Business Law

Question 1:

Step1: The relevant areas of law are the agent’s authority: actual authority, apparent authority and the indoor management rule.

Key facts of the case:

* Jasmine Trendy is the managing director of Catering WA Ltd in Western Australia

* The company only purchase food and ingredients grown or manufactured in Western Australia with the price is exceeding $20,000

* Jasmine orders goods from Tassie Foods Pty Ltd in Tasmania with the price is $40,000

* The board of directors refused to accept delivery and pay for the goods because the company can not buy the food grow and ingredients outside Western Australia

Step 2: The relevant rules of law

1. According to Harris, J. et al, 2009, when a member of a company enters into a contract, “corporations (and sometimes its board of directors) are generally referred to as the principal”, the member who enters into the contract of the company will become the agent. There are some kind of agent ‘s authority:

* Actual authority: the authority “which can be express or implied”

* Apparent authority: “the authority which arises by law in certain situation where the principle is absent and the person has the appearance of authority”

Case: Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480

In this case, Kapoor and Hoon were appointed as the managing directors of Buckhurst Company. Kapoor entered contract with Freeman & Lockyer Company. But “other directors of Buckhurts were not consulted in relation to this contract”. After finishing the work, Freeman & Lockyer Company did not receive the fees. Buckhurts refused to pay the fee because they argued that Kapoor did not have authority to enter the contract.

Decision: the court held that although Kapoor did not have actual authority to enter the contract, he has apparent authority to enter the contract. Therefore, the contract was binding on Buckhurts and they have...