LAW00720 : Legal Studies

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03-02-2021

Question:

1. Linda is the manager of a supermarket named John’s Supermarket, which is located in a large country town on the north coast of NSW. The store was named after the owner, John Miley, who lived in Sydney. On his frequent visits to the store, John would discuss the purchase of replacement stock and sign the necessary orders for Linda to dispatch to the
suppliers.

As a rule, sufficient stock was ordered during John visits so that Linda had no need to order further stock.

Shortly after John’s visit in December, Cathy, the sales manager of AFS Grocery Wholesalers Co Pty Ltd, called at the store and showed Linda the orders she had taken from a nearby supermarket with which John’s Supermarket was in direct competition.

Linda was in a dilemma. John was overseas for the next two weeks and had left no contact details. Faced with the absence of John and very worried about losing customers to his competitor, Linda placed an order for $45,000 worth of goods for the lucrative Easter trade.

Three days later Linda received the goods and immediately placed them on sale. Unfortunately, the next day John had a large consignment of similar goods delivered to the store. In a note he apologised for not informing Linda of this consignment but said he had been busy with other retail business matters.

On his return to Sydney, John received an invoice for $45,000 for the goods supplied by AFS Grocery Wholesalers Co Pty Ltd to his north coast store. He immediately informed the company that he would not pay. In a letter to the company he said:” I will not pay
because Linda the manager of my store had no authority to order those goods.”

Advise AFS Grocery Wholesalers Co Pty Ltd:
1. Of any legal rights they may have in order to obtain payment of $45,000 for the goods they delivered to John’s Supermarket.
2. Would your advice differ if John informed you that Linda was expressly prohibited from ordering any goods without his authority?

2. Bruno was a peasant farmer in Italy and had very little education. In 2010, he and his wife migrated to Australia. Soon after his arrival in Australia, he purchased a small farm on the south coast of NSW for $220,000.

In early 2012, Bruno’s wife who had never wanted to migrate to Australia left him to return to Italy. Bruno was devastated as a result of his wife’s departure and entered into a prolonged depression. This was compounded by an excessive consumption of alcohol.

In mid-2012, Brno was approached by Slybo, the managing director of Moreslybo Pty Ltd, a company that was involved in property development. Slybo told Bruno that the company was keen to purchase his property. Bruno in several conversations with Slybo told him of what had happened since his wife had left him. Slybo suggested that Bruno should return to Italy and try to patch things up with his wife. Slybo then said that, in order to help Bruno, Moreslybo Pty Ltd would purchase Bruno’s property for $160,000. Bruno was so happy that he could go back to Italy and be with his wife again and so he agreed to sell his property. Next day a contract between Moreslybo Pty Ltd and Bruno was prepared by the company’s solicitor and signed in the solicitor’s office.

A few weeks later, and before the sale of his property was concluded, Bruno was pleasantly surprised when his wife returned to Australia. She told Bruno that she could not live being separated from him. She said “I want to live with you and work the farm so that we have a future together. If things go well we can eventually make regular trips to Italy “. Bruno was delighted with his wife’s plans for their future.

Bruno told her of the contract he signed for the sale of the property. She became very upset at the news and pleaded with him to keep the farm.
Bruno now wants to keep the farm. He wants to get out of the contract with Moreslybo Pty Ltd.

Question:

1. Part 1

The question is about the agency issues which involves a representative or rather agent who acts on behalf of the principal under the confinement of the authority he has been given and therefore is able to bind the principal by his acts to the third parties, (Bourne-Webb et al 2009). In regards to its application, it’s applied in corporation which mostly thrives on it, such include; various commercial activities of a company. In addition, the author is not usually bound and he stops acting as an agent once contract between the principal and third party is completed, (Abel 2014).

Further, the relationship emerges through different ways which include: express frame where the specialist is spelt out in a deed or oral; suggested which can be construed from their lead, an a valid example is Murfitt v Royal Insurance Co (1922) where an operator was requested to sort out protection cover on natural product trees and harvests in a plantation, (Cooter 2011). The specialist gave counsel that the property would be secured while he made the accommodation of the proposition to the organization. In any case, the organization dismissed the proposition amid which there was a fire out break. The operator had no express specialist to give oral cover, however there was persuading proof that he had been doing as such in the area for at the very least two years, (Coroney 2008). Past course of managing an office was along these lines suggested and the insurance agency needed to meet the claim; apparent specialist otherwise called clear which emerges in a state where a sensible outsider would comprehend that an operator had no capacity to act and in this manner restricting the foremost paying little heed to whether the operator had or did not have inferred or express expert to act.

Subsequently, there exist various types of agent relationships such as general agent where the representative has authority to carry out various types of transactions in the principal’s name or on his behalf, (Cotterrell 2017). This kind of agent might be a manager of a company or a person with such limited powers like a purchasing agent and in whichever case, such an agent has authority to make changes in regards to the principal’s legal relationships with third parties. He also has the power to act in any other way that might be required by the principals business thou his authority can be limited if the principal expressly states his limitations, and regardless of that, the principal might be liable for any acts of the agent done in excess of his power. A case in point is: In Watteau v. Fenwick (1893) where proprietors of an unhindered house had chosen an administrator to oversee the hotel for them, (Chirelstein 2013). The licensee of the commence was the chief's name that had been scrambled on the entryway. The proprietors and the administrator had an express assention which obliged the director to the buy of packaged brew and mineral waters as it were. Regardless of the confinement, the chief purchased stogies for resale from a merchant who didn't know about the imperative. The merchant started lawful procedures against the proprietor for installment in which the court held that he could succeed and recoup the cost as the activity of the chief was inside his typical expert. Outsiders are qualified for accept that the general specialist's real expert and his standard thing (standard) expert are one and the same.

On the other hand, there exists a special agent who has power to perform only in the specifically designated circumstances. An example is in regards to a real estate agent who is usually given the duty to locate a buyer for the principal’s property.

Part 2

Regarding the legal rights that can be relied upon by AFS Grocery Wholesalers Co in order to obtain the 45 thousand dollars include: initiating an agreement with John for the contract to be ratified either orally or through a written deed, (Cwirzen, Habermehl-Cwirzen & Penttala 2008). This is so because looking at the nature of the contract of supply of goods completed by Linda, it satisfies the entire requirements for ratification of a contract which are: contract should be valid in that at the time when the agent resulted to the contract the principal must have been in existence and therefore capable of contracting; the ratification period must be reasonable, in this situation the difference between the occurrence of the events is reasonable enough for ratification to take place since John returned almost immediate; the act must be capable of taking place, since the issue is in regards to payment of goods already supplied ratification will make it possible; also, ratification can be sought as John is well aware of what transpired and at the time of the contract the AFS company knew that Linda was acting of behave of John as his agent and therefore ratification as a legal right will enable payment of money for goods supplied.

In addition to that, AFS Grocery Co may relay on the concept of agency of necessity as a legal right to obtaining their payment since at the time of the contract with Linda, John had travelled oversees for a period of 2 weeks without any details on how he could be reached. The concept is relevant since it developed in relation to maritime law during those moments when the systems made it impossible to reach the principal. When relying on the concept one has to prove that: there is an existing agency relationship; that it was impractical for the key to get correspondence from the specialist; that he acted in what he thought it was to the greatest advantage of the key; that the circumstance required a prompt activity to ensure the central's merchandise or property and that it probably been a crisis circumstance, (Dietz 2012). The specialist had no express expert to give oral cover, however there was persuading proof that he had been doing as such in the area for at least two years. Past course of managing an office was in this way inferred and the insurance agency needed to meet the claim; ostensible authority also known as apparent which arises in a state where a reasonable third party would understand that an agent had no power to act and therefore binding the principal regardless of whether the agent had or did not have implied or express authority to act, (Cho, Crenshaw & McCall 2013). Further, they might commence legal proceedings relying on the evidence that, Linda being in the capacity of a general agent without an existing express contract stating otherwise had the authority to order for the goods and that she was acting in good faith and in the best interest of his principal as the company would have experienced a major loss if she had not done anything.

In regards to whether there will be a change of advice if Linda was expressly not allowed to order goods the answer is no. Since, looking at the facts of the situation, there was a high possibility that Johns Company was going to lose its customers and as an agent Linda was required to act in a way that took into consideration the best interest of the principal as well as those of the company, (Jackson et al 2012). Also, Linda only acted in good faith after being presented with no other option as she was not able to communicate with John in order to be given the best way forward. Also, the fact that John ordered for the same goods is a clear indication that the company needed such a stock to promote its viability in the market. Therefore, the above clearly show way the verdict will still remain the same regardless of whether there was an express agreement.

2. The issue in question is in regards to the law of contracts whereby Bruno entered into a contract of sale of his property to Moreslybo Pty Ltd. The law of contract usually concerns the enforceability of legal promises and therefore qualifying a contract as an agreement that can be enforced by the courts upon breach of any of the promises by either party. In regards to breach of contract the other party has various legal remedies whereby he can commence legal proceedings for damages or rather compensation, (Razack 2008). Also, he can request the court to compel the one in breach to perform the contract.

In Australia, the law of contract is majorly governed by the common law system but increasingly legislations are supplementing the common law contract. There exist 3 types of contracts which include: contracts of records that refer to tribunals and courts judgments. An example might where during the legal process the parties come into an agreement on how to settle the issues and therefore the settlement is recorded in writing; contract under seal also referred to as special contract includes those in relation to sell property such as the one in question; also there exist simple contracts which are the most common and frequent in businesses, (Shaffer 2012).

Further there exist elements that are essential in the formation of a contract the two main ones are agreement and consideration. The agreement consists of an offer made by the person initiating the contract & acceptance normally a statement written, oral or implied from conduct of the offered agreeing to the offer of the offer or while consideration brought out in the case of Australian Woolen Mills case was defined as “an act of forbearance of one party is therefore a price for which the promise is bought.” In addition to that, other elements include an intention to create a legal relationship, capacity of parties to contract and the legal formalities of a contract, (Skempton & Northey 2008).

In regards to the legal rights Bruno can rely on for him to be exempted from liability of the contract include the issue of capacity which requires that at the time of making the contract both parties must be in a legal position to validate a contract. With this, there exist a certain group of people that are considered vulnerable and therefore accorded some protection. They include: minors where both the common law and statute limit the capacity of minors to enter into contracts; mental disorder or intoxication where a contract is considered voidable at the parties option who due to mental disorder or intoxication was not able to understand the nature of the contract being made as long as the other party was aware of the incapacity of the other person, (Zhang 2008).

The two rules in regards to incapacity still apply in case of drunkenness that has resulted to incapacity as was brought out in the case of Pitt vs. Smith. Also it should be extended to situations on incapacity caused by other substances. Further illustration was brought out in the case of Barclays Bank Plc vs. Schwartz where it was established that drunkenness just like mental incapacity, deprives an individual both the understanding of the nature of the transaction and the awareness that he does not understand it. (Von Bogdandy et al 2010).

Therefore, in this situation the fact that Bruno was deeply devastated upon his wife moving to Italy and started indulging in excessive drinking it impaired his thinking to an extend that he was able to accept selling his piece of land at a lower price of $160,000 which he had bought at a higher cost of $ 220,000 yet land in nature normally appreciates rather than depreciate.

Subsequently, Bruno can argue that he acted under duress from the manager of Moreslybo Pty Ltd who despite Bruno on several occasions informing him about what had transpired since the wife left still went ahead to encourage him to sell his property and return to Italy in an effort to work things out with her wife. In doing so, the manager did not act in the best interest of Bruno but his own by ensuring that the land is sold to him, (Hocking et al 2011). Therefore, upon prove of the above rights, the contract will be declared void which will make it possible for Bruno to be relieved from bearing liability to Moreslybo Company and be able to retain the farm.

Further, the 2005 Mental Capacity Act under its section 2 provides that an individual does not have the capacity contract if he is not able to make a rational decision in regards to the issue at hand during the time of the contract, regardless of whether the impairment is temporary or permanent. As per section 3(1) the impairment includes: not being able to understand the specified information; to retain the information; be able to effectively consider the information or communicate the decision. In addition, section 3 sub-section 4 in regards to the specified information provides that one should not be able to foresee the outcome of deciding in either way and be unable to make the decision, (Lan & Heracleous 2010). In conclusion therefore, Bruno should be relived from liability since in his state he was not able to make a rational decision that could have been made by him considering the consequences of doing so. Also, he made the decision by taking in the advice from the manager of the company which had made him believe that by selling the property and going back he could be able to make things work out and since the wife had returned he had no better reason of going back yet he had suffered because of the absence of his wife.

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Abel, R.L. ed., 2014. The Politics of Informal Justice: Volume 2: Comparative Studies (Vol. 2). Elsevier.

Bourne-Webb, P.J., Amatya, B., Soga, K., Amis, T., Davidson, C. and Payne, P., 2009. Energy pile test at Lambeth College, London: geotechnical and thermodynamic aspects of pile response to heat cycles. Géotechnique, 59(3), pp.237-248.

Cooter, R., 2011. Maturing into normal science: The effect of empirical legal studies on law and economics. U. Ill. L. Rev., p.1475.

Croney, D., 2008. The movement and distribution of water in soils. In The Essence of Geotechnical Engineering: 60 years of Géotechnique (pp. 207-222). Thomas Telford Publishing.

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