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Commercial Law

Commercial Law

Cassie is employed by a business called MME which has its head office in Brisbane. MME was considering opening an office in Ballarat. Cassie has a role of Business Development Manager for MME, a role which is prominently displayed on all her stationary and business cards. Cassie was instructed to visit the central business district of Ballarat, survey relevant business opportunities, evaluate competitors and make inquiries on retail premises before reporting back to head office with a recommendation. When Cassie arrived in Ballarat, she surveyed relevant local business opportunities, evaluated competitors and enquired on retail premises including detailed inquiries about one particular property owned by Theo. Pat is the owner and chief executive of MME.

At the same time, Cassie is in Ballarat, Pat also made inquiries with Theo over the telephone about the same property, Pat not knowing that Cassie was about to make her own detailed inquiries. Pat indicated to Theo that Cassie will be in contact to inspect the premises with a view to committing to a lease. Cassie inspects Theo’s property in central Ballarat and feels that its heritage ‘look and feel’ and central location make it best suited to MME so she executes in writing a lease arrangement with Theo on behalf of MME. When the copy of the executed lease arrives via email in Brisbane alongside with invoices for office equipment, Pat calls, and questions Cassie. Pat ultimately refuses to agree to the terms of the premises and accordingly has the office equipment order cancelled. Theo takes legal action against MME. Identify the legal issues arising in the agency from this scenario.

Where relevant you should justify and support your answers with reference to statute and/or case law. The issue, in this case, is whether Pat’s cancellation of the lease contract is a breach or not. The principle, in this case, rests on that; it is an entrenched law of contract’s principle that a party, the moment of signing a contract, is considered to be attached to the effect and ordinary meaning of the words which materialize above its signature. As a result of the provisions of the Consumer Protection Act No 68 of 2008, a landlord is presently no longer capable of presuming that a court would impose a lease agreement merely grounded upon the signature standard. The Act forbids certain particular provisions and proclaims others to be unjust, unreasonable, or unfair and requires lessors to bring to attention, particular lease agreement‘s provisions to the tenants. The application of this case is that there has been no acceptance of the landlord (Theo’s) offer.

MME required first of all having the full information of the lease contract, or, it did not have enough money to lease the premises. In either case, the contract of lease becomes unacceptable to MME. In conclusion; the contract of leasing arose when MME’s business development manager executed the lease in writing. Theo is the landlord and MME is the tenant. The Consumer Protection Act terms state that, tenants possess the rights of cancelling their leases provided that they do so whilst fulfilling the entire cancellation requirements or criteria (Olivier, 2011). Tenants who cancel lease agreements should do so formally and suitably within writing. In addition to this, they are required to give a notice comprising a minimum of 20 business days. The tenant pays rent for the 20 business days on notice. During that period, the landlord is paid by the tenant the similar; pro rata, if possible (Olivier, 2011). However, this action does not tantamount to an infringement of contract.

Thus, since Theo had received the agreed written lease contract from MME, he is supposed to be paid by MME the 20 prescribed days by the CPA. The moment Theo got the cancellation’s written notice, he was supposed to identify the date upon which the lease was planned to end. He should then have begun at that moment advertising the property for another lessee. This duty of finding a suitable and new tenant would rest wholly upon Theo’s shoulders or his agent (Crane, 2007). Theo should note the costs of advertising because they might be charged to MME, as an essential part of the logical penalty that he would be worthy of holding MME responsible for. As such, this would be due to the lease’s agreement early cancellation by MME. If MME would be found to have followed the process precisely, it would not be her responsibility to look for a substitute tenant.

The CPA terms entitle the landlord (Theo) to make the tenant (MME) accountable for the logical penalty, which is lease’s early cancellation charge (The Legal Advice Office, 2015). However, this is not meant for penalizing tenants. It is aimed at allowing the landlord (Theo) to recover whichever losses he might suffer due to the lease agreement’s early cancellation (The Legal Advice, 2015). The costs that would be incorporated in the penalty would include, for instance, the credit test costs for a probable new renter. In addition, it would include whichever other logical costs correlating to the new lessee and those that would have been practically suffered by the lessor in searching the substitute renter. Such costs would comprise advertising costs and would as well comprise the lost rational lease amount by the lessor (Theo) if at the moment the property would still be vacant.

However, it would not be carte blanche fine that the landlord would simply enforce as he would see all right for example, a rent of 2 months. That would not fit. It would be grounded on his real monetary damages. It has been rightly illustrated as the fine which cannot be charged forthright (Steyn, 2014). As such, their calculations can only be done the moment a new renter has been gotten and the lessor cannot benefit or gain financially from the penalty costs of renters’ cancellation. Simply, the lessor (Theo) would be compensated. On this ground, penalty clauses within lease agreements that declare to agree on a cancellation penalty beforehand would merely not hold up within a court (Corbett, 2010). The inconvenience caused to the lessor by an early cancellation would be both time consuming and annoying beyond doubt, but it is apparent that the tenant possesses the right of cancelling a lease.

However, the CPA is unclear since it does not define logical penalty and merely declares that a logical penalty might be charged for early cancellation (The Legal Advice, 2015). Within both law and practice, an individual who incurs damages due to the actions of another person is only liable to be reimbursed those damages that he has really sustained. However, such damages require being proven by the injured person. Also in practice, it usually should not and does not take in excess of one month to get another renter (Corbett, 2010). It is important in this regard that, both tenants and landlords familiarize themselves on their rights.

The Relationship between Agency and Contract Law

A contract that is made by an agent on behalf of the principal is regarded as the principal’s contract and not the agent’s contract (McKendrick, 2015). The relationship permits the principal to allow somebody to execute her roles, either for a precise purpose or commonly for performing several transactions. Normally, the agency correlation is realized through an informal agreement. However, it also happens through formal agreements mostly through writing. It is mandatory for the executed acts to be lawful (McKendrick, 2015). The problem of assigning loss from misguided contracts is more effortless the moment it can be placed upon the agent. However, that scenario is reasonably not interesting since the hypothesis is easy and the application of the practice restricted. Normally, the agent cannot be held responsible for the loss as a result of being very poor or being a hard target for a lawsuit, having escaped or possessing otherwise safeguarded his property from lawful judgments.

Questions entailing the liability of agents revolve roughly the contract between agent and principal instead of between third party and agent thus, the issues of the agency are secondary (DiMatteo & Hogg, 2016). The amusing cases from agency’s perspective are therefore those within which agents have made conflicts. As such, the third party and the principal are forced to divide up the loss, either as a result of the effective contract putting the threat there or due to the agent’s lack of resources to presume accountability. The common law offers six reasons that make the principal be bound by the contracts engineered by agents. The first reason is the actual express authority. As such, the principal enters into a precise contract empowering the agent to take a specific action (McKendrick, 2015). For instance, the school’s board of governors votes to empower the principal to buy a new school bus; this exemplifies actual express authority.

The second reason is an actual implied authority. This is the power possessed by an agent through the virtue of being rationally necessary to execute his express authority. As such, the authority can be deduced by a virtue of held position by the agent (McKendrick, 2015). The law allows power to be implied by the parties’ correlation, the business’s customs and nature, the condition encircling the act within a question, and the agency’s contract wording among others. Therefore, if the principal directs his agent to deposit cash in the bank tomorrow, the agent is offered the authority of driving to the bank provided that he is not prohibited from doing so in due course. During the 2nd World War, Eastern Wine Corporation advertised champagne having a diagonal red stripe that violated the French producer’s trademark (Turner, 2014). The French corporation had provided licenses to U.S importer to promote its champagne within America.

The contract between importer and producer demanded the former to inform the French company any time a rival emerged to be violating its rights. In addition, the importer was required to suggest steps through which the organization would cease the violation. The power to establish case was not explicitly presented, and normally the right of doing so was not deduced (Turner, 2014). Since France was being colonized by Germany, the importer was incapable of communicating with its principal. The court judged that the importer could start proceedings to instruct Eastern Wine from going on displaying red diagonal stripe, as the lawful action was necessary to the protection of property of the principal (Turner, 2014). The judgment that a position of a person is capable of carrying with it the meant power is critical to the business practice of the U.S.

The third reason is apparent authority (Sanbar, et al., 2007). Within the agency correlation, the actions of an agent in handling third parties would affect the principal’s legal rights. The information that the third party possesses concerning the agency contract is immaterial to the legal authority of the agent to act (Sanbar, et al., 2007). That running of authority begins from the principal to the agent. Provided the agent possesses power, either implied or express, she might attach the principal lawfully. For example, the house’s seller might be uninformed of the true identity of the buyer; the individual he thinks is the potential buyer might be an agent of a hidden principal. Nonetheless, when the agent is allowed to make the buy, the ignorance of the seller is not a foundation for either the principal or seller to cancel the transaction (Sanbar, 2007). The other reason why the principal might be attached to agreements made by agents is estoppel like in Rama Corporation Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147.

As such, the principal is stopped from opposing the agreement engineered by the agent if he could have interceded to avoid the confusion over power (Kodilinye & Kodilinye, 2013). For instance, in the case where the principal heard the covenant being made and never pointed out that the agent was not authorized. The other reason is ratification (DiMatteo & Hogg, 2016). When no other power prevails, but the principal concurs to the contract the moment he discovers it, that ratification binds him. For example, the bulbs salesman possesses no power to retail sockets. On his way to selling the bulbs, he engineers a contract. That contract would be binding provided the bulbs firm agrees to it on finding out the actions of the salesman. The other reason is inherent agency power (McKendrick, 2015). This is an agent’s power which is obtained exclusively from the relation of agency and subsists for the safeguard of individuals injured by or handling other agents or servants.

The agency correlation might somehow offer the agent the authority to injure third parties albeit demonstration by the principal that he is being acted on his behalf by the agent lacks. The case of Watteau v Fenwick best exemplifies inherent agency power within the agency and contracts’ law (McKendrick, 2015).


Corbett, D. (2010). South Africa: The Impact Of The Consumer Protection Act On Leases: Landlords Must Get Their Houses In Order. Retrieved 29 April 2016b from

Crane, F. (2007). California Real Estate Property Management. Irvine, CA: Zyrus Press.

DiMatteo, L., & Hogg, M. (2016). Comparative Contract Law: British and American Perspectives. Oxford: Oxford University Press.

Kodilinye, G., & Kodilinye M. (2013). Commonwealth Caribbean Contract Law. New Yolk (N.Y.): Routledge.

McKendrick, E. (2015). Contract Law. London: Palgrave Macmillan.

Olivier R. (2011). The Consumer Protection Act. Retrieved 29 April 2016 from

Sanbar, S. S, et al. (2007). Legal Medicine. Philadelphia, PA: Mosby/Elsevier.

Steyn, C. (2014). Does s 14 of the CPA Create an Unreasonable Disadvantage to the Owner? Retrieved 29 April from

The Legal Advice Office. (2015). The Consumer Protection Act No 68 of 2008: The Cancellation of Lease Agreements. Retrieved 29 April 2016 from

Turner, C. (2014). Unlocking Contract Law: Cheltenham: Routledge.