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LLW5000 Advanced Commercial Law
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LLW5000 Advanced Commercial Law
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Course Code: LLW5000
University: Victoria University
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Country: Australia
Question:
A) The ring vendor Lafayette insists that Lupe is liable for the ring. Lupe has come to you seeking advice and would like to know whether this is true.
B) Lupe would also like to know what recourse he may have against Daphne
C) Consider these additional facts. After having his heart broken Lupe stopped acting and spent most of his time in Monaco gabbling away his worldly possessions. After having a few weeks to himself and time to think Lupe has decided that life doesn’t stop with Fifi. Sadly he is not up to his ears n gambling debts. As it turns out the vintage ring that Daphne had chosen wasn’t just your everyday run of the mill pink diamond but apparently a very rare an valuable antique and is actually worth almost 7 times what Lafayette sold it for. Lupe purports to ratify the contract for the ring. Daphne refuses to enforce the contract.
D) Lafayette knowing that the ring is now worth so much more are keen to find a way out of the contract. Advise Lafayette.
The ring is not Lupe’s only problem. One of Lupe’s only assets left is an old vineyard that was left to him by his grandmother some ten years ago. He has never thought much about it until now as he was never really interested in making wine. The inheritance consists of 100 acres of fine vineyards in the Yarra Valley and a much smaller 20 acres plot of land up near Bright. His Grandmother has left him the land with the request that he keep it in the family and pass it on to his children and his children’s children. Lupe’s family has a long tradition of winemaking, however Lupe left at the age of 18 and moved to Hollywood to seek fame and fortune. He know wishes to continue with family business, however the only thing Lupe knows about vineyards is what a $1000 bottle of Champagne looks like. Knowing he does not have the expertise needed and wanting to elevate the vineyard into fame Lupe contacts Fred a renown viticulturist and oenologist. Lupe meets with Fred a few days later and is very impressed with him, but Fred is not interested in being an employee and instead proposes a partnership. The partnership agreement states that Fred will receive 10% of the profits and that the partnership will last for five years. Lupe makes it clear that he intends to pass on the vineyard to his children one day but in return for Fred’s knowledge and experience, Lupe will give him the smaller parcel of land in Bright at the end of the partnership.
It has been five years since Lupe hired Fred and the vineyard has been flourishing. They have doubled their intake and with some clever advice from Fred, they have been able to win a number of awards. With the additional profits they have made they have purchased additional land and built a house on it.
With the Partnership coming to an end Lupe transfers the parcel of land in Bright to Fred as promised, but Fred claims that he is entitled to a share of the additional parcel of land they purchased and the house, as this is now partnership property.
Consider these altered facts. When Fred entered the partnership he invested $600,000 not the vineyard for the purpose of setting up a cellar. Lupe’s contribution s worth about $3,000,000. However Lupe has secretly use Fred’s money to discharge the remaining mortgage on the vineyard and then has browsed the money back against the Bright property and invested it in the cellar as planned. Fred knows nothing about this.
When the partnership comes to an end, after discharging their debts there is roughly $1,200,000 in profit remaining. Lupe claims that Fred is only entitled to $200,000 proportionate to the percentage he originally invested, while Fred claims he is entitled to half of the assets.
Fred has also done some investigating and has discovered that his money was originally used to pay off Lupe’s mortgage. He now claims the house is partnership property.
D) Advise the parties.
E) Lupe now seeks your advice and would like to know if this is true.
During the vineyards final days, Goldie came for a tasting. She was so impressed by what she tasted that she purchased 12 bottles of wine on the spot, six red and six white. On the bottle of white it says Australian Riesling, finest quality grapes, artisanal production. On the red the label describes the wine as aromatic with hints of mulberry berries, dark chocolate and violets.
When Goldie opens the bottle of Riesling at her next diner party she is horrified to find that it smells bad and tastes weird, almost like vinegar. After some poking about she discovered that this one is actually made from grape syrup and edible ethanol and while it is mixed here in Australia is actually sourced abroad.
The red one is absolutely beautiful however Goldie has quickly has an allergic reaction. As it turns out the wine does not just contain mulberry but was contaminated with the another wine that contains subtle hints of roasted nuts.
F) Advise Goldie as to her rights under Consumer Law.
G) Advise Fred and Lupe as to their liability as partners.
Answer:
(A) Issue
The issue is to check that whether Lupe is liable for the contract made by Daphne.
Rules
Under agency law, it is general that a principal is responsible for the acts of his/her agent. In some of the cases an actual authority exists between principal and agent whereas, at some times, this authority is implied one. In both kinds of authorities such as actual authority and implied authority, a principal held liable for the acts and deeds of his/her agent. Another kind of agency is also there in which the identity of the principal remains undisclosed. Such authority is termed as undisclosed authority. Even in an undisclosed authority, if the third party comes to know about an undisclosed principal, then it is up to the third party then to whom the same wants to sue, to an agent or to an undisclosed principal. Here this is also necessary that in every kind of authority an agent must act within the prescribed power if the same do any act outside of the given authority then the agent is responsible for that part of the transaction. However, this is general that a third party cannot know about the scope of the authority of an agent hence a principal will be responsible for the third party even in those cases where an agent act outside of the scope of given authority.
Application
In the given case, Lupe has authorized his secretary Daphne to purchase a ring for his finance. He has authorized Daphne for such purchasing by providing her a budget of $300000. Daphne was not advised to disclose her agency. However, in this case, the third party i.e. ring vendor Lafayette came to know that Daphne is only an agent but not the actual principal. In such a scenario, according to the provisions of agency law, the same can sue Lupe as well as Daphne, but cannot sue both of them. Further, Daphne was only authorized to spend $300000 on the purchase of the ring but she spent total $320000 on the purchase of the ring. The third party i.e. seller of the ring could not be aware of this fact and such act of Daphne will not restrict the rights of the third party.
Conclusion:
In this case, Lafayette, being the ring vendor can sue Lupe for the payment of ring.
(B) Issue
Whether Lupe has any remedy in against of Daphne. If yes, then what would be these remedies?
Rules
Every Principal is liable for the acts of the agent. However, it does not mean that an agent can do anything and principal will bear the losses of unauthorized acts of an agent. Law provides a remedy to principal in those situations where his/her agent does some acts going out of the boundaries of prescribed authority or do not perform an act in the required manner. When an agent goes beyond the given power, two options are available to the principal. A principal can ratify such acts of an agent or also can refuse the same. If the principal does not ratify the act of an agent then, the agent becomes personally liable in the case.
Application
In the given case, Daphne was required to hide the identity of his principal, yet she failed to do so. Further, Lupe has approved the budget for the ring that was $300000. Being the agent of Lupe, Daphne was required to purchase the ring up to the worth of $300000. But she has spent $320000 in total. It was the act of Daphne which she has performed going outside of the boundaries of her authority. Applying the provisions of agency law, Lupe can be held Daphne liable for the balanced money i.e. $20000. Further, the size of the ring is another issue. Lupe wanted a rock in the form of ring whereas Daphne has purchased a pink diamond ring. This would not be a concern of the case because Lupe has given the authority to Daphne to finalize the ring.
Conclusion:
Lupe can refuse to ratify the purchase of Daphne which she has done out of the authority. Further, he can sue to Daphne for the price bracket i.e. $20000 but not for the size of the ring because it was not a condition of the authority.
(C) Issue
Whether the ring vendor Lafayette can come out from the contract and get the ring back.
Rules
Wherever an agency relationship exists in a case, a third party has rights towards the principal. The reason behind this is that under an agency relation, a principal provides the authority to the agent. Existence or non-existence of an authority is another term. If a third party has reason to believe that an authority exists there in the case, then he/she can held the principal liable. In general, the rights of a third party is save in a contract because the principal takes ultimate responsibility. Even in those situations where an agent acts outside of the limit of authority, the matter of dispute lies between agent and principal, and rights of a third party remain secure. A third party always remains the party of a valid contract and rules of contract law apply thereon. It was held in the case of Chappell & Co Ltd v Nestle Co Ltd that a contract cannot be held invalid on the basis of the fact that consideration was not sufficient.
Application
In the given case, the authority was very clear. Lupe authorized Daphne to purchase the ring for his fiancée. He also allotted her budget. Later on, in the case, the issues raised when Daphne crossed the limit of the provided budget. In such a scenario, the dispute was between Daphne and Lupe. Being a third party, the rights of Lafayette was secured. Further, when it was revealed that the ring was not just a pink diamond ring but was an antique, Lafayette has no right in the contract. Lafayette sold the ring in a good faith and might receive the value i.e. $320000. Now, because of a subsequent fact, the same has no right out of the contract. Lafayette Further Lafayette cannot held the contract made with Daphne invalid stating that Daphne acted outside the limit of her authority or the consideration was not sufficient.
Conclusion:
Lafayette has no right out if the contract despite any additional and subsequent facts because a valid contract existed there and both the parties have already performed their promises.
(D) Issue
The issue involved in the case is to check the rights and liabilities of the parties.
Rules
A partnership is a business structure that works according to the partnership agreement. Partnership agreement exists in a partnership to resolve all the future issues and the same bind on every partner of the firm. In addition to this, this is also true that every term cannot be introduced under a partnership agreement and therefore in a situation of dispute, the rights, and liabilities of the partners depends on equality basis. Partnership agreement supersedes all the provisions of equality and partners do need to perform their promises according to the terms of the agreement. Rests of the rights of the partners are divided equally if nothing is mentioned there regardless of the profit sharing ratio of the partners. Section 24 of the Partnership Act 1958says that a in relation to a partnership property general rule of law are applicable.
Section 26 of the act is another important section which says that if any of the partner introduces his/her personal property to the partnership firm for the purpose of business, such property will remain his/her personal estate if anything else is not decided between/among the partners.
Applications
In the given case, Fred and Lupe have entered into a partnership agreement. According to the agreement developed between them, the partnership was expected to run for the next 5 years. In addition to this Lupe and Fred has decided that the end of the partnership, Lupe will give a smaller parcel of land in bright. They also decided that Fred will be entitled to receive 10% out of profits of the business of the partnership. Apart from this, they have not decided on anything else. Later on, they have purchased some additional assets in the name of the partnership. Now the issue is that Fred is asking half shares in the property of the partnership. Three properties are there in the case as follow
The vineyard
land in bright
Additional purchased property.
In such a situation, this is to be stated that Fred will be entitled to receive a part in the land in bright as it was decided between them pursuant to their partnership agreement; he will not be able to take any shares out of the property of vineyard, as it was already decided between the parties and according to section 26 of the act, it will remain the personal estate of Lupe. Further, at last, applying the provisions of section 24 of the act, Fred can ask his share of additional land purchased by them during the course of their business as it was the partnership property and general rule of equality will be applicable.
Conclusion:
Fred is entitled to receive the half share of additional purchased land and the rest of his rights will be led by the partnership agreement.
(E) Issue
To advise Lupe that whether Fred is entitled to have a half share in additional land.
Rules
As stated earlier in the rule section, in the absence of any clear provisions, assets of the partnership business divided among them equally. A partnership business is a structure where each partner has it is different right and obligation that covers under the partnership agreement. Rights of a partner cannot be limited up to the written partnership agreement. If a right is not mentioned under the partnership agreement, it does not mean that the same does not exist there. Pursuant to the provisions of section 25 of the act, every estate purchase out of the money/earnings of partnership firm will be treated as partnership property if nothing otherwise is decided between/among the partners.
Application
In the given case, the agreement was there which consisted of some of the rights of the partners. According to the provisions of the partnership agreement, it was very much clear that Fred will not be entitled to have any shares in the property of Vineyard. For the plot of bright, it was stated that a smaller parcel will be given to Fred. The right of Fred in these two properties was certainly clear. The issue was with the third property, which they both of them i.e. Lupe and Fred purchased, in the due course of business and in the name of partnership Firm. The claim of Fred is genuine one here as according to the section 25 of the act it was a partnership property.
Conclusion:
Yes, the statement is true and Fred can ask for the half of the shares in the house that they have built in the additionally purchased land because it was a partnership property with no certain division ratio.
(F) Issue
To check the rights of Goldie under Australian Consumer Law.
Rules
According to the provisions of Australian Consumer Law (ACL), if a product shows something about the quality, place of origin or process of manufacturing, then it becomes the liability of the manufacturer to ensure that the goods consist of the elements as stated over the label. The rationale behind the same is that a manufacturer or seller of any goods must not provide false or misleading information. According to the provisions of Section 18 of ACL covers the misleading conduct of a manufacturer. Further, section 29 (1) (a) says that goods must be of that quality which is mentioned on the label of the same. Section 151 (1) (a) states that if a manufacturer breaches his liability under section 29 (1) (a) then he/she can be held liable for criminal offenses. Section 29 (1) (k) is also another important section of ACL that demands a manufacturer to provide true information about the place of origin of goods and section 151 (1) (k) provide the breach of this section as a criminal offense.
Section 33 of the act says that a manufacturer must provide true information about the manufacturing process of goods and if he/she fails to do so they can be held liable for the criminal offense under section 155 of ACL.
Application
In the given case, Goldie purchases some bottle of Riesling. On the bottle, the place of origin was stated as Australia. Further, for the quality, it was stated as finest quality grapes and for the manufacturing process, it was mentioned as artisanal production. On the findings, it has been noted that the description provided was false under the description was made under section 29 (1) (a), 29 (1) (k) of ACL. It has found that the product was not manufactured out of quality grapes but was made from edible ethanol and grape syrup. Further, the same was not made in Australia, only the mixing of the product was done in Australia, rest of the material was imported from abroad. In addition to this, red wine was also not according to the given prescription. Now, Goldie can bring an action against the partnership firm under section 29 (1) (a) and 29 (1) (k) of ACL.
Conclusion:
Being a consumer in the case, Goldie can sue to partnership firm for the damages.
(G) Issue
To check the liability of Fred and Lupe in the capacity of partners of the firm.
Rules
Unlike to a corporation, a partnership firm has no separate legal entity from it is partners. The partners act as an agent of the firm and other partners. For every deed of a partnership firm, partners are personally liable. In case of criminal offense and imprisonment sentences, the guilty liable go to jail and in case of monetary penalties, all the partners are held liable. The liability of a person as a partner of the firm is unlimited because the people who enter into a transaction with the firm actually do such transactions with the partners of the firm and can be held them responsible in case of an issue.
Application
Here, Goldie did not transact with Fred or Lupe but she has purchased the Riesling made by them and sold by the name of their firm. Later on, it has noted that the firm has breached certain provisions of ACL. Now in this situation, the responsible person was a partnership firm. But as stated that a firm is not a separate legal entity, Lupe and Fred will be held personally liable. They will be held responsible for the liabilities and penalties under section 29 (1) (a) and 29 (1) (k). Further, being the partners of the firm they will be personally liable to pay off damage to Goldie.
Conclusion
Being the partners of the firm, Lupe and Fred will be liable towards the Goldie as firm has no separate identity from it is partners.
Bibliography
Legislations
Partnership Act 1958 (Vic)
Books/Journals
Australia, Australian Competition and Consumer Legislation 2011 (CCH Australia Limited, 2011).
Nobes, Christopher, Accounting: A Very Short Introduction (OUP Oxford, 2014).
Kleinberger, Daniel S., Agency, Partnerships, and LLCs: Examples and Explanations (Aspen Publishers Online, 2008).
Sagar, David,Larry Mead and Kevin Bampton, CIMA Official Learning System Fundamentals of Ethics, Corporate Governance and Business Law (Elsevier, 2009).
Porter, Gary A. and Curtis L. Norton, Financial Accounting: The Impact on Decision Makers (Cengage Learning, 2012).
Gullifer, Louise and Jennifer Payne, Corporate Finance Law: Principles and Policy (Bloomsbury Publishing, 2011).
Delaney, Patrick R. and O. Ray Whittington, Wiley CPA Exam Review 2010, Regulation (John Wiley & Sons, 2009).
Cases
Chappell & Co Ltd v Nestle Co Ltd [1959] UKHL 1
Other Resources
Austlii, Competition And Consumer Act 2010 – Schedule 2 (2018) < https://classic.austlii.edu.au/au/legis/cth/consol_act/caca2010265/sch2.html>.
Australian Consumer Law, Section 18 (2018) < https://www.australiancompetitionlaw.org/legislation/provisions/acl18.html>.
AzCCC, advertising and Selling Guides (2018)
Estate Agents Authority, Types of authority (2018)
Find Law, Partnership Rules: FAQs (2018) < https://smallbusiness.findlaw.com/incorporation-and-legal-structures/partnership-rules-and-faqs.html>.
Murray, Jean,What Is Implied Authority in Business? (25 June 2018)
Lard Bucket, Liability of Principal and Agent; Termination of Agency (2018) < https://2012books.lardbucket.org/books/the-legal-environment-and-business-law-executive-mba-edition/s15-liability-of-principal-and-age.html>.
Broemmel, Mike,Purpose of a Partnership Agreement (2018) < https://smallbusiness.chron.com/purpose-partnership-agreement-3911.html>.
Quizlet, Ratification (2018) < https://quizlet.com/25820094/ratification-flash-cards/>. shsu.edu, Agency Relationships (2018)
Solovic,Susan,6 Things Every Partnership Agreement Needs (2018) < https://blogs.constantcontact.com/6-things-every-partnership-agreement-needs/>.
US Legal, Rights, Duties, And Liabikties Between Principal and Third Parties (2018)
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