Week 4: Bailment and Agency
1. Agency
1.1 Relationship of principal and agent is fiduciary (trust and confident);
1.1.1 Fiduciary duties are proscriptive or negative duties; fiduciary is not permitted to put their interests in conflict with their principal – nor can they make any secrete or unauthorised profit from that fiduciary relationship.
1.2 Relationship of principal and agent seems to modify the doctrine of privity of contract;
1.2.1 Where you have an effective agency, the agent (almost a third party) will enter into a contract but the principal will acquire rights and obligations under the contract even though they personally did not execute their contract.
1.3 Agency is defined as: “a word used in law to connote an authority or capacity in one person to create legal relations between a
person occupying the position of principal and third parties”
(International Harvester Co v Carrigan’s Hazeldene Pastoral (1958)).
1.3.1 Agent steps into shoes of the principal;
1.3.2 Power conferred on an agent is a reproduction of the principal’s own power.
1.4 Agency features (Dowrick 1954):
1.4.1 “Where an agent acts on behalf of his principal in a legal
transaction and uses the principal’s name, the result in law is that the principal’s legal position is altered but the agent himself drops out of the transaction”;
1.4.1.1 Persons who are not themselves sui juris (of legal capacity) may nevertheless have the power to act as agents for persons who are.
1.4.2 The power of an agent to bind his principal is limited to the power of the principal to bind himself; and if the powers of the principal to alter his own legal relations are ended by his death, insanity, or bankruptcy, the agents are terminated automatically.
1.5 Types of agency:
1.5.1 Brokers;
1.5.2 Factors:
1.5.2.1 Factors (Mercantile Agents) Act 1923 (NSW) 1.5.2.2 Factor/mercantile agent:
1.5.2.2.1 Authority in the usual course of business, to either buy/sell goods or to raise money on the security of goods;
1.5.2.2.X In possession of goods or document of title to goods;
1.5.2.2.2 Can bind a principal by occupying that position as if they have been expressly authorised by the owner of the goods to either buy/sell or raise money on the security of those goods.
1.5.3 Del Credere agents:
1.5.3.1 Agent who, in addition to their normal duties, also assumes responsibility for receiving payment to the principal of the contractual consideration;
1.5.3.2 “In dealing with a third party on behalf of the
principal, a del credere agent charges the third party an additional commission to cover the risk of the third party dishonouring its agreement with the
principal. The agent indemnifies the principal against loss resulting from such a breach”.
1.5.3.3 QLD Dep of Fair Trading: a del credere agent is a type of agent who might “accept an appointment on the basis that they guarantee to pay the sale’s proceeds to the seller, regardless of whether or not the buyer pays the proceeds”
1.5.3.3.1 Usual agency arrangement in Aus cattle industry.
1.5.4 Powers of attorney.
1.6 Other forms of acting for another:
1.6.1 Power of attorney:
1.6.1.1 Power of attorney can be given to either facilitate a single transaction or bring into effect an enduring power of attorney;
1.6.1.1.1 An enduring power of attorney will remain valid even after the principal loses capacity.
1.6.1.2 Power of Attorney Act 2003 (NSW).
1.6.2 Advanced care directive:
1.6.2.1 A document that indicates their wishes for medical treatment to be used or withheld if they can no longer communicate those wishes.
1.6.3 Enduring guardianship:
1.6.3.1 Appointment of someone else to be able to make decisions if they are no longer able to speak for themselves.
2. Agency and Sale:
2.1 Contract is formed between principal (producer) and third party (buyer);
2.1.1 Agent is not party to the contract and does not incur obligations under the contract.
2.2 Distributors and franchisers are not agents (they buy/sell on their own behalf), eg. car dealership.
2.3 Seller 1 > agent of seller 1 (or reseller) > buyer:
2.3.1 Important factors:
2.3.1.1 Who determines mark-ups or resale prices (principal or agent)?
2.3.1.2 Is the principal aware of what the agent is charging on the resale?
2.3.1.3 How does the purported agent deal with moneys received for the sale? Do they separate funds that they will account for to the principal?
2.3.2 If they are an agent, they will bring the seller into contractual obligation with the buyer (and be removed from the equation).
2.4 Hannaford v Aus Farmlink [2008]:
2.4.1 Hannaford, trading as TVO, sold cherries locally and internationally;
2.4.2 Farmlink exported TVO cherries to Hong Kong (Mak) and Singapore (Freshmart);
2.4.3 Oral agreement between TVO and Farmlink – relational contract;
2.4.4 Issue: was the relationship seller and purchaser, or principal and agent?
2.4.4.1 If sale/resale: then the vendor-purchaser relationship between TVO and Farmlink would be subject to the Sale of Goods Act 1895 (SA) and the resale
relationship between Farmlink and Freshmart would be subject to the Sale of Goods (Vienna Convention) Act 1986 (SA).
2.4.4.2 If principal/agent: TVO’s sale to Singapore is subject to the terms of CISG.
2.4.5 Farmlink would advise the quantity of cherries, TVO would advise price they wanted to sell, Farmlink would add their margin and then offer it to overseas buyers. If the selling price was accepted it remained static unless altered. TVO was unaware of the price in the overseas market due to the added margins.
2.4.6 TVO argued that Farmlink:
2.4.6.1 If as an agent, breached its contractual duties as an agent;
2.4.6.2 Failed to disclose material information relating to the operation of the agency;
2.4.6.3 Failed to exercise reasonable care and skill in performing the agency;
2.4.6.4 Was a del credere agent;
2.4.6.5 Was guilty of misleading or deceptive conduct in contravention of s 52 Trade Practices Act 1974 (Cth) and s 56 Fair Trading Act 1987 (SA).
2.4.7 Finn J held – sale/resale relationship – Farmlink acted on its own behalf:
2.4.7.1 Farmlink set the price for the overseas sale and kept its sale price and margin a secret;
2.4.7.2 Farmlink engaged all the freight forwarders and paid the freight costs itself;
2.4.7.3 Farmlink never amounted to TVO in a way which showed the total amount received, its margin and amounts paid for freight;
2.4.7.4 Farmlink issued invoices to its overseas customers;
2.4.7.5 Farmlink alone knew the identity and location of its overseas customers;
2.4.7.6 Farmlink identified itself as the shipper on the bills of lading and airway bills;
2.4.7.7 Farmlink negotiated the charges in price without checking or obtaining instructions from TVO or H;
2.4.7.8 In the year that there was insurance, the insured was Farmlink, the consignee’s interest was noted, but there was no recording of TVO having any interest in the cherries.
2.4.8 The relationship of principal and agent (fiduciary), and seller and buyer (commercially adverse), are mutually exclusive.
2.4.9 The primary indicator of whether there is an agency or sale/resale relationship depends upon whether the parties agreed that the duty of the middle man is to act primarily for the benefit of the one delivering the goods to him, or is to act primarily for his own benefit. In the absence of fully informed consent, it would be a breach of fiduciary duty for an agent to profit on the sale of the principal’s property (ie. marking up the principal’s sale price and retaining the difference).
