LAWS20058: Australian Commercial Law

Case study 1

Issue

Whether Rick is entitled to recover compensation from BB under the law of agency?

In Australia, in order to appoint an agent for the sale or purchase of property, a Real Estate Agent is appointed. Normally a Real Estate Agent is one who is appointed to find a purchaser for the property. In Peterson v Moloney(1951) it was held that a Real Estate Agent is not authorised to undertake activities that may vary the legal position of his principal. Normally, the appointment of a Real Estate Agent cease to exists as soon as a purchaser is found and is held in Wride v Holberton(1963), however, the authority can be extended to carry out sale/purchase of the property. In most of the jurisdictions in Australia, a Real Estate Agent is appointed through a written or oral contract. The agent has an obligation to comply with the terms of the contract and the governing regulations. One of the important purposes to frame a contract is that an Agent can seek his remunerations and Commissions from his Principal (Christensen & Duncan, 2009).

One of the duties of a Real Estate Agent is to sale or purchase the property to a third person on behalf of his principal, but the authority is limited to the extent specified in the contract formulated amid him and his principal. Against the said duty, an Agent has a right to seek commission for his work done but the scope of the commission is dependent upon the terms of the contract and is held in Williams & Co Pty Ltd v Bond (1965). But normally, an agent can seek commission from his Principal only when he is found to be an effective cause for the happening of the transaction, that is, sale and purchase of the property and is held in LJ Hooker Ltd v WJ Adams EstatesPty Ltd (1977). It is only when an actual sale is incurred because of the endeavours of an agent that he is entitled to seek commission from the principal and is held in Midgley EstatesLtd vHand (1952). In Watters v John Crisp Pty Ltd (1984) it was held that of the transaction is not complete then the agent is not authorised to seek commission from the principal. The right of commission also lapses if the agent do not act as per the provisions of the contract that is entered amid him and his principal. The only justified point upon which an agent can recover commission from his principal is when the agent is main cause of the transaction that is entered amid the principal and the third party and is held in Havas v Cornish& Co Pty Ltd (1985) (nortonrosefulbright, 2013).

It is necessary to establish a direct casual relationship between the ultimate sale and the actions of the agent. However, if there is an intervention of any third party who is the main cause or reason for the ultimate transaction of sale then the agent is not authorised to seek commission from the principal. In the leading case of MSM Consulting Ltd v United Republic of Tanzania (2009), it was held by the court that an agent can only seek commission when he is the effective cause of the sale. In this case the agent did not introduce the party who is the ultimate purchaser thereby not making the agent authorised to seek commission for the sale of the property. Likewise in the leading case of Estafnous v. London & Leeds Business Centres Ltd (2011), the purchaser though was introduced by the agent but the ultimate sale was incurred wherein the agent was not the effective cause of the sale, that is, the company which acquired the property (the purchaser being part of that company) was not introduced by the agent to his principal and thus it was not the agent because of whom the sale of property took place. Thus in such circumstances the agent was not considered to be the effective cause of the sale and thus no commission was paid. However, in the leading case of Christie Owen & Davies plc v. Raobgle Trust Corporation (2011) which is a very important piece of legislation, it was held that the purchaser was introduced by the agent but the sale could not take place. Eventually the property was sold to another purchaser who was intended to enter into a partnership with the first purchaser in order to develop the property purchased. It was held by the court that the gent is liable to seek commission as the ‘purchaser’ was held to include anyone who is acting on behalf of the eventual purchaser and thus involves the first purchaser thereby making the agent an effective cause of sale and thus liable to seek commission. The rule was also applied in West property solutions v lewis & Anor (2015)

(Hopgoodganim, 2016).

Application

Before application of law, the facts are briefly evaluated.

The Bricks and Brecks Limited (BB) owned property in Gold Coast. Rick as a real estate agent was engaged to find a purchaser. He introduced ABC Company Limited who made several unsuccessful offers. BB was negotiating with XYZ (not introduced by Rick).

Both ABC and XYZ entered into a JVA in order to avoid competition and if either of them become the purchaser of the property then the purchaser will complete the purchase and carry out the redevelopment along with the other. Both Rick and BB were not aware about the JVA. BB sold the property to XYZ.

Considering the facts of the case, it is held that though Rick never introduced XYZ to BB but he introduced ABC to BB. But the property was ultimately sold to XYZ who intends to develop the property along with ABC in a JVA. Thus, ABC was indirectly involved with XYZ (both are purchasers) making him also the purchaser of the property. Thereby, Rick is entitled to seek commission from BB.

Conclusion

Thus, Rick is entitled to seek commission from BB for the sale of property.

Case study 2

Issue

The main issue that arise is whether Scott has any legal rights. If yes, then whether there are any remedies available to him.

Law

The present issue is resolved by analysing the Sales of Goods Act.

Whenever goods are sold by the seller to the ultimate consumer then there are few basic implied and express provisions that must be fulfilled by such seller towards the ultimate purchaser. Sales of Goods Act 1979 of Australia list down some of the important provisions that protects a consumer. The Sales of Goods Act 1979 apply to all kinds of sales. The provisions laid down by the Act are implied provisions and are applicable even when not so

expressed by the parties (Elawresource, 2016).

Section 12 of the Act submits that the seller must have the authority to sell the goods to the buyer. It is an implied term as to title. If the seller does not have title in the goods then he has no right to sell the goods. It is a condition to the sale contract and any violation will result in the redundancy of the contract and is held in Rowland v Divall(1923).

Section 13 submits that the goods that are sold by the seller must co-exists with the descriptions of the goods so sold. However, if the buyer of the goods actually saw the goods prior to sale then this provision will not apply. The provision is applicable solely on sale by description and is rightly held in Harlington& Leinster v Christopher Hull Fine Art(1991). It is a condition (in consumer sales) to the sale contract and any violation will result in the redundancy of the contract.

Section 14 of the Act submits that the goods so sold must be of satisfactory quality provided the goods are sold within the course of business. Thus any private sale does not fall within the scope of section 14 of the Act and is rightly held in Stevenson v Rogers(1999). In order to impose liability on the part of the seller it is not required that the proof of fault must be established rather the liability under section 14 of the Act is strict and does not require any kind of proof.

As per section 14 (2A) of the Act, the quality is considered to be satisfactory when it meets the standard as per the expectations of a reasonable prudent man in the like circumstances. Quality includes the fitness, for which the goods are acquired, durability of the goods safety etc. absence o any of the following results in the violation of section 14 of the Act and is established in Aswan Engineering v Lupdine(1987). It is a condition (in consumer sales) to the sale contract and any violation will result in the redundancy of the contract.

Apart from the above provisions established under the sales of goods act 1979, the provisions of Unfair Contract Terms Act 1977 apply to the present case that deals with the restrictions applicable to the application of the exclusion clause.

As per section 3 of the Act 1977, no party can restrict or exclude the liability for the breach of the contract. Section 3 is subject to the reasonableness test provided under section 11 of the Act. Section 11 submits that liability to restrict or exclude liability only arises when the same is reasonably brought within the contemplation of the parties (Elawresource, 2016).

Further, if the seller is unable to comply with the provisions of the sales of goods act 1979 then there are several remedies that can be availed by the consumer. Such as:

1. The consumer can seek the seller to replace or repair the goods that are sold at the expense of the seller (section 48B (1) of the sales of goods Act 1979). It is necessary that the replacement or the repair of the goods must be one within reasonable time. Request under section 48B (1) of the Act results in forgo of the consumers right to reject the goods unless the goods are not rectified within the reasonable time.
2. Reduction of price can also be made under section 48C (1) of the Act;
3. When the request made under section 48B (1) of the Act is not compile with then the buyer has an option of rescission of the contract under which the goods are given back by the buyer and the seller give back the purchase price thereby retaining the position of the buyer (section 48C (2) of the Act).

After analysing the law, the same is applied to the facts of the case.

Application

As per the facts, Scott visited a caravan dealer in Melbourne and told Danny (salesman) that he wanted a caravan for a trip around Australia. Scott explained his expectations to Danny and he recommended particular caravan to Scott worth $40,000. Scott purchased the same. The journey went well for 2 days but on 3 rd day Scott hit a pothole and broke caravan’s axle. Mechanic charged $3000 but explained that the caravan is not designed to cope with rough

roads. Scott complained to Danny. He denied his liability and depicted Scott’s attention to the contract signed by him which stated that the dealer’s liability for breach of a condition in the contract was limited to the cost of repair of the goods sold.

It is submitted that the expectations were communicated by Scott to Danny prior the purchase of the caravan. Thus the expectations were not fulfilled by Danny resulting in the violation of section 14 of Act. Section 14 is applicable as the goods supplied do not fit the purpose for which the same is sought and the sale is within the course of the business.

Also, Danny can rely on the exclusion clause only when the same is reasonably brought within the notice of Scott, otherwise there is no applicability of the exclusion clause (section 3 and section 11 of the 1977 Act).

Conclusion

Thus, Scott can recover money from Danny because Danny has violated provisions of Sales of Good Act 1979. Danny can rely on the exclusion clause provided the sae is reasonably brought within the notice of Scott.

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