Homework Question - Principal vs Agent Case

[Carlito]

Hi,

Principal in a suit store authorizes his employee (agent) to buy any suit from any supplier as long as it is in the color black only. The principal made it clear for the agent that he will not tolerate any other color.

The agent then meets with a third party supplier that have a range of suits in different colors. The agent sees a red suit and he is impressed by it a lot, so he decides to order the red suit thinking that it will impress the principal. The agent signed on behalf of the store for delivery of the red suit.

Upon delivery, the principal was outraged that the agent has ordered a red suit. Because of this, the principal refuses to authorise payment for the red suit. Question is, who is liable for the payment of the suit? Is it principal or agent? Can the principal bring a personal action against the agent?

Thanks

 

[Tim W]

Is this a homework question?

 

[Carlito]

Is this a homework question?

Hi Tim,
Yes it is a tutorial question.

 

[Rod]

Agent (A) has actual express authority before purchase. He breached his warranty of authority when purchasing.

A is likely liable to T due to a breach of warranty.

However (there are lots of 'howevers' in Australian commercial law), Principal (P) may be liable to the third party (T) in which case A becomes liable to P. Much depends on the words/correspondence used, the course of previous dealings etc.

Also, from the question, it is not known but probably implied, that T knows of P's existence. If P has previously told T that A is his agent, then P can be estopped from denying liability if he didn't communicate the limits of the authority to T.

Use your textbook to support with a relevant case or 2 (Collen v Wright?).

 

[Carlito]

Agent (A) has actual express authority before purchase. He breached his warranty of authority when purchasing.

A is likely liable to T due to breach of warranty.

However (there are lots of 'howevers' in Australian commercial law), Principal (P) may be liable to the third party (T) in which case A becomes liable to P. Much depends on the words/correspondence used, course of previous dealings etc.

Also from the question it is not known, but probably implied, that T knows of P's existence. If P has previously told T that A is his agent, then P can be estopped from denying liability if he didn't communicate the limits of the authority to T.

Use your text book to support with a relevant case or 2 (Collen v Wright?).

Hi Rod,

Thanks so much for your reply, also T is not aware of P at this stage, T assumed that A has full authority. I think that P is liable for T in terms of payment since A signed on the order which makes P bind to the purchase as well. But can P take legal actions A for this?

Thanks again, Rod

 

[Rod]

But can P take legal actions A for this ?

Yes. Breach of authority.

Personally I dislike the principle of undisclosed principals. Seems a bit too much like a fraud being committed on the seller. There may be very good reasons where the seller wants to know who they are really dealing with.

 

[Carlito]

Yes. Breach of authority.

Personally I dislike the principle of undisclosed principals. Seems a bit too much like a fraud being committed on the seller. There may be very good reasons where the seller wants to know who they are really dealing with.

Thanks so much for your input Rod, much appreciated

 

[Tim W]

As a general principle, a person dealing with an agent
is entitled to rely on the presumption that the agent has
all the necessary authority to carry out their appointed tasks.

A person dealing with an agent has no duty to enquire
as to the nature and extent of the agent's powers.
Staying within their powers is part of the duty owed by the agent to their principal.

Now, I'm not going to give you the authorities for the above.
You need to do some of the work for yourself!

 

[Carlito]

As a general principle, a person dealing with an agent
is entitled to rely on the presumption that the agent has
all the necessary authority to carry out their appointed tasks.

A person dealing with an agent has no duty to enquire
as to the nature and extent of the agent's powers.
Staying within their powers is part of the duty owed by the agent to their principal.

Now, I'm not going to give you the authorities for the above.
You need to do some of the work for yourself!

Thanks Tim, that was my conclusion as well, I just need to back that up with some relevant cases.