Agency and Negligence & Company formation Flashcards
Which of the following does NOT need to be shown by the claimant in order to succeed in an action for negligence?
a) That the defendant owed them a duty of care.
b) That the defendant was in breach of a duty of care.
c) That the claimant suffered injury, damage or loss as a result of a breach of a duty of care.
d) That the damage was not too remote.
d) That the damage was not too remote.
This is a matter for the court to decide in assessing damages once negligence has been shown (ie once the claimant has proved all other statements satisfactorily).
Define the features of the following ways agency can be c #reated:
a) By Consent
b) By Estoppel
c) By Necessity
d) By Ratification
a) Agency agreed on orally or in writing. Exception: power of attorney has to be in writing
b) Estoppel: Principal allows agent to act without authority
c) Necessity: Agent can act for principal in an emergency only if:
There is a pre-existing relationship
The agent has no way of contacting principal
Agent acts prudently and in good faith
d) Ratification: Principal can retrospectively approve the actions of an agent only if:
Principal (company) was formed at time
Principal has capacity at time of action and at time of ratification
Agent makes TP aware of P at time of contract
Principal ratifies within a reasonable time
What duties does the law imply on an agent?
Avoid conflicts of interest
Perform their contracted obligations and obey the principal’s instructions
Act in person - NOT ALLOWED TO DELEGATE without permission
Maintain confidentiality for principal
What are the rights of an agent?
To claim remunerations;
To reclaim expenses incurred when carrying out contract;
Lien - to retain assets until paid
Match the term with the definition;
a) Actual express authority
b) Implied authority
c) Apparent or ostensible authority
- Agent has previously represented Principal to a TP. (Estopple)
- Authority agreed between principal and agent
- Authority implied by the position held
a) 2
b) 3
c) 1
When might an agent incur personal liability in a contract?
If they do not name the principal or are not known to TP to be an agent
Where an agents name is added to a contract
If they make a contract on behalf of P with no authority - whether mistaken or knowingly done
What are the three factors that constitute a case of negligence
- A duty of care exists
- There has been a breach of that duty of care
- Damages were incurred as a result of that breach
What are the four features that imply a duty of care exists?
- Reasonable foreseeability of consequence
- Proximity of claimant to defendant in time and place
- It is fair, just and reasonable to impose a duty of care
- Not contrary to public policy
When is the reasonable man test applied and when may this test be altered?
When determining whether there has been a breach of duty of care. Has the defendant failed to act reasonably by falling below the standards reasonably expected.
Factors that alter the reasonable man test:
A higher expectation will be placed on someone who has more qualifications, skills or knowledge in a particular area - but - the expectations will not be lowered for trainees/those will less skills.
The test will not factor in knowledge that only came available after the fact - no hindsight
If the defendant can rely on a body of professional opinion that supports the approach taken then there will be no breach
If defendant was acting in an emergency. There will be a weigh up of the advantage of the risk taken.
If defendant knew about claimants vulnerability, a higher duty of care is expected
What is the ‘but for’ test?
The claimant must prove that the damage would not have occurred but for the defendants actions
When is the chain of causation broken?
When a new act occurs after the defendant’s breach that caused or contributed to the damage. Defendant’s liability ceases at this point
What factors are used to determine whether accountants and auditors are in sufficient proximity to the claimant to permit a negligence claim?
Special relationship formation
- A client requests a professional opinion
- The accountant/auditor gives a professional opinion acting in a professional capacity
- The client relies upon the opinion
- the claimant suffers an economic loss as a result of reliance on the opinion
Only occurs if the defendant is in the business of giving professional advice and acts within that context
a) Does a duty of care exist if an individual relies on audited accounts to invest, unknown to the professional who prepared them?
b) Does a special relationship (and thus a duty of care) exist of an accountant prepares information in the knowledge that the claimant is contemplating an investment/takeover
a) No - could make accountants liable to whole world
b) yes
True or false;
a) An auditor who recklessly prepares an auditors report that contains materially misleading information is punishable by a fine
b) Auditors can enter into a provision that exempts their liability for negligence in relation to the audited accounts
a) True
b) False - this would be void. Instead, auditors can enter into a liability limitation agreement that limits the auditors liability for negligence to a fair and reasonable amount
In what situations may courts lift the veil of incorporation?
To produce a tax liability/prevent evasion of tax
To give compensation
To reveal member’s national identity
If a director is disqualified
If a Plc trades without a certificate
Fraudulent trading - intending to defraud by trading an insolvent company
Wrongful trading - not taking all steps to minimise losses to creditors when trading an insolvent co.
Indicate whether the following types of company are public or private:
a) Plc
b) Ltd
c) Companies limited by guarantee
d) Companies limited by shares
e) Unlimited liability companies
a) Public
b) Private
c) Private
d) Both - public can trade shares on stock exchange whereas private companies have to find private buyers.
e) Private
What is the memorandum of association?
A list of initial formers of the company - take at least one share each
