Advice for Tess

Discuss about the Legal Studies for Law of Agency.

In the present case, advised has to be provided to Tess, Paula and Sepal Co regarding the transactions that took place between the parties.

Advice for Tess: in this case, Paula had expressly instructed Tess to buy 1200 climwits from Woddo Co as she needed them urgently. Paula also told Tess that the price should not exceed $12,000. However when Tess contacted Woddo Co, they told that they had no stock available at present. Under the circumstances, Tess contacted Sepal Co. they told Tess that they had a lot of stock of climwits but they sold only in lots of 1400. As they had not done any business dealings with Paula in the past, the were ready to sell to Tess only. In this regard, they were also ready to give a discount of 10% to Tess. Under these circumstances, an order was placed by Tess in her own name for purchasing 1400 climwits at a price of $16,000 along with a discount of 10%. However when Tess told Paula that she had purchased 1400 climwits from Sepal Co at the price of $16,000, Paula immediately contacted Sepal Co and told them that they should supply only 1200 climwits at a price of $12,000. Under the circumstances, the issue arises if the contract created by Tess with Sepal Co in her name can be enforced against Paula or in other words, if Paula is bound by this contract or not.

For dealing with the presentation, it needs to be seen who can be considered as an agent. In this context, the law provides that any agent is the person who has been provided the authority to create legal relations between a third party and the principal (Shavell, 1980). Therefore, the relationship of agent in principle arises when the principal has allowed the agent to act on its behalf.

In this context, the principal also owes certain contractual duties towards the agent. Therefore, while it is the duty of the agent to serve the principal obediently and loyally, it is also the duty of the principal to compensate the agent as agreed between them and also to protect and indemnify the agent against any claim, liability and the expenses that may have been incurred by the agent while performing the duties given by the principal.

In view of the nature of agency relationship, there are liabilities for the principal and also for the agent regarding a third party.

Advice for Paula

According to the agency law, generally the agent does not incur any liability under the contract when a contract is validly created between the principal and the third-party. On the other hand, in some cases, the agent may be held liable towards the third-party who has entered into a contract with the principal. Therefore in such cases, it can be held that the agent is liable towards the principal when the terms of the agency agreement have been breached by the agent. Similarly, the event can also be held to be liable towards the principal if the agent has acted negligently. There are a number of situations where the agent can be held liable towards a third party, and some of these situations depend on the fact if the presence of the principal has been disclosed by the agent to the third party. Therefore under the agency law, when the contractual agency arrangement has been breached by the agent, in such a case, legal action can be taken by the principal against the agent (Landes and Posner, 1987). Apart from the above mentioned liabilities, the law of agency provides that an agent can also be held liable for the tortious acts like negligence if the agent has failed to act within the scope of authority, express or implied or the apparent authority.

In the present case, Paul authorized Tess to act on his behalf for purchasing 1200 climwits at a price of $12,000. Paula had also instructed Tess that she should buy the climwits from Woddo Co. But when they were not available with Woddo, Tess contacted Sepla Co and they told Tess that they have a large stock of climwits but they only sell in lots of 1400. At the same time, they also told Tess that as they had never dealt with Paul R., they will supply the Climwits to Tess only. At the same time, the price mentioned by Sepla Co was $16000 along with a discount of 10 percent.

In this context, the law provides that in case of the acts of the agent that fall within the actual or apparent authority of the agent, the agent cannot be held liable for these acts if the relationship of agency has been disclosed by the agent and at the same time, the identity of the principal has also been disclosed by the agent. On the other hand, the law of agency provides that when the agency has not been disclosed or partially disclosed, in such a case the agent as well as the principal will be held liable (Schiff, 1983). On the other hand, when the principal is not bound by the acts of the agent due to the lack of actual or apparent authority on part of the agent, such an agent will be held liable towards the third party in case of breaching the implied warranty of authority (Fishman, 1987).

Advice for Sepal Co

In the present case, Tess had disclosed the fact that she was acting as an agent of Paula when she wanted to purchase climwits from Sepla Co. Therefore, in the present case, the agreement formed by Tess can be enforced by Sepla Co against Paula. 

The issue that arises in this question is if Marco can set aside the contract that he has created with Ted. Hence, it has to be seen if an actionable misrepresentation has been made by Ted. 

It needs to be noted in this regard that the misrepresentation under common law overlaps with the statutory provisions related with misleading conduct. Therefore, the provisions of common law dealing with misrepresentation are practically relevant only when the provisions of Competition and Consumer Act, 2010 are not applicable or in other words, in noncommercial context. In this regard, the common law provides that an actionable pre-contractual misrepresentation is that would have been made by a party to the contract where such a party has made a false representation, whether orally or in writing or by conduct and the representation is of fact and therefore not a statement related with opinion of law or any prediction related with the future (Pentony et al., 2014). In this regard, it is also required that such a statement should have been made to the other party to the contract and similarly, the other body should have been induced by such a statement to enter into the contract. Where it has been established that the contract has been created on the basis of misrepresentation, the major remedy available to the other party is the recession of the contract. At this point, it also needs to be mentioned that generally damages are not awarded by the court in such cases unless the misrepresentation made by their party also amounts to a tort, or in other words it is fraudulent or negligent and therefore in such a case, damages under the tort law may be avoided by the court but they are not available under the contract (Dal Pont, 2008). Similarly, even when it has been established that a party to the contract has made misrepresentation, there are certain limits that have been imposed on the right to rescind the contract, for example, if it is not possible to restore the parties to the original position, the right to rescind the contract will not be available to the parties.

Misrepresentation under Common Law and Statutory Remedies

In order to establish that a misrepresentation has been made by other party, the meaning of representation will be considered by the court by adopting an objective approach. Moreover, in such cases it is also required that the misrepresentation should be:-

• A statement of an existing or a past fact.
• It should be a positive misrepresentation. And
• There shall be reliance on the misrepresentation by the other party.

Therefore the law requires that for the purpose of obtaining relief for a misrepresentation, it is required that the representation should be a statement that has been made regarding existing or a past fact. Therefore such a statement can be made by a party to the contract oraly or in writing or such statement can also be implied from the conduct of such a party. On the other hand, generally relief is not provided by the court in case of other types of statements like statements of opinion, statements that are mere puffs or the statements that are related with future intentions and the statements of law.

In the same way, generally the relief will be provided by the court only when a representation has been made by the other party and it has proved to be false. This means that relief will not be provided by the courts for the failure to disclose something by the other party. However, there are certain exceptions present to this general rule, for example in cases where a duty of disclosure can be imposed on the other party.

As mentioned above, in case of the pre-contractual misrepresentations, contractual remedies may be available under the common law or statutory remedies may also be available to the other party in accordance with the Competition and Consumer Act, 2010. Earlier, this legislation was known as the Trade Practices Act, 1974. However the provisions of CCA are being used more commonly because it is applicable in a wider range of circumstances and generally it is considered that this legislation provides better remedies.

As mentioned above, in case of the pre-contractual misrepresentations, contractual remedies may be available under the common law or statutory remedies may also be available to the other party in accordance with the Competition and Consumer Act, 2010. Earlier, this legislation was known as the Trade Practices Act, 1974. However the provisions of CCA are being used more commonly because it is applicable in a wider range of circumstances and generally it is considered that this legislation provides better remedies.

In the present case, the provisions of common law related with unconscionable conduct also need to be discussed. In this context, unconscionable conduct is also concerned with the transactions that take place between dominant and weaker parties as a result, it overlaps with provisions dealing with undue influence and duress. While unconscionable conduct has been prohibited by equity, recently there have been statutory provisions that also prohibit unconscionable conduct. According to equity, it will intervene if an advantage has been taken by one party, of the special disability from which the other party was suffering (Terry and Giugni, 2009). Such disability can be illiteracy, lack of education, advanced age or a combination of such factors. At the same time, it is also required that the transaction created by unconscionable conduct should be harsh and oppressive for the weaker party. Therefore when unconscionable conduct has been established, the weaker party has a choice to avoid such a transaction. Similarly the Australian Consumer Law also prohibits unconscionable conduct. These provisions are present in Part 2-2, ACL. 

Unconscionable conduct

These statutory prohibitions are also based on equitable notion of unconscionable conduct and in this way, they extend the range of remedies that may be available to the weaker party that hasn’t suffered unconscionable conduct. 

In the present case also, Merco was a migrant worker who had arrived in Australia only seven months ago. At the same time, it also needs to be noted that Merco could not read or write English but he can hardly speak and understand English. This created a lot of problems for Merco at his workplace and therefore he has also joined an English-language program that was being conducted by the NSW government. Under these circumstances, Merco met the sales representative of Eddo Publishing Co. who told him regarding the monthly magazine being published by his employer. Ted claimed that a lot of teachers were using this magazine or teaching English in their classes while the reality was Ted only knew regarding one English teacher who was using this magazine. At the same time, Ted also made a statement to Merco according to which, a number of employers have recommended their migrant employees that they should get a subscription to this magazine. But in reality, this statement was not true. Ted made another untrue statement according to which, only a limited number of subscriptions were present and they were only given to the persons who were selected by Ted. In this way, as a result of the above-mentioned untrue statements, Merco became ready to enter into a contract with Ted for the subscription of the magazine. 

Then Ted asked Merco to sign a contract that had 90 clauses and was 10 pages in length. This contract included a provision according to which the subscriber has agreed for an additional fee to purchase binders for the copies of the magazine each year. The presence of this clause in the contract was not brought to the notice of Merco. Under these circumstances, Merco told Ted that he could not make out most of the clauses of the contract and therefore he would like to take the help of a solicitor friend who can explain the clauses of the contract to him. But Ted told Merco that there was nothing significant and if Ted waited for one more day, he will not get the subscription to the magazine. Under these circumstances, it can be said that Merco was induced by the untrue statements made by Ted to enter into the contract for the subscription of the magazine.

As a result, Merco can rescind the contract as it has been created as a result of the misrepresentations made by Ted. 

References

Dal Pont, G. E., 2008. Law of Agency, 2nd ed. Chatswood: LexisNexis Butterworths.

Fishman, S. (1987) “Inherent Agency Power — Should Enterprise Liability Apply to Agents’ Unauthorized Contracts?” Rutgers Law Journal 19: 1

Landes, R. and Posner R. (1987) The Economic Structure of Tort Law , Cambridge, Mass.: Harvard University Press, 1987

Pentony. B., Graw, S., Lennard, J., and Parker, D., 2014, Understanding Business Law, 7th ed. Australia: Lexis Nexis.

Schiff, M. (1983) “The Undisclosed Principal: An Anomaly in the Laws of Agency and Contract,” Commercial Law Journal , May 1983, 88: 229-237

Shavell, S. (1980) “Strict Liability versus Negligence,” Journal of Legal Studies , January 1980, 9:1-25.

Terry, A., and Giugni, D., 2009. ‘Business and the Law – 5th edition’, Cengage, South Melbourne, Australia