WA Hypothetical Question Regarding Contract Law?

Discussion in 'Australian Law Students Forum' started by siji, 20 September 2018.

  1. siji

    siji Member

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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?
     
  2. DMLegal

    DMLegal Well-Known Member

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    Not that I can see. What tort did you have in mind?
     
  3. gxgi

    gxgi Active Member

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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?
     
  4. Rod

    Rod Well-Known Member
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    I agree with DM - no.

    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.

    Yes. See above.

    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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  5. 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.
     
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  6. gxgi

    gxgi Active Member

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

    Rod Well-Known Member
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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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  8. gxgi

    gxgi Active Member

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

    Rod Well-Known Member
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    I'm not aware of any statutory law covering this point.

    Mostly common law.
     
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  10. gxgi

    gxgi Active Member

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    Thanks for all of your answers.
     
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