COMMERCIAL LAW
SUMMARY
PX SOLUTIONS
COMMERCIAL LAW
Sources used ...............................................................................................................................................3
AGENCY ........................................................................................................................................................4
What is Agency? .........................................................................................................................................4
Distinguishing agency from other sorts of arrangements ...........................................................................5
Creation of Agency .....................................................................................................................................6
Undisclosed Principal ..............................................................................................................................10
Rights and Duties of the Agent ................................................................... Error! Bookmark not defined.
The content of the duties ............................................................................. Error! Bookmark not defined.
Principals, agents, and 3rd parties ............................................................. Error! Bookmark not defined.
THE SALE OF GOODS................................................................................ Error! Bookmark not defined.
The Contract of Sale ...................................................................................... Error! Bookmark not defined.
Legislative requirements for a valid contract of sale.................................. Error! Bookmark not defined.
Formalities for a contract of sale ............................................................... Error! Bookmark not defined.
Meaning of ‘Price’ ...................................................................................... Error! Bookmark not defined.
Where the Goods no longer exist ................................................................ Error! Bookmark not defined.
TRANSFER OF PROPERTY IN GOODS ................................................... Error! Bookmark not defined.
Classification of goods ............................................................................... Error! Bookmark not defined.
The transfer of property in goods ............................................................... Error! Bookmark not defined.
TRANSFER OF TITLE BY NON-OWNER – NEMO DAT ........................ Error! Bookmark not defined.
The buyer obtains no better than the seller................................................. Error! Bookmark not defined.
Conduct of owner........................................................................................ Error! Bookmark not defined.
The Seller and Buyer in Possession: s29(1) and (2) ................................... Error! Bookmark not defined.
Seller with a voidable title .......................................................................... Error! Bookmark not defined.
Property in stolen goods upon conviction of offender ................................ Error! Bookmark not defined.
Where the seller is in possession of the goods ............................................ Error! Bookmark not defined.
Where the buyer is in possession of the goods ............................................ Error! Bookmark not defined.
STATUTORY IMPLIED TERMS ................................................................ Error! Bookmark not defined.
Conditions and Warranties ......................................................................... Error! Bookmark not defined.
Merchantable Quality – s19(3) ................................................................... Error! Bookmark not defined.
PERSONAL PROPERTY SECURITY ......................................................... Error! Bookmark not defined.
Pledges........................................................................................................ Error! Bookmark not defined.
Priorities ..................................................................................................... Error! Bookmark not defined.
Rules ........................................................................................................... Error! Bookmark not defined.
Pledges and liens ........................................................................................... Error! Bookmark not defined.
Priorities ..................................................................................................... Error! Bookmark not defined.
THE LAW OF INSURANCE ....................................................................... Error! Bookmark not defined.
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Sources used
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Class notes
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Gail Pearson and Simon Fisher, Commercial law Commentary and
Materials, LBC Information Services, 1999.
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Robert Tong, LBC Nutshell: Sale of Goods – 3rd ed, 2000.
PLEASE NOTE: LAWSKOOL DOES NOT ENCOURAGE PLAGIARISM.
IT IS DISHONEST, UNETHICAL AND CAN BE ILLEGAL!
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AGENCY
What is Agency?
International Harvester Co of Australia Pty Ltd v Carrigan’s Hazeldene
Pastoral Co (1958): “a word used in law to connote an authority or capacity
in one person to create legal relations between a person occupying the
position of principal and third parties.”
Kennedy v De Trafford [1887] per Lord Herscell: “No word is more
commonly and constantly abused than the word ‘agent’. A person may be
spoken of as an ‘agent’, and no doubt in the popular sense of the word
may properly said to be an ‘agent’. Although when it is attempted to
suggest that he is an ‘agent’ under such circumstances as create the legal
obligations attaching to agency that use of the word is only misleading.”
Three general points:
a. Substance over form - Judges have cautioned that there ‘is no magic in
the word agency’ and ‘that you cannot make a man an agent by calling
him an agent when he is not in law an agent.’ (Dal Pont, p.7);
b. Legislative Definitions;
c. Onus of proof is on the agent, or person claiming someone else was an
agent, to prove agency: Pole v Leask (1863) per Lord Cranworth. This
is to protect principals “grave injustice,” puts onus on purchaser to
check out credentials of “agent.”
Types of Agents
Mercantile Agents: A mercantile agent is an agent who acts for a principal
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in the course of business. {cf. Mercantile Law Act (ACT), Factors Act
(NSW)}. There are two types:
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Brokers: Negotiate contracts between two business principals.
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Factors: Same, but the factor has physical possession of the
object being sold.
Commission Agents are appointed to sell or to buy goods on behalf of the
principal. Only gets paid if a deal is made.
Del Credere Agents agree to indemnify the principal against any loss
arising from the failure to perform of the persons with whom the agent
contracts on behalf of the principal. Higher risk for DC agent, but higher
commission.
Power of Attorney refers to the formal instrument which confers on one
person the authority to act for or in the place of another as agent - usually
for the purposes of signing legally binding documents for that other.
{Powers of Attorney Act 1956 (ACT).}
Distinguishing agency from other sorts of arrangements
Agency and Sale
Being the sole or exclusive ‘agent’ of a product or company in name does
not automatically imply the same at law. Because there is no assumption
by the consumer that she is entering a contract with the manufacturer, but
with the ‘agent’: International Harverster Co of Australia Pty Ltd v
Carrigan’s Hazeldene Pastoral Co (1958)
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Agency and Bailment
Bailment is when the bailee grants possession of an object to a bailee.
However, the bailor has no fiduciary duty to the bailee, whereas an agent
does with the principal. May coexist.
Agency and Trust
Both involve someone acting for another person and having fiduciary
duties to that person. However, 3 things:
1. Agents take instructions from the principal. The trustee acts in the
interests of the trust.
2. Trustees must posses the goods or deeds of title to the goods. Agents
are not required to.
3. Agents make their principals personally bound at law. Trustees bind
the trust, rather than the beneficiaries directly.
Agency and Employment
An employee is only an agent when they have the right to change the
employer’s relationship with third parties. May coexist, and may be argued
in the alternative when disputes arise.
Creation of Agency
Also ask: What kind of authority has been given?
1. Agreement between the parties - Prior express or implied agreement
(whether contractual or not) between the principal and the agent.
2. Agency by estoppel / representation.
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3. Ratification.
4. By operation of law - the imposition of an agency relationship on two
parties via the law.
1. Agency created by agreement
Can be implied by the actions of Ag and P’pal even if they expressly say
“I’m/You’re not and agent.” Look to whether consent for the agreement to
exist has come from both the principal and the agent: Garnac Gran Co Inc
v HMF Faure & Fairclough [1986] as per Lord Pearson.
Actual Authority: The scope is determined by the terms of an express
agreement: Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd
[1964] per Diplock LJ.
Apparent / Ostensible Authority: Apparent or Ostensible authority occurs
where a principal gives a person the appearance of having authority which
they do not have. Although this is really agency by estoppel
2. Agency by Estoppel (/representation)
3 elements {cite Freeman & Lockyer v Buckhurst Park Properties (Mangal)
Ltd [1964] per Diplock LJ}
1. A representation made by or on behalf of the principal to the third party
concerning the authority of the agent.
The representative must have actual authority to do what the agent did:
Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing
Co Pty Ltd (1975). Here, signatures of two directors were a prerequisite for
a purchase to be made by the company. Hence one director representing
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that his ‘agent’ had the power to buy machinery on behalf of the company
was not sufficient, since the director could not have done so on his own.
2. Reliance by the third party on the representation made by the principal
to the third party: Egyptian International Foreign Trade Co v Soplex
Wholesale Supplies Ltd [1985]
3. The third party must rely upon the principal’s representation and alter
his or her legal position on the strength of the representation.
These two elements are typically proven by showing that the third party
entered the contract.
Scope of Ostensible Authority:
Armagas Ltd v Mundogas SA [1986, UK] per Lord Keith: The authority is
general but of a specific type. The principal is estopped from denying it.
3. Ratification
Elements of ratification ([firth v staines [1897])
a. The agent whose act is sought to be ratified must have purported to act
for the principal: Keighley, Maxstead & Co v Durant [1901, UK],
endorsed by Crowder v McAlister [1909, Qld] per Cooper CJ - “There
can be no ratification of a contract by a person sought to be made liable
as a principal, unless the person who made the contract professed to
be acting on behalf of the other at the time.”
Keighley, Maxstead & Co v Durant [1901, UK]: An agent had authority to
purchase grain up to a particular price. Ended up contracting to pay too
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much, KMCo first decide to ratify, then change their minds. Problem was
that the contract was in the name of the agent and of D. D sues, but loses.
b. At the time the act was done the agent must have had a competent
principal: Corporations Law - s 131(1).
c. At the time of ratification the principal must be legally capable of doing
the act himself.
d. The principal must have full knowledge of all material facts relating to
the act to be ratified.
e. Ratification must take place within a reasonable time of the agent’s act
unless the contract stipulates another more specific timeframe. The
principal has no right to see if market conditions improve, or similar,
before ratifying: Prince v Clark (1823)
Evidence of ratification
To ratify the agent’s unauthorised act, the principal must do so by
unequivocal language or conduct. Ratification may be express or implied,
mere acquiescence or inactivity may be sufficient: Suncorp Insurance and
Finance v Milano Assicurazioni SpA [1993, UK] per Waller J.
Limitations on ratification: What if the 3rd party repudiates the contract?
Unclear area of law. Compare and contrast:
Kidderminster Corporation v Hardwick (1873, UK): An agent acting as an
auctioneer sells property he had no authority to. Buyer repudiates before
owner ratifies. Ratification was INEFFECTIVE
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Bolton Partners v Lambert (1889, UK): The director of a company leases a
building to a third party without authorisation. Here, ratification was given
retrospective effect by “taking the parties back to the time of contract,” and
the lessee is said to have repudiated the contract.
Bolton is criticised on two bases. Firstly, it there is no reference
Kidderminster in the judgement. Secondly, it makes no sense under
contract law since there is no “meeting of the minds”: Davison v Vickery’s
Motors Ltd (in liq) (1925, HCA) per Isaacs J. Isaacs J takes the view that
the third party revokes an offer, rather than repudiates a contract. This
view supported by Hughes v NM Superannuation Pty Ltd (1993, NSW Sup
Ct).
4. Agency created by operation of law
Agency of necessity - look this up
Agency by Cohabitation – archaic.
Undisclosed Principal
What if an agent does not disclose that he or she is acting as an agent?
Use Siu Yin Kwan v Eastern Insurance Co Ltd [1994] as precedent:
(1) An undisclosed principal may sue or be sued on a contract made by an
agent on his behalf, acting within the scope of his actual authority. But
the agent must have actual express or implied authority to do so.
Otherwise, neither ratification nor ostensible authority will give the
principal the right to sue. (Think: can’t use ratification if the 3rd party
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doesn’t know you exist, ostensible auth won’t work since p’pal not
holding anybody out..)
Construction Engineering (Aust) v Hexyl (1985, HCA)
Facts: written contract between agent and principal saying agent could not
contract as an undisclosed agent. Agent did.
(2) In entering into the contract, the agent must intend to act on the
principal's behalf.
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Only relevant to relationship between principal and agent. We want
to distinguish occasion where agent is making a personal K, or was
doing so on principal’s behalf.
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Cts ask: “Did agent and principal have a common agreement that
agent would be acting for the principal?” Here, evaluate based on
facts such as K’s, what was said, etc.
(3) The agent of an undisclosed principal may also sue and be sued on the
contract. But you may only sue EITHER agent or principal, agent then
has right to sue principal. Principal’s right to sue prevails over agent’s
(so principal can take over proceedings): Atkinson v Cotesworth (1825,
English)
(4) Any defence which the third party may have against the agent is
available against his principal. Example: If agent uses deceptive
conduct. Idea is that agent is acting for principal.
(5) If the terms of the contract, expressly or by implication, make it
inconsistent for there to be an undisclosed principal, then there cannot
be one. Excluding an undisclosed principal best done by an explicit
clause in the contract.
Siu Yin Kwan v Eastern Insurance Co Ltd [1994, English]
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Facts: Employer tries get insurance for employees, hire an agent to do so
in agent’s name. Two of employer’s sailors killed in course of employment,
successfully sued. But employer goes bankrupt, and takes action against
the insurer. Insurer argues that there is nothing in the contract to disclose
the existence of an undisclosed principal.
LORD LLOYD:
Ask: Is there anything in this contract that says that the agent is NOT
working for an undisclosed principal. "If courts are too ready to construe written
contracts as contradicting the right of the an undisclosed principal to intervene, it would
go far to destroy the beneficial assumption in commercial cases.”
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