Jevan is a band manager for the rock band ‘The Thin Heads’. Each month Jevan enters into binding contracts with John for guitar servicing for the band members as well as for others. Jevan has undertaken the function of ‘band manager’ for a number of years and often undertakes matters incidental to the bands needs including but not limited to booking accommodation, organising meals and organising instrument repairs and maintenance. A member of the Thin Heads, Jimbo asks Jevan to organise a service of a highly collectable guitar. Jevan has the work completed by John and the cost of the repair, which necessitated a full rebuild, amounting to $8,800. When Jevan returns the guitar to Jimbo, Jimbo refuses to pay as do the other members of the thin heads. However, after receiving a legal letter of demand from John and through fear of legal action, Jimbo acquiesces and makes payment. Consider all the legal issues and relevant points arising in agency from this scenario. In your response, you must consistently refer to relevant Australian agency case law.
Discuss how apparent authority arises in agency on the basis of third party perceptions. In your response use relevant Australian case authorities to support your discussion
Has Jevan been provided any authority under the meaning of agency law by Jimbo for getting the highly collectible guitar repaired.
If authority has been provided is Jivan imposed which any duties to his principle
If duties are imposed, are there any liabilities which Jevan is subjected to in relation to the duties
Whether the warranty of authority has been breached by Jevan
Under the provisions of agency law there are two types of authorities provided actual authority and ostensible authority. Actual authority takes place when the principal (authority provider) in an express of implied manner gives authority to the agent (authority receiver). The other authority is apparent authority which is created by law.
Implied authority which is best suited to address the first issue is a form of authority which is actually provided to the agent by the principal in an implied way. Implied authority is present or not is also determined by the courts in certain circumstances. In the case of Watteau v Fenwick  1 QB 346 the court analyzed the rules of an implied authority. The authority which is established for the purpose of making sure that the agent is able to carry out the expressed authority appropriately is the implied authority. The authority is imposed on the agent when the agent carries out the action in a way which is within the general scope of express authority. The principals of the case made it clear that the third party cannot be restricted from making a claim from the principal where there has been an express limitation imposed on the agent by the principal in relation to their express authority.
The facts of the case will help better understand implied authority. In this case the principal which has the owner of a pub had appointed a person who had the job position of a “pub manager”. The manager was provided an express authority in the role of the pub manager to get into transactions which were conducted by a manger in the normal course of business. The principal had prohibited the manager from purchasing cigar. However without taking into consideration the restriction the manager purchased the cigar. In this case the court stated that the actions of the manager was in his general expressed authority course. The third party who did not known about the limitation imposed has the right to make a claim from the principal for the cost of the cigar. The manager had implied authority to purchase the cigar.
Duties and Liabilities of Agents
The agent is in a relationship of fidelity and trust with the principal. This is known as a fiduciary relationship. Where there is a fiduciary relationship between the parties there are certain duties imposed by law. One of such duties include working with due skill, not having conflict of interest, basing operation in the best interest of the principal and acting with the powers provided by the principal.
The duty which needs to be analyzed in order to address the second issue is that duty of working with due and reasonable skills. This duty had been discussed by the court in the case of Armstrong v Jackson  2 KB 822. The court stated in this case that whole working for the principal the agent needs to observe due skill like a reasonable man which is obliged to do the task.
Where there are rights there are remedies and where there are duties there are liabilities. In the case of Parker v McKenna 1874 LR 10 Ch App 96 the judges dictated that the principal can make a claim against the agent which they have not taken into account the duties owed by them to the principal at law. The agent will be liable to compensate the principal for the losses faced by them due to the breach of duties.
The final rule which needs be considered to address the fourth issue in context is that related to warranty of authority. This is an aspect of agency law where an agent intentionally tries to create an agency which is actually not present and get into a transaction with the third party attempting to make the principal liable. In this situation the third party can make a direct claim against the agent as it was done in the case of P&P Property v Owen White & Catlin LLP  EWHC 2276 (Ch)
The facts of the present case study related to Jevan and Jimbo can be compared to the facts which had been present in the case of Watteau v Fenwick to indentify the existence of an Implied Authority. If both the cases are found to have similar facts than an implied authority in the present case study will be deemed to be present. Jevan just like the pub manager has been the manager of the band. He had been carrying out repair work for the band for long with the same person john who is the third party in this case. He has been provided authority to get repairs done. The repair in this case required significant money. The act of repair was in the normal course of express authority provided to Jevan by Jimbo and in order to let the authority be exercised properly (Business Efficacy) it is implied that he can get the guitar repaired at a reasonable cost. There was no reasons which were available to John to believe that there was no authority provided to Jevan by the band. Thus an implied authority is present in the situation provided by Jimbo to Jevan. Any actions which have been done by Jevan is legally binding upon the band in relation to the implied authority provided.
As there was an authority Jevan has been imposed with duties under law. He has the duty to discharge the obligations in a way which depicts he has worked with skill and care like a reasonable person. It can be stated that any prudent person who would be in the place of Jevan would get the guitar repaired as it is a highly collectible guitar. Thus he has complied with his duty of due care as asked to do under the rules of Armstrong v Jackson.
It can be stated based on the above analyzes that as there was no breach of duty done by Jevan and he acted in his implied authority he has no liability which he owes to the band or jimbo. The principals cannot make a claim against the agent in this case as per the case of Parker v McKenna
Implied authority was present which has already been analyzed. As discussed in the rules relating to breach of warranty of authority it can only take place where no authority was present. Here as implied authority is present there is no breach of warranty of authority carried out by Jevan as per the rules of P&P Property v Owen White & Catlin LLP.
- Jevan has implied authority
- Jevan has complied with is duty of due skill and care
- Jevan cannot be made liable by the principal
- There is no breach of warranty of authority carried out by Jevan
Apparent authority is an authority which is neither provided in an expressed manner nor is derived to be present in an implied way. It is a authority which has been created as a doctrine to help the third party who acts innocently to mitigate its losses. An apparent authority is identified by the court where there is reasonable apprehension on the part of the third party to believe that an authority actually exists. Where an apparent authority has been identified the principal is liable even if no expressed or implied authority has been provided to the agent. The principal of apparent authority is based in the principles of promissory estoppels (Thampapillai 2015). This is because assurance is provided to third party in a direct or indirect way that there is an authority provided by the principal to the agent. The third party actually places its reliance on the assumed authority to get into the contract. Apparent authority is also present where no actual authority has been provided. The principal however has to indulge into an expressed or implied conduct through which it signifies the third party the presence of authority to the agent which is actually not present. However in case the agent has acted in a fraudulent manner and there was bad faith on the part of the third party having knowledge that there was no authority provided to the agent there is no liability of the principal. Even where the authority of the principal has been terminated and the principal has failed to notify reasonably the third parties about such termination the principal can be liable to third party in relation to the actions of the agent (Dimitriu 2017).
The landmark case which is related to the rules regarding that of apparent authority is Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd  2 QB 480. The case is related to the provisions of apparent authority. There are four elements which have been identified by the case to analyze the existence of an apparent authority (Thampapillai 2015). In this case the court made a ruling that where a representation has been made by a person that he or she has provide authority to the agent and upon such representation the third party relied and got into the deal in good faith and suffer a loss, the third party can realize such loss from the assumed principal in the light of apparent authority (Dimitriu 2017). Thus the elements of a apparent authority are as follows
- The principal made a representation about authority being present
- The third party relied on the representation to get into the deal
- The reliance of the third party was in good faith and it had no knowledge about absence of authority as a reasonable person
- The third party suffered losses or change in position
Once the court is able to identify that the four elements of an ostensible authority have been discovered it makes the principal liable to the third party in relation to the actions committed by the agents having such authority (DeMott 2018). Intervention is done by the doctrine of promissory estoppels and the principal is restrained from going back from the agency provided to the agent by making a representation and omission on which the third party relied in good faith to get into the deal with the agent. This clearly signifies that the court will not indentify apparent authority in situation as provided by the case of Royal British Bank v Turquand (1856) 6 E&B 327 where there is reasonable knowledge that authority is not present or they must take steps to analyze the existence of the authority (Saintier 2017).
It has been discussed above that when Apparent Authority makes the principal liable to the actions of the agent. In such circumstances a remedy which is present is the remedy of ratification. The remedy provides an option to the principal to get into the contract with the third party through the ratification of the contract (DeMott 2018). Ratification of contract can be done in both implied and as well as expressed manner. In case of ratification the third party is bound by the contract which has done by the agent. In the same way where the contract has not been ratified the third party would not have any obligation to the principal under the contract (Saintier 2017)
Armstrong v Jackson  2 KB 822
DeMott, D., 2018. Fiduciary Principles in Agency Law.
Dimitriu, C., 2017. Agency law and odious debts. Ethics & Global Politics, 10(1), pp.77-97.
Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd  2 QB 480
P&P Property v Owen White & Catlin LLP  EWHC 2276 (Ch)
Parker v McKenna 1874 LR 10 Ch App 96
Royal British Bank v Turquand (1856) 6 E&B 327
Saintier, S., 2017. Commercial agency law: A comparative analysis. Taylor & Francis.
Thampapillai, D., 2015. AGENCY LAW. Australian Commercial Law, p.135.
Watteau v Fenwick  1 QB 346
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