Contractual Terms Flashcards
What is agency?
Agency is the relationship which gives one person authority to enter into binding contracts on behalf of another person.
What three things are required to determine if agency exists?
A person is authorised to make contracts.
A person enters into the contract on behalf of another
The person falls out of the picture once the contract is entered into, and is not a party to the contract.
What is actual authority with respect to agency?
Actual authority is where the agent has been given authority to bind the principal. At the time the contract is entered into, the agent has power to bind the principle.
This authority may have arisen:
1) Through express agreement between the agent and the principal
2) Through implied agreement between the agent and principal
3) Through operation of law (Authority from necessity).
What is apparent authority with respect to agency?
Apparent authority is where the agent does not actually have authority to bind the principal, but we threat the situation as if the agent did have authority
Where someone enters into a contract on behalf of another, but there is no agency, can the contract still exist?
Yes if the principal ratifies the contract.
What are three reasons there will be implied authority?
1) It is usual or customary for an agent to have this type of authority, or
2) The principal’s conduct shows that the parties have agreed to it, or
3) The law implies this type of agency into the relationship
When will agency of necessity arise?
The agent has possession of goods AND
These goods are in peril and at risk of being damaged AND
The principal cannot be communicated.
What is estoppel with respect to apparent authority?
Estoppel means that a person can’t suggest that something is true and then later deny it is true, to the detriment of another.
What are the requirements for agency by estoppel?
The principal must represent to the third party that the agent has authority AND
The third part must rely on this knowledge AND
The third part must suffer detriment as a result.
When selling a business what are tangible assets?
Items to be included in the sale such as plant and machinery in a factory or food cabinets, tables or chairs in a cafe.
When selling a business, what are intangible assets?
These include intellectual property assets such as business goodwill, licences, supply contracts, logos and trademarks.
What is stock in trade?
The stock a business holds and uses as part of its day-to-day trading. In a sale and purchase agreement, this will be the in-store cost of the stock which can include transport, packaging and warehouse costs, etc.
What does the stock in trade clause mean in the sale of business contract?
It identifies the expected stock in trade at the time of the transfer of the business with a variance value to indicate what upper and lower limits will be acceptable.
What happens if at the change of possession point the stock in trade is higher than the acceptable variance?
The purchasers can elect to keep all of the excess stock or can advise the vendor within five days that they do not wish to purchase the excess stock and can elect what stock they wish to keep.
How is the stock in trade identified?
The stock in trade is identified by a joint stocktake at the point of transfer of possession or by and independent valuer. The independent valuer is desirable. It should also be identified who actually owns the stock.
