entered into for the
establishment of the divisional office. However, Anne performed functions that exceeded the
authority that was specified to him and because of such breach of the authority provided to Anne,
the organization shall be able to claim the expenses from Anne.
Part (b)
Issue
The main issue in the given situation is that whether Wexis would be able to enforce the
lease regarding the property as a right of its own in case the lessor refused to conform to the
lease. This is after the assumption that Wexis wanted to establish a divisional office in the
specified area.
Rule
A rule was provided in the case Crabtree-Vickers PL v Australian Direct Mail
Advertising & Addressing Co. Pty Ltd (1975) 133 CLR 725 regarding the relationship of an agent
and the principal. In this case, the managing director of ADMA had mentioned the information
to Crabtree-Vickers (CV) concerning Peter Williams that he had the power to perform
5 Crabtree-Vickers PL v Australian Direct Mail Advertising & Addressing Co. Pty Ltd (1975) 133 CLR 72

5BUSINESS LAW
negotiations in relation to a particular contract. Mr. Williams made a particular contract in favor
of ADMA regarding the buying of a machinery from CV. The main issue was in relation to
argument forwarded by ADMA which states that Mr. Williams was not authorized to make any
order and hence there was no existence of any contract. It was decided by the Court that ADMA
was not accountable in relation to the contract because the actual authority belonged to the Board
of the organization and not to the managing director.
In the case of Panorama Developments v Fidelis Furnishing Fabrics Ltd [1971] 2 QB
7116, a rule was provided. In this case, the company secretary of the organization named Fidelis’,
was Mr. Bayne. Mr. Bayne exceeded the actual authority that was provided to him when he hired
expensive cars from Panorama and utilized those cars for his own needs. Fidelis’ was sued by
Panorama in order to recuperate the hiring expenses. It was held that the transactions relating to
the contracting of cars can be considered as a part of the administration of the organization and
the company secretaries are generally concerned with such contracting. Mr. Bayne shall be able
to exercise the apparent authority because he is a company secretary and hence, Fidelis’ shall be
accountable to make the payments accordingly.
Application
In the given situation, the organization decided to establish a divisional office in
Rockhampton. However, Anne, while making a deal regarding the lease of a property did not
exclusively mention that he was representing the organization as an agent.
By applying the rules as stated in the cases of Crabtree-Vickers PL v Australian Direct
Mail Advertising & Addressing Co. Pty Ltd (1975) 133 CLR 72 and Panorama Developments v
Fidelis Furnishing Fabrics Ltd [1971] 2 QB 711, it can be said that even though Anne did not
6 Panorama Developments v Fidelis Furnishing Fabrics Ltd [1971] 2 QB 711

6BUSINESS LAW
mention exclusively that she was representing the organization as an agent, Anne had the right to
exercise her actual and apparent authority regarding any transactions in favor of the organization.
Conclusion
In conclusion, it can be said that Wesix shall be able to enforce its right in relation to the
lease regarding the property because Anne had the authority to act in favor of the organization,
whether or not she mentions that information exclusively.

7BUSINESS LAW
References
Armagas Ltd v Mundogas Ltd (1986) AC 717
Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd (1992) 10 ACLC 253
Crabtree-Vickers PL v Australian Direct Mail Advertising & Addressing Co. Pty Ltd (1975) 133
CLR 72
Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd (1964) 2 QB 480
Hely Hutchinson v Brayhead Ltd (1968) 1 QB 549
Panorama Developments v Fidelis Furnishing Fabrics Ltd [1971] 2 QB 711