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Sample BBA2 BB0008 Set 2 Summer 2011

Sample BBA2 BB0008 Set 2 Summer 2011

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Published by: Rajdeep Kumar on Aug 16, 2011
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Summer 2011, BBA-II Semester 
Legal Regulatory Framework SMU Roll No. XXXXXXX 
BB0008: Legal Regulatory FrameworkAssignment Set – II
Note: Each question carries 10 Marks. Answer all the questions.
Q1. How can an ‘agency’ be created?Answer:Creation of Agency
The principal – agent relationship can be created in any of the following ways – 1) By express agreement2) By implied agreement3) By ratification4) Operation of Law
1 By Express Agreement:
Any person who is competent to contract and is of sound mind may appoint an agent. Theprincipal gives an express authority to the agent. This enables him to bind the principal byacts done within authority. The appointment may be oral or by an agreement in writing.Usually a written contract of agency is the power of attorney on a stamp paper.
2 By Implied agency:
Arise from the conduct, situation or relationship of the parties.Whenever a person places another in a situation in which that other is understood torepresent to act for him he becomes an implied agent.Smit Vs. Moss – A woman allowed her son to drive a car for her, she paying all theexpenses of maintenance and operation. When he made a collision injuring his wife, the wifecould sue the mother for the fault of her agent.Implied agency includes following types:a) Agency by Estoppel: Where a person by his conduct or by words spoken or written leadswillfully another person to believe that a certain state of affair exists he is estopped fromdenying subsequently the fact of that state of affairs. Eg.-X tells Y within the hearing of Z thathe is the agent of Z. Z does not object. Later Y supplies some goods to X who pretends toact as agent of Z. Z is liable to pay the price to Y. By keeping quiet there arises an impliedagency.
Summer 2011, BBA-II Semester 
Legal Regulatory Framework SMU Roll No. XXXXXXX 
Agency by estoppel arises when a person is heldout as an agent:i) Eventhough he is not actually an agent.ii) After he ceased to be an agent.In Trueman Vs. Lowdar The services of the agent were terminated.No notice of this was given by the principal. The agent later purchased some goods on creditin the name of principal. It was held that the principal was liable to pay the price.b) Agency by necessity: Ordinarily the powers of the agent are limited to particular acts. Yetunder extraordinary circumstances a person who is an agent may assume extraordinarypowers. Then his acts fairly done under such circumstances will be binding upon hisprincipal.The principle of agency by necessity was first applied to the cases of marine adventures.Unforeseen exigencies may arise in the course of a marine adventure which may threatenthe goods. Then the master of the ship is not able to communicate with the principal. In suchcircumstances he gets the powers and it is his duty to sell the goods to save their value. Thesale would bind the cargo owner. Thus even without the consent of the owner, a person canact as an agent. Following are the circumstances.1) Agent exceeding his authority in emergency. In cases of emergency an agent may exceedhis authority. There arises an agency of necessity provided.i) The agent was not in position to communicate with the principal.ii) The agent had taken all the reasonable care to protect the interests of the principal.iii) The agent had acted in good intention (bonafide)2) Person entrusted with anothers property – One may be entrusted with some properly forprotection or safe custody. Then the person who has been so entrusted with may do the actsneeded to protect it even if there is no express authority.In Greate Northern Rail Vs. Swaffiled a horse was sent by a train and there was nobody atthe receiving station. The Railway Co. had to take care of it. It was held that the co. acted asan agent by necessity and so can recover the amt. spent in tending the horse.3) Husband and Wife: A wife living with her husband has the implied authority of herhusband to buy articles of household necessities.Necessaries do not mean only basic ones but such goods and services which are neededaccording to the style of their living. However, following are the limitations on the wife’simplied authority.a) It is necessary that both of them are living together.b) They must be in a domestic establishment of their own.
Summer 2011, BBA-II Semester 
Legal Regulatory Framework SMU Roll No. XXXXXXX 
In Debenham Vs. Mellon the defendant was the manager of a Hotel and his wife was themanageress. They lived together there but without domestic establishment. The food wassupplied from the hotel kitchen. The wife incurred some debt for clothes and her husbandwas held not liable to pay the debt.c) The wife can run her husband into debt only for necessities. The word necessity howeveris relative.d) Husband will not be liable if he makes a reasonable allowance to his wife for her needs.The Husband can negative his liability by proving that he has expressly warned the tradersthat they should not supply goods on credit; orThe wife was already supplied with sufficient articles in question; or Wife was provided withsufficient funds to buy necessities without pledging her husband’s credit.
3 Agency by ratification:
One may act on behalf of another person without his knowledgeor consent.If the other person accepts the act of the first person done without his knowledge or consent,he is said to ratify the Act.Example: A insures B’s goods without his authority. If B ratifies the policy the policy will bevalid as if A had been authorised to insure the goods.Ratification may be express or implied in the conduct of the person on whose behalf the actsare done.Eg.–X Lends Y’s money without his authority to Z. Z pays interest to Y who accepts it. Y isconduct implies ratification of loan.Effect of ratification: Ratification renders the acts done by one person on behalf of anotherwithout his knowledge or authority as binding on the other person (Principal) as if they hadbeen performed by his authority.Ratification related back to the date when the act was done by the agent and amounts to aprevious command or authority.In Bolton and Partners Vs. Lambart – A managing director of the company purported to acton behalf of the company. He accepted an offer without authority from X, X later withdrewthe offer. Meanwhile the acceptance was ratified by the company.It was held that X was bound as ratification relates back to the date of A’s acceptance.

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