P instructs A to purchase some jewellery from TP for no more than $50,000, and because she wishes to remain anonymous, P asks A not to disclose her identity to TP. In fact, A does not even disclose to TP that she is acting for another party in her negotiations with him.
TP refuses to sell for less than $60,000 and A, realising the potential value of the jewellery, agrees to pay $60,000 believing that P will consent to that price on learning of the circumstances.
In fact, P refuses to pay for the jewellery. Explain, with reasons, whether TP can enforce the contract against P (upon learning of her identity)
- Might your answer be different if A had disclosed that she was acting as P’s agent at the beginning of her negotiations with TP. Why or why not?
- Could A be liable to TP in the circumstances set out in (i)? If so, on what basis? If not, why not?
Conversely, if on the facts you were originally given [ignoring (i) & (ii)], P had chosen to accept the contract entered into by A but TP refused to honour it, could P sue TP? Why or why not?
Case Study: A Contract for the Purchase of Jewellery
In this report through a case study the contract law is going to be discussed. The concept of agency as par the contract law is going to be the focus of this case. The role of agency in case of making a contract with the third party is going to be discussed in this case. The liabilities and duties of the agent under the contract law have been evaluated. The rights and obligation of the third party as well as the principal has also been discussed in this report.
A purchased jewellery on behalf of P because P instructed A to do so. P also asked A to make the purchase within $ 50,000. The jewellery was purchased from TP. During the negotiation of the purchase A agreed to purchase the jewellery at $ 60,000 considering the worth of the jewellery. It is important to mention that A didn’t disclose to TP that she is acting on behalf of P. Now once the purchase was done P refused to make the payment as she has specified that the jewellery should be under $ 50,000. The issue in this case is possible actions that can be taken by TP against P.
Australian contract law states the concept of agency. Law of agency is a portion of commercial law. The agency law gives recognition to a person called the agent who is responsible for working on behalf of another person with a third party. The agency can be transferred by express terms or even through implication. In case a person is acting on behalf of another and/or in case of an organisation a person holding a position that implies the fact that the person can be an agent than agency law is considered to be applied in that case (Schwenzer, Hachem & Kee 2012).
In this case A has served as an agent of P. In such situation any contract violation that is going to be done by A is going to be considered as a contract violation by P as par the agency law. But there are certain clauses in the legislation in this regard. First of all TP with whom the trade has been done has to be aware of the fact that A is serving as an agent or A appears to be an agent of P. But in this case A didn’t disclose her identity to TP the Liability of the agent to the third party section states that the agent as well as the principal is going to be liable to the third party in case of a violation of the contract. So TP can case against P after the discloser of the fact that P is the principal in the contract negotiation.
The Role of Agency in Contract Negotiations
In conclusion it can be said that the agency law is one of the elements of commercial law. This legislation allows a person to work as an agent on behalf of another person. This has occurred in this case. In this case TP can file a case against P because of the fact that the liabilities of the agent towards the third party section states that in case the identity of the agent has not been disclosed to the third party than in case of contract violation the charge can be put against both the agent and the principal.
The issue in this case is that in case TP was aware of the fact that A has been working as an agent for P than would it be possible for TP to case against P.
The rule applicable in this case is the agency law. The law of agency states that in case a person claims to be an agent of another person than it is acceptable for the third party involved to consider the agent as an authorised representative on ‘good faith’ (McKendrick 2014). So the action of the third party can be considered to be the action of the principal in this case.
In case TP who is the third party in this case was aware of the fact that A is the agency than also there would have been no difference in terms of the action that is suggested to be taken by him. TP can accuse P because of the fact that the agent of P that is A has violated the contract so it can be naturally assumed that the principal has also violated the contract. So it can be said that even in case TP was aware of the fact that A is an agent of P the solution would not have differed.
In conclusion it can be said that there is no difference that is likely to occur in case the third party is aware or not regarding the fact that the business transaction that has been done by them is with a principal or an agent. The liability of the agent to the third party clause under the liability section of the agency law has ensured that there is no difference in terms of action in case the third party has been identified or not.
The issue in this case is if A who has worked as an agent of P is liable to TP in any circumstance.
Liabilities and Duties of Agents under Contract Law
The agent is liable to be sued by the third party only in the situation where during the formation of the contract the agent has not disclosed the name of the principal and also used his or her own signature on behalf of the principal.
The Australian consumer law SS 29 and the tort law states that misrepresentation of any sort which may result in the loss of a party in terms of health of finance can be sued (Furmston Cheshire & Fifoot 2012).
The agent is not liable to the third party in most of the cases as the agent work on behalf of the principal and hence even in case of the violation of contract the principal is likely to be liable for the action. But in case of a contract formation between a third party and an agent where the name of the principal has not been disclosed at the time of the formation of the contract the agent is going to be considered as liable by the third party. In this case during the formation of the contract TP was not aware of the existence of P as a result he is legally correct to sue the third party that is A.
In this case the contract that was made by the agent was not as par the instruction of the principal so the misstatement of the third party that is A has caused loss of business to TP hence under this clause he can claim a case against A.
In conclusion it can be said that in most of the cases the third parties are not liable for their actions as they work on behalf of another party, but there are certain exceptions to these rules. The undisclosed of the principal during the formation of the contract gives the right to the third party to sue the agent. The legislation regarding misrepresentation under the consumer law also makes it illegal to make a misstatement which can result in losses financial and non financial in nature.
The issue in this case is TP who has negotiated to sell his jewellery at $ 60,000 dollar to ‘A’ who is an agent to P. But at the time of the execution of the contract TP would refuse to honour the contract can P sue TP.
Australian contract law is the primary law applicable in this case. The contract law makes it mandatory for two parties entering into contract to ensure that the conditions of the contract are being fulfilled by both the parties. There are 4 types of contract violation in the Australian contract law. Among that the ‘actual breach’ is the most common type of breach which suggests that in case two parties that has entered into contract and one party has fulfilled their end of the contract and when the turn for the other party to fulfil the contract presented itself the other party refused to execute the contract (DiMatteo 2010).
In case TP would have refused to execute the contract that was formed by A on behalf of P, P would have the right to file a case against TP for ‘actual breach’ of contract. As the end of P have been taken care by her agency A but TP has refused to execute his part of the contract. Apart from that P as the principal in this case is the actual victim in this case, A is not the one who is going to be affected by the violation of the contract.
In conclusion it can be said that the violation of contract by TP in case P would accept the negotiation by her third party than P is going to have legal authority to sue TP for the actual breach of contract.
DiMatteo, L. A. (2010). Strategic contracting: contract law as a source of competitive advantage. American Business Law Journal, 47(4), 727-794.
Furmston, M. P., Cheshire, G. C., & Fifoot, C. H. S. (2012). Cheshire, Fifoot and Furmston's law of contract. Oxford University Press.
McKendrick, E. (2014). Contract law: text, cases, and materials. Oxford University Press (UK).
Schwenzer, I., Hachem, P., & Kee, C. (2012). Global sales and contract law. Oxford University Press.
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