Tutorial 9

Question 1

appointment of agents?

Answer 1

one of the most common commercial arrangements in business

agents can be used in domestic and international trade

Question 2

an agent = ?

Answer 2

a person who has legal authority to conduct business on behalf of another person, known as a principal

an agent doesn’t contract on his/her own behalf

an agent contracts on behalf of his/her principal

Question 3

how is the arrangement between a principal and agent arranged?

Answer 3

normally, the principal pays the agent a salary, fees or commission or a share of the profits

Question 4

what happens to agents who break the terms of their agency contracts or act negligently?

Answer 4

they’ll become liable to their principals and have to pay compensation (damages)

Question 5

is a director an agent of a company?

Answer 5

yes

Question 6

is a partner an agent of a partnership?

Answer 6

yes

Question 7

what are the duties of an agent?

Answer 7

• obedience (obey lawful instructions)
• skill (use care & skill when performing duties)
• performance (perform duties)
• fiduciary duties (relationship between principal and agent is a fiduciary relationship)

Question 8

fiduciary relationship?

Answer 8

relationship where one of the parties can be expected to trust the other implicitly

Question 9

what fiduciary duties does an agent have?

Answer 9

an agent must
- avoid any conflict of interest
- not make a secret profit
- not take a bribe
- keep records of dealings on behalf of the principal
- keep confidentiality

Question 10

what are the rights of an agent?

Answer 10

• to be indemnified against losses & liabilities
• to be repaid expenses and any agreed remuneration
• to exercise a lien over property owned by the principal which has lawfully come into his possession

Question 11

indemnify = ?

Answer 11

compensate for harm or loss

Question 12

lien = ?

Answer 12

a right to keep possession of property belonging to another person until a debt owed by that person is settled

Question 13

what are the ways an agent can contract with third parties on behalf of the principal?

Answer 13

• agency by consent
• agency by estoppel
• agency of necessity
• ratification

Question 14

agency by consent?

Answer 14

consent given impliedly, in writing or orally

Question 15

agency by estoppel?

Answer 15

“holding out”

where the words or conduct of the principal leads a third party to presume that a person has the authority of an agent and the third party acts upon this (the agent has apparent or ostensible authority)

Question 16

ostensible authority = ?

Answer 16

the power of an agent to act on behalf of a principal

Question 17

agency of necessity = ?

Answer 17

where there’s an existing contractual relationship but there’s an emergency, it’s impossible to communicate with the principal, the property or interests of another are in imminent jeopardy, they act in good faith and the action was reasonable and prudent

Question 18

ratification = ?

Answer 18

if an agent makes a contract on behalf of the principal, but doesn’t have authority, the principal can later ratify the contract and so may validate past acts

Question 19

ratify = ?

Answer 19

sign or give formal consent to, officially making it valid

Question 20

what are the different types of authority of an agent?

Answer 20

actual express authority

implied actual authority

ostensible or apparent authority

Question 21

actual express authority

Answer 21

authority given either orally or in writing

Question 22

implied actual authority

Answer 22

authority implied from the nature of the agent’s activities or what is usual in the circumstances

unless the third party knows otherwise, they are entitled to assume that an agent has implied actual authority

Question 23

ostensible or apparent authority

Answer 23

authority in which lord denning said is “the authority of an agent as it appears to others”

arises where the principal represents to a third party that the agent has authority

Question 24

sole trader?

Answer 24

one human individual who is in business on his own

can, however, employ staff

don’t have to register as their business is private

must register for VAT like companies & partnerships

unlimited liability

Question 25

partnership?

Answer 25

partners are agents of eachother

when two or more people go into business together and build a joint business

Question 26

what are the 3 types of partnerships?

Answer 26

ordinary partnership
limited partnership
limited liability partnerships

Question 27

ordinary partnership?

Answer 27

under the 1890 partnership act

may engage in any type of business

all partners can manage and are agents of eachother

Question 28

limited partnership?

Answer 28

under the limited partnerships act 1907

rare types of partnerships; shouldn’t be confused with an LLP

limited liability

partnership must have one general partner who runs the business and has unlimited liability

must register with the registrar of companies

Question 29

limited liability partnerships?

Answer 29

under the limited liability partnerships act 2000

this was passed as prior to this, partners were jointly and heavily liable for the unlawful acts of another partner

under an LLP, members have limited liability

must register with the registrar of companies

Question 30

companies?

Answer 30

artificial legal persons with separate legal identity from the persons who own the shares and control the company

limited liability

Question 31

Salomon v Salomon (1897)?

Answer 31

landmark judgement and held that companies are a separate legal entity from persons who own and control them

known as the ‘veil of incorporation’

Question 32

what is company law based on?

Answer 32

companies act 2006

Question 33

what are the 2 types of companies?

Answer 33

• public (PLC)
• private (LTD)

Question 34

private companies?

Answer 34

limited by shares mostly, minority limited by guarantee

typically small/medium sized

must have at least 1 director

no limit on amount of share capital

Question 35

public companies?

Answer 35

registered as a public company

limited by shares and must have a minimum of £50,000 share capital allotted to the shareholders

minimum of 2 directors

may or may not be quoted on a recognised stock exchange

Question 36

debenture = ?

Answer 36

a contract between a creditor and the company for a loan to be repaid with fixed interest

must be paid before shareholders are paid

Question 37

‘piercing the corporate veil’?

Answer 37

corporate veil can be pierced in certain circumstances to prevent the abuse of a company’s legal personality

only applies when the person deliberately evades an existing legal obligation, liability or restriction

Question 38

key benefit of a company being a separate legal person?

Answer 38

limited liability for shareholders