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COURSE NAME: BUSINESS LAW_1_______________CODE: BCC105 _______

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ASSIGNMENT TITLE: _____QUESTION 1 AND 2 ____________

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Question 1

It often happens that a person has no time to do certain things personally. That person may lack

the skills to do the act himself. He has to resent employing an agent in such circumstances.

An agency is a contract where one person the principal employs another person the agent to act

on his behalf and enter into contractual and other relationships. The transactions done between

the agent and third parties will be binding.

What the agent is tasked to do by the principal is what is called the agent`s mandate. There are

basically three requirements for a valid contract of agency, these are: there must be a contractual

relationship between the principal and the agent, representation of the principal by the agent and

authorization of the agent to act on behalf of the principal.

Express terms are precise and certain as stated by the parties. This is the commonest type of

authority and they can be written or verbal. The principal however cannot give greater authority

than he has and cannot overreach himself.

Where express terms are given the agent is not allowed to surpass his mandate. In the case of

Eva Weaver v Priscilla Deverell it was held that, Sometime during his life, Percy Holmes

purchased a life insurance policy for $25,000 in which he named his partner, Eva Weaver, the

primary beneficiary. The couple had lived together for over 20-years, and at times, Weaver paid

the premiums associated with the policy. In 2009, Holmes designated his daughter, Priscilla

Deverell as his Power of Attorney and she in turn changed the beneficiary on the insurance

policy from Eva to herself. Percy died in 2010, and both women applied for the benefits stated in

the policy. Weaver quickly filed a complaint with the Shelby Country Chancery Court claiming

that Priscilla Deverell committed fraud when she changed the beneficiary to herself.
In the case of Eva Weaver v Priscilla Deverell, Weaver argued that, since Holmes was of sound

mind when the change was made, Deverell did not have the actual authority to change it.

Deverell defended her actions stating that she, having been granted Power of Attorney, had the

right to change the beneficiary, using the doctrine of actual authority as her defense. Eva’s

lawyers argued that, under her title as “attorney in fact,” Deverell had the authority to change the

beneficiary. The court disagreed, however, ruling in favor of Eva Weaver. As of 2014

The agent since he will be acting on behalf of the principal has got the following duties, to avoid

a conflict of interest, not to make secret profits or to accept a bribe, to account to the principal

for payments received and to preserve confidentiality.

The agent must not allow situations where his personal interest conflicts, or possibly conflicts,

with his duty to his principal. An agent must not, without his principal’s consent, use the

principal’s property to secure a profit for himself or use any information or knowledge for his

own benefit which he has acquired by virtue of his position as agent to the principal.

Agent might have certain interests that might conflict with the interests of his principal. In such

cases, an agent can avoid that conflict situation by disclosing any potential conflict to his

principal who may then, if he so wishes, permits then him to continue to act for him in full

knowledge of the potential conflict.

Also the agent my not make secret profits or accept bribe. A secret profit is made where an

agent, whilst acting for his principal, receives some profit over and above that agreed with the

principal. An agent is not allowed to accept commission from a third party without his

principal’s approval.
An agent has two key duties in respect of payments he receives that are supposed to be given to

the principal, these are he must keep such monies separate from his own money unless he is

permitted by the agency agreement to mix the funds and he must keep and maintain accurate

accounts of transactions and to furnish his principal with them when his principal requests them.

When an agent fails to maintain proper accounts of transactions made on his principal’s behalf

he will put his own funds at risk because there is a presumption that any monies that the agent

cannot prove to be his own will be deemed to belong to his principal.

An agent has got mandate to preserve his principal’s confidentiality. This includes not disclosing

any confidential information to any third parties. This duty is higher than merely taking

reasonable precautions with the principal’s information and survives the termination of the

agency agreement.

The agent has got the duty to perform the designated mandate fully and to the best of his ability.

If he does not perform then he is not entitled to any commission and he may be liable to the loss

arising out of the breach of contract.

Besides express terms of the contarct, the agent also owe duties to their principals through

implied terms, ratification, estoppels authority, usual authority and negotionum gestio/ agent of

necessity.

Implied terms of the contract are terms which are inferred from the circumstances. If an agent is

employed in the course of his duties he has authority as is usual in such a position. The existence

of special relationship for example partner and co-partner, employer and employee may assist in

deciding whether there are implied terms or authority.

Ratification also spells out the duties of the agent to the principal besides express terms. This

occurs when a person (agent) acts without authority but when the principal gets to hear of the

actions, he agrees with them and accept them. If that happen the person who acted without

authority will be held to have authority by ratification. The action will be held as if there had

been authority from the onset. On the evidence that there had been no misrepresentation on the

part of the plaintiffs as for doctrine of ratification the ratification would have retrospective effect

and hence it would not be utra vires. Retrospective effect o ratification is thrown back to the date

of the act done and that the agent is put in the same position as if he had authority to do the act at

the time the act was done by him.

Estoppels authority is another type of authority which spells out the relationship between agent

and principal. This occurs when a person creates an impression that a person is his agent and a

third part acts on the faith of that, the principal will be bound. The representation must come

from the principal and not the agent. In this case the principal is bound by what the agent does

when there is no express, implied authority and no ratification.

Usual authority is another type of authority which spells out the duties of an agent to his

principal where there are no express terms, implied terms or ratification. This occurs as a result

of the position held by a person for example where one is a director of a company. He can do

things that are ordinarily done by directors even if the power is limited by articles of association.

The director will bind his principal if he does a similar act.

Lastly negotionum gestio is a situation where the agent acts without authority. This is applicable

where a person acts on situations which are justifiable on behalf of another person for example in

case of emergency. The intention of the agent must be to benefit the other party. In such
circumstances they are allowed (agents) to recover their expenses. When they act the party they

act for is not a principal but is called dominus. In such cases the situation should be such that it is

impossible to communicate with the dominus for example putting of fire of a shop on fire.

In brief the agent has got a mandate to work on behalf of the principal with due care to the

assigned task and to the best interest of the principal. The principal must also honour the work

done by the agent through payment of agreed commission or payment where the agent perform

his duties effectively and deligently.

Question 2

Peter and Paul entered into a contract of sale. This type of contract is like any other contracts but

is has got its own peculiar features which makes it stand out of the crowd. Being a contract it

must meet all the essential elements of a valid contract that is, agreement must be legal, parties

must have contractual capacity, terms must be clear and it must be enforceable.

A sale can be defined as a contract where one person the seller promises to deliver a thing

(property/goods) to another who is the purchaser or buyer who in his party promises to buy at

certain price.

For it to be a contract of sale it must meet the following requirements, there must be agreement

and it must be one of sale. In the case of Peter and Paul that requirement was fully met. The

agreement was of sale of 10 bales of tobacco.

As like any other contract, there must be consent on both parties to enter into a contract of sale.

One party must intent to sell and in this case Paul was intending to sale and the other party who

is Peter was intending to buy.

Another requirement for it to be a contract of sale is the property sold (merx) which is the subject

matter of sale. This is important since some things can not be sold and the sale of others is

restricted by law. The property sold need not be in existence at the time of sale. In the case of

Paul and Peter the property was 10 bales of tobacco and this makes this requirement fully met.

The property is capable of being sold. If the merx is not in existence at the time of sale, there

must be a possibility of it coming into existence at a later stage.

Lastly there must be price (pretium). The price must be in current money. The price must be

fixed and must be real. In a contract of sale a price must be paid for the thing or the parties must

have agreed that the price will be paid in the future. Thus an agreement to pay by goods is not

good enough. In the case of Paul and Peter the price was US$ 2000 for ten bales of tobacco and

Peter paid 75% of the purchase price and promised to pay the balance within a period of one

week

The above three requirements constitute the litmus test for a contract which is alleged to be one

of sale. Paul and Peter`s contract met the above three requirements so it is a valid contract of

sale.

A valid contract of sale will transfer ownership to the purchaser upon the mere agreement of the

parties. The contract becomes perfecta. Upon conclusion of the contract risk passes to the buyer,

notwithstanding the fact that the buyer has not yet assumed possession of the property, In the

case of Paul and Peter risk passes to Peter upon conclusion of the contract.

Risk refers to the issue who bears loss due to accidental deterioration, damage or loss to the merx

after the conclusion of the contract but before delivery, there are exceptions to this general rule

and these are; where the parties agree to vary the general rule, where the seller had delayed

delivery, where the seller is negligent in business sense. Where the sale is one of unascertained

goods, where the contract is subject to suspensive conditions and where the contract become

void for one reason or another.

In the case of Peter and Paul there was no variation of the general rule. Paul was not negligent in

his business sense; he did not delay in delivery since there was no time frame as to when he was

supposes to deliver the goods. The goods were ascertained and the contract was not void.
The destruction of the property which is the subject matter of the contract was caused

supervening impossibility (fire) and Paul is not at fault as far as the destruction is concerned. The

contract becomes void because of subsequent impossibility.

Because of supervening impossibility the contract becomes void. Performance of the contract

become impossible because the subject matter that is 10 bales of tobacco have been destroyed.

Supervening impossibility is the impossibility arising after the formation of a contract. However,

this arises at the time when the seller`s performance is due. Such impossibility usually arises due

to facts that the seller who is Paul in this case had no reason to anticipate and did not contribute

to the occurrence of fire. Paul did not foresee that performance will become impossible. This can

be best explained by the case of Taylor v. Caldwell

Brief Fact Summary: Taylor (Plaintiff) sued Caldwell (Defendant) for breach of contract

to rent out Defendant’s facility for four concert dates.

Synopsis of Rule of Law: A party’s duty, under a contract is discharged if performance

of the contact involves particular goods, which without fault of either

party are destroyed, rendering performance impossible.

Facts: Plaintiff and Defendant entered into a contract, in which, Defendant agreed to let

the Plaintiff use The Surrey Gardens and Music Hall on four certain days. After the

signing of the contract, but before the first contract, the concert hall was destroyed by

fire. The destruction was without fault of either party and was so extensive that the

concerts could not be given.

Issue: Whether the loss suffered by Plaintiffs, is recoverable from the Defendant?
Held: The Defendant was discharged from performing, and his failure to perform was not a

breach of the contract. When the contract is absolute, the contractor must perform it or

pay damages for nonperformance although in consequence of unforeseen events the

performance of the contract has become impossible. However, that occurs only where the

contract is absolute. The contract here is subject to an implied condition that the parties

shall be excused if performance becomes impossible from the perishing of the thing

without fault of the contractor. The parties regarded the continuing existence of the hall

as the foundation of the contract, and the contract contained an implied condition that

both parties would be excused if the hall did not exist. Therefore, the destruction of the

hall without fault of either party excuses both parties, the Plaintiff from taking the

gardens and paying the money and the Defendant from performing their promise to give

the use of the hall.

In the case of Peter he will claim Restitution. When restitution is ordered, the breaching party

that is Paul is required to pay Peter back his 75% payment. Paul cannot demand the remaining

balance of the purchasing price because of the destruction of the merx which is the subject matter

of the contract by supervening impossibility.

References
1. Christie R.H., (1985) Business Law in Zimbabwe, Juta & Co (Ltd)

2. Christie R.H., (1993) The Law of Contract in South Africa, Butterworths,

Durban.