1
1 C ONTENTS
2 AGENCY ... 3
2.1 THE NATURE OF AGENCY ... 3
2.2 THE SCOPE OF AGENCY ... 3
2.3 CAPACITY OF PRINCIPAL AND AGENT ... 4
2.4 CREATION OF AGENCY AUTHORITY ... 5
2.4.1 ACTUAL AUTHORITY ... 5
2.4.2 CONSTRUCTIVE AUTHORITY ... 7
2.4.3 OPERATION OF LAW ... 15
2.5 RIGHTS AND OBLIGATIONS OF PRINCIPAL, THIRD PARTY AND AGENT ... 15
2.5.1 DUTIES OF AN AGENT ... 15
2.5.2 PRINCIPAL’S DUTIES TO AGENT ... 18
2.5.3 AGENT’S DUTIES TO THIRD PARTY WHERE AGENT HAS NO AUTHORITY ... 19
2.6 TERMINATION OF AGENCY ... 21
3 SALE OF GOODS ... 21
3.1 ELEMENTS OF CONTRACT OF SALE OF GOODS ... 22
3.1.1 GOODS ... 22
3.1.2 TRANSFER OR AGREEMENT TO TRANSFER PROPERTY ... 22
3.1.3 MONEY CONSIDERATION CALLED PRICE ... 22
3.2 TRANSFER OF AGREEMENT TO TRANSFER PROPERTY IN GOODS ... 23
3.2.1 TRANSFER OF SPECIFIC GOODS ... 23
3.2.2 TRANSFER OF UNASCERTAINED GOODS ... 25
3.2.3 RETENTION OF TITLE ... 26
3.3 TRANSFER OF TITLE TO THIRD PARTIES BY NON-OWNER ... 27
3.3.1 TRANSFER BY NON-OWNER – NEMO DAT QUOD NON HABET ... 27
3.4 IS IT A CONTRACT FOR SALE OF GOODS OR A CONTRACT FOR WORK AND MATERIALS? ... 32
3.4.1 TESTS FOR DETERMINING WHAT TYPE OF CONTRACT ... 32
3.4.2 IS A DIFFERENT ARRANGEMENT IN PLACE? ... 34
3.5 IMPLIED TERMS ... 34
3.5.1 DISTINCTION BETWEEN TERMS, PUFFS AND REPRESENTATIONS ... 34
3.5.2 IMPLIED TERMS AS TO TITLE ... 35
3.5.3 IMPLIED TERMS AS TO DESCRIPTION... 37
4 AUSTRALIAN CONSUMER LAW ... 42
4.1 STATUTORY UNCONSCIONABILITY ... 43
4.1.1 SECTION 20 ... 43
2
4.1.2 SECTION 21 ... 46
4.1.3 SECTION 22 – FACTORS TO TAKE INTO ACCOUNT FOR PURPOSE OF S 21 ... 46
4.1.4 REMEDIES FOR UNCONSCIONABILITY... 48
4.2 UNFAIR CONTRACT TERMS ... 48
4.2.1 ROADMAP ... 48
4.2.2 EXAMPLES OF UNFAIR TERMS ... 50
4.2.3 EXCLUSIONS AND SEVERANCE ... 51
4.2.4 REMEDIES ... 51
4.3 CONSUMER GUARANTEES ... 51
4.3.1 GUARANTEE AS TO TITLE (S 51 ACL) ... 51
4.3.2 GUARANTEE AS TO UNDISTURBED POSSESSION (S 52 ACL) ... 51
4.3.3 GUARANTEE AS TO UNDISCLOSED SECURITIES ETC (S 53 ACL) ... 51
4.3.4 GUARANTEE AS TO ACCEPTABLE QUALITY (S 54 ACL) ... 52
4.3.5 GUARANTEE AS TO FITNESS FOR ANY DISCLOSED PURPOSE ETC. (S 55 ACL) ... 52
4.3.6 GUARANTEE RELATING TO SUPPLY OF GOODS BY DESCRIPTION (S 56 ACL) ... 53
4.3.7 GUARANTEE RELATING TO SUPPLY OF GOODS BY SAMPLE OR DEMO MODEL (S 57 ACL) ... 53
4.3.8 GUARANTEE AS TO REPAIRS AND SPARE PARTS (S 58 ACL) ... 53
4.3.9 GUARANTEE AS TO EXPRESS WARRANTIES (S 59 ACL) ... 54
4.3.10 REMEDIES FOR BREACH OF CONSUMER GUARANTEES ... 54
5 PERSONAL PROPERTY SECURITY... 54
5.1 DEFINITIONS ... 54
5.2 WHAT CAN PPSA APPLY TO? ... 55
5.3 ROADMAP FOR CREATION OF SECURITY INTEREST... 55
5.3.1 DOES THE CONTRACT INVOLVE A RETENTION OF TITLE CLAUSE (‘ROMALPA CLAUSE’)? ... 55
5.3.2 MUST BE ENFORCEABLE SECURITY AGREEMENT (S 20(2) PPSA) ... 56
5.3.3 ATTACHMENT: SECURITY INTEREST MUST BE ENFORCEABLE AGAINST THE GRANTOR AND ATTACHED TO PERSONAL PROPERTY (S 19 PPSA) ... 56
5.3.4 PERFECTION (S 21 PPSA) ... 56
5.4 PRIORITY RULES ... 57
5.4.1 PERFECTED INTEREST THAT IS FIRST IN TIME HAS PRIORITY (S 55(4) PPSA) ... 57
5.4.2 PRIORITY IF INTEREST IS UNPERFECTED (S 55(2) PSSA) ... 57
5.5 SPECIAL PRIORITY RULES ... 57
5.5.1 DOES THE TRANSACTION INVOLVE PURCHASE MONEY SECURITY INTERESTS
(PMSI)? 57
5.5.2 DOES THE TRANSACTION INVOLVE PROCEEDS FROM COLLATERAL? (S 31 PPSA) 57
3
5.6 WHEN CAN A THIRD PARTY TAKE COLLATERAL FREE OF A SECURITY INTEREST?
58
5.6.1 WHEN SECURITY INTEREST IS UNPERFECTED (S 43(1) PPSA) ... 58
5.6.2 WHEN THERE IS A DEFECT IN THE SERIAL NUMBER (S 44(1) PPSA) ... 58
5.6.3 MOTOR VEHICLES (S 45(3) PPSA) ... 58
5.6.4 TAKEN IN ORDINARY COURSE OF BUSINESS (S 46(1) PPSA)... 58
5.6.5 LOW VALUE PERSONAL, DOMESTIC OR HOUSEHOLD PROPERTY (S 47 PPSA) ... 58
2 AGENCY ... 6
2.1 THE NATURE OF AGENCY ... 6
2.2 THE SCOPE OF AGENCY ... 7
2.3 CAPACITY OF PRINCIPAL AND AGENT ... 8
2.4 CREATION OF AGENCY AUTHORITY ... 8
2.4.1 ACTUAL AUTHORITY ... 8
2.4.1.1 ACTUAL EXPRESS AUTHORITY... 9
2.4.1.2 ACTUAL IMPLIED AUTHORITY ... 9
2.4.2 CONSTRUCTIVE AUTHORITY ... 10
2.4.2.1 APPARENT/OSTENSIBLE AUTHORITY ... 11
2.4.2.2 RATIFICATION ... 14
2.4.2.2.1 REQUIREMENT 1: AGENT MUST HAVE PURPORTED TO ACT FOR THE PRINCIPAL ... 14
2.4.2.2.2 REQUIREMENT 2: PRINCIPAL MUST BE COMPETENT AT THE TIME THE ACT WAS DONE ... 16
2.4.2.2.3 REQUIREMENT 3: PRINCIPAL MUST RATIFY WITHIN REASONABLE TIME 16 2.4.2.2.4 REQUIREMENT 4: PRINCIPAL MUST BE IN POSITION TO PERFORM THE WHOLE CONTRACT ... 17
2.4.2.2.5 REQUIREMENT 5: PRINCIPAL MUST KNOW ALL THE MATERIAL FACTS . 17 2.4.2.2.6 NATURE OF RATIFICATION ... 17
2.4.2.2.7 EXCEPTIONS TO RATIFICATION ... 18
2.4.3 OPERATION OF LAW ... 19
2.4.3.1 AGENCY BY NECESSITY ... 19
2.5 RIGHTS AND OBLIGATIONS OF PRINCIPAL, THIRD PARTY AND AGENT ... 19
2.5.1 DUTIES OF AN AGENT ... 19
2.5.1.1 DUTIES OF AN AGENT UNDER EQUITY ... 19
2.5.1.2 AGENT’S DUTY UNDER CONTRACT ... 20
2.5.2 PRINCIPAL’S DUTIES TO AGENT ... 21
2.5.2.1 CONTRACTUAL DUTIES ... 21
4
2.5.2.2 SETTLEMENT THROUGH AN AGENT: WHEN A THIRD PARTY MAKES
PAYMENT TO AGENT ... 22
2.5.3 AGENT’S DUTIES TO THIRD PARTY WHERE AGENT HAS NO AUTHORITY ... 23
2.6 TERMINATION OF AGENCY ... 24
3 SALE OF GOODS ... 25
3.1 ELEMENTS OF CONTRACT OF SALE OF GOODS ... 25
3.1.1 GOODS ... 25
3.1.1.1 SPECIFIC GOODS (S.3(1) GOODS ACT) ... 25
3.1.1.2 UNASCERTAINED GOODS ... 25
3.1.1.3 ASCERTAINED GOODS ... 25
3.1.1.4 FUTURE GOODS ... 26
3.1.2 TRANSFER OR AGREEMENT TO TRANSFER PROPERTY ... 26
3.1.3 MONEY CONSIDERATION CALLED PRICE ... 26
3.2 TRANSFER OF AGREEMENT TO TRANSFER PROPERTY IN GOODS ... 26
3.2.1 TRANSFER OF SPECIFIC GOODS ... 26
3.2.1.1 RULES FOR ASCERTAINING INTENTION... 26
3.2.2 TRANSFER OF UNASCERTAINED GOODS ... 28
3.2.3 RETENTION OF TITLE ... 30
3.3 TRANSFER OF TITLE TO THIRD PARTIES BY NON-OWNER ... 31
3.3.1 TRANSFER BY NON-OWNER – NEMO DAT QUOD NON HABET ... 31
3.3.1.1 ESTOPPEL – PRECLUDING CONDUCT UNDER S 27 GOODS ACT ... 31
3.3.1.1.1 ESTOPPEL BY REPRESENTATION ... 31
3.3.1.1.2 ESTOPPEL BY NEGLIGENCE ... 31
3.3.1.2 SALE BY MERCANTILE AGENTS – S 67 GOODS ACT... 32
3.3.1.3 SALE BY PERSON HAVING VOIDABLE TITLE – S 29 GOODS ACT... 33
3.3.1.4 SALE BY SELLER OR BUYER IN POSSESSION – SS 30 (SELLER) AND 31 (BUYER) GOODS ACT ... 34
3.3.1.5 SALE UNDER POWER OR SALE PURSUANT TO COURT ORDER – S 26 GOODS ACT ... 35
3.4 IS IT A CONTRACT FOR SALE OF GOODS OR A CONTRACT FOR WORK AND MATERIALS? ... 35
3.4.1 TESTS FOR DETERMINING WHAT TYPE OF CONTRACT ... 36
3.4.1.1 RESULTING CHATTELS TEST (LEE V GRIFFIN [1861]) ... 36
3.4.1.2 SUBSTANCE OF THE CONTRACT TEST (ROBINSON V GRAVES (1935)) ... 36
3.4.1.3 MANUFACTURER AND INSTALLATION OF PROPERTY TEST (BROOKS ROBINSON V ROTHFIELD [1951] ... 36
3.4.1.4 IS INSTALLATION ANCILLARY TO THE SALE (COLLINS TRADING CO V MAHER [1969]) ... 37
3.4.2 IS A DIFFERENT ARRANGEMENT IN PLACE? ... 38
5
3.5 IMPLIED TERMS ... 38
3.5.1 DISTINCTION BETWEEN TERMS, PUFFS AND REPRESENTATIONS ... 38
3.5.2 IMPLIED TERMS AS TO TITLE ... 39
3.5.2.1 RIGHT TO SELL OR SUPPLY (S 17(A) GOODS ACT) – CONDITION ... 39
3.5.2.1.1 FEEDING TITLE ... 39
3.5.2.2 QUIET POSSESSION (S 17(B) GOODS ACT) – WARRANTY... 40
3.5.2.3 FREE FROM ENCUMBRANCES (S 17(C) GOODS ACT) – WARRANTY ... 40
3.5.3 IMPLIED TERMS AS TO DESCRIPTION... 40
3.5.3.1 GOODS AS DESCRIBED (S 18 GOODS ACT) – CONDITION ... 40
3.5.3.2 FIT FOR PURPOSE (S 19(A) GOODS ACT) – CONDITION ... 42
3.5.3.3 MERCHANTABLE QUALITY (S 19(B) GOODS ACT) – CONDITION ... 45
3.5.3.4 SALE BY SAMPLE (S 20 GOODS ACT) – CONDITION ... 45
4 AUSTRALIAN CONSUMER LAW ... 46
4.1 STATUTORY UNCONSCIONABILITY ... 46
4.1.1 SECTION 20 ... 46
4.1.1.1 SPECIAL ADVANTAGE ... 46
4.1.1.2 KNOWLEDGE ... 47
4.1.1.3 RELEVANT CASES ... 47
4.1.2 SECTION 21 ... 49
4.1.3 SECTION 22 – FACTORS TO TAKE INTO ACCOUNT FOR PURPOSE OF S 21 ... 50
4.1.3.1 RELEVANT CASES ... 50
4.1.4 REMEDIES FOR UNCONSCIONABILITY... 51
4.2 UNFAIR CONTRACT TERMS ... 52
4.2.1 ROADMAP ... 52
4.2.1.1 STEP 1: Is the contract a consumer contract or a small business contract? ... 52
4.2.1.2 STEP 2: If yes, is the contract a standard form contract? ... 52
4.2.1.3 STEP 3: If yes, is/are the term(s) unfair? ... 52
4.2.2 EXAMPLES OF UNFAIR TERMS ... 54
4.2.3 EXCLUSIONS AND SEVERANCE ... 54
4.2.4 REMEDIES ... 54
4.3 CONSUMER GUARANTEES ... 54
4.3.1 GUARANTEE AS TO TITLE (S 51 ACL) ... 54
4.3.2 GUARANTEE AS TO UNDISTURBED POSSESSION (S 52 ACL) ... 55
4.3.3 GUARANTEE AS TO UNDISCLOSED SECURITIES ETC (S 53 ACL) ... 55
4.3.4 GUARANTEE AS TO ACCEPTABLE QUALITY (S 54 ACL) ... 55
4.3.5 GUARANTEE AS TO FITNESS FOR ANY DISCLOSED PURPOSE ETC. (S 55 ACL) ... 56
4.3.6 GUARANTEE RELATING TO SUPPLY OF GOODS BY DESCRIPTION (S 56 ACL) ... 56
6
4.3.7 GUARANTEE RELATING TO SUPPLY OF GOODS BY SAMPLE OR DEMO MODEL
(S 57 ACL) ... 57
4.3.8 GUARANTEE AS TO REPAIRS AND SPARE PARTS (S 58 ACL) ... 57
4.3.9 GUARANTEE AS TO EXPRESS WARRANTIES (S 59 ACL) ... 57
4.3.10 REMEDIES FOR BREACH OF CONSUMER GUARANTEES ... 57
5 PERSONAL PROPERTY SECURITY... 58
5.1 DEFINITIONS ... 58
5.2 WHAT CAN PPSA APPLY TO? ... 58
5.3 ROADMAP FOR CREATION OF SECURITY INTEREST... 58
5.3.1 DOES THE CONTRACT INVOLVE A RETENTION OF TITLE CLAUSE (‘ROMALPA CLAUSE’)? ... 58
5.3.2 MUST BE ENFORCEABLE SECURITY AGREEMENT (S 20(2) PPSA) ... 59
5.3.3 ATTACHMENT: SECURITY INTEREST MUST BE ENFORCEABLE AGAINST THE GRANTOR AND ATTACHED TO PERSONAL PROPERTY (S 19 PPSA) ... 59
5.3.4 PERFECTION (S 21 PPSA) ... 60
5.3.4.1 CONSEQUENCES OF NON-PERFECTION ... 60
5.4 PRIORITY RULES ... 60
5.4.1 PERFECTED INTEREST THAT IS FIRST IN TIME HAS PRIORITY (S 55(4) PPSA) ... 60
5.4.2 PRIORITY IF INTEREST IS UNPERFECTED (S 55(2) PSSA) ... 60
5.5 SPECIAL PRIORITY RULES ... 61
5.5.1 DOES THE TRANSACTION INVOLVE PURCHASE MONEY SECURITY INTERESTS (PMSI)? 61 5.5.2 DOES THE TRANSACTION INVOLVE PROCEEDS FROM COLLATERAL? (S 31 PPSA) 61 5.6 WHEN CAN A THIRD PARTY TAKE COLLATERAL FREE OF A SECURITY INTEREST? 61 5.6.1 WHEN SECURITY INTEREST IS UNPERFECTED (S 43(1) PPSA) ... 61
5.6.2 WHEN THERE IS A DEFECT IN THE SERIAL NUMBER (S 44(1) PPSA) ... 61
5.6.3 MOTOR VEHICLES (S 45(3) PPSA) ... 62
5.6.4 TAKEN IN ORDINARY COURSE OF BUSINESS (S 46(1) PPSA)... 62
5.6.5 LOW VALUE PERSONAL, DOMESTIC OR HOUSEHOLD PROPERTY (S 47 PPSA) ... 62
2 AGENCY
2.1 THE NATURE OF AGENCY
• Exception to the doctrine of privity
• A set of legal relationships governed by common law principles
• An agent has the authority to legally bind the principal in relation to a third party
7
o E.g. agent signs a contract on principal’s behalf o Principal appoints the agent to act on its behalf
o The principal and the third party have a contractual relationship
o The agent deals with the third party on behalf of the principal (there is no contract between the agent and the third party, only the principal and the third party) o Rights/duties that can be created or affected by an agent:
Agent can contractually bind the principal to the third party
Agent can pay or receive money for the principal
Agent can make or receive representation on behalf of the principal
Agent can impose liability on the principal for its tortious acts
2.2 THE SCOPE OF AGENCY
• When assessing whether A was agent for P, ask whether A was the agent for P for this act o Agency relationship must relate to the act in question
o P must have legal capacity to perform act authorised to the agent o A must have authority for this act
• International Harvester v Carrigan’s (1958) – determining an agency relationship o C visited IH’s hay baler exhibit
o IH representative told C they can purchase their machinery from their agents Hassan & Kensell ‘Machinery and general agents’ (HK)
o HK sell machinery to C, machinery to be transported from IH’s warehouse to C o After sale, HK went bankrupt and machinery broke down
o C sued IH, the company that referred them to HK on basis that HK acted as their agents
o Issue: whether there was an agency relationship between IH and HK which allowed C to claim remedy from IH for the faulty hay baler
o Court held no agency relationship
o Agency connotes authority or capacity of a party to create legal relations between a principal and third parties
o Did not find any actual or ostensible authority
o Just because the word ‘agent’ is used, doesn’t mean there is an agency relationship
• Peterson v Moloney (1951)
o Peterson sold house and goods to third party (Moloney) o Moloney paid purchase price to real estate agent
o Real estate agent failed to pass price of house onto Peterson and real estate agent went bankrupt
o Peterson sued Moloney for purchase price, Moloney argued he wasn’t liable as he had paid the agent
o Court defined agent as person who is able ‘by virtue of authority conferred upon him, to create or affect legal rights and duties’ between the principal and third parties
o To determine where agency existed, you must identify the act which the agent was purported to have authority to perform – the agent had authority to find a
purchaser, but did not have authority to accept the money
Peterson didn’t authorise the agent to accept the purchase price, the agent didn’t have implied authority to accept the purchaser price. The purchaser price was paid to Peterson
• Beazley v Seed & Grain (1988)
8
o Agent authorised to sell certain land prepared written record of oral agreement between vendor and purchaser and sent copies to both parties
o Vendors argued written record constituted written memo signed by them
o Issue: whether there was an enforceable contract because of the agent’s authority o One must always ask for what purpose a person has been appointed an agent and
look at whether the particular act done by the agent was done as an agent or in some other capacity
o Found at the time he sent the letter, the agent was not actually an agent for that aspect of the transaction
2.3 CAPACITY OF PRINCIPAL AND AGENT
Capacity of a principal
• The principal must have the legal capacity to perform the act through the agent
• Whatever a person can do themselves can be done through an agent o Can only do through an agent what they could do themselves
o If principal is insane, agency is void whether or not the sanity of the principal is known
• S 124 Corporations Act provides that a company has legal capacity as a natural person Capacity of an agent
• All persons of sound mind can be an agent
• Agent doesn’t need contractual capacity
• Capacity modified by statutory requirement to be licensed e.g. licensed real estate agents, stock brokers, auctioneers etc.
2.4 CREATION OF AGENCY AUTHORITY
• Agency relationship can be created by:
o Actual authority
Express agreement; or
Implied agreement o Constructive authority
Apparent or ostensible authority (estoppel through representation)
Usual authority
Ratification
o Operation of law (e.g. necessity)
Actual authority: express or implied
Constructive authority: estoppel or ratification
Operation of the law 2.4.1 ACTUAL AUTHORITY
• An agent has actual authority where it results expressly or by implication from an agreement between A and P
• Agreement do not need to be contractual and do not have to be in a particular form o Exceptions where prescribed form must be followed:
S 126 Instruments Act 1958 in sale of land agreements, if A signs on behalf of P, P is bound by that agreement only if A was authorised to act in this manner in writing signed by P
9
Deed (under seal) e.g. Power of Attorney is construed strictly in favour of P 2.4.1.1 ACTUAL EXPRESS AUTHORITY
• P must grant and A must accept authority to perform certain tasks for P
• There must be a consensual agreement
• It can be created by written contract or by spoken words 2.4.1.2 ACTUAL IMPLIED AUTHORITY
• Authority which is not granted to A expressly but arises by implication from terms in which A was made an agent
• Inferred by conduct rather than express words
• Four ways in which actual implied authority can be created:
o Incidental authority: A can do anything incidental to ordinary conduct of trade or business it’s authorised to conduct
o Usual authority: A can do anything A usually has authority to do
o Customary authority: A can act according to usages and customs of place or business it operates within
o Do what is implied by the conduct of the parties and the circumstances of the case RELEVANT CASES:
• Equiticorp Finance v Bank of New Zealand (1993) o E Group was comprised of companies in Au and NZ
o Hawkins was director on boards of many of the companies, was chef executive with general authority for conduct of E Group’s business
o Bank provided loan to one company within E Group, was used to finance a takeover o Hawkins used funds deposited with Bank towards repaying debt. Those funds were
deposited by 2 other corporations in E Group, but Hawkins was a director of one of the corporations
o Both corporations went into liquidation, liquidators claimed that use of funds had been in breach of Hawkins’ fiduciary duties to the companies
o Issue: did Hawkins have implied authority to act in this manner
o NSW CA held there had not been breach of duty and Hawkins did have implied authority to act on E Group’s behalf
o Court recognised difficulty arising when directors of one corporation in group enter into transaction on behalf of the corporation with the believe that the transaction is of benefit to the group as a whole
o Applied test – whether an intelligent and honest man in position of director of company could have reasonably believed the transactions were for the benefit of the company
• Garnac Grain Co Inc v HMF Faure & Fairclough Ltd (1968) o Allied (supplier) contract for supply with Garnac o Garnac contracted supply to HMF for higher price
o HMF contracted supply with Allied (original seller) for even higher price o Issue: whether there was agency between Allied and HMF
o Held: no agency, HMF didn’t enter into contract with Garnac on behalf of Allied.
Instead there were two separate contracts (HMF purchased from Garnac and HMF sold to Allied)
o Relationship of P and A can only be established by consent of P and A
o They are held to have consented if they agreed to what amounts to a legal agency relationship, even if they didn’t recognise it themselves and professed to disclaim it
10
• Hely-Hutchinson v Brayhead Ltd (1968)
o Richards (A) was director of Brayhead Ltd (P), made decisions without Board of Directors’ consent but would inform them afterwards
o A entered into transaction (takeover deal) Brayhead didn’t want and which failed, H- H incurred loss and sued Brayhead
o Brayhead refused to pay H-H on basis that Richards didn’t have authority to make decision in the first place
o Court held Richards had apparent authority to bind Brayhead, Brayhead then appealed
o Issue: whether Richards had apparent authority or actual authority to make decision on Brayhead’s behalf, thereby making Brayhead liable for loss incurred by H-H o Richards had actual implied authority – court looked at conduct of the parties o Looked at ‘course of dealing’, the fact that the board had on numerous occasions
let Richards continue to act without intervention, which created implied authority o He had no express authority, but he was appointed chairman, and entered into
contracts without sanction of the Board, thus his authority was implied
If a board has allowed one of its directors to continually act as if they have a certain level of authority, and to enter into contracts, then it may be
assumed that the director has actual authority and can bind the company in agreements with third parties
• Norwich Fire Insurance Society Ltd v Brennans (Horsham) Pty Ltd (1981) o Norwich (P) was insurance company, negotiated contract with Brennans (TP) o Brennans told to deal with Norwich’s agent, they paid agent and signed contract o Agent went bankrupts, no monies were passed to Norwich
o Issue: whether there was actual implied authority for Norwich’s agent to collect money
o Held: agents had actual implied authority
o Focused on what could be implied from conduct of parties
o Implied that agent had actual authority to receive payment on behalf of Norwich, derived from suggestion that Brennan’s deal with the agents on matter of insurance o Concept of dealing covered signed the contract and paying the money
• Cumming v Sands (2001)
o Cumming employed by Dr Brand, formed sexual relationship o Cumming did favours for Brand’s mother like purchasing a house
o Mother died, Brand and sister Sands were executors to will and held equal shares to house
o Cumming rented house at market rate and agreed to maintain it, did extensive renovations to house
o Brand died leaving his share to Cumming, Cumming claimed cost of renovations from Sands, arguing Brand was Sands’ agent
o Issue: whether Brand had acted as Sands’ agent when he allowed Cumming to make renovations to home, making Sands liable for cost of renovations
o Held: there was implied agency, Sands encouraged improvement to house through actions of Brand, thus liable for costs
2.4.2 CONSTRUCTIVE AUTHORITY
• Where there is no actual authority but an action of P creates an agency relationship which P is estopped from denying
• Can arise from estoppel when P represents to third party (TP) that A has authority which A does not actually possess
