ACCA law chpt 5

Samuel is a director at Buckhurst Park Properties Ltd. He enters into a contract with a third party on behalf of the company, even though he was not formally appointed with the authority to do so. The company had, however, allowed Samuel to appear as if he had such authority. What is the main legal principle established in Freeman & Lockyer v Buckhurst Park Properties Ltd (1964) that applies to this situation?

• Directors must always be formally appointed.

• A director's authority is always apparent.

• A principal is bound by the acts of an agent if they have represented or allowed the agent to appear to have authority.

• A company cannot refuse to honor any contract.

Answer explanation

The case established that a principal is bound by an agent's acts if the principal has represented or allowed the agent to appear to have authority, emphasizing the importance of apparent authority in agency relationships.

After a train journey, the owner failed to collect his horse from the station. In this situation, what action did the stationmaster take?

• Sold the horse.

• Left the horse at the station.

• Paid for the horse to be stabled overnight.

• Returned the horse to the railway.

Answer explanation

In Great Northern Railway v Swaffield, the stationmaster took responsibility for the horse by paying for it to be stabled overnight, as the owner failed to collect it. This action ensured the horse's welfare.

During a sudden medical emergency on a ship, Florence, who is in charge of the cargo, cannot contact the ship's owner for instructions. She decides to sell part of the cargo to pay for urgent medical supplies for the crew. Under what circumstances can Florence be recognized as an agent of necessity according to the legal principle?

• When there is an emergency, communication with the principal is impossible, and the agent acts in good faith.

• When the agent has prior approval from the principal.

• When the agent acts in their own interest.

• When there is no emergency but the agent decides to act.

Answer explanation

An agent of necessity is recognized when there is an emergency, communication with the principal is impossible, and the agent acts in good faith. This ensures actions taken are necessary and in the principal's best interest.

Elsie, Neha, and Anaya are promoters who entered into a contract to buy goods on behalf of a company that had not yet been formed. Later, the company was incorporated but refused to pay for the goods. Why were the promoters personally liable, as in the case of Kelner v Baxter (1866)?

• Because the company existed at the time of the contract.

• Because the company did not exist at the time, and thus could not ratify the contract.

• Because the company refused to pay for the goods.

• Because the promoters acted outside their authority.

Answer explanation

The promoters were personally liable because the company did not exist at the time of the contract, meaning it could not ratify the agreement. This lack of existence left the promoters responsible for the obligations.

Thomas owns a pub but appoints Fenwick to manage it. Fenwick hires Watteau to supply goods, even though Fenwick was not expressly authorized to do so. What is the main topic illustrated by this situation?

• Agency by Necessity

• Implied Authority

• Pre-incorporation Contract

• Express Authority

Answer explanation

The main topic of Watteau v Fenwick (1893) revolves around implied authority, where an agent acts beyond their express authority but is still binding on the principal due to the circumstances and the nature of the business.

Charlie is a hotel manager. He buys cigars for the hotel lounge. What is implied authority in this context?

• Authority explicitly given by the principal

• Authority to do what is usual in their role

• Authority to make any purchase without restriction

• Authority to act against the principal's instructions

Answer explanation

Implied authority allows a hotel manager to make purchases that are customary for their role, such as buying cigars for guests. This reflects the authority to do what is usual in their position, rather than unrestricted purchasing.

Rabia and Maria entered into a contract, but later Rabia realized she needed to ratify it for it to be valid. What is required for ratification to be valid in this situation?

• Ratification of only the parts of the contract that are favorable

• Ratification of the entire contract

• Ratification of the contract within 30 days

• Ratification of the contract by a third party

Answer explanation

For ratification to be valid, the entire contract must be ratified. This ensures that all terms are accepted, not just the favorable parts, maintaining the integrity of the agreement.

Maria is considering a contract that Rabia entered into on her behalf without her prior approval. What happens if Maria ratifies the contract?

• She becomes liable only for the items she likes

• She becomes liable for the whole contract

• She is not liable for any part of the contract

• She can choose which parts of the contract to accept

Answer explanation

If Maria ratifies the contract, she accepts all its terms and becomes liable for the entire contract, not just parts she likes. This means she is fully bound by the agreement with Rabia.

Jamie works at a diner and is responsible for updating the menu. One day, she decides to add milkshakes to the menu without asking the owner. What type of authority did Jamie have when she added milkshakes to the menu?

• Express authority

• Implied authority

• Apparent authority

• No authority

Answer explanation

Jamie had apparent authority when she added milkshakes to the menu, as her actions suggested she had the authority to make such decisions, even if it wasn't explicitly granted.

Ava owns a company and allows Noah to act on her behalf in business dealings, even though she has not given him explicit authority. A third party enters into a contract with Noah, believing he has authority because of Ava's conduct. In a dispute, what principle established in Freeman & Lockyer v Buckhurst Park (1964) would apply?

• Agency by necessity

• Non-existent principal cannot ratify

• Principal is bound where they represent or allow an agent to appear to have authority

• Principal bound by acts usual for the agent’s role

Answer explanation

In Freeman & Lockyer v Buckhurst Park, the principle established is that a principal is bound by the acts of an agent if they represent or allow the agent to appear to have authority, even if the agent lacks actual authority.