Agency,innkeepers doctrine,and liquor licensing law - Case Study Example

ial Questions on Week 9 Topics: Agency, Innkeeper's Doctrine and Liquor Licensing Law Question a) Worf (the "third party cannot enforce the contract against Picard (the "principal") because Riker (the "agent") acted outside its actual authority and against the instructions of the principal. In the given problem, the named principal instructed the agent to negotiate for the wine collection with a limit of $200,000 but the agent contracted, in violation of the named principal's instructions, with the third party in an amount of not less than $220,000 for the wine. If a principal is disclosed and named, and the agent acts out outside its actual or apparent authority, then only the agent is liable to the third party. Hence, Worf cannot enforce the contract against Picard. (b) No, the answer would still be the same even if the agent had not informed the third party of the name of the principal because the agent acted outside its actual authority and against the instructions of the unnamed principal. In the given problem, the unnamed principal instructed the agent to negotiate for the wine collection with a limit of $200,000 but the agent contracted, in violation of the unnamed principal's instructions, with the third party in an amount of not less than $220,000 for the wine. If a principal exists but the name of the principal is not disclosed, and the agent acts out outside its actual or apparent authority, then only the agent is liable to the third party. Hence, Worf cannot enforce the contract against Picard. (c) Yes, the answer would be different if the agent had not informed the third party that he was acting as an agent. In such case, the third party may choose whether to sue the agent or the principal. Under the doctrine of undisclosed principal, where existence of the principal is undisclosed, and there is a subsequent dispute over the contract, the third party may choose, usually based ability to satisfy any judgment, whether to sue the agent or the principal. However, a third party who obtains judgment against either the principal or the agent, the third party loses all rights against the other. Hence, Worf may chose to enforce the contract against Picard. (d) Yes, the principal has a cause of action against the agent for having acted outside its actual authority and against the instructions of the principal. In the given problem, the principal instructed the agent to negotiate for the wine collection with a limit of $200,000 but the agent contracted, in violation of the named principal's instructions, with the third party in an amount of not less than $220,000 for the wine. Specifically, the principal in the given problem has the following causes of action: (1) for rescission of the agency agreement, (2) refusal to pay the agent commission or the flat fee for the agent's services, (3) a claim for damages, (4) a cause of action for the recovery of secret commission (the 'gift' of four cases of rare vintage wine accepted by the agent), and (5) criminal charges for accepting a secret commission in the form of a 'gift' of four cases of rare vintage wine. Picard, therefore, has several causes of action against Riker. (e) Should the principal in the given problem voluntarily chose to accept the agreement concluded by his agent and the third party, Picard will be deemed to have ratified the acts of his agent. Under the legal principle of ratification, where an agent enters into a contract without any authority, the principal can ratify the action; or where an agent enters into a contract for an existing principal and in so doing exceeds its authority, the principal can ratify the action. The principal's ratification of the agents acts, however, are subject to the following conditions for a valid ratification: (1) when contracting, the agent must be clearly acting as an agent, not personally, and the third party must be aware that they are acting as an agent; (2) the principal must exist when the agent contracts; (3) the principal must have the capacity to contract for the object of the contract at the time of the contract and at the time of ratification; (4) the principal must ratify the whole contract; (5) by the time of the ratification, the principal must have full knowledge of the transactions between the agent and the third party; (6) ratification can only be by the principal for whom the agent was acting when the contract was made; and (7) the ratification by the principal must be made within a reasonable time. Therefore, should Picard voluntarily chose to accept the agreement concluded by his Riker and Worf, then Picard will be deemed to have ratified the acts of his agent and the legal principle of ratification applies. Question 2. Tanya will be responsible for the sum of $15,000 payable to the contractor arranged by Steve under the principle of agency by necessity. Under the legal principle of agency by necessity, where there is an existing contractual relationship or that the contracting party has been put in a position where they were entrusted with the property of another, immediate expense was reasonably necessary in the circumstances to preserve the property. It must be shown that it is virtually impossible to contact the owner of the property and that the agent acted in the best interests of the principal and not in their best interests or the best interests of others: Great Northern Railway Co v Swaffield (1874) LR 9 EXCH 132, and Springer v Great Western Railway Company (1921) 1KB 257. In the given problem, it is virtually impossible for Steve to contact Tanya as the altter was hospitalized as a result of an accident. Moreover, the problem shows that Steve acted in the best interests of the Tanya only and not in his own best interests or the best interests of others. Hence, under the principle of agency by necessity, Tanya will be responsible for the payment of the sum of $15,000 to the contractor. Question 3. (a) The term breach of warranty of authority refers to a situation where the agent has falsely claimed to have authority the agent does not in truth possesses. For a cause of action based upon a breach of warranty of authority to be successful, the following conditions must exist: (1) the agent falsely claimed to be acting with the principal's authority; (2) the claim of authority induced the third party to enter the contract with the principal; (3) the third party was not aware of the lack of authority; and (4) the third party suffered loss. (b) A contractual agency may be terminated by the performance of the agency contract as agreed, mutual agreement, revocation of the agent's authority, renouncement of authority by the agent, and acceptance of secret commission. A contractual agency may likewise be terminated by operation of law as in the following cases: by the lapse of a set time period for the life of the agency, death, bankruptcy or insanity of the agent or principal, by the frustration of the contract, and when object of the contract becomes illegal. Question 4. It is important in common law to identify the duties of innkeepers1 because under the innkeeper's duty to safeguard guest's property, common law imposes strict liability upon the innkeeper for such loss and damage. The innkeeper's duty to safeguard guest's property is only subject to a limited defence which is one of the four perils of travel - the act of god, act of the Queen's enemies, inherent vice and the guest's fault. For an innkeeper to be strictly liable at common law under this duty, the property of guest must be infra hospitium or within the precincts of the inn. The duties of the innkeepers maybe be limited by limited liability legislations. Most Australian states and other countries in fact have legislation which limit the amount for which inns will be responsible. To be able to utilize or benefit from limited liability legislations, however, it is necessary that hotels strictly comply the following conditions: (1) provide and make available at all times a safe for guests' property and post notices of such availability in designated areas of the hotel; (2) post notices that the hotel's liability is limited; (3) the posting of the notice should be clear, direct and conspicuous; and (4) the hotel must strictly follow the legislation otherwise it will lose the protection and benefit o of the limited liability statute and consequently, the common law unlimited and strict liability applies. Nevertheless, most statutes also provide that the hotel will lose the protection of the statue if the hotel is negligent as in case where an employee of the hotel stole the guest's property or did not properly lock up the storage room. The right to set the "rules of house" is significant because the said right maybe invoked and useful in countries without any innkeeper limited liability legislation limiting the amount of strict liability. The right to set the "rules of house" is subject to the condition that the reasonable rules must be brought to guest's attention and that the rules must not exclude or limit liability contractually which is void at common law. Question 5. Under Section 3 of the South Australian Liquor Licensing Act 1977, the purposes and functions of liquor licensing, in general, is to regulate and control the sale, supply and consumption of liquor for the benefit of the community as a whole. In particular, the purposes and functions of liquor licensing are as follows: "(a) to encourage responsible attitudes towards the promotion, sale, supply, consumption and use of liquor, to develop and implement principles directed towards that end (the responsible service and consumption principles) and minimise the harm associated with the consumption of liquor; (b) to further the interests of the liquor industry and industries with which it is closely associated - such as the live music industry, tourism and the hospitality industry - within the context of appropriate regulations and controls; (c) to ensure that the liquor industry develops in a way that is consistent with the needs and aspirations of the community; (d) to ensure as far as practicable that the sale and supply of liquor contributes to and does not detract from the amenity of community life; and (e) to encourage a competitive market for the supply of liquor." Question 6. (a) Denny may not be held liable for discrimination by asking Shirly for her identification because under Section 115 of the South Australian Liquor Licensing Act 1977 (the "Act") any evidence of age may be required. Hence, the charge of discrimination against Denny may not prosper. (b) However, Denny, Rose and the hotel have violated several provisions of the Act. Section 108 of the Act provides that liquor is not to be sold or supplied to intoxicated persons, thus: "(1) If liquor is sold or supplied on licensed premises to a person who is intoxicated, the licensee, the responsible person for the licensed premises and the person by whom the liquor is sold or supplied are each guilty of an offence." In the given problem, Rose sold another Scotch and Coke to Allen who was clearly intoxicated. Hence, the hotel (the licensee), Denny (the responsible person for the licensed premises) and Rose (the person by whom the liquor is sold or supplied) are each guilty of an offence under the Act. Nevertheless, the Act provides for defence to the charge of the said offence, thus: "(2) It is a defence to a charge of an offence against subsection (1) for the defendant to prove - (a) if the defendant is the person by whom the liquor was sold or supplied - that the defendant believed on reasonable grounds that the person to whom it was supplied was not intoxicated; or (b) if the defendant is the licensee or responsible person for the licensed premises and did not personally sell or supply the liquor - that the defendant exercised proper care to prevent the sale or supply of liquor in contravention of subsection (1). In the given problem, Rose may invoke the defence that she has reasonable grounds that Alen was not intoxicated. Also, the hotel and Denny may raise the defence that the hotel and Denny exercised the proper care to prevent the sale or supply of liquor to Allen. (c) Furthermore, the hotel (the licensee), Denny (the responsible person for the licensed premises) and Rose (the person by whom the liquor is sold or supplied) may each be held guilty of an offence under Section 110 of the Act by selling liquor to minors, thus: "If liquor is sold or supplied to a minor on licensed premised by or on behalf of the licensee, the licensee, the responsible person for the licensed premises and the person by whom the liquor is sold or supplied are each guilty of an offence. For the licensee, or the responsible person for the licensed premises -$20,000 for any other person - $5000. (2) A licensee who permits a minor to consume liquor on the licensed premises is guilty of an offence - $20,000." In the given problem, Allen turned out to be a minor (15 years old) and hence, the hotel, Denny and Rose maybe held liable under the abovementioned provision of the Act. (d) Furthermore, Denny and the hotel may also be held liable under Section 107 of the Act prohibiting minors from being employed to serve liquor in licensed premises if it is true and if it is proven that Denny's son Brad, who is only 16, sometimes acts as a bartender when the bar is very busy. (e) Moreover, the hotel and Denny have the power to remove or refuse entry (Section 24), power to bar (Section 125) and power to remove person who is barred (Section 127) under the Act. Reference: Latimer, p 2002, Australian Business Law, CCH Australia limited, Sydney, NSW Read More