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Applying Agency Law in the Situation of Undisclosed Principal

Discuss about the Industry and Its Regulatory Environment.

The principal issue that is identified in this situation is that whether the Terence is eligible to claim the value of the contract entered by Sara from Gaby.

In the given situation the agency law is applicable and relevant. The definition of agency is explained as the agreement through that the principal gives the power to deal with the other parties that is also the third party and represents the principal who is in contract with the other third party to an agent. There are parties that are involved in the agency agreement is the authority that is conferred by the principal. Secondly in order to perform on the place of the principal, the agent obtains the authority and lastly, Agent is dealt by the third party.

In the agency law, two kinds of contracts are there. One is a contract that is made between the agent and the principal, under that the agent is granted the power by the principal and the second is a contract that is made between the agent who acts on behalf of the principal and the third party.

It has been explained that whether a principal is assured by the agent’s actions is dependent or whether the power of the agent has been delegated by the principal.

However, in relation to the doctrine of an undisclosed principal, it is illustrated that the third party has the authority to select from whom he can demand the performance. In case named Yin Kwan v, Eastern Insurance Co Ltd [1994] 2 AC 199 the doctrine of election has been established. It has been stated in certain circumstances that when this third party does not have information of the agent that he was performing on the behalf of the organization, he has the authority to choose the demand for performance (De Baere & Nowak,  2016). On applying the above-mentioned doctrine, a contract has been made between the agent and the third party relying on the fact that agent was performing on his own believing the information that agent had some skill to perform.

The facts that have been given in the above-mentioned case study is that Terrance has appointed Sara as a jewelry designer. This means through the fact that Sara has been provided with the power to perform on the behalf of Terrance. Gaby requested Sara to design a piece of jewelry that is a brooch that was worth a thousand dollar. Therefore, in this case of undisclosed principals, by applying the doctrine of election as it was given the case of Ireland v Livingstone (1872) LR 5 HL 395, it has been explained that the performance of contract can be demanded by Gaby from Sara because she did not carry any knowledge that Sara was performing as Terrance's agent and Sara forgot to tell Gaby that she is the agent of Terrance.

Principle of Usual Authority in Peter, Mary and Terrance Situation

In the conclusion, it has been explained that Gaby has the authority to choose demand of performance either from Terrance or from Sara. However, Gaby had the authority to impose the agreement against Sara to demand performance from her

In the situation that has been provided here that involves Peter, Mary and Terrance apply the Principle of Usual Authority. According to the case Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 the usual authority seemed to be synonymous with the authority that is implied. It has been explained that the implied authority is that authority that is considered by courts to be given by the principal to the agent for releasing the duties that have been passed on the agent by the express authority. In the case Watteau v Fenwick [1893] 1 QB 346 an example has been set to explain the usual authority under which it has been said that bar owner had the responsibility to make the payment for the cigars though he did not give permission to those cigars (Cohen, 2017). In the case above the court held the judgment that the principal was responsible for the duties that have been performed by the agent on his behalf that is generally within the possibility, the power that has been provided to them without the limitations.

Therefore, by the investigation of the pieces of evidence of the above-mentioned case, it has been explained that Peter has been provided with the power to perform the supply purchaser of Terrance. Peter was forbidden by Terrance to buy gold as there were more supplies of gold. However, Mary and Peter signed a contract. Mary was a gold dealer who transacted with the terrific designs of Terrance who previously supplied 50 grams of gold for $1500. Therefore, the application of the principle of usual authority as explained in this case Watteau v Fenwick, it has been stated that it is the duty of Terrance to pay to Peter the gold amount that has been purchased by him that is deliberated to be falling under the Usual Authority of Peter.

In this situation above the law of Ostensible of the apparent authority can be applied. The term ostensible authority has been defined the authority that can be assumed by the third party but cannot be given by the principal. Therefore in the given situation, it is believed by the third party that the part played by the agent within the power conferred by the principal on him, the principal will be responsible for the agent's actions and this power is not given by the principal. The apparent law is established by the doctrine of estoppel. The reason for the law of ostensible authority is that the principal is assured by the agent’s actions because of the third party executed his business in the guarantee that agent has the power and is dependent on that assurance and thus it will be unfair to the principal for denying the power that has been conferred on him. In a case named Freeman & Lockyer v Buckhurst Park Properties [1964] 1 All ER 63, Lord Diplock had done an important test to consider that the principal must be assured by agent’s actions (Knox, 2016). The test considers that whether it is rational to believe for the third party that agent is performing with the power provided to him because the principal has told him or her to do so or the principal has permitted him to perform on the behalf of the principal.

Application of Ostensible Authority in the Roger's Situation

Therefore, it has been analyzed by the details of this case that it was rational to trust Peter as the agent of Terrance because Terrance failed to close down the access to email that Peter used. The mail that was sent to him was by a business id and thus Gordon could not recognize that it was Peter who acting on behalf of Terrance. Thus Peter's act will be binding on Terrance.

The issue that is recognized in this situation is that whether Industrial Machines Ltd. can sue Roger personally for the company's failure named United Chemicals Pty Ltd. for the payment of the last installment.

In the case study that has been provided applies the doctrine of the separate legal entity. In the case named Salomon v Salomon, the establishment of the doctrine of the separate legal entity was done. This doctrine of separate legal entity describes that the identification of an organization must be distinguished from the owner of an organization. Thus it has been said that the owner of the company is not only accountable to pay the debts that have been incurred by the organization. In the case above mentioned named Salomon v Salomon, Salomon had given all his business assets to a shoe company and in return, he has been paid with the debentures and shares. Thus there are three categories in which Salomon has acted. Firstly, the third party who is the seller of the organization. Secondly, a large number of shareholders of the organization and lastly the company’s managing director.

The debentures were later sold by Salomon after that the organization ruined. There are some grounds under which the idea of the separate legal entity was established. The structure of the organization is not similar from a large number of shareholders. No such signal was there in deceiving the creditors (Croucher, 2018). Those documents that were socially blocked were obtainable to the creditors to determine the existence of the debentures.

By analysing the information of the case mentioned it has been stated that the person named Roger Smith was the only man in the majority of shareholders of the organization named United Chemicals Pty Ltd., However, the organization named United Chemicals Pty Ltd. has a separate legal entity from its owners as per mentioned in the case named Salomon v Salomon. Therefore, in the aforementioned case, it has been stated that even if Roger Smith holds up the majority of the shareholders still he can’t be personally responsible for those debts that the company is carrying. The corporate sector of the organization cannot be raised because there was no hint of his share to cheat the shareholders of the company.

According to the relation of section 117(1) of the Corporations Act 2001 (Cth) it has been stated that the importance to register a company, an individual should fill an application with Australian Securities and Investment Commission must contain the requirements that have been provided in section 117(2) of the Corporation Act 2001 (cth).

According to the section 117(2), there are certain details that must be contained in the application to register a company. The plan to form a kind of organization. A planned name for an organization (Shin 2017). The name and birth date of the directors of the organization. The address of the individual who wishes to become the directors of an organization. The address and name of every individual who wishes to be the members of the organization. The name, family name, and date of birth of the secretary of the company. The address of the office of the organization that has been registered. The address of the concerned person who wants to become the director of the company.

Therefore, to analyze the information of this case it has been said that it is the wish of Roger to expand his business in that area where he can make explosives. However, the details of the case explain that a person carrying conviction records cannot be granted with the license as it is prohibited by the Commonwealth legislation. However, it is given in the case law that Roger has been imprisoned before for theft.

According to 117(1) of the CA, it has been explained that to register an organization, an application for the license must be provided that must be present with ASIC. This application should be containing the requirements that have been provided in section 117(2) of the CA. Thus, relating to section 117(2)(D), the person who is willing to become the director of the organization, his or her application should be containing the names of his former and present family names. Therefore, the application of Roger should contain his identity and name if he is willing to become the company’s managing director. An inspection was done by ASIC and it was found upon inspection that Roger was imprisoned for theft and his company named Explosive Pty Ltd. will not be allowed to give the license.

Reference list

Cohen, G. M. (2017). Law and Economics of Agency and Partnership. The Oxford Handbook of Law and Economics: Volume 2: Private and Commercial Law, 399.

Croucher, R. (2018). Law reform agencies and government Independence, survival and effective law reform? University of Western Australia Law Review, 43(1), 78.

De Baere, G., & Nowak, J. T. (2016). The right to “not prohibitively expensive” judicial proceedings under the Aarhus Convention and the ECJ as an international (environmental) law court: Edwards and Pallikaropoulos. Case C-260/11, Edwards and Pallikaropoulos v. Environmental Agency, Judgment of the Court of Justice (Fourth Chamber) of 11 April 2013, EU: C: 2013: 221.

Freeman & Lockyer v Buckhurst Park Properties [1964] 1 All ER 63,

Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549

Ireland v Livingstone (1872) LR 5 HL 395

Knox, A. (2016). The temporary agency work industry and its regulatory environment: Evidence from Australia. In Temporary Agency Work and Globalisation (pp. 117-148). Routledge.

Shin, S. (2017). Non-Signatories in Arbitration Proceedings with Focus on a Third Party Beneficiary and Equitable Estoppel Doctrines in the United States. J. Arb. Stud., 27, 77.

Watteau v Fenwick [1893] 1 QB 346

Yin Kwan v, Eastern Insurance Co Ltd [1994] 2 AC 199

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My Assignment Help (2019) The Essay Explores The Applicability Of Agency Law, Separation Of Legal Entity, And Corporations Act 2001 (Cth) In Different Situations. [Online]. Available from: https://myassignmenthelp.com/free-samples/industry-and-its-regulatory-environment
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My Assignment Help. 'The Essay Explores The Applicability Of Agency Law, Separation Of Legal Entity, And Corporations Act 2001 (Cth) In Different Situations.' (My Assignment Help, 2019) <https://myassignmenthelp.com/free-samples/industry-and-its-regulatory-environment> accessed 20 May 2024.

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