Assignment 03
Rishma Minoshanie
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Question 01
Issue
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Is there is a contract between Terrance and Gabby .
Is there is a contract between Terrance and Marry
Is there is a contract between Terrance and Gordon
Question 02
Issue
Is Rodger personally liable to the $200,000 debt owing to company
Can Rodger challenge the refusal of the license by the Co.dept on the previous working
Question 01
Law
Undisclosed principle occurs when contract formed between 3 rd party and the principal even if agent
does not disclose that she or he is acting on behalf of the principle (CSU LAW504 Modules, 2018,
Topic 12 p. 94). However the third party is still liable to work to the principle .Under this undisclosed
principle it is very important to understand ‘Doctrine of election ‘.In the event of undisclosed principle
the 3rd party can elect from whom to demand performance and this is known as doctrine of election
.This is very important in situations like 3rd party enter into contracts with the agent and thinking that
agent is the principal because agents have skills acting like they are principle. In that scenario ,when it is
identified that the agent was done his job on behalf of a principal ,usually the third party demand
performance from the agent rather from principle .A very good example for doctrine of election is Siu
Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199.
Under the common law there are different types of authority Actual authority, Ostensible authority,
Authority of necessity .Actual authority can be divided n t two parts .Express and implied (customary
authority) (CSU LAW504 Modules, 2018, Topic 12 p. 91).Under the express authority principal
stated by orally or in writing .However in implied authority comes in to action when there is no authority
given by verbally or in writing. As an example employer gives some authority to employee by positioning
them in relevant role and designations .Its gives employees to authority to handle their role in relevant
situations. In Watteau v fenwick [1893]1 QB 346.
Ostensible or apparent authority can be defined as in case where the principle does not expected to give
authority, however he represents that the agent has authority and also principle is bound by that
representation. The representation should be by the principle it is not sufficient to create apparent
authority by agents own representation .form of inaction is where the representation by the principle,in
this case principle already knows that the agent acting like he or she has authority but principle doesn’t
involve to correct that impression that in 3 rd parties mind or actually ignore what kind works that the
agent is doing (CSU LAW504 Modules, 2018, Topic 12 p. 92).Freeman & Lockyer v Buckhurst park
properties [1964] 1 AII ER 630-is a very good example for ostensible or apparent authority .In this case
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Kapoor act as MD on several occasions knowing by the company but Kapoor had not been legally
appointed to that role.Kapoor entered in to a contract with third party as they believe that he had been
given actual authority from the company and company is liable for this contract .on the other hand if 3 rd
party suspect or they knew that the agent had no authority then the principle is not liable .This is
basically depending on the evidence .
Question 02
Law
According to section 22 of the Acts Interpretation Act 1901 (Cth) person including Body Corporation
except the contrary intention appears .In other words generally a corporation could be able to do similar
as the natural person can do (CSU LAW504 Modules, 2018, Topic 14 p. 108).The corporations
liability is separate from its members .Liability is limited for shareholders for the corporations debts in
the limited liability companies. The corporations is not treated as agents of their shareholders but
shareholders acting on behalf of the company through its board of directors .This concept reasonably
established in Salomon v Saloman & Co Ltd [1987] AC 22.In this case salmon formed a company
.Company paid him by shares and debenture as the company transferred the assets of his business
.Salmon becomes a shareholder of a company and also secured creditor .Further ,debenture is a
certificate which is indicates about the company’s capital which provides in the form of loan by someone
.The important benefit of debenture is that the debenture can be sell to someone .salmon sold
debenture to a 3rd party after the company went insolvent .Creditors of the company went to the court
and the court rejected the creditors argument by holding that the company is an separate legal entity
from its shareholders and also documents were publically available to creditors to check existing
ownership of the debenture .Further there was no identification of fraud .Therefore , Salomon v
Saloman & Co Ltd [1987] AC 22 case is a good example for establish the concept of separate personality
and limited liability of shareholders (CSU LAW504 Modules, 2018, Topic 14 p. 108).
In some situations the law ‘lifts the veil’ .Under this court will take actions for the persons who control
the corporations and impute the co’s actions to them. A very god example for the Gilford Motor Co Ltd v
Horne [1993] Ch 935-Horne was an employee of Gilford motor company and agreed to a restraint of
trade .After he resign from the company he started a same type of trade with his wife and another
former employee .The court said that he had broken the condition of restraint and identified Horne is
the master mind of the new company (CSU LAW504 Modules, 2018, Topic 14 p. 110) .
Question 01
Application
In this case Terrance runs a business and appointed Sara and Peter as Designer and the supplies
purchaser .Gabby is a customer who needs to design a brooch from the sara .Sara did not mentioned
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that she works to the Terrance .Therefore Gabby was thinking that sara was the owner of the
company .When Terrance call to confirm the order Gabby said he does not have any contract with the
Terrance and he have a contract with Sara. Undisclosed principle is the law relating to this incident .Its
means contract between 3rd party and principle whenever that the agent does not disclose that he or
she is working on behalf of the principle .The most important thing under this undisclosed principle is
the 3rd party may have ability to elect from whom to demand performance (Doctrine of election ).Under
this case Gabby did not know that sara is an agent as she was acting like she was the owner of the
company .Therefore he has power to elect from whom to demand performance .
Terrance appointed Peter as supplies purchaser and informed him to buy only silver as business is over –
supplied with gold .While peter was having drink with the Marry he agrees to buy gold from her at the
price of $ 1,500/-.Marry came to the Terrance place and asked for the gold for $ 1,500/- Terrance refuse
to accept gold or pay money for her .Under the common law there are three types of authority
,including actual authority ,ostensible authority ,Authority of necessity .Actual authority can be divide in
to two parts .Express authority and implied authority .Express authority means principle give
instructions by orally or in writing. When there is no express authority then implied authority comes in
to action. However ,in this case Terrance orally instructed to the Peter not to buy gold .But peter breach
the actual authority given by Terrance and promised to buy gold from Marry .Marry has been made
aware of the limitations on the agents authority will it be effective against him.
In this case peter was dealing with Gordon on behalf of Terrance .Gordon is a diamond seller and peter
had deal with him regularly. Peter ordered diamond from the Gordon and picked it and disappeared.
Under this situation Gordon usually deal with peter and he thought that peter had authority to this
diamond deal .In some cases principle does not intended to give authority but the role which is
represented by the agent intended that he or she has that authority and also principle is liable for that
kind of works done by the agent .Therefore perter’s role intended Gorgon that he have authority to buy
diamond from Gordon. Termination was done on Monday but Gordon did not know about it.That is the
reason Gordon accepts his order and sold diamond for peter.
Question 02
Application
Under this scenario Roger smith is a major shareholder of the company and his wife only had 8% of
shares .However, according to the corporation law company is an separate from the shareholders
.Therefore no one can sued from the managers or from the directors or from shareholders on behalf of
the company .In other words Industrial machines company cannot be sued from the Roger on behalf of
the United chemical private Ltd.
Roger was convicted of theft in 2005 and he established company which was named as Explosive
industries Pvt Ltd with owning 99 % shares by him and 1% for his wife. Furthermore, he was appointed
as MD and his wife as secretary .He tried to get Explosive manufacturing license for his new company
from the Commonwealth Department of industries .However commonwealth Department of industries
do not issue license for person who has criminal conviction. Then the department declines his
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application .In this case Roger is the major shareholder and it is clearly understand that he is the master
minded person of this company and holding more responsibilities as MD. Therefore as per the law he
could not be able to get the license as he was convicted of theft in 2005.
Question 01
Conclusion
As per the principle of undisclosed there is a legally binding contract between Gabby and
Terence. Therefore Gabby has to pay $ 1000 to Terence.
As a supplies purchaser Peter can make decisions to buy materials .Therefore there is a legally
binding contract between Terrance and Marry and Terrance has to pay for Gold.
Gordon did not know that the Peter fired by Terrance and Gordon accept his order and issue
diamond as usual .Therefore there is a legally binding contract as per the law and Terrance has
to pay for the diamond.
Question 02
Conclusion
As per the corporation law United chemical pty Ltd is a separate legal entity .Therefore Industrial
Machine Ltd could not be able sue $200,000.00 from Roger
According to the past history records Roger was convicted of theft in 2005 .Therefore commonwealth
legislation do not allow to issue explosive manufacturing license to Roger due to his criminal records
.Therefore he can’t challenge to the refusal of his application.
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References
CSU LAW504 Modules, 2018
Cases
Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199.
Watteau v fenwick [1893]1 QB 346
Freeman & Lockyer v Buckhurst park properties [1964] 1 AII ER 630-
Salomon v Saloman & Co Ltd [1987] AC 22
Gilford Motor Co Ltd v Horne [1993] Ch 935
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