Vicarious Liability In The Agency Context †MyAssignmenthelp.com

Question: Discuss about theVicarious Liability In The Agency Context. Answer: Issue An advice is furnished to the CEO of Golf Club Resort (company) whether the company is required to pay the bill to Willow Landscaping? Law The relationship of an employer-employee or master-servant is very crucial mainly because it decides whether the employer or the master can be held accountable for the actions of his employee or servant. In (NMFM Property Pty Ltd v Citibank Ltd (No 10)[1], thelaw of agency is defined and it is held by the court that when two people are in the relationship of principal/master/employer and agent/servant/employee and such employee is acting on the directions and under the control of the employer then any liability arising from such an action will fall upon the principal[2]. Thelaw of agency is based on the concept of vicarious liability wherein the employer is accountable for his employees actions Scott v Davis[3]. The only requirement to make the employer liable is that the employee is totally functioning within the powers that are delegated to him. Thus, to make a person an agent of the principal, the main requirements are:[4] The employee is within the services of the employer; The actions of the employee is directed and guided by the employer; The actions which are carried out by the employee are delegated to him by the employer. Now, the employer can gave power to his employee by three means. The same are:[5] Actual express authority An actual express authority is a kind of delegation wherein the principal intentionally conveys powers to his employees so that the employee can carry out work on his behalf. This kind of delegation is possible when the principal either by way of agreement or by actions or verbally grants authority to the agent[6]. Actual implied authority An actual implied authority is the authority for which the principal does not have to make any actual efforts. But, when any tasks are allotted to the agent then the power that is coupled with such tasks so that the agent can perform such tasks adequately is an implied authority. For example, to take decisions when the principal cannot be reach at and the decisions is for the benefit of the principal, to act for the best interest of the principal etc[7]. Ostensible authority The ostensible authority is the third kind of authority wherein the power to take actions on behalf of the principal is not carried out under the any actual or implied authority, but, this authority is gained by the agent because of a representation that is made by the principal. When the principal makes a depiction in front of an outsider to make an outsider believe that a specific person is the authorized representative of the principal then an ostensible authority is granted to such agent. When an outsider under such pretext of ostensible authority enters into a contract with the agent, then, the principal cannot deny the authority on the part of the agent and is bound by the transactions that are entered[8]. However, if the outsider is aware of the defect in the authority, then, he cannot bound the principal by the actions of the agent. The abovelaw is now applied to the facts of the case. Application Noora Norra Golf Club Resort is owned by Gabba Pty Ltd (company). Ricardo is working for the company. Recently there is financial crunch so the Chief Executive officer of the company has directed Ricardo that he is only authorized to enter into contract on the company behalf provided the value of the contract should not exceed $ 10,000. The situation reveal that the Chief Executive Officer has by words of mouth has given a power to Ricardo that he can make contracts but has limited this power only to the extent of $ 10,000. Thus, an actual express authority is given to Ricardo. But, Ricardo violated his actual express authority and without telling the chief Executive Officer, he makes a contract with an outsider, Willow Landscaping, who has no idea that the authority of Ricardo to enter into contracts is limited to $ 10,000. Now, Ricardo makes a landscaping contract with Willow Landscaping for an amount of $ 13,000 along with extra cost of $ 4,000 which makes the total cost of the project at $ 17,000. Ricardo is not authorized to enter into contracts of such amounts. When the Chief Executive Officer asks about the project, Ricardo only tells him about the project and makes no mention to the extra cost. The Chief Executive Officer gave his approval and tells Willow Landscaping that it can take the project forward with Ricardo. Thus, by stating this information to Willow Landscaping, the Chief Executive Officer has actually given an apparent authority to Ricardo. Thus, Ricardo is now authorized to make a contract with Willow Landscaping which is approved by the Officer on behalf of the company. Conclusion Thus, the contract made by Ricardo with Willow Landscaping is binding in nature and is enforceable in law. Issue An advice is furnished to Aspirational Developments regarding Jeremy's conduct? Law As already submitted the relationship of an employer-employee or master-servant is very crucial mainly because it decides whether the employer or the master can be held accountable for the actions of his employee or servant. However, it is not always that the master is accountable for the actions of his servant. The servant is also under a scrutiny to conduct his actions in such manner so that he does not bring any disadvantage to his master. So there are several duties that are imposed on a servant[9]. A servant or an agent should act like a trustworthily person and makes sure that no actions should be carried out by him which results in conflicting interest. If the interest conflicts then the interest of the master must proceed the interest of the servant[10]. An agent must make sure that the confidential information received by him during the tenure of his service should not be given to any third party unless his principal has approved of the same[11]. If the agent in order to bring gain to himself makes profits of secret nature then it is his duty to pay back such profits to his master[12]. His acts must be such which are carried out with honesty, trustworthiness, diligence and care. He must act as per the wishes of his master. If these duties are not fulfilled by the agent then he must face consequences for the same. Application It is submitted that Jeremy is the estate agent of Aspirational Developments Pty Ltd and is selling high-rise units. He recently through one of his friends got the news that the other competitor is into difficulties and thus the units he is selling can be sold at higher cost. So, he secretly arrange funds and bought three units which he later sold and earn profits. It is submitted that these actions of Jeremy is in violation of his fiduciary duty, he also made secret profits which is not permitted. Also, there is conflict of interest and he preferred his own interest to be superior of the company. Further, he discloses the confidential information of the company for small payment and thus is in breach of is duty to not to disclose secret information of the company. Conclusion Thus, Jeremy is on violation of several of his duties and thus must compensate the company. Bibliography Books/articles/Journals Adams, Michael. Essential Corporate Law: Second Edition. Cavendish Australia, 2002. Hassall, Douglas. "Dal Pont: Law of Agency." International Trade and Business Law Review 429, 2003. Krawitz, Alan. "Protecting Outsiders to Corporate Contracts in Australia." Murdoch University Electronic Journal of Law, Volume 9, Number 3 (September 2002), 2002. Mccarthy, Luke. "Vicarious Liability In The Agency Context." Vol 4 No 2 (QUTLJJ), 2004. Case laws FreemanandLockyer v Buckhurst Park Properties(Mangal)Ltd[1964] 2 QB 480. Hely-Hutchinson v Brayhead Ltd.Hely-Hutchinson v Brayhead Ltd[1967] 1 QB 549. Industrial Development Consultants Ltd v Cooley[1972] 1 WLR 443. NMFM Property Pty Ltd v Citibank Ltd(No 10) (2000) 107 FCR 270. Re Smith and Fawcett Ltd. [1942] Ch 304. Regal(Hastings)Ltd v Gulliver.Regal(Hastings)Ltd v Gulliver[1942] UKHL 1. Scott v Davis[2000] HCA 52. Union Bank of Australia Ltd vAlbert ErnestRudder[1911] HCA 39.