COMMLAW 7012 Business And Corporations Law


This assessment will show you your ability engage in legal research.

1. To identify legal issues that arise out of new factsual situations. 2. To analyse the applicable laws and to determine which rules are relevant and then to apply the law to the problem.

2. summarize the applicable law and create a report to a client that states which liabilities result from unique factual situations


Issue: Based upon the facts in the question, it must be decided whether Brad has entered into a valid contract to purchase petrol from Caltex. Tina will also need to decide if such a contract is binding.

The issue arises because Tina specifically told Brad not to enter into a contract with Caltex for the future purchase of petrol.

A second issue is to decide if Paul had made a secret profit when he was Tina’s agent.

Law: The principles of law related to agency must be applied in order to resolve the above-mentioned questions.

An agency is a contract between two parties, called the principal or agent.

It is required that the principal has given the agent power to execute the contracts.

This situation results in the principle being legally bound by such an agreement (Watteau and Fenwick, 1893).

In such a situation, the relationship that develops between the principal agent and the principal is not the only one. A relationship is also established with the third-party.

A legal relationship is formed between the agent and the third party as a result.

Even if the agent created the contract in this case, the law on agency provides that no relationship exists between the agent or the third-party (Harris Hargovan and Adams 2015).

The law on agency defines the types of authority that an agent can have from the principal (Freeman and Lockyer in Buckhurst Park Properties(Mangal) Ltd., 1964).

Accordingly, the law of agency allows for the principal to give the agent actual authority, apparent authority, or the authority necessary.

Concerning the agent’s express authority, the principal can confer authority on the agent orally and in writing.

Implied authority can also be used. Even though the principal may not have conferred authority directly on the agent, but because the agent is in his current position and some type or authority has been attached to that position, it can still be said that the agent holds this implied authority. (Lipton Herzberg, Welsh, 2016).

The agent also had apparent authority in a case that no authority had been conferred on him by the principle. However, the principal made representations to the other parties that such an authority be granted to the agent.

While it is not required that an agent present live, it is necessary that the principal has made the representation in relation to the authority of agent. (Christie and Another v Harcourt & Co., 1973).

This representation can also be made by a principal in the form or inaction.

The law stipulates that the principal must inform third parties that an agent is not authorized in such situations.

It is possible that the principal could be held liable if he fails to notify the agents about his lack of authority.

Agents are also required to follow all instructions given by their principal under the law of agency.

If the principal gives directions to the agent, the law could consider the agent a potential liability.

The law also states that the agent must use his talent in a beneficial way for the principal in such a partnership.

It is the agent’s duty to ensure that the principal is well taken care of.

In the same way, the agent has a legal duty to act in good faith.

Agents are also required to consider the best interests and the principal’s needs when acting for them.

Vermeesch and Lindgren (2011) recommend that agents avoid conflicts of interests.

Agents are required to inform the principal immediately if there is any conflict of interest.

Agents are also required to disclose any secret profits made while representing principals (Harris Hargovan and Adams 2015).

The Court in Bentley v Craven (1853), stated that if an agent makes a secret profit, it is permissible for the principal to recover that profit.

Agents are also required to keep the principal’s vital information secret. The agent is prohibited from using such information to make a secret profit (Robb V. Green, 1895).

Application: Based on the rules of law agency in this question.

Tina has given Brad explicit authority in the past for Brad to purchase patrols on her behalf.

Tina was able to recover from her illness and withdrew this authority, telling Brad that he shouldn’t order patrols in the future.

Brad ordered 30,000L patrol despite the fact that this authority had been removed.

It should be noted, however, that Tina had not withdrawn her authority for Brad to purchase petrol. However Caltex and third parties weren’t aware of this lack.

Caltex can therefore reasonably conclude that Brad had the authority for a contract to purchase patrol. Such contract will be binding upon Tina.

The second issue in this question is that Paul made a profit acting as Tina’s agent.

In the same way, everyone had to inform Tina of the true value of her car.

Paul made a conflict of interests by deciding to purchase the car for himself and make a profit from it.

Paul infringed on the duties of his agent.

This law allows Tina to recover the amount from Paul.

Conclusion: Even though Tina explicitly stated to Brad that she would not be ordering patrols in the future, Brad can enforce the contract he made for Caltex’s purchase of patrol.

Caltex was unaware that Tina had withdrawn her authority.

Caltex was able to conclude that Brad had the authority and power to bind Tina.

Paul, however, made a secret profit as Tina’s agent and Tina can claim this amount from Paul.

Question: The question is whether Simon’s agreement binds George, Sara, or Mary. This is primarily because the partnership agreement states that each partner has the authority to enter in a contract worth $10,000. In the event that a contract exceeds that amount, the partner will need to notify the other members.

Before you sign the contract.

A second issue is whether the partnership will be subject to the Simon-created contract to buy the Ute.

Law: You can resolve the above-mentioned questions by following the rules of the Partnership Act.

The Partnership Act states that the parties can enter into a partnership in writing or orally.

The partnership agreement contains all of the powers granted to partners (Graw, Whitford 2015).

The partnership agreement also lists the powers that have been granted to partners.

Accordingly, a partnership agreement can state that when a partner creates a contract that falls under the authority of a partner, the content is binding on the other partners (Robb and Green, 1895).

This is also provided by the Partnership Act. A partner can also act as an agent for other partners (Watteau, Fenwick and 1893).

It is worth noting that the implied authority given to partners is restricted to the nature of the business.

Therefore, if a partner acts in a way that is not consistent with the general business activities of the firm, this act will not be binding on the other members.

Application: Simon has applied to SunStar Computer to purchase a large variety of storage drives for $12,000.

While the current partnership agreement clearly stipulates that only the partners can enter into a contract less than $10,000, it is clear that this contract is binding on the partnership.

Sun Star computer did not realize that the contract was binding on the partnership because of restrictions placed upon the authority of the partners during the signing of contracts.

Sun Star Computers is therefore able to enforce the contract against the partnership.

Simon had created a contract to purchase the secondhand Ute. As we have already mentioned, the partnership was generally in the business of information technology.

Simon entered into the contract to enable the partnership enter the freight business.

It cannot be said that Ute was purchased in the normal course business of the partnership.

This contract does not bind the partnership.

Conclusion: The above-mentioned reasons lead us to conclude that Simon’s purchase of 500 TB storage drives from SunStar Computer NBN was against the other partners.

This is because, even though the partnership agreement states that a partner may enter into a contract for less $10,000, the other partners must be informed before any contract exceeding this amount.

Sun Star Computer was unaware that the partnership agreement contained such a restriction.

It is now that all other partners are bound by Simon’s purchase contract for 500 TB storage drive, regardless of whether this contract was beyond their authority.

Simon’s contract for the purchase of a secondhand Ute at a price of $9000 can be referred to as a “contract within the power of the partners”. However, the contract is not binding on any of the other partners.

This is because the partnership business was not related to the general nature business of the partnership.

The contract does NOT bind Mary, Sara, George and Sara.


Graw, Parker Whitford, Sangkuhl (2015) Understanding Business Law 7th edition LexisNexis Butterworths

Harris, J. Hargovan. A. Adams. (2015) Australian Corporate Law LexisNexis Butterworths 5th Ed.

Lipton P. Herzberg A. and Welsh M. (2016) Understanding Company Law, 18th Edition, Thomson Reuters

Vermeesch. R B. Lindgren. K E. (2011) Business Law of Australia Butterworths.

Case Law

Freeman and Lockyer v Buckhurst Park Properties, Mangal) Ltd [1964] 2QB 480

B. I & 315

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