3. Contract Law “Is My Agreement an Enforceable Contract?” The Law of Contract involves answering 4 questions: (1) Is my agreement an enforceable contract? Are all of the elements of a contract present. (2) If so, what does it require me (and the other party) to do? - What “promises” have become terms of the contract. (3) Can I get out of it (without paying some form of penalty)? - Was the formation of the contract defective in some way (ie were there any ‘vitiating elements’ present). (4) If not and I want to terminate it anyway, how can I – and what penalties might I incur? - How can contract come to an end and what remedies are available to a party not in default. Contract: An agreement which the law will enforce.
Requirements for Validity In most cases – contracts do not have to be written. They can be: * written; * partly written and partly oral; * wholly oral; or * implied from the way the parties behave. Elements of a Contract Offer AcceptanceConsiderationIntention to be bound MutualityCapacityLegality Offer: A promise to do (or not to do) something – together with an intention to be contractually bound on acceptance by the other party. OR A clear statement of the terms on which an offeror is prepared to be contractually bound. Offers can be made to: one person;an identified group of people; or the world at large.
Offers to the World at Large: Offers not directed to any specific person or persons but to anyone who becomes aware of them (other than those – if any – who are EXPRESSLY excluded from the offer). Invitations to Treat: Statements made to others inviting THEM to make you an offer. Examples: advertisements and circulars;displays of goods in shops; calls for bids at auctions; and calls for tenders.
PUFF: Obviously far-fetched statements made to induce a contract but not intended to form part of the contractual obligation. Termination of Offers: Revocation by the offeror;Rejection by the offeree; Lapse of time;Death of a party;Change of circumstances;
Failure of a condition;Supervening incapacity. Acceptance: A FINAL and UNQUALIFIED assent to the terms of an offer (ie the offeree agrees to deal on EXACTLY the SAME terms that the offeror offered). Who May Accept? Only those persons: To whom the offer was intended; and To whom it was communicated.
What Can Be Accepted? What was offered (without any additions, deletions or conditions). IF any alteration is made the offeree is not accepting – he or she is making a counter-offer. Counter-offer: Rejects the original offer and substitutes a new offer for it. Rules of Acceptance: Acceptance generally must be COMMUNICATED to be effective. Such communications may be by WORDS or ACTIONS.
SILENCE cannot be STIPULATED as the required means of acceptance. An offeror can WAIVE his or her right to communication of acceptance. The offeror can REQUIRE acceptance to be in a prescribed manner. Revocation of Acceptance: An acceptance can be revoked IF the revocation comes to the offeror’s attention before he or she receives the acceptance. Intention To Be Bound:What separates a mere agreement from a contract is the parties’ intention to be bound IF agreement is reached.
Rules for Intention To Be Bound:With all agreements determine the parties’ intention objectively – looking at both the agreement and at all of the surrounding circumstances. * The old “presumptions” no longer apply-BUT it is still probable that: * purely SOCIAL or DOMESTIC agreements will not involve the required intention to create a LEGALLY ENFORCEABLE agreement; but * BUSINESS or COMMERCIAL agreements will probably involve that intention. Consideration: The price paid by the promisee for the promisor’s promise. Consideration can take the form of either: a BENEFIT to the promisor;
Or a DETRIMENT to the promisee incurred at the promisor’s request. Consideration can be: executory; executed;BUT NOT past. The Concept of “VALUE”: Consideration must be something of value in the eyes of the law. BUT it need not be of an equivalent value to the promisor’s promise. (ie, it needs to be SUFFICIENT but it need not be ADEQUATE.) Privity of Contract: “Privity” refers to any relationship between two parties. Privity of contract means that ONLY the parties to a contract have rights under it. Therefore, only the parties to a contract can:enforce it; orhave it enforced against them.
4. Contract Law: “What Does the Contract Require Me To Do (What are its “Terms”)?” Terms: Every promise that was intended to be legally enforceable as part of the contractual obligation. The Possibilities
Representation or Term? The answer depends on the parties’ CONTRACTUAL INTENTION. (ie would a reasonable person have understood that the statement was intended to become part of the contractual obligation?) Types of Term: Express terms (those to which the parties expressly agree); Implied terms (those which the parties do not expressly discuss – but which form part of their agreement anyway). Express Terms: Can be incorporated into the contract in any way – provided the parties expressly agree to them.
They can be: a. Written into the contract (if the contract is in writing); b. Incorporated into the contract as the result of oral statements; c. Incorporated into the contract in some other way (by, for example, being displayed on a sign in a shop or other business premises where the customer is likely to see them before finalising the contract). Express Terms and Written Contracts: If you take the trouble to write your agreement down it is assumed that EVERYTHING you INTENDED to be part of the contractual obligation will be in the written document. Therefore, if something is NOT in the written document it is assumed that the parties did not intend it to be a term of their contract.
This is called the “Parol Evidence Rule”. INNES J.: “where a contract is reduced into writing, [and] … appears … to be entire, it is presumed that the writing contains all the terms of it and evidence will not be admitted of any previous or contemporaneous agreement which would have the effect of adding to or varying it in any way.”
Major Exceptions to the Parol Evidence Rule: PARTLY WRITTEN, PARTLY ORAL contracts; contracts impliedly subject to some TRADE USAGE OR CUSTOM (the custom will still be a term – part of the obligation – even though it is not expressly referred to in the written contract). “Tests” to Help Determine CONTRACTUAL INTENTION: TIME; WRITING;SPECIAL KNOWLEDGE OR SKILL; AndIMPORTANCE IN THE MINDS OF THE PARTIES. Implied Terms: Terms May Be Implied: by trade usage or custom; by statute; and by the courts in other cases where inclusion of the term was clearly intended. When Will Courts Imply Terms? the term must be reasonable and equitable; it must be necessary to give the contract business efficacy; it must be so obvious that it goes without saying; it must be capable of clear expression; it must not contradict any express term of the contract. Classifying Terms: Terms are NOT all equally important. Some terms are ESSENTIAL to the contract - other terms are less important. Therefore, if a term is breached the remedy should depend on how important that term was. The Test of “Essentiality”: Does it appear from the contract, taken as a whole, that the promise was of such importance that the promisee would not have entered into the contract at all UNLESS he or she was assured of a STRICT or SUBSTANTIAL performance of it?
Condition: A MAJOR term of the contract. Breach entitles the innocent party to terminate the contract and/or sue for damages. Warranty: A MINOR term of the contract. Breach only entitles the innocent party to sue for damages. Intermediate Term: A term which is capable of BOTH major and minor breach. If breached in a MAJOR way the innocent party may bring the contract to an end and/or sue for damages. If breached in a MINOR way the innocent party may only sue for damages. Exemption Clauses: Terms of a contract excluding or limiting one party’s liability for a breach of contract (or other wrongful acts or omissions in their performance – or non-performance - of the contract).
Exclusion Clauses: Clauses that exclude liability completely. Limitation Clauses: Clauses limiting liability to a fixed (or determinable) monetary amount. Requirements for Validity: The exemption clause must have become a ‘term of the contract’? It must be clear and unambiguous; and It must be wide enough to cover the breach complained of. Becoming a Term: To be a term you must show that: a. The exemption clause was intended to be a term of the contract (ie apply the normal “contractual intention” test for terms); AND b. It was actually or constructively brought to the “NOTICE” of the party against whom it is to be used.
Types of Notice: “ACTUAL” : Where the existence and contents of the clause are actually brought to the other party’s attention. “CONSTRUCTIVE”: Where the proferens does everything reasonably necessary to bring the clause to a reasonable person’s attention. Content and Timing of Notice: Notice of the existence and contents of the exemption clause must be given to the other party - before or at the time of contracting. The Clause Must Be Clear and Unambiguous: If a clause’s meaning is not clear or if it is ambiguous the courts will still enforce it BUT they will enforce it on its narrowest meaning. This is an application of the “Contra Proferentem” rule .
The Clause Must Be Wide Enough to Cover the Actual Breach: If a clause does not clearly cover the particular breach by the proferens it will not excuse him of her from liability. For example, a clause that excluded liability for “any breach of contract” will not protect the proferens from liability for some tort he or she commits while performing the contract. The Effect of Signature: Someone who signs a document is DEEMED to have read, understood and agreed to its contents.
5. Contract Law: “Can I Get Out of it?” (the “Vitiating Elements”) The Importance of “Consent” in Contract: All contracts depend on the parties agreeing with one another about something. If one party’s consent to the contract was obtained in a wrongful way there is no genuine consent. If there is no genuine consent the courts can set the contract aside. Factors Affecting Consent: Misrepresentation MistakeDuress Undue InfluenceUnconscionability Misrepresentation
The Elements of an Actionable Misrepresentation: a FALSE STATEMENT; of FACT; ADDRESSED to the party misled;intended to AND actually INDUCING the contract. Non-Inducing Representations: where the representee is NOT AWARE of the representation; where the representee KNOWS that the representation is false; where the representee DOES NOT ACT on the representation; and where the representation is not MATERIAL to the contract.
Categories of Misrepresentation: Fraudulent misrepresentation; Negligent misrepresentation;Innocent misrepresentation. Remedies for Misrepresentation: Rescission (termination) of the contract (in all three cases). If the misrepresentation was “fraudulent” the court may also award damages in the tort of “deceit”. If the misrepresentation “negligent” the court may also award damages in the tort of “negligence”. If the misrepresentation was “innocent” damages CANNOT be awarded. Additional remedies MIGHT be available under section 18 of the Australian Consumer Law. Mistake: Legal mistake occurs when the parties enter into the contract under some mistaken belief about the subject matter of the contract OR their own rights, duties or liabilities. The mistake must be fundamental to the obligation. If it is, a court may set the contract aside (ie may terminate it). Types of Mistake: Common Mistake -where the parties make the SAME MISTAKE. Mutual Mistake-where the parties misunderstand on another and deal at CROSS PURPOSES. Unilateral Mistake- where only ONE PARTY IS MISTAKEN and tries to take advantage of that mistake. Effect of Mistake: At Common Law - the contract will be VOID (if the mistake is sufficiently FUNDAMENTAL). In Equity - the contract is only VOIDABLE (ie you ask the court to terminate it); * The court can also order RECTIFICATION of the written contract to remove the mistake. Duress: PRESSURE exerted by one person on the other person to COERCE the other person to contract on particular terms.
Categories of Duress: Duress of the Person;Duress of Goods;Economic Duress. Economic Duress: The plaintiff must prove that: a. some form of economic pressure induced the contract; and b. that pressure went beyond what was legitimate. Pressure will be ILLEGITIMATE if: it consists of UNLAWFUL THREATS; or it amounts to UNCONSCIONABLE CONDUCT. Effect of Duress: the contract is voidable by the party coerced; the right to avoid can be lost by ratification or affirmation; damages may be obtainable in the tort of intimidation.
Undue Influence: Where one party abuses the influence that he or she has over the decisions of another in order to obtain some undue benefit, either personally or for some third party. Undue Influence can arise: through some RELATIONSHIP of trust and confidence; or through actual COERCION or general DOMINATION. Relationships of Trust and Confidence: “Special Relationships” (or “relationships of influence”); and other relationships (where a high degree of trust and confidence has developed). Effect of Undue Influence: the contract can be set aside (rescinded) by the party under the influence; the court can do what is needed to restore the parties to their original positions. Unconscionability: The taking of unfair and improper advantage of another party’s disability to gain a benefit for yourself or for some other person. The 3 Requirements: 1. The weaker party must have been under a special disability vis-à-vis the stronger; 2. The stronger must have been aware of that special disability; and 3. It must have been unfair for the stronger to procure agreement in those circumstances.
Effect of Proving Unconscionable Conduct: The contract is voidable at the instance of the weaker party; The courts may reduce the weaker party’s liability instead of extinguishing it completely; These remedies can be lost through ratification, affirmation, acquiescence or third party involvement. Restraint of Trade Clauses: Generally VOID on public policy grounds.
UNLESS the restraint is REASONABLE both: as between the parties; and in the public interest. Reasonable = No greater than is necessary to protect the LEGITIMATE INTERESTS of the party imposing it. 6. Contract LawDischarge (Termination) and Remedies Ways a Contract Can Be Discharged: by performance;by agreement;through frustration;through breach; andby operation of law. Discharge by Performance: Discharge occurs when both parties have completely performed their obligations under the contract.If one party does not completely perform his or her obligations a range of penalties can apply.
Discharge by Agreement: in the original contract; or in some subsequent agreement. Discharge Through Frustration: When performance of the agreed obligation becomes IMPOSSIBLE through NO FAULT of either party the contract terminates. THEREAFTER, neither party can demand further performance.
Effect of Frustration: the contract is discharged at the point of frustration; payments made up to that point cannot be recouped UNLESS there has been a total failure of consideration; payments due after the frustrating event occurs cannot be recovered.
Discharge through Breach: When one party breaches a contract in a MAJOR way the other party may choose to treat the contract as terminated. (The breach is said to be a “repudiation” of the contract by the guilty party and, if the innocent party “accepts the repudiation”, the contract comes to an end.) If that happens, the innocent party can still sue for damages but cannot be required to continue performing his or her part of the contract.
Types of Breach: ACTUAL breach-an actual failure to perform as required when performance becomes due. ANTICIPATORY breach - a clear indication by one of the parties that he or she will not perform when performance becomes due. The Innocent Party’s Election: ACCEPT the breach and SUE for damages; or REJECT the breach, keep the contract on foot and attempt to have it PERFORMED. Discharge by Operation of Law: In some cases the law requires that a contract automatically come to an end. If that happens the contract automatically comes to an end – irrespective of what the parties intend.
Examples include fraudulent alteration and “merger”. In cases of bankruptcy the law also permits the trustee in bankruptcy to terminate a contract. Remedies: Breaches of contract are normally remedied by an award of “damages” – an amount of money that is paid as compensation. Where damages are an inappropriate remedy the equitable remedies of: * specific performance;
* injunction; or * restitution, may be ordered instead. Damages: A MONETARY amount awarded to COMPENSATE an innocent party for FORESEEABLE LOSS arising naturally and consequentially out of a BREACH of contract. Principles on which Damages are Awarded: Damages are designed to compensate for actual loss;Damages can be pre-agreed (but be careful of the difference between “liquidated damages” and “penalties”).
Liquidated Damages and Penalties: Liquidated Damages – a genuine pre-estimate of likely loss if there is a breach. Penalties – stipulations inserted not as estimates of loss BUT to make it punitively expensive for one party to commit a breach of contract. Mitigation: Plaintiffs are required to take reasonable steps to minimise the loss they suffer as a result of the other party’s breach. Specific Performance: An order of the court requiring a party to perform the obligations that he or she undertook to perform under the contract. Injunction: An order of the court prohibiting someone from engaging in specified behaviour. Restitution: Where one party is compelled to RESTORE money or some other benefit to the person from whom it was obtained BECAUSE it would be UNJUST to allow him or her to keep it. Quantum Meruit (“As much as he has earned”): An amount awarded to someone who has conferred a benefit on another in circumstances such that he or she cannot be remunerated or compensated for that benefit in any other way.
7. Statutory Regulation of Contracts Sale of Goods Act 1896 (Qld) and the Competition and Consumer Act 2010 (Cth) Evolution of Consumer Protection Measures: * Laissez faire and the will theory of contract; * The caveat emptor concept; * The Sale of Goods Act as an early form of consumer protection; * The Competition and Consumer Act and the Australian Consumer Law; * Evolution of non-judicial means of dispute resolution.
Competition and Consumer Act 2010 (Cth): Concerned mainly with two things: a) protecting consumers against unconscionable conduct and unfair practices; and b) preventing (or, at least, regulating) anti-competitive behaviour. The Australian Consumer Law (Sch 2 to the CCA): General Protections * Part 2-1 – Misleading or deceptive conduct; The elements of s 18: The conduct complained of must have occurred “in trade or commerce”; and It must be “misleading or deceptive” or “likely to mislead or deceive”. Must Engage in Conduct in Trade or Commerce: Two elements: “Engaging in conduct”; and The conduct must occur “in trade or commerce”. The Conduct Must be “Misleading or Deceptive”: “Misleading or deceptive” simply means that the conduct must be capable of leading someone into error. Intent is irrelevant. Culpability is irrelevant. Taco Co v Taco Bell (1982) 42 ALR 177 suggested the following guidance (at 202-203): “First, … identify the relevant section (or sections) of the public … by reference to whom the question of whether conduct is, or is likely to be, misleading or deceptive falls to be tested …
Second, once the relevant section of the public is established, the matter is to be considered by reference to all who come within it … Thirdly, evidence that some person has in fact formed an erroneous conclusion is admissible and may be persuasive but is not essential … Finally, it is necessary to enquire why proven misconception has arisen …” The four critical components: a) whether particular conduct is misleading or deceptive can only be judged against the background of the audience to whom that conduct was directed; b) the conduct must have been capable of leading members of that audience into error; c) evidence that someone has actually been led into error is not necessary; and d) it must be shown that the conduct actually caused the error.
The conduct must have been capable of causing the error: Unless the conduct is capable of leading the intended audience into error it cannot breach s 18. It is not enough that it merely causes confusion or leaves the intended audience wondering. Evidence that someone has been misled is not necessary: In every case it is up to the court to determine, as objectively as it can, whether particular conduct was or was not misleading or deceptive. In reaching that decision it can, but need not, consider particular instances of individuals being led into error.
The Conduct must have actually caused the error: If the defendant is to be liable, he or she must have been responsible for the plaintiff’s error. Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 * Part 2-2 - Unconscionable Conduct; * s 20 – in commercial transactions; * s 21 – in consumer transactions; * s 22 - in business transactions. * Part 2-3 - Unfair Contract Terms;
* s 23 – unfair terms in standard form contracts are VOID; * s 24 – meaning of unfair; * s 25 – examples of unfair terms. * Part 3-1 - Unfair Practices; * s 23 – unfair terms in standard form contracts are VOID; * s 24 – meaning of unfair; * s 25 – examples of unfair terms. Specific Unfair Practices: s 32 – offering prizes etc (not intending to supply them); s 35 – bait advertising; s 36 – wrongly accepting payment;ss 40-42 – unsolicited supplies; ss 44-45 – pyramid schemes;s 49 – referral selling; s 50 – harassment and coercion. * Part 3-2 – Consumer Guarantees. * s 51 – title (= SOGA s 15); s 52 – undisturbed possession (= SOGA s 15) ; * s 53 – undisclosed securities (= SOGA s 15); s 54 – acceptable quality (= SOGA s 17); * s 55 – fitness for purpose (= SOGA s 17);
* s 56 – compliance with description (= SOGA s 16); * s 57 – compliance with sample (= SOGA s 18);s 58 – repairs and spare parts; * s 64 – NO EXCLUSION of consumer guarantees.
Remedies: Injunctions under s 232; Damages under s 236; and Ancillary remedies under s 243 (declaring the contract or any part of it void, varying the contract, refusing enforcement, directing refunds or the return of property, requiring payment for any loss or damage, directing repair or replacement and requiring provision of services.)
Restrictive Trade Practices: s 45 - anti-competitive behaviour; s. 46 - misuse of market power; s 47 - exclusive dealing; s 48 - resale price maintenance.
8. Tortious Responsibility, Vicarious Liability and the Employment Relationship Torts: Civil wrongs, Any form of WRONGFUL BEHAVIOUR, not AUTHORISED by law, which causes loss, damage or injury to others. Negligence: A culpable failure to exercise your DUTY OF CARE not to injure others through your (advertent or inadvertent), acts or omissions. Now also governed by the Civil Liability Acts in each jurisdiction.
Elements of Negligence: A duty of care; Breach of that duty of care; Resulting loss, damage or injury. The Duty of Care: Owed to all those “who are so closely and directly affected” by your acts that you should have them in mind when you are considering the acts or omissions later called into question. Lord Atkin in Donoghue v Stevenson .
Owed to those with whom you are in a “proximate relationship”. Establishing the Duty: Was there a reasonably foreseeable risk of injury? Is this a case where there is an established duty of care? If not, look at the “salient features” of the case to see if there is a sufficiently proximate relationship to warrant finding a duty of care. Are there policy considerations which warrant not finding a duty of care? Salient Features: The victim’s vulnerability; Reliance and dependence; Assumption of responsibility by the tortfeasor; The tortfeasor’s ability to control what caused the harm. Breach of the Duty of Care: To show breach you must show that the defendant failed to meet the standard of care that was expected of him or her. Principles – Breach of Duty: A person does not breach the duty of care unless: The risk was foreseeable; The risk was not insignificant; and A reasonable person would have taken the precautions. (Civil Liability Act 2003 (Qld) s 9(1).) Therefore: Establish what STANDARD of care was applicable in the circumstances; and
Show a FAILURE to meet that standard. Standard of Care depends on: The probability that the harm would occur; The likely seriousness of the harm; The burden of taking precautions; The social utility of the activity that creates the harm.
(Civil Liability Act 2003 (Qld) s 9(2).) Failure to meet the required standard of care means not doing what a REASONABLE PERSON would have done in the circumstances. What is reasonable depends on: The risk involved in your act or omission; The need to accept an element of risk – the defences of “emergency” or “necessity”; The practicality of adopting preventative measures; Established and accepted community standards.
Onus of Proof: “He who alleges must prove”; Res ipsa loquitur (the thing speaks for itself) – a rule of evidence rather than of substantive law. Damage: The damage must be damage that the law recognizes. There must be a “causal link” between the breach of duty and the damage (ie the negligence must have caused the plaintiff’s injury). AND the damage must not be “too remote”.
Causal Link: “The breach of duty was a necessary condition of occurrence of the harm” (factual causation) Civil Liability Act 2003 (Qld) s 11(1)(a) “But for” test; “Caused or materially contributed to” test; “Common sense” test. Not ‘Too Remote”: It must be “appropriate for the scope of the liability of the person in breach to extend to the harm so caused”. Civil Liability Act 2003 (Qld) s 11(1)(b).
That is, there must be a causal link between the act/omission and the damage “in law” as well as “in fact”. Defences to Negligence: Negligence has not been proven (ie one or more of the three elements is missing); Contributory negligence; Volenti non fit injuria (the willing cannot be injured).
Contributory Negligence: Where a plaintiff was at least partly to blame for his or her own injury liability will be apportioned and the damages actually awarded will be reduced. Proving Contributory Negligence: the plaintiff breached a duty he or she owed the defendant; or the plaintiff failed to exercise reasonable care for his or her own safety. Volenti non fit injuria: If a plaintiff, with full knowledge of the risk, voluntarily accepts the risk of injury he or she cannot recover damages. Therefore TWO aspects: knowledge of the risk; and voluntary acceptance of it. Negligent Misstatement: An example of negligence generally. Therefore, the plaintiff must show: the defendant owed a duty of care; he/she breached that duty; and there was a resulting loss. Liability for Negligent Misstatement: Depends on: Assumption of responsibility by the adviser; and Reliance on that advice by the advised. Vicarious Liability: One person’s liability for torts committed by another. The other will generally be an employee or agent: the tortious act must have been committed in the course of his or her employment or agency.
9. The Agency Relationship What is an AGENT? One who acts for another (the principal) with the authority of that principal - whether that authority is actual (express or implied) or ostensible. In so acting, the agent is said “to stand in the principal’s shoes” (“qui facit per alium facit per se” – he/she who acts through another acts himself/ herself). Agent’s Authority: actual authority -express; or -implied. apparent or ostensible authority. Considerations Affecting whether a Valid Agency Exists: * Legal capacity to act as agent or to incur the liabilities of a principal. * The creation of a principal – agent relationship by consensual appointment. * The creation of that relationship by estoppel or by operation of law. * The creation of that relationship by subsequent ratification.
Types of Agent: special agents;general agents;universal agents. (The difference is the extent of their authority) Creation of Agency: Normallyby agreement; by operation of law; Agency may also arise by holding out or by estoppel;by ratification. Agency by Operation of Law: TYPES Agency of necessity. Agency from co-habitation. Agency by Estoppel: Arises where one person gives another person power to act on his or her behalf in circumstances such that third parties are justified in treating that other person as having authority to do even unauthorised acts on the principal’s behalf. The agency will arise even though the “agent” did not have actual authority. The Third Party may successfully claim against the “apparent” principal.
The Requirements for Agency by Estoppel: A representation (express or implied). A reliance on that representation. An alteration of the third party’s position as a result of such reliance. Agency by Ratification: Where the agent acts without the principal’s authority BUT the principal subsequently “adopts” those acts. In such cases: The principal is bound; and The principal can also enforce the contract (provided ratification occurs before the third party acts to terminate it). Conditions for an Effective Ratification: The agent must have purported to act for the principal. The principal must have been competent to act as principal. The alleged principal must have been competent to do the act himself/herself. The Agent’s Duties: To obey instructions. To exercise due care and skill. To act personally. To account to the principal for all property received on the principal’s behalf. To act as a good fiduciary:
(i) to avoid conflicts of interest between the agent and the principal;
(ii) not to accept bribes or secret profits; (iii) to maintain confidentiality. The Principal’s Duties: To pay the agent the remuneration to which he/she is entitled. (To this end an agent also has a lien on the principal’s property in his/her possession.) To indemnify the agent against liabilities and expenses properly incurred in carrying out the agency.
Liabilities of Agents: to the principal; to third parties: - principal disclosed; - fact of agency disclosed;- fact of agency kept secret. Torts Committed by Agents: Liability of the agent; Liability of the principal (vicarious liability). Termination of Agency: by performance; by agreement; by revocation; by renunciation; by death, insanity or bankruptcy; by impossibility (frustration) or illegality. Types of Business Agencies: Partnerships; Corporate structures; Trust relationships. Partnership: A statutory agency based on a fiduciary relationship. The statutory agency can continue after dissolution – at least for the purpose of winding up the partnership’s affairs. Company Arrangements: Corporate officers must, of necessity, act as the company’s agents. Such agency may be: actual; or ostensible. Trusts: The trustee has a fiduciary relationship with the beneficiaries and must act for their benefit. The relationship is not one of principal and agent but there are some similarities because of its fiduciary nature.