1.

Is Susie bound by the contract that Emily has made with Liam and Louise? Contracting through company agents A contract become binding upon a company if it is established that it was entered into by an agent of the company with the authority to do so. Was Emily the Agent of Susie when she made the contract with Liam and Louise for their Wedding Reception? An agent is some who conducts or enters into a transaction with a third parties on behalf of or as representative of another who is known as the principal1. Whether an agency relationship exists is determined as a question of law which the courts approach objectively2. Does Susie as the Principal have capacity?
The principal must have legal capacity to do the act which the agent performs on the principals behalf3. The information provided states that is the executive chef and owner of the business Susies Catering Centre Pty Ltd therefore providing her the with legal capacity to perform the actions of an agent.

Does Emily as an Agent have capacity? An agent is not personally required to have legal capacity as the principals legal capacity is delegated onto the agent4. Therefore, as Emily was appointed by Susie as executive chef she would have the requisite capacity. Consequently, it can be argued that Emily was the agent of Susie when she made the contract with Liam and Louise for their wedding reception. Was Emily authorised by Susie to enter into the contract Liam and Louise? For a valid contract to exist, Emily must have been authorised in some way by Susie to enter into the contact. Authorisation can occur through forms of actual express authority, actual implied authority or ostensible authority.

1 International Harvester Co of Australia v Carrigans Hazeldene Pastoral Co (1958) 100 CLR 644 at 652; Scott v Davis [2000] HCA 52. 2 Garnac Grain Company Inc v HMF Faure & Fairclough Limited [1968] AC 1130. 3 Christie v Permewan Wright & Co Limited (1904) 1 CLR 693 at 700. 4 Watkins v Vince (1818) 2 Stark 368.

Actual express authority For this authority to occur will depend on the construction of the terms of any instructions given to Emily by Susie5. Where a principal has appoints an agent, the scope of the agents actual authority can appear by interpreting the terms of appointment contract between the agent and principal. However, if the appointment occurs orally, the scope of the actual authority is determined from the principals oral statement6. On the facts provided, Emily was appointed as an events manager by Susie and her duties consisted of interviewing potential clients, discussing their requirements, suggesting menus and themes, giving quotations and then accepting orders. However, Susie instructed Emily not to accept any orders for a wedding with more than 100 guests without obtaining prior approval from Susie as she wanted to check on the cost calculations and staffing requirements. Consequently, Susie has not provided Emily with actual express authority as Liam and Louises wedding had 120 guests which was outside of Emilys scope of accepting orders for 100 or less guests. Implied authority Authority can implied in the following ways:
1. Incidental Authority occurs where the act of the agent is normally incidental to the

authorised act. The act of accepting an order is not normally incidental to the role of an events manager and therefore does not apply here.
2. Usual Authority is the authority to do acts that are usually part of the job. 3. Customary Authority covers activities that are typically carried out in a particular

kind of business: Con-Stan Industries Australia Pty Ltd

4. Course of Dealing -Authority may be gleaned where, in the circumstances, certain

things are commonly accepted. Implications can be drawn from this as to what else will have authority: Hely Hutchinson v Brayhead Ltd
If the principal has given instructions to the agent which prevent the implication being made the principal will not be bound by acts of the agent, though ostensible authority may still exist: Waugh v HB Clifford& Sons Ltd
5 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165. 6 Tobin v Broadbent (1947) 75 CLR 378.

Did Emily have Ostensible Authority?

An agents ostensible authority is authority as it appears to others occurring regardless of any agreement between the agent and principal and can arise as a matter of law without the consent of the principal 7. For ostensible authority to exist the following elements must be determined: Element 1 - Was there a representation made? There must be a representation by words or conduct by the principal (or someone expressly authorised by them) to the third party that the agent acts for them8. As the principal in this case is a company, the representation must be made by someone who has:
1. 2. 3.

Actual authority from the company to make the representation; or Actual authority to do the act concerned; or Actual authority to manage the business of the company generally or in respect of those matters to which the contract relates 9.
Conseqentley, Susie would be the person making the representation as the owner of Susies Catering Company.

Permitting agent to act in some way in the conduct of the principals business with other persons creates apparent authority10: 4.

Whenever potential clients telephoned the business, they were offered an appointment with the events manager and the meetings were held in her office, which upon entering had Emilys name and position painted on the door. There was also a plaque positioned on her desk which also detailed her name and position.

A representation of ostensible authority will often flow from a principal equipping an employee with a certain title, status and facilities. In the case of Pacific Carriers v PNB Paribas11 a banks employee had signed an indemnity on behalf of the bank. The court held that the employee had the representation of authority from the following factors: The bank had placed her in a position which equipped her to deal with the indemnity requested; The form and content of the document itself; She was provided her with the stamp of the bank which she used;

7 Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480. 8 Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480. 9 Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd. 10 Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480. 11

The organisational structure of bank whereby she was the one who dealt with the request and communicated response, signed document and dispatched it without any internal checks or qualification of capacity in which bank was participating in the transaction. Arguing by analagy, a court could also find that there was a representation of authority in the current situation as:

5.

Susie Catering Company had placed Emily in a position which equipped her to deal with the acceptance of orders by giving her documents bearing the company letterhead to use for giving quotations and accepting orders, which provided space for Emilys signature above printed wording reading Accepted by Susies catering Pty Ltd. Emily Smith, Events Manager;

6.

Emily had possession of the company stamp and the authority to affix it to accepted order forms and did so with Liam and Louises order; The organisational structure provided that Emily was the only person who dealt with the clients besides the receptionist who made her appointments, she communicated the responses between potential clients and Susie, provided the quotations and signed the acceptance of the orders and processed the deposits from clients. There is no evidence of any internal checks or qualification of capacity in which the company was participating into the transaction. In Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd12 it was held that a representation may flow from supplying a person with a blank order or arming them with a document which, when signed, would bear the hallmark of authenticity. As previously mentioned, Emily was given documents bearing the company letterhead to use for giving quotations and accepting orders. By arming Emily with these types of documents, Susie consequently allows a representation that Emily is entitled to make these types of decisions on behalf of the company.

7.

12

Element 2: Reliance? Must be a causal connection between the representation to the third party and the dealing between the third party and agent: Hely-Hutchinson Note if relevant: The third party cannot hold the principal liable where the third party was not aware of the representation, did not believe it, or where the third party knew or had the power to know the truth: Hely-Hutchinson Element 3: Detriment? The third party must have suffered a detriment in relying on the representation as to authority. Substantial detriment is not necessary. Conclude as to whether or not ostensible authority has been made out. If it has, go on to write: Principal will be bound to third party Third party is able to sue Principal Principal can sue Agent for breach of duty