WA Hypothetical Question Regarding Contract Law?

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siji

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20 September 2018
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I am not sure where to start. I have a hypothetical question about contract law. Situation is like this.

Johnson instructs Kepler Wessels to purchase a brand-new Maîtres du Temps Chapter One from Thomas Muller for no more than $400k and because he wishes to remain anonymous, Johnson asks Kepler not to disclose his identity to Thomas Muller. In fact, Kepler does not even disclose to Thomas Muller that he is acting for another party in his negotiations with him.

Thomas Muller refuses to sell for less than $550k and Kepler, realising the potential value of the jewellery, agrees to pay $550k believing that Johnson will consent to that price on learning of the circumstances.

In fact, Johnson refuses to pay for the jewellery. Explain, with reasons, whether Thomas Muller can enforce the contract against Johnson (upon learning of his identity)

Here it is clear Johnson is an undisclosed principal. Common law doctrine on undisclosed principals confers rights and imposes liabilities on the undisclosed principal, notwithstanding that he is not made a party to the relevant contract. This doctrine is an exception to the general rule that only a party to a contract may sue and be sued thereon.
  1. Doctrine of undisclosed principal allows third party, where agency not

    Disclosed, to sue the agent, or principal – but not both.
    In the above senario the agent (Kepler) was acting outside his authority by offering $550k , where he was clearly instructed to buy for no more than $400k. Is this not a tortious act?
 

gxgi

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24 September 2018
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Good question I can come up with a few more questions. Who is liable on this contract? Can Johnson ratify? Can the seller sue the principal? What would happen if the principal accepted the contract?
 

Rod

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Is this not a tortious act?

I agree with DM - no.

Who is liable on this contract?

Either Johnstone and Wessels. Seller gets to choose, probably based on who likely has the most money. Not sure if joinder can be used. Suspect so, but not sure.

Can the seller sue the principal?

Yes. See above.

What would happen if the principal accepted the contract?

He may be able to sue the agent for the difference. Would need to examine the agreement/contract between principal and agent.
 
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Rob Legat - SBPL

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You should post this in the law students thread, and be prepared to show some of your thinking.
 

gxgi

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24 September 2018
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Either Johnstone and Wessels. Seller gets to choose, probably based on who likely has the most money. Not sure if joinder can be used. Suspect so, but not sure.

Even if the agent has acted outside of their scope of authority. The agent agreed for over $50,000?
 

Rod

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Principals should choose their agents with care.

The principle here is that principals cannot evade their responsibilities/obligations by being careless or possibly duplicitous in their choice of agent. The other party should not suffer because of the actions of the principal in choosing an agent.

The law protects the innocent party.
 
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gxgi

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24 September 2018
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Principals should choose their agents with care.

The principle here is that principals cannot evade their responsibilities/obligations by being careless or possibly duplicitous in their choice of agent. The other party should not suffer because of the actions of the principal in choosing an agent.

The law protects the innocent party.

Is there any legislation you know regarding "The law protects the innocent party".
Wouldn't the agent have to pay for damages?
 

Rod

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I'm not aware of any statutory law covering this point.

Mostly common law.
 
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