Nature And Functions Of Law In Society, World Legal Systems, And Agency Essay.

At the completion of this topic you should be able to:

1. explain the nature of law and the functions of law in society;

2. outline how different world legal systems are classified;

3. describe each of the components of the Australian federal system;

4. outline the functions of the three branches of government:legislative, executive and judicial;

5. describe the structure and the functions of the Commonwealth parliament and the distribution of power between the Commonwealth and the States;

6. outline the jurisdiction of Commonwealth and State courts;and

7. outline the ways in which disputes can be resolved other than by litigation, using Alternative Dispute Resolution (ADR) mechanisms.

Classifications of Different World Legal Systems

Agency law governs the relationship which two individuals have, where by one acts as the agent and the other one holds the position of being the principal. This law results in the principal being responsible/ accountable for the work done by their appointed agents (Busch, Macgregor and Watts, 2016, p. 37). This accountability is owed towards the third party, whereby the agent deals on behalf of the principal with such third party. The reason for holding the principal accountable stems from the need of protecting the third party, for the acts undertaken by the agent on behalf of the principal, as the third party usually has no clue about the authority given to the agent and the limit of it. Hence, when the action is undertaken by an agent as per the authority given to him, the principal is held liable (Munday, 2010, p. 13).

There are two broad classifications of agency law, which are then further subdivided into various aspects. These two are the express and the actual authority. Under the express authority, which is also known as the actual authority, the agent is told expressly on behalf of the principal to do certain activity (Murdoch, 2014, p. 5). Another type of classification deals with the ostensible or the apparent authority. In this, as the name suggests, the third party makes an impression of the presence of authority with the agent, when in actuality, the agent does not have the said authority to do so same, though, it seems that the agent has the requisite authority (Patterson Law, 2012).

A leading case law which is often used in the matter of establishing liability of the principal is the verdict given in Watteau v Fenwick [1893] 1 QB 346. The defendant of this case, Fenwick was sued by the plaintiff, Watteau for the payment of cigars which were attained from Humble. Humble, in this case, had no knowledge about the assigning of interest by defendant to the plaintiff. It was held by the court that the defendant would be liable for the acts undertaken by his agent, due to the applicability of agency law. And so, Fenwick was ordered to pay the claimed amount to Watteau (Smith, 2012).

The applicability of agency law can be further clarified with the help of Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 4. Shiv Kumar Kapoor and the defendant were together sued by Freeman and Lockyer for the outstanding amount pertaining to the architectural work fee. Even though Siva Kapoor was never appointed as the MD of the company, he acted out as one and was in reality, just the director of the company. This was known to the other directors. The court stated that due to the presence of agency law, Freeman and Lockyer had to be paid the claimed sum (PQ Magazine, 2017).

Components of the Australian Federal System

In the give scenario, Tina had given the express authority to Brad to order the fuel from Caltex. And due to the knowledge of Tina, the case of Watteau v Fenwick cannot apply, as in that case, there was an absence of such knowledge. When this express authority lapsed, the apparent authority applied, as she continued to hold out Brad as her agent, by paying for the dues of ordered fuel. So, by paying for the same, it seems as if he had the authority. Applying the case of Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd, Tina would have to pay for the acts undertaken by her agent, due to the applicability of ostensible authority.

Conclusion

To conclude, Tina would have to pay Caltex the obligations, which her agent undertook, due to the apparent authority.

An agent has the duty of working for the progress of the principal and not undertakes any such activity where the personal interests, overpower the interests of the principal. The agents have the duty of discharging their obligations in good faith and also make certain that the dealings are fair (Jones, 2014). The agent is required to ensure that while working on behalf of the principal, they apply the principles of care, along with proper diligence (US Legal, 2017).

Yam Seng Pte Ltd v International Trade Corporation Ltd [2013] EWHC 111 is one of such cases, where the agent was held to have contravened his duty to act with good faith towards the principal, as the agent acted in a dishonest manner. In this case, the exclusive rights were given to the plaintiff, as a result of which, he could supply exclusive fragrance of an established brand in certain nations. Though, there was a contravention of the implied term pertaining to the good faith, as the defendant provided false information to the plaintiff (Maughan and Wells, 2013).

In this particular case, Paul withheld crucial information which was related to the price of the vehicle. Paul knew that his neighbor was interested in buying the vehicle for a price of $25,000 and the fact that Tina was unaware of this value and was willing to sell the vehicle at $19,000. Instead of making Tina aware about this, he withheld this information and made profits of $6,000. This clearly contravened the fiduciary duty which Paul owed to Tina by being her agent.

Paul should have honestly disclosed the facts of the matter to Tina, instead of making secret profits. Applying the case of Yam Seng Pte Ltd v International Trade Corporation Ltd, the dishonesty of Paul makes Tina eligible to initiate legal proceedings against him for the secret profit made.

Functions of the Three Branches of Government

Conclusion

To conclude, Tina can recover the money from Paul, as a result of the secret profit made by him.

Are the three partners liable to pay the amount claimed by Sunstar Computer Hardware Ltd for $ 12,000 and to You Beaut Ute Ltd for $ 9,000?

Whenever an arrangement is made between two or more than two parties, to work towards a common goal of attaining profits and where the mutual interest is aligned, a partnership is formed and the individuals come to be known as partners. The Partnership Act, 1892 is the legislation governing the provisions of partnership in the state of New South Wales. As per section 1 of this act, the partnership is carried on for earning profits and for a common purpose (NSW Legislation, 2012).

The partnership is governed through an agreement which is drawn amongst the partners, containing the terms of such an association, and is known as the partnership agreement (Commins Hendriks Solicitors, 2017). Section 53B contains the provisions regarding the same. The partnership can be formed, even without such a partnership agreement (NSW Legislation, 2012). As this is an agreement, the provisions of the contract law also become applicable on partnership (Williams, 2011, p. 335). This opens the possibilities of raising a claim for the breach of contract. In case of breach of contract, the aggrieved party can initiate claims against the breaching party for damages, which are awarded in form of monetary compensation (Latimer, 2012, p. 469). An application can also be made for equitable remedies, which help in getting the contract rescinded, stop the party from doing certain activity, or ask for doing a specific performance of certain aspect (Clarke, 2016).

The agency law is also application over the partnership. And due to this law, the partners become liable for the acts undertaken by the other, as each partner acts as an agent for the other partner. This liability is raised towards the third party and the entire partnership is bound by the same (Parisi, 2017, p. 415). As per Section 5 of the Partnership Act, 1892 (NSW), the partners and partnership firm are bound by the actions undertaken by the partners of that particular firm.

Section 8 of this act provides that when a notice is given, which results in the partners being restricted for binding the firm for certain task, the acts undertaken which contravene such restriction, would not bind the firm for such a contravened act done. Apart from this, Section 9 of this act fixes the responsibility over the partners for the obligations of the firm, which result from the acts of the partners of such firm (NSW Legislation, 2012). The reason for this has been highlighted in the case of Lang v James Morrison & Co Ltd (1911) 13 CLR 1, as per which the partners have the authority to conduct business on behalf of the partnership firm, and so, by acting on behalf of the firm and the other partners, the partners become liable towards each other (Jade, 2011).

Jurisdiction of Commonwealth and State Courts

A noteworthy case in this matter is the case of Phillips-Higgins v Harper [1954] 1 QB 411. It was held, that in this case, the partners held a fiduciary duty towards each of them, for the reasons of the partner being a partnership firm’s agent. Hence, the partners owe a duty of care to the other partners and the others owe the same duty back to them (Swarb, 2015a).  To clarify the point further, the case of Mercantile Credit Co Ltd v Garrod [1962] 3 All ER 1103, needs to be discussed.  In this case, holding the responsibility of partners to be accountable for each other, the court stated that the sale was done as per the common trade and business perused by the partnership, which made the same binding over the other partners (Swarb, 2015b).

An exception to this case can be found in the matter of National Commercial Banking Corporation of Australia Ltd v Batty (1986) 60 ALJR 379. In this particular case, the court held that the partnership firm would not be liable in such circumstances when the partners indulged in wrongful actions, which were not done as per the scope of authority given to such partner. In addition to this, the money which the firm received for this was not in the common course of the business of the firm, and so, the partnership firm could not be held accountable for the partner’s act undertaken without authority (Jade, 2017).

This case study highlighted that a partnership was formed between the four individuals Mary, Sara, George and Simon. This partnership firm was ruled by the partnership agreement. One of the partners of the firm, Simon, entered into a contract with Sunstar Computer Hardware Limited to the value of $12,000 for the storage drive. As per National Commercial Banking Corporation of Australia Ltd v Batty, this was in normal course of business for the partnership. However, the same was outside the scope of authority which was given to Simon. So applying section 8 of the partnership act, the firm would not be bound by this contract. And for the breach of his authority, even the other partners would not be bound as per the governing provisions of the act.

So, there was a breach agency law, contract law and the partnership act in this case. But the agency law principle still governs this contract. Hence, for this particular contract, even though the firm would not be liable but the other three partners would be bound to pay the sum of $12,000 to Sunstar Computer Hardware Limited. Due to the breach of partnership agreement, which acts as a contract, the three partners can initiate claims of breach of contract against Simon and get an injunction order against him. This injunction order would stop Simon from undertaking any such acts in the future, which could create a liability for the partnership firm.

Regarding the contract drawn with You Beaut Ute Ltd for ute to the amount of $ 9,000, the same was done as per the authority given through the partnership agreement. However, this was not done in the usual course of business. Hence, for this particular contract, Simon would be personally bound to pay the sum of $9,000 to You Beaut Ute Ltd for ute.

Conclusion

To conclude, three partners liable to pay the amount claimed by Sunstar Computer Hardware Ltd for $ 12,000 but for the amount claimed by You Beaut Ute Ltd for $ 9,000, Simon would be personally liable. 

References

Busch, D., Macgregor, L., and Watts, P. (2016). Agency Law in Commercial Practice. Oxford: Oxford University Press, p. 37.

Clarke, P. (2016). Remedies for Breach of Contract. Retrieved from: https://www.legalmatch.com/law-library/article/breach-of-contract-equitable-remedies.html

Commins Hendriks Solicitors. Written Partnership Agreements – Why All Partnerships Should Have One. Retrieved from: https://www.comminshendriks.com.au/written-partnership-agreements-%E2%80%93-why-all-partnerships-should-have-one

Jade. (2011). Lang v James Morrison and Company Ltd. Retrieved from: https://jade.io/j/?a=outline&id=62121

Jade. (2017). National Commercial Banking Corporation of Australia Ltd v Batty. Retrieved from: https://jade.io/j/?a=outline&id=67268

Jones, D. (2014). Implied duty of good faith - what is the current position for distributors?. Retrieved from: https://www.agentlaw.co.uk/site/briefing_notes/implied_duty_of_good_faith_what_is_the_current_position_for

Latimer, P. (2012). Australian Business Law 2012, 31^st ed, Sydney, NSW: CCH Australia Limited p. 469.

Maughan, A., and Wells, S. (2013). UK: Good Faith Obligations In English Law. Retrieved from: https://www.mondaq.com/x/252158/Contract+Law/Good+Faith+Obligations+In+English+Law

Munday, R. (2010). Agency: Law and Principles. Oxford: Oxford University Press, p. 13.

Murdoch, J. (2014). Law of Estate Agency, 5^th ed, London: Routledge, p. 5.

NSW Legislation. (2012). Partnership Act 1892 No 12. Retrieved from: https://www.legislation.nsw.gov.au/inforce/f9dfc85e-8f91-e79f-99e5-8042677519f3/1892-12.pdf

Parisi, F. (2017). The Oxford Handbook of Law and Economics: Volume 2: Private and Commercial Law. Oxford: Oxford University Press, p. 415.

Patterson Law. (2012). The Doctrine of Ostensible Authority. Retrieved from: https://pattersonlaw.ca/NewsArticleView/tabid/179/ArticleId/169/The-Doctrine-of-Ostensible-Authority.aspx

PQ Magazine. (2017). A Quick Look At… Freeman & Lockyer V Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480. Retrieved from: https://www.aiaworldwide.com/international-accountant/editors-blog/quick-look-%E2%80%A6-freeman-lockyer-v-buckhurst-park-properties

Smith, J.C. (2012). Watteau v Fenwick. Retrieved from: https://h2o.law.harvard.edu/collages/1557

Swarb. (2015a). Phillips-Higgins v Harper: QBD 1954. Retrieved from: https://swarb.co.uk/phillips-higgins-v-harper-qbd-1954/

Swarb. (2015b). Mercantile Credit Co Ltd v Hamblin: CA 1964. Retrieved from: https://swarb.co.uk/mercantile-credit-co-ltd-v-hamblin-ca-1964/

US Legal. (2017). Rights, Duties, and Liabilities Between Principal and Agent. Retrieved from: https://agency.uslegal.com/rights-duties-and-liabilities-between-principal-and-agent/

Williams, G. (2011). Corporations and Partnerships in New Zealand. The Netherlands: Kluwer Law International, p. 335.