The Relationship between Contract and Agency Law - Essay Example

LAW ASSIGNMENT INSTITUTION NAME STUDENT NAME PROFESSOR'S NAME DATE OF SUBMISSION Word count 2,197 Introduction Business laws are rules and regulations that are formulated to ensure lawful business activities are undertaken by any individual. This rule ensures that there is a fair competition in the market, and there are no conflicts that arise from any business transaction. The existence of commercial laws ensures that the business people are protected from the customers and at the same time the customers are protected from the fraudulent business personnel. However, in this world of business, we are living in there is no ideal ideals business situation. There is no contract that can lack a breach from either party. The laws of tort are mostly violated by individuals who lack trust and honest. Individuals with fraudulent minds will always want to obtain something out of wrong procedures and at the end of the time they want to get unfair profits. In this article, commercial laws which arise from the given scenarios and case study will be addressed adequately and exhaustively. Commercial laws that are violated in this case are many depending on the perspective of each person in the scenario. The first law that is breached is the laws of contract, according to Theo the contract is breached since he is not paid for the lease agreement reached upon with Cassie, who is a business development manager at MME. From Theo’s perspective, he was supposed to be paid by the company for the lease of the premises since the contract was executed in writing by both parties. According to the Australian business laws, a contract is a legally binding agreement between two or more parties. From the above scenario, the execution of an agreement by both Theo and Cassie made the lease to be a binding contract which was to be obeyed by both parties. According to Goldberg, and Victor, (2015), Cassie was no able to complete her obligation in the execution of the business contract that was signed with Theo. This was because the chief executive office of MMA was not in a position to agree to such a contract. This is treated as a breach of contract since Pat contradicted his idea of ensuring that contract went through, and Theo is paid the agreed amount as stated in the agreement (see Miller v. Chase Home Finance). However, Pat denies the existence of such agreement. Legally, the failures of the business to fulfill the contractual agreement is referred to as a breach of contract. Theo can file a lawsuit to demand for compensation if the contract was breached and the jurisdiction will allow him to be compensated for the losses. Pat may also claim that there was no contract between the two parties. This is because Pat is the chief executive officer of the company and was never involved in the signing of the agreement. This will render the agreement as invalid since for an agreement to stand there has to be a complete understanding between the parties involved. Even a simple handshake with Theo would have indicated that the contract is sealed. The decision to determine whether the contract stands will entirely depend on the jury and the fact that there is a chance that Cassie had the powers to sign the agreement and make it valid instead of the chief executive officer as cited in Sonic-Calabasas A, Inc. v. Moreno, (2013) 57 Cal. 4th 1109. Secondly, the other scenario from the case study give is there is the element of fraudulent misrepresentation. In this case, the MME company can be said to have been misrepresented by Cassie. Theo can sue Cassie for fraudulently misrepresenting the company since she executed the agreement without approval by the director of the company, Pat. When an organization is run by various individuals, there has to be an understanding of who to take part in the formulation of a contract and finally signing of the contract. When one party has a representative who misrepresents the others, this is found to be breaching of the law of contract as cited in Wigod v. Wells Fargo Bank, NA, 673 F.3d 547 (7th Cir. 2012). Cassie can be said to have misrepresented the company. However, misrepresentation can be either made without the knowledge of the participants. When a person represents a party in a contract and the person is negligent in the formation and execution of the contract, the person is said to have misrepresented the party (McKendrick, 2014). Cassie misrepresented MMA in the leasing agreement made with Theo since he had not communicated about the prospect of the search for the premise to the chief executive officer. This is a case of misrepresentation where recklessness is involved; Cassie did not bother to ask Pat about the procedure of obtaining the lease and agreement. Cassie was instructed by the chief executive officer to visit the central business district of Ballarat and make inquiries about the convenient location and premise to open a branch of the company. Basing on this grounds, Theo can file a lawsuit to claim compensation since the company breached contract due to misrepresentation. Cassie acted recklessly to induce the other party to the contract and agreement before confirming from the superiors of the company. Cassie did not report back to the company as instructed but decided to enter into a lease agreement with Theo (Sneddon, et al., (2012). The company can defend itself from misrepresentation by claiming that the contract was not valid from the start. This is because Cassie decided to execute the contract, but the company was not aware of any contract talks going on between the two parties. Pat also called to confirm from Theo on the prospect of the premises. This was to act as a proof that the person to finalize on the contract was Pat. This will make the company defend itself from the grounds of misrepresentation. The company expected Theo to showcase the premise to Cassie and then complete the agreement with the chief executive officer. The contract can also be termed as invalid since it doesn’t meet the threshold of a legal contract. There are many contracts that people enter without realizing when a party agrees to make certain amount of payment or taking various actions against something at a given time is thought to be entering into contract. A contract is, therefore, a legally enforceable terms which are agreed upon by the parties involved. For a contract to be legally binding, there must be a sign of agreement between the two parties. This can be through facial gestures or simply by shaking hands. A written contract is therefore signed to indicate that the agreement is binding, and hence breaching of that particular contract leads to constitutional penalties if the found party is guilty as seen in Schnabel v. Trilegiant Corp., 697 F.3d 110 (2d Cir. 2012). For this case, there are no signs of legal binding agreement made between the parties involved. Pat is not seen to have agreed on the terms of contract hence, never signed the agreement to make it formal. The company will not be liable in case the contact is claimed to have been binding since the chief executive officer was never involved in the process of formalizing the contract. Theo will not be able to file a lawsuit to seek compensation for the non-existing contract. A non-binding contract is found to be based with no clear understanding among the parties involved. Theo will not be able to get any compensation basing on this dimension of the contract execution. Cassie was not able to complete the contract since the confirmation had to come from the chief executive officer. Pat never signed the agreement and hence it would not count to be on any grounds to sue the company (Titan Ins. Co. v. Hyten). According to the business laws, the contract which has not been signed will not hold to be referred to as contract. When a contract is signed, then it becomes a binding element in creating an agreement and can later be used as an evidence to claim compensation whenever one party has violated the contract. The relationship between contract and agency law Agency law is preferred in a situation where the principal is in a position to be able to use another person to do any transaction on their behalf. The principal, in this case, is the company or the organization in which it wants to obtain an agreement for certain business activity from another party. The person representing the company will be referred to as the agent. The agent is legally associated with company in which he or she is representing. Sometimes the agent may not be legally representing the company, but the contract is legal as far as there is no detected form of irregularities in the contract. The are several importance of agency in the initiation of the common law. According to Sitkoff, (2013), The agency law helps in ensuring that the agents who are used in the making contracts for large corporations conduct the transactions and agreements in a legal way. It ensures that there are little or no fraudulent activities while contract are made to ensure that various business activities are accomplished without much involvement of the corporation. The purpose of agency law is to ensure that the owners of large corporations can delegate duties to its employees during contractual agreement and transactions. There are several activities that the owners of the company are involved with hence it's normally necessary for them to employ agents who will represent them in undertaking various business transactions. In a partnership the individual partner act as an agent who represent the rest of the partners. The rest of the partners may not be able to get involved with the all business activities undertaken by the partnership. According to partnership act, the involvement of one partner in any business contract is binding since he/she act as a representative of the partnership. The shareholders of various corporations will not be able to participate in transactions of the company or any business activity. However, they appoint the directors to ensure that the company can participate in various business activities (DeMott, 2014). Agency law is normally thought together with the partnership and corporate acts since it has much influence on the outcome of the organization which used agents in various business transactions. However, agency laws apply in almost all the areas of business laws. The agency laws are related to contract when the contract is at the stage of validation. The agent representing certain firm has to be able to validate the contract made between the two parties involved. The agent has to be legally representing the company in undertaking any transaction between both parties. The agency law also applies in tort when there is liability involved with the use of agents in undertaking any business activity (Dal Pont, 2014). There are several issues which arise due to the use of agent in making agreements and signing of contracts. The principal can be able to cancel the agreement made by its agents whenever there are irregularities involved. The agency law guards the principal from misrepresentation by agents (Hillman, 2012). There are situations where the agents falsify information about its principal and hence the realization of this leads to the cancellation of the contract and the parties involved in the contract can be sued by the affected parties. This protect the principal from any fraudulent contracts. The agent will not be liable for the inconvenienced caused by the principal whenever a legal action is taken against those that are involved in the contract. The problem arising from any contract can be easily attributed to the agent since he/she is directly involved in the formulation of the contract. When a loss occurs in a contractual agreement, the agent will be the soft target by the principal since the agent may not be even wealthy enough to recover the loss. The agent is protected from litigation since he/she does not have the power to be involved in much of the agreement terms hence benefiting less from the contract. However, there are case where the agent is responsible for the occurrence of the loss in the development of a contract. This will be limited to only the principal and the agent hence the involvement of the third party is minimal. This will deviate from agency law since it only deals with the involvement of an agent with a third party (Poole, 2014). In conclusion, agency law ensures that both parties who are involved in the formulation of a contract have a fair treatment whenever there is any legal issue involved. The agent has a fully legal capacity to represent the principal in entering into contractual agreement. The agent is protected from any liability arising from a contract since the principal has the full capacity to review the contract before the agreement is enforced. The third party is also protected from any legal action taken against them whenever the contractual agreement is termed as invalid in a commercial court. Bibliography Burton, Steven J. (2012). Principles of contract law. Chen-Wishart, M. (2012). Contract law. Oxford University Press. Coops, C & Huett, L 2006, Section 52: the sounds of silence, King & Wood Mallesons, viewed 29 November 2012 Dal Pont, G. (2014). Agency and Powers of Attorney—Union or Intersection?. Journal Of Contract Law, 32, 1-35. DeMott, D. (2014). Agency in the Alternatives: Common-Law Perspectives on Binding the Firm. Forthcoming in Research Handbook on Partnerships, LLCs and Alternative Forms of Business Organizations (Robert W. Hillman & Mark J. Loewenstein, Eds.)(Edward Elgar 2015). Goldberg, Victor P. (2015). Rethinking Contract Law and Contract Design. Edward Elgar Publishing. Hillman, R. A. (2012). The richness of contract law: An analysis and critique of contemporary theories of contract law (Vol. 28). 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