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Business Law

UNIT V

BUSINESS RELATIONSHIPS

Agency

Introduction
It is important that there exist a basic understanding of the law of contract
because agency law is based on contractual principles.
People appoint agents for various reasons. It may be because a person lacks
the required skill or level of expertise, or it may be because it is cost
effective, or because of time constraint etc.
For whichever reason an agent is appointed, at the heart of the relationship is
trust.

Definitions
Agency is the relationship that exists between two persons where one, called
agent, is considered in law to represent the other, called the principal, in
such a way as to be able to affect the principal’s legal position in respect of
strangers to the relationship by the making of contracts or the disposition of
property. [Friedman (1990)]

An agent is a person invested with a legal power to alter his principal’s legal
relations with third parties. [Towle v White]

An agent is a person who acts with their principal’s authority to bring about
a contract between the principal and the third party. [Richard Lawson &
Douglas Smith (1997)]

It is useful to have a definition of an agent and agency because it establishes

the liability of the parties to each other. If persons deal with each other as
principals, they each will be directly liable to the other for any breaches that
occur but if one acts as an agent, automatically, he is out of the picture once
the contract is concluded and he bears no personal liability, unless in certain
exceptional circumstances.

Parties
- Principal

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- Agent
- Third

P Contract A Contract TP
Indirect contractual relationship

Capacity
Principal and third party must have contractual capacity otherwise there is
no contract, but since the agent is not a contractual party it is not necessary
that he has capacity even though it is desirable.

Types of agents
A principal may use a number of types of agents. Each type serves a
different function. One should understand when a principal may use each
type since liabilities of the parties differs according to the type used.
1. Universal Agent. A universal agent has authority to do acts for a
principal which he or she may do personally and may lawfully delegate.
Universal agency may arise when a principal transfers blanket authority
to an agent because the principal will be away for a period of time.
2. General Agent. A general agent has authority to do all acts connected
with a certain job. A general agent has far-reaching powers to do many
acts on behalf of the principal. For example, a general power of attorney
gives an agent the power to do all acts necessary to do a job the principal
can lawfully do and can lawfully delegate to another person.
3. Special Agent. A special agent has authority to do only a particular act
or series of acts of very limited scope. A special agent has less power
than a general agent. For example, a person may create a special agency
to collect a debt owed by a customer; such an agency would include the
powers to sue, negotiate a compromise, and deduct reasonable fees. A
special agency is helpful when a person needs someone to represent his
or her interest temporarily or only in a certain affair.
4. Professional Agent. Professional Agents are persons who represent
themselves to the public as having expert knowledge in a particular field
and offer to act as agent for anyone. Some examples of professional
agents are lawyers and accountants. A professional agent is subject to
the principal’s control, but the principal does not have direct control over
how the agent conducts business for the principal. For example, a
business manager may hire a Chartered Accountant to audit the financial
statements of a company. In such a case, the accountant is under the
manager’s control but may conduct the audit independently.

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5. Sub-Agent. The Sub-Agent is appointed by the agent to help him or her

carry out duties assigned by principal. The sub-agent works for the agent
not the principal unless the principal specifically authorizes the
employment.

Creation of an Agency
The relationship of principal and agent is usually created by mutual consent.
This consent need not be formal or expressed in a written document. It is
usually an express agreement even if informal. For example, Paula may ask
Andrea to take Paula’s suit to the dry cleaner to be cleaned. Paula and
Andrea thereby expressly agree that Andrea is to be Paula’s agent in making
a contract between Paula and the dry cleaner.

Agency may be created by consent which may be express, implied or

retrospective (by ratification), by operation of the law or by estoppel.
1. Express agency. Parties may negotiate a contract appropriating the agent
and detailing all the terms of the agency. All of the elements of a valid
contract must exist in an agency contract: offer, acceptance, capacity,
consent, legality, and consideration.
2. Implied agency. An agency may arise from a persons conduct or
relationship. If, for example, Jackie is an employee of ABC Ltd. Her
duties include making contracts for the company, say by ordering goods
on ABC Ltd.’s account. Jackie is, by implied agreement, the agent of
ABC Ltd. for this purpose.
3. Agency by ratification. Ratification creates an agency through approval
of an unauthorized act after a party performs it. Assume a person takes a
car without permission, sells the car for $300,000 and gives the proceeds
back to the original owner. If the owner is satisfied with the transaction,
he or she may approve it giving the seller agency authority to act
retrospective from the time the car was taken.
-Kelner v. Baxter
However the law imposes a number of conditions on agency by ratification.
1. The principal must have capacity to contract both at the time at
contract and at the time of ratification.
2. The person must act for the principal who is named or otherwise
identified as a party to the contract.
3. The principal must approve the entire contract.
4. The contract/act must be legal.
5. The principal must have full knowledge of the contract.

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4. Agency by operation of the law. In a few situations, the law presumes

that a person has the authority to act for another. For example, the law
presumes that partners are agents for the partnership. Also an agency by
necessity may arise in carriers, by sea or land, of goods. However special
conditions apply for this to be applicable.
Agency by operation of law may be sub-divided into:
- Agency by necessity
- Agency by co-habitation
- Agency by statute/common law
- Agency by Necessity – occurs when a person is entrusted with another’s
property and it becomes necessary to do something to preserve that
property. Three conditions must be fulfilled before this type of agency
can arise.
 It must be impossible to get the principal
– Springer v Great Western Railway
 There must be an actual and definite commercial necessity.
– Prager v Baltspiel Stamp and Heacock Ltd.
 The agent must act bonafide in the interest of all parties concerned.
-Great Northern Railway v Swaffield
- Agency by co-habitation – at common law when a husband and wife are
living together, the wife is presumed to have her husband’s authority to
pledge his credit for necessaries, judged according to his style and
standard of living. The presumption of agency arises from cohabitation
and not from marriage. The presumption can however be rebutted by the
husband proving some fact. E.g. that he expressly forbade his wife to
pledge his credit.
Note – That the presumption of agency by cohabitation may not be
applicable in present times because it is quite possible to prove that the third
party intended to contract with the wife not the husband.

- Agency by statute – a statute may presume a person as agent of another

e.g. Companies Act presumes managing directors as agent of the
company.
5. Agency by estoppel. Agency by estoppel arise when a person, either by
conduct or negligence, leads a third person to reasonably rely on the
representation that an agent has authority when, in fact, the person has no
authority. this situation may arise:

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(a) when A, who dealt with X as P’s authorised agent, continues to do so

after his authority as agent of P has been terminated but X is unaware
of the termination;
(b) when A, to P’s knowledge, enters into transactions with X as if A
were P’s agent and P fails to inform X that A is not P’s agent.
Agency by estoppel can only arise where the conduct of the apparent
principal creates it. Agency does not arise by estoppel if it is the
‘agent’ who holds himself out as agent, and not the ‘principal’.

Authority of an agent

A contract made by an agent is binding on the principal and the other party
only if the agent was acting within the limits of his authority.
1. Actual authority
a. Express authority
Express authority consists of the instructions a principal gives an
agent regarding the extent of the agent’s powers and limitations on
them. Thus, parties dealing with an agent they know to be acting
under express authority must take notice of his or her limitations.
This rule applies even if the parties do not know what the agent’s
limitations are; if they do not know, they must ask. An agent may
receive express authority orally or in writing. If authority is conveyed
in writing, the writing must include a description of all the authority
the principal intends to confer on the agent.
b. Implied authority (or customary) authority
The basis of implied authority is that the principal, by appointing an
agent to act in a particular capacity, gives him authority to make those
contracts which are necessary or normal incident of the agent’s
activities. It may cover such things as are customary unless they
know to the contrary.
See Watteau v Fenwick

2. Apparent authority
An agent has powers beyond those the principal expressly gives or courts
can reasonably imply: An agent has authority to do all acts within the
scope of apparent authority. Apparent authority is authority a person
knowingly or carelessly causes More precisely, it consists of authority
neither conferred nor implied but that authority which fairly and
reasonably appeared to the person relying upon it, from the omissions of
the principal, to have been given by the principal another person to

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believe an agent possesses. For example, a store owner who puts a

person in the store with instructions not to sell merchandise gives the
person apparent authority to sell merchandise since a customer coming
into the store unaware of the person’s limitations, could reasonably
assume the person was a clerk with power to sell. As a result an agent
with limited express or usual authority can be held in practice to have a
more extensive authority. An agent could never confer authority on him
or herself.

For apparent authority to be created so as to bind the principal where the

third party acted on it the following conditions must be met.
(a) There must be representations or holding out by the principal or by
an agent acting on his behalf (not by the agent claiming apparent
authority).
(b) The representation must be one of fact.
(c) The third party must rely on that representation.

Liability of Principal and Agent when Agent contracts as Agent of a

named or unnamed Principal

The general rule is that when an agent contracts as an agent of either a

named or unnamed principal and the agent at the time of contract is acting
with some form of authority whether actual or apparent, even though he may
have exceeded his express authority, the principal is liable to the third party
on the contract.

Generally, once the agent has brought about a contract between the principal
and the third party the agent no longer has any liability to the third party.

However, there are certain exceptions to the above stated general principle.
These exceptions [when the agent will be personally liable even though he
contracted as an agent of a named/unnamed principal] are:
1. where the agent contracts personally by signing a contract without
any qualification such as;
[-----on behalf of------]
2. where the agent contracts under seal in his own name
3. where the agent has acted for a fictitious or non-existent principal
4. where the custom of the particular trade makes the agent
personally liable

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5. where the agent agrees to assume personal liability or personal

guarantee to persuade the third party to contract with an unknown
person.

Liability of Principal and Agent to the third party when the Agent
contracts as Agent of an undisclosed Principal:

Since the agent has not disclosed the existence of a principal, the general
rule is that the agent is personally liable.
The principal may become personally liable when he/she takes over the
contract. For the principal to take over the contract, certain conditions must
exist.
1. There must be an absence of a personal consideration [it must not be that
the third party wanted to deal with the agent only.]
2. The take over must be consistent with the terms of the contract entered
into with the third party.
Humble v Hunter, Said v Butt

Effect of the undisclosed Principal

1. The third party can sue either the agent or the principal.
2. If the third party intends to sue the principal he must act promptly,
otherwise, only the agent will be available for action.
3. Once the third party decides on who to sue [whether the principal or the
agent], he cannot change his mind.
4. An individual principal intervening may sue the third party.
5. If the principal has taken action against the third party, then the agent
cannot sue the third party.
6. The principal would have a right of action against the agent if he
intended the agent to disclose but he did not.

Liability of Principal to Third party for Agents tort, fraud, and

misrepresentation:

Principal is liable for any tort, fraud, or misrepresentation made by the agent
while acting within the scope of his authority whether actual or apparent.
If the agent cannot be said to be acting with some form of authority, he will
be personally liable to the third party.
Lloyd Vs Grace Smith & Co.

Breach of Warranty of Authority

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Implied warranty of authority: when a person holds himself out as an agent,

he is impliedly representing or stating that has the authority of the principal
to act. This means he is impliedly giving you a warranty or guarantee that
he has the authority of the ‘principal’. If it turns out that he had no authority,
he has breached the implied warranty that he gave the third party and this is
known has breach of warranty of authority.
Effect of breach of warranty of authority: The principal is not liable to the
third party, the agent is personally liable on the contract.
Yonge v Toynbee

Note – For the agent to be liable for breach of warranty of authority, he must
not be acting with any form of authority whether actual or apparent or must
have exceeded both actual and apparent authority.

DUTIES OF THE PRINCIPAL AND AGENT

Duties of Agent
1. To obey lawful instructions of principal - Turpin v Bilton

2. To work with skill and diligence of a reasonable average member of his

trade or profession - Keppell v Wheeler

3. Fiduciary duties:
a. Not to delegate duties except;
- principal consented to delegation
- it is presumed that agent is intended to delegate from the circumstances
- if delegation is usual practice of the trade
- where an emergency occurs making personal performance impossible
- where no special skill or confidence is required
note: principal may sue agent for appointing incompetent sub-agent

b. Agent must not abuse his position for personal benefit- Armstrong v
Jackson
c. Agent must render due account
d. Agent must make full and prompt disclosure of all material facts
e. Agent must not make secret profit or take bribe-Lucifero v. Castel
f. Agent must not allow personal interest to conflict with duties-
-Armstrong v Jackson

Duties of Principal:

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1. To pay agent for services rendered in accordance with instructions.

Reasonable remuneration implied,
Note: that the agent has a right of lien if he is not paid

2. To indemnify agent for all lawful expenses while carrying out duties but
not while acting outside scope of authority.

Remedies available to Principal for agent’s breach of duty

1. Bring action for breach of contract and ask for appropriate remedy for
breach
2. Recover any profit agent may have made
3. Refuse to pay agent remuneration or give an indemnity
4. Dismiss agent without compensation
5. Recover secret profit from agent
6. Terminate contract with third party if third part had actual knowledge of
agent’s breach or deliberately ignored agent’s breach or had reason to
believe agent’s breach.
7. Sue third party for any damage suffered (if above applies).

Remedies of agent against Principal

1. Bring action for breach of contract for non-payment
2. Lien on principal’s goods for non-payment.

Termination of Agency relationship

An agency does not last forever. An agency ends when the parties to it do
certain acts: it may also end by act law. When an agency terminates, the law
may require the principal to give notice to third parties to prevent them from
continuing to rely upon the existence of the agency. An agency relationship
may be terminated in any of the following ways:

A. Termination of act of parties:

An agency may terminate by an act performed by the principal, by the agent,
or by both parties. That act may consist of a condition expressed in the
contract creating an agency, the occurrence of which ends the relationship,
or the parties may do some act that makes the continuation of the agency
impossible.
Termination by Contractual terms: An agency may terminate because of a
condition or limitation the parties put into the contract creating the agency.

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Customarily, one of the following three conditions exist in most agency

contracts:

1. When the purpose for which parties created an agency has been
fulfilled, the authority of the agent ends and the relationship
terminates. Thus, an agent hired to sell a car stops being an agent
when He or she completes all acts necessary to transfer ownership
of the car. It does not matter whether it is the agent or the principal
who does the act that fulfills the purpose of the agency, in the car
sale example, the agency ends if the principal sells the car him or
herself.

2. The time period set for an agency in the agency contract expires,
the authority of the agent ends and the agency terminates. A time
period may be stated in months or may be stated more generally,
such as “until I return from this trip, you are to act as my agent”. If
no time period is stated in the agency contract, the agency ends
after a reasonable period of time.

3. When an agency is dependent upon the occurrence of an event or

the performance of an act, the agent’s authority ends and the
agency terminates when the event occurs or the act is performed.
For example, a principal and an agent may agree at the time they
create an agency that the agency will end when the agent earns a
10 percent return on funds entrusted to him or her.

Termination by Mutual Consent: The authority of an agent ends when the

parties do some act that makes it impossible for the agency to continue.
Acts that terminate an agency include the mutual consent of parties to end an
agency, the revocation of authority by a principal, or the renunciation of
authority by an agent.

Termination by Revocation of Principal: In most agencies, the agent acts

merely to serve the purpose the principal wishes to serve when the agency
was formed. If a principal’s purposes change, he or she should be able to
change the agency as well. Thus, the Law gives a principal the right to
revoke an agency’s authority at any time before the agent begins to act. A
term in the agency contract stating that the principal agrees not to revoke the
agency for a specific period of time does not prevent the principal at any

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time although he or she may be held liable for losses the agent suffers
because of the breach of contract.

A principal may revoke authority for any reason. Usually, a principal

revokes authority if an agent is incompetent, disloyal, or disobedient. But a
principal may not revoke an agent’s authority for acts the agent has already
performed. Thus, if an agent makes contracts or commits a tort for a
principal, the principal may not take away authority retroactively. Nor may
a principal take away authority in an agency that is coupled with an interest.
A later section in this chapter discusses this form of agency.

Termination by Renunciation of agent: The law does not normally force a

person to act as an agent or to continue to act as an agent against his or her
will. Thus an agent has the power to renounce his or her authority at any
time. But if an agent does so in violation of a contract, he or she is liable to
the principal for breach of contracts. Thus, a principal cannot force an agent
to perform a contract.
An agent may terminate an agency for any reason. Common reasons for
terminating an agency include a principal’s request to do dishonest acts,
violate the law, or assume obligations over and above those agreed to at the
time the agency was created. Cruel, oppressive, or immoral conduct on the
part of the principal may also justify an agent’s renunciation.

Termination by Act of Law

In many cases, agencies terminated by operation of law. Upon the

happening of an event that makes the continuation of an agency impossible
or impractical, the agency terminates:

Lack of Capacity: Both the principal and the agent must have the capacity
to form an agency relationship. When either party lacks capacity, the
relationship ends. Thus, the death of a principal ordinarily terminates the
authority of the agent instantly if the purpose of the agency instantly if the
purpose of the agency requires the personal participation of the principal.
This applies even if the third party or the agent is unaware of the principal’s
death. However, sometimes the courts will modify the rule if the interests of
an innocent third party intervene.
The death of an agent ordinarily terminates an agency relationship because
the agent can no longer perform personally. But if the agent services are

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routine, the agent does not end automatically; another person can perform in
the deceased agent’s place.
The insanity of a principal or agent ordinarily ends or at least suspends an
agent’s authority. However, if a third party has transferred an object of
value to a principal or an agent without knowledge of his or her insanity, the
third party may treat the relationship as if it were still existing.
The bankruptcy of a principal or an agent ordinarily ends the agent’s
authority to act in any matter relating to the bankruptcy. The insolvency of
either party does not terminate the relationship, however

Change in Law: A change in law that makes the continuation of a agency

unlawful ordinarily terminates the agent’s authority to act. But if it is
possible to eliminate the illegal aspects of an agent’s activities without
destroying the nature of the agency, the agency may continue in a modified
form.

Destruction of Subject Matter: The destruction of the subject matter of the

agency terminates the agency unless the rights of innocent third parties
intervene. Thus, an agent’s authority to sell a piece of property ends if a fire
destroys the property. But if a third party has given the agent money for the
property he or she may sue the agent or the principal to recover the money.
In addition, the conduct of the principal or the agent may result in the
destruction of an agency’s subject matter, making the continuation of the
agency impossible.

Notice of Termination

The law may require a principal to give notice of the termination of an

agency. If a principal fails to give required notice he or she continues to be
bound by the authority of the agent. The type of notice a principal must give
depend on how the agency terminates:

1. Upon revoking the authority of an agent, a principal must give

actual written or verbal notice to persons who know of the agency
or who have dealt with the agent. He or she must also publish a
general notice in a newspaper for persons who have never
transacted business with the agency.

2. A principal need not give notice if an agency ends according to

contract or by the fulfillment of the purposes of the agency.

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3. Since an agent may incur liability to third parties by continuing to

act as an agent, a principal must give notice or revocation to agent.
Notice of revocation becomes effective when the agent receives it.

4. Generally, a principal need not give notice of termination when

termination occurs by act of law. The law presumes that people
know the circumstances that caused an agency to end by act of law
because such facts are printed in public documents and journals.
Legal documents record the death, insanity, or bankruptcy of a
person; changes in the law are well publicized events. Hence the
law assumes that all third parties are aware of such events.

5. A principal must notify the third party if termination results from

the destruction of the subject matter of the agency, if the third is
not aware of the destruction.

6. A principal must notify the agent if the relationship ends by act of

law as the result of even known only to the principal and not likely
to be known by the agent.

Agency coupled with irrevocable interest

Normally, a principal may revoke the authority of his or her agent, but there
are situations in which a principal may not do so. These situations arise
when an agent had an interest in the continuance of the relationship. If an
agent’s interest is a substantial one, the law protects the relationship by
preventing the principal from unilaterally revoking the agency. An agency
coupled with an irrevocable interest arises for example when a person owes
money to another person. To pay the debt, the debtor gives the creditor the
authority to sell a piece his land and keep the sale price in payment for the
debt. In this way, the parties create an agency couples with an interest. The
agent has such a substantial interest in the agency that the principal may not
revoke it. If the principal revoked the agent’s authority before the agent sold
the land, he would be acting unfairly to the agent because the agent expected
to receive the proceeds of the sale in settlement of the debt.

An agency coupled with an interest does not end by revocation of the

principal or by death of one of the parties. Such a relationship may end,

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however, by mutual consent; by renunciation of the agent; by insanity;

bankruptcy; or war; or by a change in the law that makes the agency illegal.

Business Law

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CONTINUATION OF BUSINESS RELATIONSHIPS

Employer/Employee Relationship

Definition of Employment Relationship

An employment relationship is such that exist between employer and

employee under the provisions of a contract of employment. The terms and
conditions of the contract of service is usually contained in the contract of
employment. If given authority the employee may act as agent of the
employer to make the employer liable under the principles of agency.

Employee vs. Independent Contractor

An employee as stated earlier works under a contract of service and an
independent contractor works under a contract for service. Independent
contractor is not considered an employee and the employer may therefore
not be responsible for the actions of the independent contractors as he would
for the employee.

The essence of a contract for service is that a person performs services for
another.
It is important to distinguish an employee from an independent contractor
for the following reasons:
1. Certain legislative provisions protecting the employee will not apply to
independent contractors. E.g. Employment (Termination and
Redundancy Payments) Act, Employment (Equal pay for men and
women) Act.
2. The principle of vicarious liability is applicable in employer/employee
relationship not to independent contractors.
3. The implied rights and duties applicable to contract of employment is not
applicable to independent contractors.

Liabilities of Employer and Employee

Employer is liable for acts of the employee done during the usual course of
employment. The employee is however personally liable for crimes and all
other acts outside the scope of his employment.

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Employers’ duties
The employers’ duties are both statutory and common law. They are as
follows:

1. To pay contractually agreed remuneration

2. To treat employees with trust and confidence
3. To indemnify employees
4. To observe provisions relating to hours of work
5. To provide work for employees
6. To take reasonable care of employees and to provide a safe and healthy
system of work.

Employees duties

1. To be ready and willing to work

2. To obey lawful orders
3. To use reasonable care and skill
4. To take care of employer’s property
5. To act in good faith
6. To perform his task in a reasonable manner
7. To render personal service to employer.
The employer’s right is to expect the employee to observe and comply with
his (employees) duties and vice versa.
8. Not to take bribe or make secret profit.

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AGENCY
TUTORIAL QUESTIONS

1. Mr. French operates a green grocery in Papine. He employed Mr.

Thomas for the purposes of buying fresh vegetables from a farmer in
Black River and transporting them to Papine.

After Mr. Thomas bought the vegetables for $3,000.00 he also bought
fifty pounds of chicken because it was “dirt-cheap”. The cost of the
chicken was $7,000.00. This was billed directly to Mr. French. After
making his purchase, he discovered that Jam Green Transport was on
strike therefore he had no means of transporting the goods to Papine.

Mr. Thomas took his purchase to a nearby cold storage facility hoping
to store them there until he could arrange for transportation.
Unfortunately, the cold storage facility was unable to store all the
goods. In fact, only one half of the vegetables and chicken could be
stored. Mr. Thomas sold the remaining vegetables and chicken to
Sparks Motel for less than half the purchase price. Mr. Thomas told
Mr. French that he had paid $5,000.00 for the vegetables and
$10,000.00 for the chicken.

Mr. French on hearing the news became adamant and refused to pay
for the cost of the storage and the cost of the chicken. He also

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demanded to know the full price for the vegetables and chicken which
were sold to Sparks Motel.

Advise the farmer, Mr. French and Mr. Thomas.

2. Mr. Buy Right who owns a chain of successful supermarkets in

Kingston recently employed Novice as a branch manager for one of
his supermarkets in the corporate area. At his briefing session Novice
was told to get the necessary approval for purchases exceeding
$50,000.00 from the same supplier at any given time. Novice was
given a vehicle for his personal and official use by Mr. Buy Right
because of the late opening hours of the Supermarket.

A couple of months after he started the job, Novice purchased a

container load of corned beef from an overseas supplier at
$500,000.00. Mr. Buy Right was not on the island when the Contract
was signed with the overseas supplier so Novice was unable to inform
him of the good deal. The container arrived and Novice sold the
corned beef to customers who considered the price very reasonable.
They have now discovered that the consignment was suspected to be
contaminated and that was why it was sold very cheap. Some
customers became seriously ill and had to be hospitalised.

Advise Mr. Buy Right.

3. In March 2005, John a collector of vintage vehicles appointed Louise,

a dealer in Vintage cars to sell his 1969 Morris Oxford. Louise
advertised the vehicle in the newspapers and printed brochures which
listed the specifications of the car, including its ownership history
through the years. She also advertised the car on her website.
John was quite keen on getting the car sold so that he could use the
proceeds to purchase spare parts for his 1960 ‘Speedo Motorbike’.

Joan knew the value of the Morris Oxford is far greater than John’s
asking price of $1.2M so instead of accepting many offers to purchase
at John’s asking price, she kept the car on her premises to advertise
her business.

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In April, she accepted an offer of $1.9M from Henry, but she paid
over to John only $1.2M which is the sum he expected to receive.
Henry the purchaser of the car, had been told by Louise that John had
been the sole owner of the car, that it had a mileage of 50,000 and
that the brake discs were new. In fact John bought the car from a
retired lecturer in 1990 had not refitted brake discs since then and
Louise had arranged for the mileage on the car to be altered by her
chief mechanic.

Henry discovers that the brake discs are old, that the mileage of the
car had been altered and that the car was therefore worth far less than
the sum paid. Henry is furious and drops in to see John at his home,
only to find him quarrelling with Timothy who claims he paid Louise
$1M for the bike and has come to collect the 1960 ‘Speedo Bike’.
John maintains that he gave Louise no authority to sell the bike.

Advise John on his liability to both Henry and Timothy.

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