The Essay Explores Contract And Agency Law, Corporate Veil.

Formation of contracts

Discuss about the Contract Law Between Gaby and Sara.

The following are the issues that consist in this question. Firstly, a valid contract was formed between Gaby and Sara. Secondly, whether Terrence was liable to pay for the price of the gold that was ordered by Peter. Thirdly, Terence have to pay for the diamonds that Peter had ordered after his period of termination.

As per the Agency Law, it can be observed and stated that an agent is treated to be an individual who is given the authority by the principal to act on his behalf when third parties are associated. Therefore, generally an agent is the conferred authority by the principal so that he can perform the duties on his behalf based on the agreement of agency. An agreement of agency consists of the parties that is the principal who delegates the agent to carry out the activities on his behalf. Thereafter, the principal should allot the authority in an implied or expressed manner.  Lastly, when the third party transacts with the agent in order to make him believe that he would be acting on behalf of the principal. It was observed that in the activities of agents form based on the principals especially if it is determined that the third party had proper proof to make him believe that the agent was acting within the scope of authority. However, the principal is usually not entrusted with such authority.

In accordance to the judgment of Hansen v Marco Engineering (Aust) Pty Ltd [1948] VR 198, it was observed that it involved the process of undisclosed principals where the agents can be sued by the principal. In other cases, it was noticed that when an agent carries on a business with another party and fails to disclose that he was actually acting within the authority that was allotted to him by the principal. The agent was barely representing the principal and the third party will therefore have the choice to demand performance. The doctrine of election refers to a situation where it has been determined that the authority can be segregated into the apparent and original authority. An authority that is entrusted by the principal to the agent either orally or in writing is known as an express authority. On the other hand, the theory of implied authority is also applicable in this case study.  When an authority is governed by the courts to have an implication in the agreement of partnership is defined as an implied authority. The purpose of this authority is to execute the duties that are allotted to the agent expressly. Such a situation was observed in ACCC v Flight Centre Travel Group Ltd (2016) 339 ALR 242. This case chiefly dealt with the implied authority. This case stated that the passenger had forbidden to purchase any kind of product from the attendant. However, the passenger purchased the product and therefore it was held by the Court that the flight attendant was held liable to compensate the same amount as it was governed by the Courts that the activities of buying such products was included in the original and normal authority of agent.

Authority in agency relationships

Apparent authority is usually governed by the courts where the third party believed that the agent had carried out his given duties as directed by the principal. The agent did so even when principal had not entrusted the original authority to the agent. Therefore, such situations, the principal will be held liable for the activities of the agent. Consolo v Bennett [2012] FCAFC 120 showed that it dealt with the concept of apparent theory. This case stated that a test needs to be applicable to govern and decide whether it was considered to be reasonable for the third party. It was believed that the agent was originally carrying out the acts on behalf of the agent and the issue was whether the principal had taken proper measures to prohibit the agent to act on his behalf.

By observing the facts, it can be stated that in the first stage Gaby saw the design of Sara’s brooch. During then, she failed to state to Gaby that Terence was his principal as he employed her. Designing the jewelry was Terence’s department. Gaby assumed and thought that Sara acted on her own and believed that she had the skill to construct the jewelry and deliver them accordingly with the order. Therefore, the theory of doctrine of election can be applied in relation of the undisclosed principles. It can be said that Gaby had the right to ask either Terence or Sara regarding the performance.

The next scenario states the fact that the gold was ordered by Peter from Mary when he was the agent of Terence. Previously, in plenty of occasions, Mary had delivered to Terence’s terrific jewelry. Thus, this application of the principal authority has been determined in the case of Consolo v Bennett. It can be stated that Terence will be held liable to Mary regarding the price of the old order, which was made by Peter. Therefore, it can be concluded by stating that Peter was performing the activities within the usual authority when the gold was ordered from Mary.

The third scenario explains that the diamonds were ordered by Peter with the help of the email id of Terence. Terence thereafter fired Peter. Access to the email was available for Peter to the terrific jewelry of Terence. Thus, it was not possible for Gordon to be aware of the fact that Peter was acting beyond the authority he was asked to. It can be said that Terence had not taken the necessary steps to prohibit Peter from carrying out the activities on his behalf. Hence, Terence will be held liable to pay Gordon the gold that was ordered by Peter.

Liability of agents and principals

Conclusion

In the first issue, it can be concluded stating that there was no contract between Terence and Gaby since Gaby did not give her approval. In the second issue, it can be concluded stating that Terence will be liable to make the payment of the price of the gold that was ordered to Mary as he was carrying out his authority. Thirdly, it can be concluded by stating that Terence will be liable to clear the payment of the diamonds to Gordon.

As per the facts, the issues state that whether the Industrial Machines Pty for the failure of the company to clear off the debts can sue Roger personally. Secondly, the issue is whether Industrial Explosive Pty Ltd. will be entitled to receive the license and on what grounds it can be rejected.  

The doctrine of separate legal entity is clearly applicable in such a situation. This doctrine of separate legal entity of a company was determined in the case of Solomon V Solomon. In this most common case, the concept of corporate veil has been discussed. The judgment of the case explained that the company was considered to be a separate legal entity from the shareholders, liabilities and owners. It is treated to be different from the liabilities of its owners. Generally, an individual who is a member of a company will not incur the unlimited liability to clear of the debts of any company. It was observed in the case of Solomon V Solomon, that the assets of the shop were transferred personally to the business to receive the shares and debentures in return. Thereafter, the debentures were sold to a third party that are succeeding to which the company had become insolvent. However, the conclusion of the case states that Solomon had the majority of the shareholders, managing director of the company and he had acted as the third party who had transferred the assets of the company.

According to the Explosive Regulations 2013, the law of Dangerous Goods Act 1985 of Victoria, Explosives Act 1936 of South Australia, Dangerous Goods Safety Act 2004 of Western Australia, Explosives Act 1999 of Queensland and Dangerous Substances Act 2004 of the Australian Capital Territory are linked. Therefore, as per Part 3 of 17 as mentioned above states that any individual who manages the exclusive precursor was suppose to be authorized under this Act. The section 18 of the Act claims that a license can be handed over to a natural citizen for handling the explosives where the force can be applied for applying for the license of for taking care of the explosives. However, according to section 19, a company has power and authority to nominate a natural human being to hold the security clearance for the license to handle explosive precursor. If a corporation ensures to nominate a one responsible person.

After reviewing the scenario of the case study, it can be observed that the scenario. The first picture of the case scenario is that Rojer for of the company. Majority or maximum number of shares of the United Chemicals Pty Ltd were held by Roger Smith. Therefore, with the virtue of the existence of the separate legal entity of Roger Smith’s company, he will not be held liable personally for the debts that have been incurred by the company. The application of this principal of corporate veil was determined in the case of Solomon V Solomon. He was held personally liable for the debts of the company as the recognition was different as compared from that of the company. It was also observed that there was nonissue of fraudulent intent on the part to swindle the shareholders.

The second scenario of the case study explains the fact that Roger Smith was prevented by the legislation of Commonwealth by applying for the license to manage the explosives. He was convicted due to this reason five years back and the reason was theft. According to the legislation of commonwealth, it prevents individuals from applying for a license to produce the explosives that has a record of the criminal conviction. Therefore, the intention of Roger was to create the Explosives Industries Pyt Ltd. and hence he asked Mary to apply for the license of managing explosives on behalf of the company. As per Section 19 of the Explosives Regulations 2013, a company can apply for a license to handle the explosives including the natural person who holds a security clearance. Hence, it can be observed and stated that the application for Mary had refused the it since it did not include the nomination of a natural person who held a security clearance.

Conclusion

It can be concluded from the above scenario that Industrial Machines cannot sue Roger Smith personally. Secondly, the license application of Roger Smith of the Explosive Industries Pty Ltd. was refused because of the criminal conviction.

References:

Salomon V Salomon & Co Ltd [1897] AC 22

Hansen v Marco Engineering (Aust) Pty Ltd [1948] VR 198

ACCC v Flight Centre Travel Group Ltd (2016) 339 ALR 242

Consolo v Bennett [2012] FCAFC 120

Explosive Regulations 2013

Explosives Act 1999

Dangerous Substances Act 2004