To show that an agency relationship exists, it is necessary to prove that theprincipal expressly or impliedly consented to the agent acting on his or herbehalf so as to effect the principal’s relations with third parties.In addition, it is also necessary to show that, with respect to the relevantcontract under consideration, the agent was purporting to act on behalf of theprincipal and not solely on his or her own benefit, unless the contract issubsequently ratified by the principal:Port Jackson Stevedoring Pty Ltd vSalmond & Spraggon (Aust) Pty Ltd (The New York Star)(1978) 139 CLR 231(HC); (1980) 144 CLR 300 (PC). In general, it can be said that where:1.a contract makes it clear that a benefit is to be conferred on a beneficiary;2.the contract makes it clear that the promisee is acting as agent of thebeneficiary;3.the promisee was authorised to enter into the contract on the beneficiary’sbehalf (or the contract was subsequently ratified); and2Nickolas James,Business Law(Wiley, 4thedition, 2017) 283-284.
74.the beneficiary provided consideration for the promise, then thebeneficiary is a party to the contract and is entitled to enforce it.Assignment or novationIn some instances, contractual parties may transfer their contractual rightsand/or obligations to a third party – commonly known as an assignment ofcontractual rights. Where contractual rights owed to one contractual party (theassignor) are transferred to a third party (the assignee), the assignee is the onlyparty able to enforce the contract. Only non-personal contractual rights may beassigned (i.e. the identity of the assignor is not material to the contractualrelationship or to the contractual performance to be rendered).In comparison, the process of novation relates to the transfer of contractualobligations from one of the original contracting parties to a third party. The effectof novation is that the original contract is terminated and a new contract isformed between one of the original parties and the substituted party. Fornovation to occur, it is generally necessary to show that a consensus has beenreached between the original and substituted parties (except where the originalcontract authorised a party to substitute another party without the need forfurther agreement).5. Lack of ConsentWhile agreement is essential for the formation of a contract, not everyagreement to a proposal results in a binding contract.The law recognises that, in certain circumstances, a party’s consent to thecontract may not have been real or genuine, having been affected by someadulterating factor. The courts, and in more recent years the legislature, havedeveloped a number of rules pertaining to contractual consent. Where a partyhas not genuinely consented to a contract, they may succeed in having thecontract set aside.MistakeAs a general rule, if one party to the contract has made amistake, it does notentitle them to argue that the contract is unenforceable or terminate thecontract. The rule here is ‘caveat emptor’ or ‘let the buyer beware’.3
Upload your study docs or become a
Course Hero member to access this document
Upload your study docs or become a
Course Hero member to access this document
End of preview. Want to read all 14 pages?
Upload your study docs or become a
Course Hero member to access this document
