The UK Commercial Law - Essay Example

UK Commercial Law Scenarios and Questions Question A Advice to Tom on the Legal Issues Involved Tom who lived with Barbara in a large house in suburbia with several pets including pigs, goats and chicken outside in the garden can bring charges against Jerry and animals feeds supplier. He can bring charges against Jerry since he had told him to pass by at a large animal feed supplier and order several bags of animal feeds for him. Whilst he was at the animal feed supplier, Jerry saw a Land Rover for sale in good condition and agreed to purchase it on behalf of Tom. For this case, an agency was created between Tom and Jerry. An agency is created when a person employs another to contract on his behalf thereby creating a relationship of agency. For this case where Tom had authorised Jerry to pass by at the large animal feed supplier and order several bags of animal feeds, an agency was created. An implied agency under the agency by estoppel was created between Tom and Jerry since it was a verbal appointment. 1 An agency by estoppel states that whereas an agency can in general arise by the will of the principal, he may nevertheless so conduct himself leading another to believe that someone is his agent and he is then estopped from denying this fact. For instant, if a person is allows another to order goods on his behalf and always pays for them, then he will be estopped from denying the authority to a third person who relied on the appearance. (Emerson, 2003) This agency by estoppel is as effective as an agency intentionally created. The rule of estoppel is based on the principle of holding out and is not confined to contracts of employment only. (Jertz and Miller, 2004) A relevant case studied is that of:- Scarf v. Jardie of 1882 In this case, a retired partner of the defendant firm negotiated a contract with the plaintiff, who did not know at that time that the partner had already retired from the partnership. It was held that the firm was bound by the contract.2 Another relevant case studied under agency by estoppel is that of:- Lloyd v. Grace, Smith & Co. of 1912 In this case, the managing clerk of the defendant company obtained a client's signature conveying two of her cottages which he fraudulently sold and disappeared with the proceeds The defendant company was held liable because they put him in a position where it would be normal for the employee to have such authorities.3 Since there existed an agency relationship between Tom and Jerry, Tom need to be advised that Jerry might bring a case against him for refusing to accept the Land Rover he bought on his behalf knowing very well that Tom would be very happy with the purchase. Since Jerry was engaged to act as an agent by Tom (principal) whereby he ordered and paid for animal feed on his behalf we can say that Tom acted for undisclosed principal. When he was ordering the animal feed for Tom, he would not have disclosed that he was an agent engaged by Tom since they would not have sold the animal feeds for them because Tom had been banned from their premises. Tom on the other hand needs to be aware that, since his goat had ran amok causing a lot damages to the animal feeds supplier, a case can be brought against him. The animal feed supplier may sue him for trespass by cattle under the law of tort. A trespass by cattle of a person we usually treated as if he has committed it himself. If a man's cattle, poultry, sheep or goats trespass on another's land, the owner of such animals becomes liable for trespass and must pay damages for the damages caused to the plaintiff's crops or property. If the cattle trespassed without causing any damage, the owner is still liable to pay damages because trespass is actionable per se. 4 A relevant case studied under trespass by cattle is that of:- Anderson v. Buckton of 1815 In this case, the defendant's cattle affected by contagious disease trespassed on an adjoining pasture and infected the plaintiff's cattle. It was held that the defendant was liable for damage arising from the spread of the disease and for the damage to the grass. 5 Since Tom's goat had run amok to animal feed's premises causing a lot of damages, he ought to be aware that a case can be brought against him by the animal feed supplier for damages caused by his goat. Tom may defend himself if sued by the animal feed supplier that at the act of trespass by his goat was involuntary and without any negligence by proving that at the time the goat ran amok, there was no negligence on his part. On the issue whereby Jerry purchased a Land Rover on his behalf, he may have ratified the issue if he was interest in the Land Rover even though Jerry had no proper authority to purchase a Land Rover on his behalf or he exceeded his authority to purchase a Land Rover whereas he was authorised to purchase the animal feeds. However, since he was not interested in the Land Rover, he should allow Jerry to take full liability of the Land Rover since; He acted in excess of his authority. This is because, a breach of implied warranty of authority arises where Jerry who professed to act as an agent had no actual authority from Tom to purchase a Land Rover and he exceeded his power. For this case, Tom is under no liability on the contract, but jerry becomes personally liable for breach of implied warranty of authority to the seller of the Land Rover. At the time Jerry was purchasing the Land Rover, he acted for a concealed principal (Tom). A concealed principal is one whose existence or identity is not disclosed by the agent at the time of entering into a contract. For this case, Jerry and the seller of the Land Rover should become liable to each other and therefore, Jerry should continue retaining the Land Rover but not force it to Tom. However, it is immaterial for this purpose that Jerry believed to have authority of purchasing the Land Rover. Advice to Barbara on the Legal Issues Involved Barbara wanted to sell her old computer since he had already order for a new upgraded one. She advertised her old computer and a man approached her claiming to be Sir Giles, owner of the large estate nearby. Barbara released her computer in exchange to a check that later bounced. Later on, she approached Sir Giles and found out that it was the man she had dealt with and it seemed the rogue had disappeared. She later on discovered that her computer had been bought by a local businessman. This case is an issue of misrepresentation under law of contract. Misrepresentation does not render the contract void, but the party misled will be able to avoid the contract by providing that misrepresentation was of fundamental fact, not of law. Misrepresentation usually occurs when a party to a contract is induced to contract with another by a misleading statement made by the second party. The false misrepresentation is not restricted to words, and may be made by the conduct of the parties. For instant, if a person wears the robe of a clergyman and obtains goods from another party by inducing him to believe that he is a clergyman. 6 For this case, the man who gave a cheque that later bounced to Barbara in exchange of her computer misrepresented himself as Sir Giles. For this case, Barbara ought to recover her computer from the local businessman who bought it. On the issue of the computer Barbara wanted to dispose that was alleged to have been bought by a local businessman, Barbara should recover it. Of course when the local businessman bought the computer, there were implied warranties that: - He will enjoy quiet possession of the computer. This meant that when he obtained possession of the computer, he had a right to enjoy it, and if his right of possession and enjoyment was to be disturbed, then he was entitled to sue the seller for the damages. There was also an implied warranty that the computer in question shall e free from any charge or encumbrance in favour of any third party, not declared or known by the local businessman before or at the time where the contract was made. When the local businessman bought the computer, there was an implied condition of right to sell. This means that the seller of the computer had the right to sell the computer and in an agreement to sell, he had the right when the property was to pass. As a result of this, if the title turned out to be defective, the local businessman was entitled to reject the computer and claim damages. A relevant case studied is that of: - Rowland v. Divall of 1923 In this case, the plaintiff bought a car from the defendant and used it for four months before discovering that the car had never belonged to the defendant. The plaintiff had to return the car to the true owner. It was held that the defendant was in bleach implied condition of right to sell and the plaintiff was entitled to recover the full price he had paid because of the total failure of consideration.7 When Barbara agreed to release the computer to a man he believed to be Sir Giles, there was no mistake of identity. For this case, Barbara may not recover the computer from the person he sold. This case is under mistake as to the identity of the other party in law of contract. This type of mistake will nullify the contract where the identity is of material importance, and the mistake is known to be the other party. (Emanuel, 2004) A relevant case studied is that of; Philips v. Brooks Ltd of 1919 A fraudulent person by the name of North entered the plaintiff shop and selected a diamond ring. North paid for the ring by cheque by falsely representing himself to be a well - known Lord, whereupon the plaintiff allowed him to take the ring. North pledged the ring with Brooks. The cheque was dishonoured, and the plaintiff sued the defendant for the recovery of the ring. It was held there had been no mistake to identify, as the plaintiff intended to deal with the person in the shop. The property in the goods had rightly passed to the purchaser.8 For the case of Barbara, in order for her to succeed in the case to recover her computer, she must prove that he confirmed Sir Giles address and was convinced he was the one she was dealing with and not a stranger. She must clarify that the contract between her and the swindler was void for mistake she intended to contract with Giles and not the person who was at her premises. 9 On the issue of Barbara's new computer that was due to arrive last week but a cargo destined for her local supplier was written off in an accident on the M1. She had ordered the computer from the supplier's catalogue and had paid the deposit for it. Since the supplier had released for delivery to Barbara, this was a clear indication that a transfer of ownership had taken place from him to Barbara. This case is under the transfer of property in goods in sale of goods. It is governed by a rule that states that when there is unconditional contract for the sale of specific goods in a deliverance state, the property passes to the buyer when the contract is made, and it is immaterial whether the time of payment or time of delivery has been postponed. For instant, of Alex goes into Afro's shop and buys a fridge, the fridge becomes the property of Alex, even though neither the payment nor the delivery has taken place. So, for the case of Barbara's newly imported computer the property was in her position immediately it was dispatched for delivery after paying the down payment. For this case, she ought to pay the balance as demanded by the supplier. It is immaterial that the computer never arrived to her. For the case whereby Barbara's newly imported computer was written off in an accident on the M1, the master of a ship sold the computer after an accident and he acted so by reason of genuine emergency. He sold in good faith as he assumed the role of agency by necessity and he must prove that he was unable to communicate with Barbara to obtain fresh instruction in regard to the computer. For this case, Barbara can not bring any action against the cargo carrier to recover her newly imported computer. 10 On the issue of insurance policy Tom had taken to insure his property, he ought to have disclosed everything to the insurer. This contract is based on contracts uberrimae fidei. This means that there must be utmost good faith and it require not only that there be no active misrepresentation, but the parties must disclose all material facts, suppressing nothing when making the contract. For such a contracts, when if a party fails in this duty, the contract will be voidable at the option of the other. In the insurance contract, a client is supposed to disclose all facts required by the insurer for this influences the insurer in deciding whether or not he should accept the risk. For this case, Tom ought to have made a frank and true disclosure of all materials facts known to him for the purpose of enabling the insurer to make a decision regarding the policy. At the time of entering to a contract, Tom did not disclose to the insurer that he had make a minor claim three years ago for glass damage to a broken window. It is immaterial that the claim was minor and therefore not worth being disclosed to the insurance company. For this case, the insurance company should not compensate Tom for damages. 11 Question B The Changes to the Protection of the Insured Resulting from the financial services authorities taking over regulation of insurers from association of British Insurers Financial Services and Markets Act 2000 gave power Financial Services Authority (FSA) to regulate all industries that deals with financial services in the UK. Since then, the Financial Services Authority (FSA) took over the management and protection of insured taking over from the Association of British Insurers. The Association of British Insurers has around 400 members which accounts for ninety seven percent of all insurance companies in the UK. The association has a responsibility of dealing with the issues affecting the insurance companies and advising the government and other public authorities on issue parting the industry. Since Financial Services Authority (FSA) took over from the Association of British Insurers, there has been positive response in terms of market share in most of the insurance companies. There insurance companies have experienced a significance growth since due to popularity of better protection of the insured by Financial Services Authority (FSA). References Becker, G. S. (1968). Crime and Punishment: An Economic Approach. Journal of Political Bohnet, I., S. Huck and B. S. Frey (1999): More Order With Less Law: On Contract Enforcement and Crowding. Mimeo. Kennedy School of Law. Harvard University. Bayles, M. D. (1990): Procedural Justice. 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