Sample Law Case Studies Paper on Agency Law

Agency Law

Question One

Issue

The main issue arising from the above case study is whether Goldman Asset Management was acting on behalf of PharmaCo international. In other words, it seeks to establish whether there was any form of agency existed between the two parties. PharmaCo international sought to distribute service painkiller drugs from Paratol Limited. The drugs were worth $ 2,000,000. The payment process was to take place via Goldman Asset Management, which in the above case was to act as the agency firm on behalf of PharmaCo international PharmaCo International went bankrupt in the coming years, and the process left the burden to Goldman Asset Management. The company was divided into two sections. The first one was the Processing and Payment section while the second one was the Guarantee and Valuation Department. The processing part of the PharmaCo International was to be catered for by the processing and payment section of the company while the Guarantee part was to be catered for by Guarantee and Valuation Department. The main bone of contention revolves on whether GAM was acting on behalf of PharmaCo International. If it is established that the company was acting on behalf of the other party, then it is more likely that the company was liable. However, if it is established that the company there was no form of agency, then PharmaCo international will be required to cater for all the damages. In the above case, the principal was PharmaCo International, the agent was Goldman Asset Management, and the third party was Paratol Limited.

Relevant Law

Laws establishing an element of agency between PharmaCo international and GAM will be used to determine the relevant action to be taken by Paratol limited. The first issue is to establish whether any form of agency existed between the two parties.  There are several types of agents.  They include general agents, special agents, and universal agents. Of particular importance in the above case are special agents. These types of agents are recruited to carry out specific functions or transactions. When GAM accepted at a given point to transact any form of business with Paratol that related to PharmaCo international an aspect of the agency was directly established between the two parties. Agency is established between the principal and agent and not with the third party. a good example is the case of International Harverster Co of Australia Pty Ltd v Carrigan’s Hazeldene Pastoral Co (1958). Agency exists when one party accepts to transact any form of business on behalf of the other parties. Apart from determining the exact time that any form of agency is established between any two parties, it is important to determine the exact time that any form of agency become dissolved.  There are several ways in which an agency is dissolved. One of the major reasons is when one party either the agent or the principal has been declared bankrupt and cannot, therefore, cannot meet all their obligations to the required parties. Termination of any form of agency between the two parties is also allowed when parties are either winding up or are under any form of receivership Stern v. Marshall, 131 S. Ct. 2594, 564 U.S., 180 L. Ed. 2d 475 (2011)[1]. The above forms of termination are founded under the law. There are cases where termination of agency comes from either the principal or the agent. Agency can also be terminated when any word or conduct of the principal is inconsistent with the fulfilment of certain roles Alvarez v. New Haven Register, 249 Conn. 709 (Sup. Ct., Conn., 1999)[2]. In such cases, the principal may fail to indicate to the agency their current condition that may have an impact on the role of the agent. The termination of any form of agency can be informed of writing or oral conversations Scheerer v. Fisher, 688 S.E.2d 472 (Ct. App., N.C., 2010)[3].

The second major issue that relates to the above case was the form of authority granted to the agent. There are different forms of authority granted to a given agency. They include express authority, implied authority, and apparent authority. All of the above forms of authority may determine the individual who is liable for any form of damages. Express authority is the strongest form of authority that can be established between the principal, the agent and the third party.  [4]This form of agency comes in the written form and shows that the principal has provided express authority for the agent to act completely on behalf of the party. A common example of this form of authority is found in company cheques where the agents write checks for payments.  In express authority, the principal bears all the risk in case the agent acted wrongfully.  A good example of such a scenario is found in the case of Allen A. Funt Productions, Inc. v. Chemical Bank.  When express authority is granted, the principal is supposed to cater for any form of damage that might have arisen due to the actions of the agency. An important point is the use of a written statement permitting express authority between different parties.

The third major issues are to determine cases where the agent is directly liable to some of the damages. Agents are liable for damages when act outwards directly disobeying the orders that had been provided by the principal[5]. They are also liable when they become negligent in carrying out some of their duties and in the process fail to conduct business in the required manner.  Moreover, agents become liable when they inform the third party of any information that was learnt while in an agency with the principal. In addition to the above agents are not supposed to act outside their mandate in fulfilling their obligations to different parties. When such a scenario occurs, agents are liable for all the damages that have been made Stern v. Marshall, 131 S. Ct. 2594, 564 U.S., 180 L. Ed. 2d 475 (2011)[6].  The above cases illustrate when the agent becomes liable in any form of agency. However, the principal becomes liable under certain circumstances. First, when the party that authorised the transaction was the principal and when the agent had been given the power by the principal to act on their behalf. In this case, the form of authority in question is not apparent In other words, the principal becomes liable if the agent followed all the transaction details that were provided by the principal and in no way violated any contractual terms or obligations.

Application / Analysis

Several important facts directly apply in the case of Paratol Limited. In the first case, it is important to establish if any form of agency existed between the two parties that have been mentioned in the above case. Any form of the agency that is direct or implied is created when one party acts on behalf of the other party. Therefore, it is true to imply that there was a form of agency between PharmaCo international and GAM. The second issue is to determine the validity of the agency since there are several important issues that arise from the above case. The first is termination of the agency. PharmaCo international was declared bankrupt after engaging in business with Paratol Limited. Bankruptcy has been mentioned as one of the factors that lead to the termination of any form of agency[7]. If the law is followed to the latter, then it is true to state that the agency relationship that existed between the two entities ended the day the other company was declared as being bankrupt[8] Therefore, GAM was part of the agency relationship and therefore the principal company was too liable for all the damages incurred by another party[9]. Therefore, it is correct to state that GAM was not liable for the above damages.

Secondly, there was no form of express authority that had been granted to GAM. In addition, PharmaCo international choose to engage in different business practices while being fully aware that they were running out of business. Therefore, their actions can be seen to be in bad faith and inconsistent with the required actions of the different parties. In addition, the form of agency that had been created by the two parties was special meaning that the company was only allowed to transact specific business and therefore could not in any way act as the guarantor in case of any financial mismanagement issue[10]. This is the major reason as to why GAM guarantor region never entered into any agreement with PharmaCo international. Their agency was limited to certain conditions, and this is why their business was transacted over the payment section. If GAM accepted to act as a guarantor of the money, then they would have been liable for all the damages. However, this was not the case.

            The agent, GAM acted according to the instructions of the principal. In other words, GAM carried out the instructions of PharmaCo international to the latter and in no way did the company violate any of the instructions provided by the principal[11]. In the above case, PharmaCo international became fully liable for all of its actions since the agent had followed its instructions to the latter. The principal  is estoped from denying the conduct of the agent provided the agent acted in the correct manner. Lysaght Bros and Co Ltd v Falk( No 2) supports the above view.

            Regardless of the two point mentioned in the above case, it is also important to note that GAM as an agency  made several payments on behalf of their principal. They were also in the know concerning the financial status of the company. Therefore it means that they knew that PharmaCo was going down but still engaged with a third party. In essence this is the role played by guarantors. By the manager signing the letter, it was an indicative step that they had apparent authority making them liable to the damages or in this case liabilities.

Conclusion

Agency was established between GAM and Pharmaco international meaning that GAM would act o behalf of PharmaCo international in any transaction. After Agency has been established the main issue trickles down to whether the manager had authority to sign the transaction or not.  If Paratol establishes that agency existed and that the manager at GAM had authority to sign letters on behalf of the principal, then Paratol can hold GAM liable as the guarantor of Pharmaco  International. A  good example is provided in the case of Pacific Carriers Ltd VS BNP Paribus.  In addition to the above, it can be argued that GAM knew of the financial status of PharmaCo International and more so about their asset evaluation.  They knew the company was going bankrupt but never paid any attention to informing the other party of their principal. Since they already acted as the guarantor to PharmaCo international which is now on debt they should pay up the damages

Question Two

Right and Liabilities of Fast Gravel Pty Ltd’s

Issue

The major issue is to determine where liability should apply especially in cases where the agent provides wrong information regarding information provided by the principal[12]. In other words, the principal is not aware of the actions of the agent. Additionally, it seeks to establish the validity of the agency between the two parties.

Relevant Laws

 Different forms of agency are created using different approaches. These forms include express agreements, implied agreements, estoppels, ratification and operation of different laws. A good example of an estoppel relationship is the case of Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd Express agreements are formed between agents and principals through several different means. These means include word of mouth, writing, and use of different deeds[13].  Verbal responses involve making an offer for the agent while writing procedures follow certain principles recorded in statutes.  Deeds are used when wills are to be executed by a given party. A good example is the case of Transfer of Land Act 1893[14]. Implied agreements are inferred from different circumstances while estoppels is whereby the actions of an individual either through the use of words makes another party believe that they are in agreement[15]. Whether an individual or a given party has made another party believe that they are their agents remains an issue of fact that is to be determined based on circumstances. A good example involves the case of Crabtree-Vickers PL v Australia Direct Mail Advertising[16].

The second law relates to liability in case of agency. Agents become liable immediately they act on commands that are perceived never to have come from any party. In most cases when the agent acts outside the instructions provided by the principal they directly become liable since they have breached the initial contract that was made between them and the third party.  If an agent impersonates themselves or state to be representing a given individual, they are still liable for the breach of contract because they have directly or indirectly implied that they are acting on behalf of a certain party which is not the case Connick v. Thompson, 131 S. Ct. 1350, 563 U.S. 51, 179 L. Ed. 2d 417 (2011)[17].  In this case, the agent becomes liable to the third party since their actions did not consist with the behavior that is expected from them.

Application and Analysis

For any form of apparent authority to exist between two parties, it is important to note the following. First, a relationship has to exist between the principal and the agent. Any form of representation has to be exclusively given by the principal. In the above case, Amy acted as an agent on behalf of Bob though Bob had not in any way indicated that Amy would represent him in matters to do with agency. Additionally, Bob had not in any way engaged in activities with Amy that could have suggested that the two parties might have formed a given form of contract between them[18]. Therefore, Amy impersonated the role of an agent that was nonexistent between the two parties and in such cases, did not in any way represent the wishes of Bob, who was supposed to act as the principal.

Since  agency has not been established between Amy and Bob, Amy has no authority to act on behalf of Bob and therefore it is not possible for the Amy to represent Bob in any process. However, Bob can ratify Amy and in the process Bob will be required to cater for all the damages  to the company

The third faction was induced to enter into a contract with principal though the party had no information concerning the agency between the two parties. The agent cannot claim to have any form of authority since the third party acted against the norms and no form of ostensible authority can be granted by claiming to act for a party that has not provided the agent with such authority[19].

Fast Gravel Pty Ltd’s can sue the principal and the agent for considerable damages. However after it has been established that no form of agency exists between the two parties, then the other party, which is the agent can be sued for breach of implied contract and all forms of liability that the company was forced to go through[20]. In this case, the agent will be expected to pay for all the damages that were incurred by the above party since the principal had no prior information regarding the above link between the two different parties[21].

Conclusion

 No agency existed between Amy and Bob and thus Bob was not liable for any damages. Fast Gravel Pty Ltd’ to sue the agent for breach of implied agency and therefore, Amy will be expected to pay the whole amount that relates to the above case.

Question 2b

Issues

Liability in the case where the agent never followed the instructions of the principal to the latter.

Relevant Law

All agents are supposed to act basing on the information that has been provided by the client. Failure to do so means that the agent has not followed the instructions of the principal and in such cases the agent becomes fully liable for all of the damages in the case[22]. This case looks at liability to the agent from the principal. Agents become liable when they disobey the orders provided by the principal[23]. A good example is in the case of Egyptian International Foreign Trade Co v Soplex Wholesale Supplies Ltd [1985]. They also become liable when the agent becomes negligent in carrying out some of their activities. In addition, the agent can become liable if they release any information regarding the nature of their agency

Application and Analysis

If Bob was indeed interested in having the sand, it means that there was a form of agency between Bob and Amy. Also, Bob must have specifically provided Amy with the required instructions on the type of sand as well as the amount that was going to be paid immediately the sand had been delivered. Fast Gravel Pty Ltd’ claims that the amount payable to the above party was less by $50. In other words, the agent never adhered to the instructions provided by the principal. Amy formulated her instructions and provided them to the third party.  The instructions never showed the intent of the principal. Therefore, it is more likely that the agent becomes liable for the extra amount that was supposed to be paid by the principal. If the principal had in any way indicated that the charges on the delivery of the items were to be sent and later on changed tact, then they are expected to be liable for the charges Maples v. Thomas, 132 S. Ct. 912, 565 U.S., 181 L. Ed. 2d 807 (2012)[24]. However, as it currently stands, the liability remains with the agent for failing to follow instructions provided by the principal.

The above form of relationship will have to be ratified before it officially categorised as a form of agency between Bob  and Amy. Once it has been ratified it means that all the original instructions provided by the agent to the third party would follow to the latter. It therefore means that if the sand was delivered then the principal Bob would pay all charges according to what the agent- who in this case would be Amy- had agreed on with the third party. Ratification is highlighted in the case of “International Harvester CO VS cardigan[25]

Conclusion

The principal provided the right information to the agent and therefore has no liability on the above issue. Since the agent failed to provide the instructions as provided by the principal, they are expected to cater for the charges that were not requested by the principal[26].

Bibliography

  1. Stern v. Marshall, 131 S. Ct. 2594, 564 U.S., 180 L. Ed. 2d 475 (2011).
  2. Alvarez v. New Haven Register, 249 Conn. 709 (Sup. Ct., Conn., 1999)
  3. Scheerer v. Fisher, 688 S.E.2d 472 (Ct. App., N.C., 2010)
  4. McKendrick, Ewan. Principles of English Commercial Law. Oxford University Press, USA, 2
  5. Thampapillai, Dilan. “Agency Law.” Australian Commercial Law (2015): 135.
  6. Stern v. Marshall, 131 S. Ct. 2594, 564 U.S., 180 L. Ed. 2d 475 (2011).
  7. Thampapillai, D., Tan, V., Bozzi, C., & Matthew, A. (2015). Australian Commercial Law.
  8. Thampapillai, Dilan. “Agency Law.” Australian Commercial Law (2015): 135
  9. Harts v. Farmers Insurance Exchange, 597 N.W.2d 47 (Sup. Ct., Mich., 1999)
  10. Goldberger, Jeffrey. “Contract law in the cases: 2013 in review.” Commercial Law Quarterly: The Journal of the Commercial Law Association of Australia 28, no. 2 (2014): 12.
  11. Eater, Waste & Land, Inc., d/b/a Westec v. Lanham, 1998 WL 112869 (Sup. Ct., Colo.)
  12. Owen, David. Products Liability Law, 3d (Hornbook Series). West Academic, 2014.
  13. Goldberger, Jeffrey. “Contract law in the cases: 2013 in review
  14. Alvarez v. New Haven Register, 249 Conn. 709 (Sup. Ct., Conn., 1999)
  15. Wilken, Sean, and Karim Ghaly. The Law of waiver, variation and estoppels
  16. Scheerer v. Fisher, 688 S.E.2d 472, 202 N.C. App. 99 (Ct. App. 2010)
  17. Goldberger, Jeffrey. “Contract law in the cases: 2013 in review
  18. Crabtree Vickers PL v Australia Direct Mail Advertising
  19. Connick v. Thompson, 131 S. Ct. 1350, 563 U.S. 51, 179 L. Ed. 2d 417 (2011).
  20. Goldberger, Jeffrey. “Contract law in the cases: 2013 in review The Journal of the Commercial Law Association of Australia 28, no. 2 (2014): 12.
  21. Twomey, David. Labor and Employment Law: Text & Cases. Cengage Learning, 2012
  22. Craig, Paul, and Gráinne De Búrca. EU law: text, cases, and materials Oxford University Press,   2011.
  23. Eater, Waste & Land, Inc., d/b/a Westec v. Lanham, 1998 WL 112869 (Sup. Ct., Colo.)
  24. Harts v. Farmers Insurance Exchange, 597 N.W.2d 47 (Sup. Ct., Mich., 1999)
  25.  International Harvester CO VS cardigan
  26. Maples v. Thomas, 132 S. Ct. 912, 565 U.S., 181 L. Ed. 2d 807 (2012)

[1]  Stern v. Marshall, 131 S. Ct. 2594, 564 U.S., 180 L. Ed. 2d 475 (2011)

[2] Alvarez v. New Haven Register, 249 Conn. 709 (Sup. Ct., Conn., 1999)

[3] Scheerer v. Fisher, 688 S.E.2d 472 (Ct. App., N.C., 2010)

4McKendrick, Ewan. Principles of English Commercial Law

[5] Thampapillai, Dilan. “Agency Law.” Australian Commercial Law (2015): 135

[6]  Stern v. Marshall, 131 S. Ct. 2594, 564 U.S., 180 L. Ed. 2d 475 (2011)

[7]  Thampapillai, D., Tan, V., Bozzi, C., & Matthew, A. (2015). Australian Commercial Law

[8]  Thampapillai, Dilan. “Agency Law.” Australian Commercial Law (2015): 135

9 Harts v. Farmers Insurance Exchange, 597 N.W.2d 47 (Sup. Ct., Mich., 1999)

10Goldberger, Jeffrey. “Contract law in the cases: 2013 in review.” Commercial Law Quarterly: The Journal of the Commercial Law Association of Australia 28, no. 2 (2014): 12

[11]  Eater, Waste & Land, Inc., d/b/a Westec v. Lanham, 1998 WL 112869 (Sup. Ct., Colo.)

[12]  Owen, David. Products Liability Law, 3d (Hornbook Series). West Academic, 2014.

[13]  Goldberger, Jeffrey. “Contract law in the cases: 2013 in review

[14]  Alvarez v. New Haven Register, 249 Conn. 709 (Sup. Ct., Conn., 1999

[15]  Wilken, Sean, and Karim Ghaly. The Law of waiver, variation and estoppels

[16]  Scheerer v. Fisher, 688 S.E.2d 472, 202 N.C. App. 99 (Ct. App. 2010)

[17]  Goldberger, Jeffrey. “Contract law in the cases: 2013 in review

[18]  Crabtree Vickers PL v Australia Direct Mail Advertising

[19]  Connick v. Thompson, 131 S. Ct. 1350, 563 U.S. 51, 179 L. Ed. 2d 417 (2011)

[20]  Goldberger, Jeffrey. “Contract law in the cases: 2013 in review The Journal of the Commercial Law Association of Australia 28, no. 2 (2014): 12

[21]  Twomey, David. Labor and Employment Law: Text & Cases. Cengage Learning, 2012

[22]  Craig, Paul, and Gráinne De Búrca. EU law: text, cases, and materials Oxford University Press,  2011

[23]  Eater, Waste & Land, Inc., d/b/a Westec v. Lanham, 1998 WL 112869 (Sup. Ct., Colo.)

[24]  Harts v. Farmers Insurance Exchange, 597 N.W.2d 47 (Sup. Ct., Mich., 1999)

[25]  International Harvester CO VS cardigan

[26]  Maples v. Thomas, 132 S. Ct. 912, 565 U.S., 181 L. Ed. 2d 807 (2012)