Law On Sales

Westmead International School
School of Economics Business and Accountancy
LAW ON SALES
Presented to the Faculty of the

School of Economics, Business and Accountancy
Batangas City
In Partial Fulfilment
Of the Requirements for the Degree of
Bachelor of Science in Accountancy
BALZOTE,JESSE JAMES
REYES, JANZEN
ABUYEN, GJAYA
DALISAY, BLESSIE JOY
ILAGAN, HELEN
RAMOS, NHICA JOY
RODRIGUEZ, HAZEL
May 2018
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PARTNERSHIP
A legal form of business operation between two or more individuals who

share management and profits. The federal government recognizes several types
of partnerships. The two most common are general and limited partnerships.If your
business will be owned and operated by several individuals, you'll want to take a
look at structuring your business as a partnership. Partnerships come in two
varieties: general partnerships and limited partnerships. In a general partnership,
the partners manage the company and assume responsibility for the partnership's
debts and other obligations. A limited partnership has both general and limited
partners. The general partners own and operate the business and assume liability
for the partnership, while the limited partners serve as investors only; they have no
control over the company and are not subject to the same liabilities as the general
partners.Personal liability is a major concern if you use a general partnership to
structure your business. General partners are personally liable for the partnership's
obligations and debts. Each general partner can act on behalf of the partnership,
take out loans and make decisions that will affect and be binding on all the partners
(if the partnership agreement permits).
One of the major advantages of a partnership is the tax treatment it enjoys.

A partnership doesn't pay tax on its income but "passes through" any profits or
losses to the individual partners. At tax time, the partnership must file a tax return
that reports its income and loss to the IRS. In addition, each partner reports his or
her share of income and loss.The only requirement is that in the absence of a
written agreement, partners don't draw a salary and share profits and losses
equally. Partners have a duty of loyalty to the other partners and must not enrich
themselves at the expense of the partnership. Partners also have a duty to provide
financial accounting to the other partners.In the absence of a written agreement,
partnerships end when one partner gives notice of his express will to leave the
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partnership.In the absence of a written agreement, partnerships end when one

partner gives notice of his express will to leave the partnership. The disadvantages
of forming a partnership is that thepartners are individually liable for business
debts.
If you decide to organize your business as a partnership, be sure you draft
a partnership agreement that details how business decisions are made.The
agreement should address the purpose of the business and the authority and
responsibility of each partner. It's a good idea to consult an attorney experienced
with small businesses for help in drafting the agreement. Your partnership
agreement must cover major areas of investment liability and business control for
it to be a valid legal document. A partnership agreement must include the capital
or property each of the partners is investing in the company. The agreement should
also include what roles each partner will be performing when the business is
operational, including managerial capacities and who controls the day-to-day
operation of the business. Each partner's contributions to the company should
mirror each partner's percentage control of the business.
The dissolution of partnership is allowed, provided such dissolution does

not amount to a breach of contract or is prejudicial to third parties. The death of a
partner or the unauthorized transfer of ownership of his share in the partnership [in
case there is a limitation to this effect] results in the dissolution thereof. In other
words, any change in the composition of the partnership, unless so allowed, will
result in the dissolution thereof. Consequently, the remaining partners may form
a new partnership with less or more partners.
When your business partner dies, you could consider selling off the entire
business and liquidating the assets and distributing them accordingly or bringing
in an heir of your partner’s estate to take their place. Both of these options may
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seem undesirable, and there are other actions you can take to create a more
favourable outcome.
If you both signed a written partnership agreement when starting the business, it
is likely that you included a clause detailing how long the partnership is intended
to operate for and what the outcome would be on the occurrence of death or
permanent disability. Often this can provide for a few different options including the
deceased’s estate taking over their share of the partnership,a transfer of the other
partner’s share to you on a payment to the estate, oran option for you to buy the
share of the partnership using a financial formula.
If you did not create a written partnership agreement with your business
partner, then the Partnership Act in your state or territory will apply to regulate what
happens to your business.
Generally, the partnership agreement will be dissolved immediately upon the death
or bankruptcy of one of the partners. You will then owe your partner’s estate a debt
for their share of the partnership that accrues at the date of their death. This
outcome may not be what either of you had intended to happen when you first
started your business together, particularly because of the impact on your finances
and on having to wind up the business. This can create avoidable stress for both
yourself and your partner’s estate and can be very time-consuming.
The partnership has a juridical personality separate and distinct from that of each
of the partners, even in case of failure to comply with the requirements needed. To
determine whether the partnership exists, these rules shall apply: persons who are
not partners as to each other are not partners as to third persons. Co-ownership
or co-possession does not of itself establish a partnership, whether such-co-
owners or co-possessors do or do not share any profits made by the use of the
property. The sharing of gross returns does not of itself establish a partnership,
whether or not the persons sharing them have a joint or common right or interest
in any property from which the returns are derived. The receipt by a person of a
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share of the profits of a business is prima facie evidence that he is a partner in the
business, but no such inference shall be drawn if such profits were received in
payment.
A partnership must have a lawful object or purpose, and must be

established for the common benefit or interest of the partners.When an unlawful
partnership is dissolved by a judicial decree, the profits shall be confiscated in favor
of the State, without prejudice to the provisions of the Penal Code governing the
confiscation of the instruments and effects of a crime. It may be constituted in any
form, except where immovable property or real rights are contributed thereto, in
which case a public instrument shall be necessary. Every contract of partnership
having a capital of three thousand pesos or more, in money or property, shall
appear in a public instrument, which must be recorded in the Office of the
Securities and Exchange Commission.
Obligations of the Partners
Every partner is a debtor of the partnership for whatever he may have

promised to contribute thereto. He shall also be bound for warranty in case of
eviction with regard to specific and determinate things which he may have
contributed to the partnership, in the same cases and in the same manner as the
vendor is bound with respect to the vendee. He shall also be liable for the fruits
thereof from the time they should have been delivered, without the need of any
demand. When the capital or a part thereof which a partner is bound to contribute
consists of goods, their appraisal must be made in the manner prescribed in the
contract of partnership, and in the absence of stipulation, it shall be made by
experts chosen by the partners, and according to current prices, the subsequent
changes thereof being for account of the partnership. An industrial partner cannot
engage in business for himself, unless the partnership expressly permits him to do
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so; and if he should do so, the capitalist partners may either exclude him from the
firm or avail themselves of the benefits which he may have obtained in violation of
this provision, with a right to damages in either case. Unless there is a stipulation
to the contrary, the partners shall contribute equal shares to the capital of the
partnership.
If there is no agreement to the contrary, in case of an imminent loss of the

business of the partnership, any partner who refuses to contribute an additional
share to the capital, except an industrial partner, to save the venture, shall he
obliged to sell his interest to the other partners. The losses and profits shall be
distributed in conformity with the agreement. If only the share of each partner in
the profits has been agreed upon, the share of each in the losses shall be in the
same proportion.
In the absence of stipulation, the share of each partner in the profits and
losses shall be in proportion to what he may have contributed, but the industrial
partner shall not be liable for the losses. As for the profits, the industrial partner
shall receive such share as may be just and equitable under the circumstances. If
besides his services he has contributed capital, he shall also receive a share in the
profits in proportion to his capital.
If two or more partners have been intrusted with the management of the
partnership without specification of their respective duties, or without a stipulation
that one of them shall not act without the consent of all the others, each one may
separately execute all acts of administration, but if any of them should oppose the
acts of the others, the decision of the majority shall prevail. In case of a tie, the
matter shall be decided by the partners owning the controlling interest. In case it
should have been stipulated that none of the managing partners shall act without
the consent of the others, the concurrence of all shall be necessary for the validity
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of the acts, and the absence or disability of any one of them cannot be alleged,
unless there is imminent danger of grave or irreparable injury to the partnership.
Property Rights of a Partner
A partner has an equal right with his partners to possess specific

partnership property for partnership purposes,but he has no right to possess such
property for any other purpose without the consent of his partners. A conveyance
by a partner of his whole interest in the partnership does not of itself dissolve the
partnership, or, as against the other partners in the absence of agreement, entitle
the assignee, during the continuance of the partnership, to interfere in the
management or administration of the partnership business or affairs, or to require
any information or account of partnership transactions, or to inspect the
partnership books; but it merely entitles the assignee to receive in accordance with
his contract the profits to which the assigning partner would otherwise be entitled.
However, in case of fraud in the management of the partnership, the assignee may
avail himself of the usual remedies.
Obligations of the Partners with Regard to Third Persons
Every partnership shall operate under a firm name, which may or may not
include the name of one or more of the partners. Being not a members of the
partnership, included their names in the firm name, shall be subject to the liability
of a partner. Every partner is an agent of the partnership for the purpose of its
business, and the act of every partner, including the execution in the partnership
name of any instrument, for apparently carrying on in the usual way the business
of the partnership of which he is a member binds the partnership, unless the
partner so acting has in fact no authority to act for the partnership in the particular
matter, and the person with whom he is dealing has knowledge of the fact that he
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has no such authorityAn act of a partner which is not apparently for the carrying
on of business of the partnership in the usual way does not bind the partnership
unless authorized by the other partners.
Dissolution and Winding Up
The dissolution of a partnership is the change in the relation of the partners

caused by any partner ceasing to be associated in the carrying on as distinguished
from the winding up of the business. On dissolution the partnership is not
terminated, but continues until the winding up of partnership affairs is
completed. When a specific thing which a partner had promised to contribute to
the partnership, perishes before the delivery; in any case by the loss of the thing,
when the partner who contributed it having reserved the ownership thereof, has
only transferred to the partnership the use or enjoyment of the same; but the
partnership shall not be dissolved by the loss of the thing when it occurs after the
partnership has acquired the ownership thereof.
The dissolution of the partnership does not of itself discharge the existing
liability of any partner. A partner is discharged from any existing liability upon
dissolution of the partnership by an agreement to that effect between himself, the
partnership creditor and the person or partnership continuing the business; and
such agreement may be inferred from the course of dealing between the creditor
having knowledge of the dissolution and the person or partnership continuing the
business.
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Limited Partnership and General Partnership
A limited partnership is one formed by two or more persons under the

provisions of the following article, having as members one or more general
partners and one or more limited partners. The limited partners as such shall not
be bound by the obligations of the partnership. A limited partner whose surname
appears in a partnership name contrary to the provisions of the first paragraph is
liable as a general partner to partnership creditors who extend credit to the
partnership without actual knowledge that he is not a general partner. He shall not
become liable as a general partner unless, in addition to the exercise of his rights
and powers as a limited partner, he takes part in the control of the business.
A person may be a general partner and a limited partner in the same

partnership at the same time, provided that this fact shall be stated A person who
is a general, and also at the same time a limited partner, shall have all the rights
and powers and be subject to all the restrictions of a general partner; except that,
in respect to his contribution, he shall have the rights against the other members
which he would have had if he were not also a general partner. A limited partner
also may loan money to and transact other business with the partnership, and,
unless he is also a general partner, receive on account of resulting claims against
the partnership, with general creditors, a pro rata share of the assets.
The liabilities of a limited partner as set forth in this article can be waived or
compromised only by the consent of all members; but a waiver or compromise
shall not affect the right of a creditor of a partnership who extended credit or whose
claim arose after the filing and before a cancellation or amendment of the
certificate, to enforce such liabilities.
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Role of Partnership in Business
Forming a Partnership
Partnerships are usually registered with the state in which they do business,
but the requirement to register varies from state to state. Partnerships use a
partnership agreement to clarify the relationship between the partners, the roles
and responsibilities of the partners, and their respective shares in the profits or
losses of the partnership.
It is relatively easy to form a partnership, but, as noted above, the business

must be registered with the state where the partners do business. Depending on
the state, you may have the choice of one or more of the types of partnerships
mentioned above. Once you have registered with your state, you can then proceed
to the other typical tasks in starting a business.
Requirements for Joining a Partnership
An individual can join a partnership at the beginning or after the partnership

has been operating. The incoming partner must invest in the partnership, bringing
capital (usually money) into the business and creating a capital account. The
amount of the investment and other factors, like the amount of liability the partner
is willing to take on, determine the new partner's investment and share of the profits
(and losses) of the business each year.
The Importance of a Partnership Agreement
When a partnership is formed, one of the first acts of the partners should be
to prepare and sign a partnership agreement. This agreement describes all the
responsibilities of the partners, sets out each partner's distributive share in profits
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and losses, and answers all the "what if" questions about what happens in a
number of typical situations.
To ensure your business partnership stays on course, follow these tips.
1. Share the same values.
Don’t write the first word of your business plan until you know that you and
your partner have the same dreams, goals and vision for your new business. Does
your partner dream of starting the next Starbucks, while you envision a part-time
catering business that gives you plenty of time with your family? You and your
partner must share the same core values, goals and work ethic if you want the
business to succeed.
2. Choose a partner with complementary skills.
When you and your business partner have different strengths, you'll double
the power of your startup team right off the bat. For example, a shy tech expert
who wants to start an Internet business would do well to find a partner with sales,
marketing and people skills. This way, both partners can focus on doing what they
enjoy and are good at.
3. Have a track record together.
Succeeding as business partners doesn’t require having run a business

together or even having worked together before. It does require a track record of
going through similar challenges together successfully. Look for a partner you’ve
handled conflicts with, achieved common goals with and survived tough times with
in the past.
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4. Clearly define each partner’s role and responsibilities.
An informal organization where each partner does what’s needed at that

moment may work in the very early startup stages, but not in the long term.
Defining each partner’s job title and duties helps eliminate disagreements by giving
each partner control of his or her domain. Employees and customers also benefit
from knowing which partner handles what aspects of the business.
5. Select the right business structure.
You can organize a partnership as a general partnership, limited partnership

or limited liability partnership. However, you can also organize it as a C corporation
or S corporation. Each form of business has its advantages and disadvantages in
terms of liability, taxes and continuity. Talk to an attorney or other experienced
advisor to help determine which form of business is right for you and your partner.
6. Put it in writing.
Even if you're starting a business with your best friend from kindergarten,
you need to draw up legal documents regarding your business structure, capital
contribution to the business, how decisions will be made and disputes resolved
and what happens if one partner wants to leave the business. Thinking through all
the things that could go wrong and how you will handle them makes it easier to
deal with any difficulties that do arise.
7. Be honest with each other.
Soft-pedaling your true feelings because you don’t want to hurt your
business partner will cause more problems than it eliminates. In order for your
partnership to work, both of you must feel comfortable openly sharing your
opinions and hashing out any disagreements that arise. Sweeping your concerns
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under the rug only leads to bitterness and resentment which can destroy your
partnership—and your business. These can be tough issues to discuss, especially
when you’re excited about your startup and can’t wait to get going. But unless you
take the time to lay the foundation for a lasting business partnership, your new
business may never get off the ground.If you’re considering going into business as
a partnership, then you’ll need to be prepared to split the profits.
Formally Structure Your Small Business
Before you make any decisions about splitting profits, talk to a lawyer about the
best way to legally structure your business.
There are a few options to consider. The simplest route is to form a “general
partnership”, simply register your “doing business as (DBA)” name and open a
bank account in the business’ name. This structure assumes that all profits, liability
and management duties are equally divided among the partners. If the partnership
is unequal, such as a 30-70 ratio, then you’d need to document the percentages
assigned to each partner in the partnership agreement (more on that later).
Another option is a “limited liability partnership (LLP)”. Professional partners, such

as lawyers or accountants,are often advised to go this route since it protects the
business owners from personal liability for the debts or liabilities incurred by the
partnership. For example, if you run into a cash flow issue and your business fails
neither partner will be personally liable for any debts owed to creditors. Another
option is a “limited partnership (LP)” in which one partner invests in the business
but doesn’t manage it, leaving that task to one or more of the other partners. Read
more about each of these structures on NOLO.com.
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Decide on How You’ll Split Profits
In a business partnership you can split the profits any way you want – as long as
everyone is in agreement. You could split the profits equally, or each partner could
receive a base salary and then split any remaining profits. (Remember, in an equal
partnership (50-50) neither partner can make a decision without the other’s
approval, whereas in a 51-49 ratio, for example, one partner has final authority).
If you know ahead of time that one or more partner will only play a minor role in
income generating activities you might agree to pay the more active partner a
higher salary. Another variation is to pay partners only for work performed based
on pre-agreed rates for certain projects.
Whatever you decide put in place a profit-sharing agreement and make it part of
your larger partnership agreement.
Put Everything in Writing with a Partnership Agreement
A partnership agreement is the business version of a prenuptial agreement and

should be completed before you start operations and any profits are made (the
division of profits is a critical part of this process). Although an agreement is not
legally required, it can protect your interests as one half of the partnership for the
duration of your partnership and through its dissolution.
Things to include in the agreement include the following:
 Division of profits – This includes both the division of profits and losses
and how and when each partner will get paid.
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 Contributions to the partnership – If either partner contributes any assets

to the business, whether it’s cash, property, or equipment, you’ll need to
ensure these are documented.
 Business decision-making – What authority does each partner have to
make business decisions? How will you handle disputes? How will you
handle the dissolution of the partnership when that time comes?
 Who does what – Divide up your management duties and document them
here. For example, who handles media relations, payroll, etc.
Work with a lawyer and your accountant to develop and formalize the agreement,
there are many factors that require consideration when forming any kind of
partnership and getting legal and financial advice now will save you a lot of hassle
in the long run.
How Business Partnerships are Taxed
As you structure your profit sharing agreement you’ll also need to be aware of how
the IRS taxes partnerships. In a partnership the business “passes through” any
profits or losses to its partners. Partners include their respective share of the
partnership’s income or loss on their personal tax returns. Partnerships do,
however, need to file an annual ‘information return’ to report income, deductions,
gains, losses, etc. with the IRS.
Read more about a partnerships tax obligation on SBA.gov.
Plan Ahead for a Happy and Profitable Partnership
Protecting yourself before you start a business partnership is your best

strategy for ensuring the union is a happy one. Profit sharing is an important
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consideration but there are many moving parts to a business that need to be
considered and included in the partnership agreement.
Republic of the Philippines

Congress of the Philippines
Metro Manila
Eighth Congress
The praise "doing business" shall include soliciting orders, service

contracts, opening offices, whether called "liaison" offices or branches;
appointing representatives or distributors domiciled in the Philippines or who
in any calendar year stay in the country for a period or periods totaling one
hundred eighty (180) days or more; participating in the management,
supervision or control of any domestic business, firm, entity or corporation in
the Philippines; and any other act or acts that imply a continuity of commercial
dealings or arrangements, and contemplate to that extent the performance of
acts or works, or the exercise of some of the functions normally incident to,
and in progressive prosecution of, commercial gain or of the purpose and
object of the business organization: Provided, however, That the phrase
"doing business: shall not be deemed to include mere investment as a
shareholder by a foreign entity in domestic corporations duly registered to do
business, and/or the exercise of rights as such investor; nor having a
nominee director or officer to represent its interests in such corporation; nor
appointing a representative or distributor domiciled in the Philippines which
transacts business in its own name and for its own account.
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Small and medium-sized domestic market enterprises with paid-in

equity capital less than the equivalent of five hundred thousand US dollars
(US$500,000) are reserved to Philippine nationals, unless they involve
advanced technology as determined by the Department of Science and
Technology. Export enterprises which utilize raw materials from depleting
natural resources, with paid-in equity capital of less than the equivalent of
five hundred thousand US dollars (US$500,000) are likewise reserved to
Philippine nationals.
Reference:
https://www.entrepreneur.com/encyclopedia/partnership
https://www.thebalancesmb.com/what-is-a-business-partnership-398402
http://www.wipo.int/edocs/lexdocs/laws/en/ph/ph155en.pdf
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Sales
The law relating to the transfer of ownership of property from one person t
o another for value, which is codified in Article 2 ofthe UniformCommercial
Code (UCC), a body of law governing mercantile transactions adopted in whole o
r in part by thestates.
The sale of a good, or an item that is moveable at the time of sale, is a transactio
n designed to benefit both buyer andseller. However, sales transactions can be c
omplex, and they do not always proceed smoothly. Problems can arise atseveral
phases of a sale, and at least one of the parties may suffer a loss. In recognition
of these realities and of the basicimportance of orderly commerce to society, legi
slatures and courts create laws governing sales of goods.
The most comprehensive set of laws on sales, the Uniform Commercial Code (U
CC), is a collection of model laws on anassortment of commercial activities. The
UCC itself does not have legal effect; it was written by the lawyers, judges, andpr
ofessors in the American Law Institute (ALI) and the National Conference of Com
missioners on Uniform State Laws(NCCUSL). All states have adopted the UCC i
n whole or in part by enacting the model laws contained in its 11 articles.
Article 2 of the UCC deals with the sale of goods. All states with the exception of
Louisiana have enacted at least some ofthe model laws in Article 2. Laws on the
sale of real estate and the sale of services are different from laws on the sale ofg
oods, and they are excluded from Article 2. A service contract may be covered by
the provisions in Article 2 insofar as itinvolves the transfer of goods, and courts
may use Article 2 as a reference for interpreting laws on the sale of services.Som
e contracts are a blend of the sale of goods and the sale of services and may be
covered by Article 2. For example, theservice of food by a restaurant may be con
sidered, for some purposes, a contract for a sale of goods (U.C.C. § 2-314).
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Article 2 covers sales by both private individuals and merchants. Merchants are p
ersons engaged in the business of buyingor selling goods. A small number of pro
visions apply only to merchants, but otherwise the provisions cover all sales.
Contract Formation
A contract for the sale of goods can be made in any manner that shows agreeme
nt between the buyer and seller. A contractmay be made orally or in writing or thr
ough any other conduct by both parties that acknowledges the existence of a con
tract.
To form a contract, one of the parties must make an offer, the other party must a
ccept the offer, and consideration, orsomething of value, must be exchanged. An
offer may be revoked without any loss to the offeror if the revocation is madebefo
re the other party accepts the offer and gives consideration. However, an offer m
ay not be revoked for up to 90 days if itis (1) accompanied by an assurance that t
he offer will be kept open; (2) made by a merchant; and (3) in writing signed by th
eoffering merchant (U.C.C. § 2-205).
If a party accepts an offer but in the process of accepting changes material terms
of the offer, the acceptance may beconsidered a counteroffer. A counteroffer eli
minates the first offer, and no contract is formed until the original offeror acceptst
he counteroffer and consideration is exchanged. In contracts between merchants
, additional or different terms by theofferee become part of the contract unless (1)
the offer expressly limits acceptance to the terms of the offer; (2) the newterms
materially alter the contract; or (3) the offeror objects within a reasonable time.
Many basic principles of contract law also apply to the sale of goods. The Statute
ofFrauds requires that an agreement tosell goods at $500 or more must be in writ
ing or it cannot be enforced in court. The writing must be signed by the party to b
echarged, it must contain language indicating that a contract has been made, an
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d it must identify the parties to the contractand the quantity of goods sold. There
are a few exceptions to the Statute of Frauds.
A sales contract that is Unconscionable may be struck down in whole or in part

by a court. A sale is unconscionable if aperson in a superior bargaining position d
ictates terms that are grossly unfair to the other party. A court will determinewhet
her a sale is unconscionable by examining the circumstances at the time the cont
ract was made. Courts rarely findunconscionability in sales between merchants b
ecause merchants generally are more sophisticated in sales negotiationsthan are
non-merchants.
Parties to a sale sometimes do not include all the terms of the sale at the time th
e agreement is made. Such omissions willnot destroy the agreement if the partie
s intend to add terms at a later date. If the parties wish to modify an existing sale
scontract, the modifications should be in writing if they increase the value of the s
ale to $500 or more.
Issues Arising Prior to Performance
Performance is the fulfillment of a promise in the contract. Many issues can arise
in a sales contract after the contract ismade and before a party's performance is r
equired.
Sometimes performance may be made impracticable. If the goods are completely

destroyed before the risk of loss haspassed to the buyer, and the goods have no
t been destroyed through the fault of either party, the seller may be excusedfrom
performing. Risk of loss is responsibility for any damage or destruction of goods;
the parties may decide in the contractwhen the risk of loss of the goods passes fr
om the seller to the buyer. If the goods are only partially destroyed or havedeterio
rated, the buyer may demand to inspect the goods and either void the contract or
accept the goods with a reductionin the contract price.
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A seller may avoid performing only if the destroyed goods were specifically identif
ied when the sale was made. Forinstance, if the sale is of a lamp handpicked by t
he buyer, the destruction of that particular lamp would excuse the seller'sperform
ance, and the seller would not be liable to the buyer for the loss. However, if the
contract is simply for a lamp of aspecific description, the seller could tender any l
amp that meets the description, and the buyer would not be excused fromperfor
ming.
There are two situations in which a party must make a substituted performance in
case the agreed method of performancebecomes impracticable. First, when the
goods cannot be transported by the agreed-
upon method of transportation, the sellermust use available transportation that is
a commercially reasonable substitute. Second, if an agreed-
upon method ofpayment fails, the buyer must use a commercially reasonable sub
stitute method of payment if one is available. If a partyfails to substitute transport
ation or payment, that person could be liable to the other party for losses resultin
g from thefailure.
In some cases the purpose of a sale may be frustrated by circumstances beyond

the control of both buyer and seller. Forexample, assume that a party agrees to b
uy one thousand T-
shirts in anticipation of a local rock concert. If the concert iscancelled after the sal
es contract is made, the buyer may escape the contract under the doctrine of frus
tration of purpose.
At times it may appear to a party that the other party will be unable to perform by
the expected date. For example, assumethat a party agrees to sell goods on cred
it. If the buyer becomes financially insolvent before the goods are delivered, thes
eller may demand cash before delivering the goods. If the goods are in transit, th
e seller may instruct the carrier to withholddelivery of the goods. A party is consid
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ered insolvent if he or she cannot pay debts as they come due, has ceased to pa
ydebts, or has liabilities that exceed assets.
If a party has reasonable grounds to feel insecure about the other party's ability t
o perform, the insecure party may demandassurances before performing. For ex
ample, a seller may be insecure if a buyer falls behind in payments, or a buyer m
ayfeel insecure if a seller delivers defective goods to another party and those goo
ds are of a kind similar to those expected bythe buyer. In such cases the concern
ed party may demand assurances such as an advance payment or some other
affirmative action.
If the other party does not provide any assurance, the concerned party ma
y withhold performance.Alternatively, if the other party gives the assurance, the c
oncerned party must follow through on his obligations. Preciselywhat constitutes
an effective assurance that depends on the nature of the goods, the size of thec
ontract, the length of time until performance, and similar considerations. In any c
ase a concerned party may not makecommercially unreasonable demands on a
party prior to performance and then withhold performance if the other party does
not meet the demands.
If a party unequivocally declares an unwillingness to perform prior to the ti

me of performance, the other party may considerthe declaration an anticipatory b
reach of the sales contract. An anticipatory breach operates in the same way as
an actualbreach and gives the nonbreaching party the right to sue for losses resu
lting from the breach. A refusal to give assurancesafter a demand for assurances
may be considered an anticipatory breach. A party may retract a repudiation if th
e retractionis made before the aggrieved party cancels the contract.
22
Seller's Obligations
Generally, the seller's primary obligations are to transfer ownership of the

goods and deliver the goods. A seller may agreewith the buyer to perform other o
bligations. For instance, a seller may agree to package or label the goods in a ce
rtain wayor service the goods for a specific period of time.
A seller should convey the title to the goods free from any security interest
or other lien or claim, unless the buyer wasaware at the time of the sale that oth
er persons had a claim to the goods. If the sales contract does not specify a time
ofdelivery, the seller should deliver the goods within a reasonable time after the c
ontract is made. Delivery should occur in oneshipment unless the parties agree o
therwise. If the sales agreement does not indicate where the goods are to be turn
edover, the delivery of the goods should occur at the seller's place of business. T
he tender of the goods should be at areasonable hour of the day, and the buyer s
hould have the ability to take the goods away.
If the goods are in the possession of a third party, or bailee, at the time of t
he sale, the seller must arrange matters with thebailee so that the buyer may tak
e possession. If the goods are to be transported, there are two ways to handle de
livery. Thebuyer and seller may agree to a shipment contract, in which case the s
eller must arrange for the transportation. In ashipment contract, the seller's duties
for delivery are complete as soon as the goods are delivered to the carrier. With
adestination contract, the seller's obligation to deliver does not end until the good
s are delivered to the buyer or at a selectedlocation.
Warranties
In the context of the sale of goods, a Warranty is concerned with identifyin

g the kind and quality of the goods that aretendered by the seller. The two basic t
ypes of warranties are express warranties and implied warranties.
23
An express warranty is any representation or affirmation about the goods

made by the seller's words or conduct. Forexample, the description of the goods i
n the sales contract constitutes an express warranty that the goods will conform t
othe description.
Implied warranties are warranties that are imposed on sellers by law. A wa

rranty of merchantability is implied in every salescontract. This warranty is a pro
mise that the goods pass without objection in the trade, are adequately packaged
, conform toall promises or affirmations of fact on the container, and are fit for the
ordinary purposes for which such goods are used. TheImplied
Warranty of merchantability also includes a promise that multiple goods will be o
f even kind and quality.
Another implied warranty recognized by courts is the warranty of fitness fo

r a particular purpose. This warranty requires thatgoods be fit for an identifiable,
particular purpose. It is effective only if the seller has reason to know of any parti
cularpurpose for which the goods are required and also knows that the buyer is r
elying on the seller's expertise to select suitablegoods.
Some sellers attempt to disavow any responsibility for the quality of their
merchandise. Sellers may not disclaim thewarranty of merchantability unless the
y use the word "merchantability" in the disclaimer, which may be oral or written. If
written, the disclaimer clause or term must be conspicuous. The implied warranty
of fitness for a particular purpose may bedisclaimed in writing, but it cannot be di
sclaimed orally. In some states, statutes or court decisions prohibit the disclaimer
ofwarranties in consumer sales.
If a seller fails to tender goods, the buyer may choose one of three remedi
es. First, the buyer may seek damages from theseller. Damages are the total fina
ncial losses resulting from the failure to tender. Generally, damages for non-
deliveryconsist of the market price of the goods minus the sale price. Market pric
24
e is figured by determining the market price at thetime the buyer learned of the br
each at the place the tender was to have been made.
Second, the buyer may cover or purchase similar goods elsewhere and th
en recover for losses resulting from the purchase.If the purchase price of replace
ment goods is greater than the original sale price, the buyer may recover the diffe
rence fromthe seller. The buyer must cover in Good
Faith, without delay, and on reasonable terms. When a seller is unable to perfor
ma sale as agreed, the buyer should try to minimize his or her damages by cover
ing the loss. If an aggrieved buyer fails tomake reasonable efforts to cover, a cou
rt may reduce any damage award to account for the failure.
Third, a buyer may force the seller to perform by taking the seller to court
and obtaining an order for Specific
Performanceor maintaining an action for Replevin. An action for specific perfor
mance may be ordered if the goods are unique and inother proper circumstances
. Goods may be considered unique if the buyer is unable to find the goods elsew
here. An actionfor replevin is a method of recovering goods that is similar to spec
ific performance. Replevin is allowed where the goods arespecifically identified in
the contract and the buyer is unable to cover the goods after a reasonable effort,
or thecircumstances indicate that the buyer will be unable to cover. If a buyer ha
s paid only part of the sale price and the sellerbecomes financially insolvent withi
n ten days of the first payment and is unable to tender the goods, the buyer may
pay anyremaining balance and sue to obtain the goods. This would give the buye
r the goods and prevent the seller from using thegoods to pay other debts.
If the buyer elects to collect damages after covering or damages for non-
delivery, the buyer may collect additional damagescalled incidental damages and
consequential damages. Incidental damages are those resulting from the seller's
breach.These include expenses incurred in inspection, receipt, transportation, ca
25
re, and custody of goods rightfully rejected; anycommercially reasonable charges

or expenses incurred in covering; and any other reasonable expense incident to
a delay intender of the goods or other breach on the part of the seller. Conseque
ntial damages include any loss that results fromrequirements of which the seller i
s aware at the time of contracting and that could not have been prevented by cov
er or othermethod, and foreseeable and avoidable injuries to persons or property
resulting from a breach of warranty.
If a seller tenders nonconforming goods, or goods that do not meet the sp

ecifications in the sales contract, the tenderconstitutes a breach of the contract. I
n such a situation, the buyer may either accept or reject the goods. Any recovery
bythe buyer will depend on whether the buyer accepts or rejects the goods.
A buyer has the right to inspect goods before accepting them. If the goods
are nonconforming, the buyer may accept thegoods and recover from the seller t
he difference between the value of the goods as warranted and their actual value
with thedefects.
A buyer may elect to reject nonconforming goods. To reject goods, the bu

yer must take some positive action to give theseller notice of the rejection. If the s
eller can cure the problem, the buyer should tell the seller why he is rejecting the
goodsor risk a reduction in damages. In transactions between merchants, a buye
r should specify the problem to the seller if theseller makes a written request for a
full and final written statement of all defects on which the buyer bases the rejecti
on.
A seller has the right to cure nonconforming goods if he gives notice to the
buyer and if conforming goods can be deliveredbefore the last date for delivery u
nder the sales contract. In any case a buyer may agree to extend the time for deli
very ofconforming goods. In some cases a buyer may have no choice. Under sec
tion 2508(2) of the UCC, if a seller sendsnonconforming goods that he reasonabl
26
y believed would be acceptable, the seller has additional time to deliver conformi
nggoods if he gives notice of such intent to the buyer.
If a buyer rejects goods, the buyer may not exercise any ownership over t
he goods. The buyer must hold the goods for areasonable time and permit the se
ller to remove them or await instructions from the seller. If the seller issues instru
ctions tothe buyer, the buyer should follow any reasonable requests. For exampl
e, if the goods are perishable and the seller has nolocal agent, the buyer should
attempt to sell the goods for the account of the seller. The buyer then could recov
er thedifference between the amount that the buyer could have made with the go
ods and the amount that the buyer actuallyreceived.
If the buyer rejects nonconforming, nonperishable goods and the seller has no ag
ent near the buyer, the buyer should followinstructions from the seller. If the selle
r issues no instructions, the buyer may either store the goods for the seller's acco
unt,reship the goods to the seller, or sell the goods for the seller's account. An ag
grieved buyer may then recover any lossesincurred in storing, shipping, or reselli
ng the goods.
If a buyer rejects nonconforming goods and cannot sell them, the buyer may hold
the goods for the seller and recover thedifference between the market price of th
e goods as warranted and the value of the goods as delivered. A buyer also may
ask for specific performance. If the seller is unable to provide the goods as reque
sted, the buyer may recover any moneyalready paid toward the sale plus any con
sequential or incidental damages resulting from the breach.
Buyer's Obligations
A buyer's basic obligations are to accept the goods and pay the sale price.
If the goods are nonconforming, the buyer mayreject the goods. If the goods con
27
form to the specifications of the sales contract and the buyer wrongfully rejects th
em, theseller may choose one of four options, or a blend of two or more options.
First, the seller may sue for damages. The amount of damages for a wron
gful rejection would be the sale price minus themarket price of the goods, measur
ed at the time and place of the tender. Second, the seller may sue for the price of
thegoods, but only if the goods cannot be resold in the seller's ordinary course of
business or if circumstances indicate thatresale efforts will be fruitless. Third, the
seller could cancel the contract, putting an end to shipments and reserving the ri
ghtto sue for damages or collect unpaid balances. Fourth, the seller could resell t
he goods to a third party and recover thedifference between the sale price and th
e resale price plus any incidental damages.
The resale of wrongfully rejected goods presents a few special problems.

Under section 2–
706 of the UCC, the sale may beeither public or private. A private sale is made p
ersonally by the seller, whereas a public sale is made with public notice andcarrie
d out by a sheriff or at a publicly held auction. In either case the sale must be co
mmercially reasonable in method,manner, time, place, and terms. Furthermore, t
he seller must notify new buyers that the goods are being resold under abreache
d contract to disclose the potential for legal conflict.
A seller who resells wrongfully rejected goods must inform the original buy
er of the resale. If wrongfully rejected goods areperishable, the seller need not gi
ve notice to the buyer of the time and place of the resale. If the resale of wrongful
ly rejectedgoods is at a public sale, only goods identified in the contract may be s
old, and the sale must be made at a usual place forpublic sale, provided that suc
h a site is reasonably available. If the goods are not in view of bidders at a public
sale, thepublic notice of the sale must state the place where the goods are locate
d, and the seller must give bidders an opportunityto inspect the goods. If the selle
28
r resells the goods for a price higher than the price in the original sales contract a
nd theextra profit covers costs incident to the resale, the seller has no damages,
and the original buyer is not liable to the seller forthe wrongful rejection.
In sales where the buyer pays a deposit and then wrongfully rejects the go
ods, the seller may keep the goods and thedeposit. However, a seller is not entitl
ed to a deposit that far exceeds his or her actual or expected damages. Under se
ction2–
718 of the UCC, a buyer is entitled to restitution of any amount by which the sum
of the payments already made exceedseither (1) the amount of any reasonable li
quidated damages clause, or (2) 20 percent of the value of the total performancef
or which the buyer is obligated under the contract, or $500, whichever amount is
smaller.
When a buyer accepts a seller's tender of conforming goods, the buyer is obligat
ed to pay the sale price contained in thecontract for sale. In some cases the parti
es may fail to agree to a price or choose to leave the price terms open. Undersec
tion 2–
305 of the UCC, if a price term is left open, the price should be set in good faith a
t a reasonable market price atthe time of delivery. If the parties intend that there i
s to be no contract unless a price is agreed to or fixed by a particularmarket indic
ator and the parties ultimately are unable to agree to a price term, there is no con
tract. In such a case the buyermust return any goods received, and the seller mu
st return any money paid by the buyer.
Generally, a buyer has the right to pay in any manner observed in the business u
nless the seller demands a particular formof payment. Unless the parties agree o
therwise, payment should be made when the goods are delivered to the buyer. A
buyer does not have the right to inspect the goods if they are delivered cash on d
29
elivery or on similar terms, or if thecontract provides for payment before inspectio

n.
Installment Contracts
Installment contracts have a few of their own special rules. An installment

contract calls for periodic performances over alength of time. The parties may agr
ee to make payments in any way, but if the sale price can be divided, the buyer u
suallymakes payments on installment contracts upon each delivery of goods.
Buyers in installment sales do not have the same full rights of rejection as
buyers in other sales. If a seller tenders aninstallment of nonconforming goods, t
he buyer may reject the installment only if it substantially impairs the value of that
installment and cannot be cured. Under section 2–
612 of the UCC, if the nonconformity is not substantial and can be curedby the se
ller, the buyer must accept a nonconforming installment and sue for damages.
The tender of one nonconforming installment in an installment contract for

sale does not always constitute a total breach ofthe entire installment contract. G
enerally, a non-
breaching party to an installment contract may cancel the contract onlywhen a br
each or cumulative breaches substantially impair the value of the entire contract.
The NCCUSL and the ALI began work in the late 1980s on a revision to Ar
ticle 2 of the UCC. Work on the project seemed tobe finished in 1999, when the A
LI approved what it thought was the final draft of the revision. However, oppositio
n fromcertain important industries, including software manufacturers, led to the wi
thdrawal of the revision. It was feared that manystates would refuse to adopt the
changes because of this opposition.
The controversy surrounding the revision has centered on software, downloadabl

e information and "smart goods." Thesetypes of goods, which include cars, refrig
30
erators, and other appliances, use computer programs to enhance theirperforma

nce. By 2002 the drafters' latest revision excluded "information" from the definitio
n of goods, thus removing thedownloading of electronic information from the reac
h of the Article. However, the comment section to the draft noted thatArticle 2 wo
uld cover the sale of smart goods, even though these goods include computer pr
ograms.
After years of work, the NCCUSL and ALI in May of 2003 adopted the revised ver
sion of Article 2. After its final review,which was being completed in 2003, the revi
sed Article 2 will be sent to the states for their considerations in adopting therevis
ed version. The process of state adoption will likely take a number of years.
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"The phrase 'in the course of trade or business' means the regular conduct
or pursuit of a commercial or an economic activity, including transactions
incident thereto, by any person regardless of whether or not the person
engaged therein is a non-stock, non-profit private organization (irrespective
of the disposition of its net income and whether or not it sells exclusively to
members or their guests), or government entity. "The rules of regularity, to
the contrary, notwithstanding, services as defined in this Code rendered in
the Philippines by nonresident foreign persons shall be considered as being
rendered in the course of trade or business."
"(1) The term 'goods or properties' shall mean all tangible and intangible
objects which are capable of pecuniary estimation and shall include:
"(A) Real properties held primarily for sale to customers or held for lease in
the ordinary course of trade or business;
31
"(B) The right or privilege to use patent, copyright, design or model, plan,
secret formula or process, goodwill, trademark, trade brand or other like
property or right;
"(C) The right or the privilege to use in the Philippines of any industrial,
commercial or scientific equipment;
"(D) The right or the privilege to use motion picture films, films, tapes and
discs; and
"(E) Radio, television, satellite transmission and cable television time.
"The term 'gross selling price' means the total amount of money or its
equivalent which the purchaser pays or is obligated to pay to the seller in
consideration of the sale, barter or exchange of the goods or properties,
excluding the value-added tax. The excise tax, if any, one such goods or
properties shall form part of the gross selling price.
"(b) Transactions deemed sale. — The following transactions shall be

deemed sale:
"(l) Transfer, use, or consumption not in the course of business of goods or

properties originally intended for sale or for use in the course of business.
"(2) Distribution or transfer to:
"(A) Shareholders or investors as share in the profits of the VAT-registered

persons; or
"(B) Creditors in payment of debt
"(3) Consignment of goods if actual sale is not made within 60 days following
the date such goods were consigned.
32
"(4) Retirement from or cessation of business, with respect to investment of

taxable goods existing as of such retirement or cessation.
(c) Changes in cessation of status of a VAT-registered person. — The tax

imposed in paragraph (a) of this section shall also apply to goods disposed
of or existing as of a certain date if under circumstances to be prescribed in
regulations to be promulgated by the Secretary of Finance, the status of a
person as a VAT-registered person changes or is terminated.
"(2) Sales returns, allowances and sales discounts. — The value of goods or
properties sold and subsequently returned or for which allowances were
granted by a VAT-registered person may be deducted from the gross sales
or receipts for the quarter in which a refund is made or a credit memorandum
or refund is issued. Sales discount granted and indicated in the invoice at the
time of sale and the grant of which does not depend upon the happening of
a future event may be excluded from the gross sales within the same quarter
it was given.
"The phrase 'sale or exchange of services' means the performance of

all kinds of services in the Philippines for others for a fee, remuneration or
consideration, including those performed or rendered by construction and
service contractors; stock, real estate, commercial, customs and immigration
brokers; lessors of property, whether personal or real; warehousing services;
lessors or distributors of cinematographic films; persons engaged in milling,
processing, manufacturing or repacking goods for others; proprietors,
operators or keepers of hotels, models, rest houses, pension houses, inns,
resorts; proprietors or operators of restaurants, refreshment parlors, cafes
and other eating places, including clubs and caterers; dealers in securities;
landing investors; operators of taxicabs; utility cars for rent or hire driven by
the lessees (rent-a-car companies), tourist buses; and other common carriers
33
by land, air, and sea relative to their transport of goods or cargoes; services
of franchise grantees of telephone and telegraph, radio and television
broadcasting and all other franchise grantees except those under Section
117 of this Code; services of banks, non-bank financial intermediaries and
finance companies; and non-life insurance companies (except their crop
insurances) including surety, fidelity and indemnity and bonding companies;
and similar services regardless of whether or not the performance thereof
calls for the exercise or use of the physical or mental faculties. The phrase
`sale or exchange of services' shall likewise include:
"(1) The lease or the use of or the right privilege to use any copyright, patent,
design or model, plan, secret formula or process, goodwill, trademark, trade
brand or other like property or right;
"(2) The lease or the use of, or the right to use of any industrial, commercial
or scientific equipment;
"(3) The supply of scientific, technical, industrial or commercial knowledge or

information;
"(4) The supply of any assistance that is ancillary and subsidiary to and is
furnished as a means of enabling the application or enjoyment of any such
property, or right as is mentioned in subparagraph (2) or any such knowledge
or information as is mentioned in subparagraph (3); or
"(5) The supply of services by a nonresident person or his employee in

connection with the use of property or rights belonging to, or the installation
or operation of any brand, machinery, or other apparatus purchased from
such nonresident person;
34
"(6) The supply of technical advice, assistance or services rendered in

connection with technical management or administration of any scientific,
industrial or commercial undertaking, venture, project or scheme;
"(7) The lease of motion picture films, films, tapes and discs; and
"(8) The lease or the use of or the right to use radio, television, satellite
transmission and cable television time.
THE CHAN ROBLES VIRTUAL LAW LIBRARY - QUICK GLANCE

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Legislation affecting the sale of goods

When you sell a product to a customer, you are entering an agreement
or contract with them. A customer has legal rights if the goods they purchased
from you do not 'conform to contract' - ie if they are faulty.Under the
Consumer Rights Act, in order to ensure your products conform to contract,
they should:
Match their description - by law, everything that is said about the

product must not be misleading, including whether it is said by a sales
assistant, or written on the packaging, on advertising materials, in-store or in
a catalogue.
Be of satisfactory quality - including being of an acceptable appearance,

free from minor defects (eg marks or holes), safe to use, durable and in good
working order.
Be 'fit for purpose' - ie if a customer states (or when it should be

obvious) that an item is wanted for a particular purpose, even if it is a purpose
35
the item is not usually supplied for, and you agree the item is suitable, or do
not say it is not fit for that purpose, then it must be reasonably fit.See
supplying satisfactory and safe goods and services and Consumer Rights
Act.
What customers can do if you break the contract;
If your goods don't match the specifications you gave before the sale,
then under the Consumer Rights Act, you have effectively broken the contract
with the customer. For more information, see customers' key rights when
buying or hiring goods and customers' key rights when buying services.
Customers have the right to reject unsatisfactory goods and claim

refunds. See customers' rights to reject goods and claim refunds.
In some circumstances, customers can't legitimately complain about

unsatisfactory goods - eg if they bought the goods more than six years ago
(five in Scotland), or if you pointed out the defect before the sale. See what
customers can't complain about.
Role of Sales Operations

Selling has often been considered more art than science. These days,
however, the best sales forces are empowered by technology solutions and data.
Consider, for example, the relatively recent rise and growth of cloud-based
applications, mobile technologies, social networks, big data, and sophisticated
analytics. These trends and tools have been a gateway for many organizations to
create greater sales force effectiveness and thus achieve organic, profitable
growth.
36
In part, the march toward science is why sales operations continues to be

increasingly vital to sales success. Why? According to Dharmendra Sahay and
Scott Shimamoto, Principals at ZS Associates, sales operations is uniquely
positioned to leverage data and technology to support the sales organization,
diagnose issues, and design solutions. In fact, they define sales operations by six
categorical functions, all of which have deep roots in science and technology:
1) Data management. Sales operations managers help sales leaders pick and
choose which data to examine. They also make sure data is clean, accurate, and
complete (not to mention organized and rolled up into reports, ideally via a
centralized and automated database).
2) Platforms and systems. A sales organizations CRM and other platforms or

applications must be integrated, robust, and cost effective. The goal is for these
assets to deliver value to the sales team in a scalable, flexible fashion.
3) Reporting and administration. Sales leaders and the sales force dont have
much use for data thats raw, inaccurate, or untimely. Efficient processes and
accurate reports and dashboards enable sales leaders to respond to market
challenges and drive revenue growth.
4) Pricing and contracting support. Given the pace of business, its imperative
that sales operations enable the sales team with high-quality proposals that can
be turned around quickly and efficiently. Contracts must be positioned
competitively; however, they must also fulfill company and customer objectives
and establish mutual value.
5) Analytics and business insight. Intelligent analysis of raw data can be

invaluable for sales leaders: Which customers are most receptive to certain
products? What are the best practices of top-selling reps in the organization?
37
Analytics from sales operations can provide answers to these kinds of questions
and help sales leaders base decisions on facts, not intuition.
6) Lead generation and management. Many sales teams complain that leads
from marketing are often useless. Meanwhile, marketers insist theyve fulfilled their
lead-generation objectives. The truth lies somewhere in the middle. The sales
operations function can make generating, capturing, and following up on leads a
seamless, cost-effective, and collaborative process.
Although the basic mission of a sales operations team is to organize data and
generate deep customer insight in order to enhance sales force productivity and
effectiveness, the practical role of sales operations varies widely from one
company to the next. Essentially, sales operations teams can choose to offer
varying levels of service depending on a sales organizations sophistication.
The primary level of service is support. That includes anything from

generating sales performance reports, managing administrative programs (for
example, an incentives plan), and keeping CRM relevant. The next level of service
is delivering information and insight to the right people at the right time, including
highlights of emerging problems, misalignments, and other challenges. The third
level includes developing potential solutions to sales force effectiveness
challenges across a range of critical areas, such as customer segmentation, sales
resource optimization, sales process, talent development, and motivation.
Finally, sales operations teams that deliver the highest level of impact
distinguish themselves as strategic partners. They detect emerging customer or
market trends and help determine how the business can meet those opportunities
and challenges to drive greater sales success.
38
“The best sales ops teams have a clearly articulated mission statement,”
Shimamoto says. “They build a framework to support that mission and deliver
value and impact.”
The art of selling will continue to play a factor in sales success, and the
influence of science and technology will likewise continue to grow. Organizations
that nurture excellent sales operations teams will find it easier to maintain a
competitive edge, enhance sales force effectiveness, and achieve consistent,
sustainable sales success.
Legal requirements
You must consider your legal requirements when starting your business. If you do
not follow legislative requirements and regulations, your business can face serious
penalties. A range of legal requirements may affect your business.
Business structure
 You must keep all registrations for your business structure up to date. For
example, your business name must be renewed when due and you must
lodge annual returns if you operate a company.
 The Corporations Act 2001 (Cwlth) details requirements relating to

companies and financial products and services.
 Taxation requirements of businesses include GST and PAYG.
 If you go into a partnership, your solicitor should draw up a written contract

before you begin trading or make any financial commitments.
39
Leasing premises
 Retail shop leases must comply with the Retail Shop Leases Act 1994.
 Your solicitor should read any lease before you sign to ensure the terms
and conditions are appropriate and you understand your obligations
before you sign.
 If you operate a home business, your local council may limit the number of
people who can work there. You can use the local government directory to
find contact details for your local council.
Intellectual property
 Protecting your intellectual property (IP) gives you the legal entitlement to
that IP. You can protect your IP using trademarks, patents and designs.
 You will need to review and, if appropriate, renew IP protection regularly

(e.g. trademarks must be renewed every 10 years).
 IP issues are complex and you should seek specialist advice.
Employment
 Legally, when you employ staff you must meet certain employer
obligations.
 You must select the right person for your business in line with the job
description and selection criteria you have specified. Read how to recruit
and interview staff.
 You should make offers of employment in writing, including conditions of

awards, agreements and the employment contract.
40
 All employees should attend induction training to become familiar with the
workplace and any work health and safety issues. A carefully developed
induction training process can protect your business from risks including
health, safety and environmental (HSE) issues, discrimination and unfair
dismissal claims. Read about keeping your workplace safe and your legal
obligations when training staff.
 Before dismissing a staff member you must ensure you've followed due
process and are not breaching the Anti-Discrimination Act 1991.
Supplier agreements
 Getting your agreements with suppliers in writing will minimise

misunderstandings and disagreements. Agreements may include creditor
terms, supply conditions and any marketing and promotion support.
Risk management
 Manage risks by avoiding them, minimising their negative effects,

transferring them to another party, or deciding to accept some of the
possible consequences should they arise.
 Several forms of insurance can help with risk management. Read more
about risk management.
 Learn more about managing risk when starting up.
Privacy and information
 Safeguard your customers privacy by complying with state and national

privacy laws. Read more about privacy and information management.
41
Contracts
 Contract law is complex. Your solicitor can develop standard agreements

for your business to reduce confusion and costs.
 All parties must have the legal capacity to enter into a contract.
 A contract of sale involves an exchange of goods, services, or property

from the seller to the buyer for an agreed amount. It refers to a specific
type of legal contract.
Health, safety and the environment (HSE)
 Your business must have a responsible attitude to HSE issues.
 You have a duty of care to the health and safety of your staff, customers
and the general public as per the Work Health and Safety Act 2011.
 You also have a responsibility to address environmental issues. Learn

more about the environment and your business.
 Health, safety and environment issues include workers'

compensation, food handling and safety, safety related to construction
sites, ergonomic requirements and security issues.
 Learn more about keeping your workplace safe.
Legal requirements checklist
 Before you start your business, seek legal advice from your solicitor and
other specialist advisers.
 Review your legal requirements on a regular basis. Your business may

change over the years, and so may legislation.
42
Also consider...
 Free legal advice for small businesses and people thinking about starting
a business is available through Bond University's Bond Law Clinic.
 Read more about paying transfer (stamp) duty when acquiring a business.
 Find out about business requirements under trade measurement laws.
 Read more about industrial relations, including minimum wages, awards

and agreements.
Reference :
https://legal-dictionary.thefreedictionary.com/Sales+Law
American Law Institute. Available online at <www.ali.org> (accessed August 10,

2003).
National Conference of Commissioners on Uniform State Laws. Available online

at <www.nccusl.org> (accessed August10, 2003).
"Sales." 1994. SMH Bar Review.
Cross-references
Carriers; Consumer Protection; Model Acts; Product Liability; Shipping Law.
https://www.business.qld.gov.au/starting-business/licensing-
obligations/legal-obligations/meeting-obligations/requirements
https://www.sellingpower.com/2013/10/31/10232/understanding-the-role-of-
sales-operations
43
AGENCY
Generally speaking, a relationship known as agency arises whenever a

person called "the agent" has express or implied authority to act on behalf of
another called "the principal" and consents so to act. The primary sense in which
the word agency is used is when a person is appointed to create a binding
contractual relationship between the principal and a third party. If in the exercise
of his express or implied power given by the principal, an agent enters into a
contract with a third party and expressly states that he is acting for and on behalf
of a principal, the agent will then create a binding contract between the principal
and that third party. The word agency may also be used to describe the situation
where a person is appointed by another to do acts on his behalf. In Hong Kong,
estate agents are rarely authorised to enter into contracts on behalf of their clients.
An agency is created by express appointment when the principal appoints

the agent by express agreement with the agent. This express agreement may be
an oral or written agreement between the principal and the agent.
Contract law principles apply to an agency agreement. An agent may agree

to act in consideration for a reward. On the other hand, an agency is gratuitous if
the agent agrees to act for no consideration.
The general rule is that agency may be created orally and there is no
formality for the creation of agency by express agreement, except for one
situation which is discussed below. This general rule applies even to cases of
appointing agents for the signing of agreements for sale and purchase of
immovable property, whether on behalf of the vendor or the purchaser.
44
The one exception is where an agent is appointed to execute a deed on

behalf of the principal. In this case, the agent will have to be appointed by deed,
which is called a power of attorney
Operating & Managing A Business in the Philippines (AGENCY)
A Private Recruitment and Placement Agency (PRPA) aims to govern and regulate
the activities of all individuals and entities engaged in the recruitment and
placement of persons for local employment. The Department of Labor and
Employment is authorized to issue a certificate to an individual, partnership,
corporation, or entity to operate a private recruitment and placement agency.
To apply or renew a license to operate a private recruitment and placement
agency in the country, an applicant must be a Filipino citizen, if single
proprietorship. In case of partnership or a corporation, at least seventy-five percent
(75%) of the authorized capital stock must be owned and controlled by Filipino
citizens. A single proprietorship requires a minimum net worth of P200,000.00 and
partnership or a minimum paid-up capital of P500,000.00 in the case of a
corporation. The owner, partners or the officers of the corporation must be of good
moral character and not otherwise disqualified by law. An office space with a
minimum floor area of fifty (50) square meters must be fulfilled.
Application for license shall be filed with the Regional Office having jurisdiction
over the place where the applicant wishes to establish its main office. The applicant
45
for a license shall submit a duly accomplished application form. To support the
application, the following requirements are needed; a filing fee of One Thousand,
certified copy of the Certificate of Registration of firm or business name from the
Department of Trade and Industry (DTI), in the case of single proprietorship; or a
certified copy of the Articles of Partnership or Incorporation duly registered with the
Securities and Exchange Commission (SEC), in the case of a partnership or a
corporation. The applicant also need to satisfy a sworn statement of assets and
liabilities and/or a duly audited financial statement, as the case may be, owner’s
certificate/title of office location or contract of lease of office space for at least two
(2) years; NBI clearance of the applicant, or the partners in the case of a
partnership or all the officers and members of the Board of Directors, in the case
of a corporation, income tax returns for the last two (2) years; g. A verified
undertaking that the applicant shall not engage in the recruitment of children below
15 years of age or place children below 18 years old in hazardous occupation in
accordance with Republic Act No. 7610 as amended by Republic Act No. 7658
and other related laws; and assume full responsibility for all claims and liabilities
which may arise in connection with the use of the license must also be submitted.
Furthermore the applicant must present an organizational structure and list of all
officers and personnel with their respective bio-data, two (2) passport-size ID
pictures and a detailed description of their duties and responsibilities. A specific
address and location map of the Office/proposed office, list of all authorized
46
representatives, if any, who must be at least high school graduate, with their
corresponding bio-data, two (2) passport-size ID pictures, high school diploma or
other proof of educational attainment duly authenticated, NBI clearance and
Special Power of Attorney (SPA).
In this case no application shall be accepted, unless all the requirements have
been complied with. Upon receipt of the application, the Regional Director or his
duly authorized representative shall evaluate the documents submitted and
conduct an ocular inspection of the applicant’s office within fifteen (15) working
days after the ocular inspection, the
Regional Director shall act on the application, and immediately notify the applicant
of the action taken. Application which do not meet the requirements shall be
denied. Posting of cash and surety bonds and payment of license fee prior to the
approval of the license, the applicant shall post cash and surety bonds of Twenty-
Five Thousand Pesos (P25,000.00) and One Hundred Thousand Pesos
(P100,000.00) respectively, valid for two (2) years and then pay a license of Six
Thousand Pesos (P6,000.00). The bonds shall answer for all valid and legal claims
arising from the illegal use of the license and shall likewise guarantee compliance
with the provisions of the Labor Code and its implementing Rules. In case of loss
of license, the licensee shall pay Six Hundred Pesos (P600.00) as payment for the
issuance of a certified copy of the license upon presentation of proof of loss.
47
Publication. The Agency shall publish once in a newspaper of general circulation
the license number of the agency, names and pictures of authorized
representatives within fifteen (15) days from the issuance of the license and shall
submit a copy of said
publication to the Department.
Validity of the License. The license shall be valid all over the Philippines for two (2)
years from the date of issuance, upon submission of proof of publication unless
sooner suspended, cancelled or revoked by the Regional Director.
Non-transferability. No license shall be tr.ansferred, conveyed or assigned to any
other person or entity.
Display of License. The original license or a copy shall be displayed conspicuously
at all times in the office premises of the PRPA.
Renewal of License. An application for renewal of license shall be filed not later
than thirty (30) days before expiration of the same. No agency shall be allowed to
renew its license if it has been convicted by the regular courts for violation of the
Labor Code, as amended, and its implementing Rules, or if its license has been
previously revoked.
48
Requirements for Renewal. The Agency shall submit its existing license together
with the requirement specified.
Change of Ownership. Any Agency which desires to transfer ownership shall
surrender its license to the issuing Regional Office.
Changes of Business Address. An Agency which desires to transfer to a new
business address shall notify the Regional Office which issued the license at least
thirty (30) working days prior to the intended date of transfer. It shall likewise notify
the Regional Office which has jurisdiction over the new business address and
submit a sketch of the new office and a copy of the contract of lease, if any.
Granting / Renewal of Authority To Recruit and Procedures
A licensed Agency or its authorized representative needs to secure an authority to
recruit from the Regional Office having jurisdiction over the place where
recruitment activities will be undertaken. This authority is coterminus with the
license unless sooner revoked/cancelled by the issuing Regional Office or
terminated by the Agency.
The following documents shall be submitted by the applicant/agency for the
issuance/renewal of an Authority to Recruit: Letter request by the agency, copy of
current license, certification under oath of licensee of the proposed recruitment
activities of the representative, NBI clearance and bio-data of the representative

49
with two (2) ID pictures, clearance from previous agency, if applicable. No
application shall be accepted unless all the requirements have been complied with.
Within ten (10) working days from receipt of complete documents, the application
is expected to be approved or revoked with reasons,
Steps to be followed in the Recruitment of Persons
The Agency or its duly authorized representative will present to the PESO,
Provincial and District Office where the recruitment activity is to be undertaken,
copy of existing license, and original copy of authority to recruit issued by the
Regional Office concerned. The Agency or its authorized representative and the
recruit will have a recruitment contract, duly notarized a copy of which shall be
submitted to the Regional Office where recruitment activity was undertaken. A list
of the names and addresses of its recruits, together with copy of documents must
be submitted to the Regional Office or the appropriate Provincial/District Office
where recruitment was undertaken for appropriate authentication and validation.
After the recruitment activity, a certification will be issued by the Regional Office
to the Agency or its duly authorized representative that the recruitment activity has
been in accordance with this rule.
In case of replacement of worker, an employer shall be entitled to replace a worker
without additional cost only once, within one (1) month from the first day the worker
50
reported for work, on any of the following grounds: a. The worker is found to be
suffering from an incurable or contagious disease as certified by a competent
physician; b. The worker is physically or mentally incapable of discharging the
minimum normal requirements of the job, as specified in the employment contract;
or c. The worker abandons the job, voluntarily resigns, commits theft or any other
prejudicial to the employer.
The employer is entitled to a refund of seventy five (75%) percent of the service
fee if the Agency failed to provide a replacement after a lapse of one (1) month
from receipt of the request for the replacement based on any of the grounds
enumerated above. The employer is deemed to have forfeited his right for a
replacement without cost or refund of the service fee, if he failed to avail of the
same within one (1) month from the date of engagement of the worker.
Hearing and Disposition of Recruitment Violation and Related Cases
Complaints based on any of the grounds against a licensee/and or the authorized
representative/s shall be filed in writing and under oath with the
Regional/District/Provincial Office having jurisdiction over the place where the
PRPA/Branch Office is located, or where the prohibited act was committed, or at
51
complainant’s place of residence, at the option of the complainant; provided, that
the Regional Office which first acquires jurisdiction over the case will do so to the
exclusion of the others. All complaints needs to be under oath to be administered
by any officer authorized by law and must contain, among others the following: a.
The name/s and address/es of the complainant/s; b. The name/s and address/es
of the respondent/s;
c. The nature of the complaint;
d. The substance, cause/grounds of the complaint;
e. When and where the action complained of happened;
f. The amount of claim, if any; and
g. The relief/s sought. All pertinent papers or documents in support of the complaint
must be attached whenever possible. Complaints duly received shall be docketed
and numbered and shall be scheduled for hearing within ten (10) working days.
Upon receipt of the complaint, the Regional Director issues show cause order
directing the respondent/s to file a verified Answer/Counter-Affidavit within ten (10)
working days and copy furnished the complaint/s and not a Motion to Dismiss,
incorporating all pertinent documents in support of its defense, and attaching proof
of service of a copy upon the complaint/s. The answer shall be deemed filed on
52
the date of receipt stamped, if filed personally, or on the date indicated in the
registry receipt, if filed by registered mail. Only one motion for extension of time to
file answer shall be allowed. The Regional Director, upon receipt of such motion
may grant a non-extendible period not exceeding ten (10) working days. Rulings
of the Regional Director on motions for extension will be sent by personal service
or by registered mail.
Failure to file an answer/counter affidavit will constitute a waiver on the part of the
respondent. The Regional Director and the process server who personally served
the subpoena, notice, order, resolution or decision submits his return within five (5)
working days from the date of his service, stating legibly in his return his name,
the mode/s of service, the name/s of the other person/s served and the date/s of
receipt. If no service was effected, the serving officer states the reason. The return
shall form part of the records of the case.
If the Regional Director find upon consideration of the answers, counter-affidavits
and evidence submitted, that resolution/decision may be rendered, the case will
then be submitted for decision. The proceedings before the Regional Office are
non-litigious in nature. Subject to the requirements of due process, the
technicalities and procedures obtaining in the courts of law shall not strictly apply.
The Regional Director may avail himself of all reasonable means to ascertain the
facts of the case, including ocular inspection, where appropriate, and examination
53
of informed persons The withdrawal/desistance of the complaining witness shall
not bar the Regional Office from proceeding with the investigation on recruitment
violation/s. The Regional Office shall act on the case as may be merited by the
results of the investigation and impose such penalties on the erring Agency as may
be deemed appropriate.
At any stage of the proceedings, the parties may submit a Compromise Agreement
subject to the approval of the Regional Office. The conduct of hearings shall be
terminated within fifteen (15) working days from the first scheduled hearing. The
Regional Director shall resolve the case within ten (10) working days from the time
the case is deemed submitted for decision.
Pending investigation of a complaint leading to the cancellation/revocation of
license, the Regional Director, who is hearing the case, may suspend the license
of the PRPA concerned on any of the following grounds: a. There exist reasonable
grounds to believe that the continued operation of the Agency will lead to further
violation or exploitation of the workers being recruited; b. Failure of the licensed
PRPA to submit its Position Paper/Answer on the complaint within the prescribed
period; c. Failure to attend the hearing despite due notice called by the Regional
Office; d. Failure or refusal to obey subpoena duces tecum and subpoena ad
testificandum issued by the Regional Director; and e. Prima facie evidence shows
that the Agency has violated and continues to violate any of the provisions of the
54
Labor Code, as amended, its Implementing Rules and Regulations on the
recruitment and placement of workers.
The Regional Director who issued the license shall have the power to suspend/
cancel the license of the Agency. An order of suspension/cancellation or
revocation shall have the effect of suspending or terminating all activities of the
Agency which fall under the definition of recruitment and placement. The Regional
Office may seek the assistance of other government institutions, agencies or
offices to ensure that suspension or cancellation orders are implemented. In the
absence of any applicable provisions of these Rules, the pertinent provisions of
the Rules of Court may be applied in a suppletory character. Decision of the
Regional Director is appealable to the Secretary within ten (10) working days from
receipt of a copy of the order, on any of the following grounds: a. If there is prima
facie evidence of abuse of discretion on the part of the Regional Director; b. If the
decision and/or award was secured through fraud or coercion; c. If made purely on
questions of law; and/or d. If serious errors in the findings of facts are raised which,
if not corrected, would cause grave or irreparable damage or injury to the
appellant.The appeal shall be filed with the Office of the Secretary, copy furnished
the Regional Office, issuing the Order of suspension or cancellation/revocation.
The Secretary shall have thirty (30) working days from receipt of the records to
resolve the appeal. The decision of the Secretary shall be final and inappealable.
55
Cessation of Operation of the Notice of Closure of the Agency or its Branch
The Regional Office concerned must be notified by the Agency or its branch office
which ceases to operate prior to the expiration of its license or its authority to
operate. Justification for such closure must be stated, accompanied by the original
receipt of cash bond and the license, or the authority to operate, as the case may
be.
An Agency which voluntarily surrender its license shall be entitled to the refund of
its deposited cash bond only after posting a surety bond of similar amount from a
bonding company accredited by the Insurance Commission. The surety bond is
valid for three (3) years from expiration of the license.. To ensure the effective
supervision and regulation of the activities of all licensees, the Regional Director
or his duly authorized representative shall have access to the licensee’s records
and premises at any time of the day or night whenever work is being undertaken
to determine violation or may aid in the enforcement of these Rules. The Regional
Director shall issue writs of execution to the appropriate authority for the
enforcement of his/her Orders. All Agencies shall submit to the Regional Office,
copy furnished the Bureau, not later than the 5th working day of every month
reports verified and confirmed by the Regional Director or his duly authorized
representative of their recruitment and placement activities during the preceding
month.
56
Agents play a vital role
The Use Of Agents Is Probably Indispensable To Commercial Transactions,

But The Established Principles Of Agency Are Littered With Pitfalls For The
Unwary Principal. Critically Evaluate This Assertion.
Agents play a vital role in commercial activity. Many commercial transactions in
the field of commerce are conducted through agents who act as intermediaries
and represent the interests of their principals in the conduct of the principals
business. Auctioneers, estate agents, commercial agents,commission agents,
mercantile agents, brokers, factors, solicitors and barristers are just a few of the
many people described as agents who may act on people behalf in the ordinary
course of life. The essential point to be borne in mind is that the relationship
between agent and principal is essentially a binding contractual one which imposes
upon both parties' rights, duties and obligations. Agents “are to be found in all
advanced societies and… [Their] activities are an inevitable feature of a developed
economy”.
In addition, it may be useful at the beginning of any discussion of agency to

attempt a definition of the common factor which brings them all into the category
“agent” or, indeed, it may be useful to ask whether they all properly called agents.
The courts have only very rarely attempted to define the agency relationship
though they have an occasion pronounced on what agency was not. In the recent
case of Comet Group plc v British Sky Broadcasting the court held that promotional
contracts to be quite distinct from agency. Fridman (1996) stresses that the effect
of someone being an agent is that he affects the legal rights of his principal, and
he works backwards from his conclusion to suggest the following definition “
Agency is the relationship that exists between two persons when one, called the
57
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”. However,
in common law principle in operation is usually represented in the Latin phrase,
qui facit per alium, facit per se which means the one who acts through another,
acts in his/her own interests and it is a parallel concept to vicarious liability and
strict liability in which one person is held liable in Criminal law or Tort for the acts
or omissions of another.
Fridman's definition of agency is based on a power-liability analysis of the

relationship between the principal and agent. The power-liability analysis focuses
on the agent's power to alter the principal's legal relations with third parties and the
principal's consequent liability to have his relations so altered. It is clear, therefore
that the principal cannot actually confer power on his agent. As Professor Montrose
(1938) has explained “the term power...is a legal relation, one which exists by
virtue of a legal rule. The power of agent is not strictly conferred by the principal
but by the law: the principal and agent do the acts which bring the rule into
operation, as a result of which the agent acquires a power”.
Explaining agency in terms of a power-liability relationship appears to avoid

the critics based on the consent of the parties. However, the danger with an
explanation which focuses on the agent's power to affect the principal's relations
with third parties is that is shifts attention away from the internal relationship
between the principal and agent to the external relationship between the principal
and third party. It must always be remembered that agency is a triangular
relationship between principal, agent, and third party. The law of agency is as
much concerned with the relationship between the principal and agent as it is
concerned with the relationship between the principal and third party. The
reformulated power-liability analysis is seen has having several strengths. It is
58
emphasizes that the recognition of the relationship of agency is a matter of law,

and not simply a determination of the facts. The answer to the legal question posed
depends upon considerations of public policy generally, and is not simply focused
upon consent. In contradistinction to the consensual model which concentrates
upon the linear relationship between the principal and agent, the power liability
model focuses upon the triangular configuration which is a hallmark of true agency.
The strengths of the ‘power-liability' analysis are clear, but weaknesses soon being
to surface. A favourite case with power-liability theorists, Boardman v Phipps,
where there was no consent to the actions of the ‘self-appointed' agents, was
concerned not with the liability of the principal, but the liability of the agent for
breach of fiduciary duty. This was inevitable when the aim of ‘power-liability'
theorists was to reduce agency relationship to the lowest common denominator.
Most developed legal systems recognize the concept of agency and in most
areas, there is a marked similarity between the rules of different legal systems. In
recent years there have been attempts to harmonize national laws on agency as
part of the general trend towards harmonization of laws applying to international
commercial activity. A Convention Agency in the International Sale of Goods,
drafted under the auspices of UNIDROIT, was adopted at Geneva in 1983. The
Convention applies where the agent has his place of business in a contracting
state, or where the rules of private international law lead to the application of the
law of a member state.Moreover, the Convention is concerned only with the
external aspects of agency, that is with the relations of principal and agent with
third parties with whom the agent deals; it does not regulate the relationship
between principal and agent.
The relationship of principal and agent may be created in any one of the following
ways:
59
 By express or implied agreement between the principal and agent;

 Under the doctrine of apparent authority ;
 By operation of law; and
 By ratification of the agent's acts by the principal;
Used consensual but it need not be contractual. An agency may be gratuitous.

Even in the commercial context the agency may not be contractual. According to
Coleman J in Yasuda Fire & Marine Insurance Co of Europe Ltd v Orion Marine
Insurance Underwriting Agency Ltd “although in modern commercial transaction
agencies are almost invariably founded upon a contract between the principal and
agent, there is no necessary for such a contract to exist. It is sufficient if there is
consent by the principal to the exercise by the agent of authority and consent by
the agent to his exercising such authority on behalf of the principal”.
The relationship between the ‘authority' and the ‘power' of an agent was
considered above. However, the term ‘authority' is not always in strict sense.
Actual authority will be considered on the agent by the principal under the terms of
the agreement or contract between them. The scope of the agent's actual authority
is important. According to Diplock LJ in Freeman and Lockyer v Buckhurst Park
Properties Ltd “an actual authority is a legal relationship between the principal and
agent created by a consensual agreement to which they alone are parties. Its
scope is to be ascertained by applying ordinary principles of construction of
contracts, including any proper implications from the express words used, the
usages of the trade, or the business between the parties”.
Lord Denning MR stated in Freeman & Lockyer v Buckhurst Park Properties

Ltdthat implied actual authority occurs when it is inferred from the conduct of the
parties and the circumstances of the case, such as when the board of directors
appoint one of their number to be managing director. Actual authority, express or
60
implied, is binding as between the company and the agent, and also as between
the company and other, whether they are within the company or outside it.
Apparent authority according to Slade J in Rama Corpn Ltd v Proved Tin and
General Investments Ltd “…is merely a form of estoppel, indeed, it has been
termed agency by estoppel, and you cannot call in aid an estoppel unless you have
three ingredients such as representation, reliance on the representation and an
alteration of your position resulting from such reliance”. However, Diplock LJ
identified four elements to be taken into account before a company could be bound
by the conduct of an agent with no actual authority:
 A representation that the agent had authority to enter into make the
contract in question;
 Where such a representation was made by a person with actual authority
to manage the business of the company;
 Where the plaintiff was induced by the representation; and
 The contract in question was not authorized under the company's
memorandum or articles.
Continuing in, the agency of operation of law can arise in several ways such as
by agency of necessity, statutory agency and agency arising from cohabitation.
However, Ratification validates the agent's actions with effect from the time those
actions took place. Lord Sterndale MR stated in Koenigsblatt v Sweet “Ratification
…is equivalent to an antecedent authority”. It can be express or implied from the
principal's unequivocal conduct. In Keighley Maxted & Co v Durantit was held that
ratification was not effective because A had not made it clear that he was acting
as an agent during the purchase. However, in Kelner v Baxter it was held that
ratification was ineffective because Co did not have capacity to make the contract
at the time it was made. The effect of the rule in Bolton Partners v Lambertis limited
61
in a number of ways. The case hase been criticized for putting the third party in a
worse position than he would have withdrawn the offer before the principal
accepted it. It was held that as soon as Board ratified the contract, it became
effective from 13 of December.
As I have stated above the agent has power to affect the legal relations of his
principal with regard to third parties. Typically, the agent will do this by contracting
on behalf of the principal or by disposing of the principal's property. In this
paragraph I will concentrate on the effect of contracts made by agents; when
considering the rights and liabilities arising under a contract made by an agent, it
is important to ascertain whether the agent was acting for a disclosed or
undisclosed principal. The general rule is that where an agent makes a contract
on behalf of his principal, ‘ the contract is that of the principal, not that of the agent,
and prima facie at common law the only person who can sue is the principal and
the only person who can be sued is the principal.This general rule applies where
the agents contract was authorized, either in advance, or after the fact by
ratification; the position may be different where the agent has apparent but not
actual authority. In, particular, the rights and liabilities of principal and agents
against third parties may differ according to whether the agency is disclosed or
undisclosed. A disclosed agency is where the agent reveals that heis acting as an
agent; it is sufficient that the fact of agency is revealed, and there is no need for
the principal to be named. In contrast, the agency is undisclosed where the agent
does not reveal the fact of agency at all and purports to be acting on his own behalf.
The decision of Wills J in the case of Watteau v Fenwick1 has met with a vast
amount of criticism throughout the course of the last century. Academics have
condemned the decision because the case decided that an undisclosed principal
could be held liable for an act of the agent, which had been expressly forbidden.
Furthermore the judiciary, both within the United Kingdom and the Commonwealth,
62
have on the whole decided to either to distinguish the case or ignore the decision.
However despite this, the case has yet to have been overruled and so currently
stands as good law. Goodhart and Hamson (1931) believe it was decided upon
apparent authority,yet as stated it is doubted whether this contention is valid
because the principal was not known. An agency by ratification, which allows a
known principal to ratify a contract and be bound by it could not be inferred
because Humble did not contract as an agent. Therefore, Wills J decided that
“Once it has been established that the defendant was the real principal, the
ordinary doctrine as to principal and agent applies - that the principal is liable for
all the acts of the agent which are within the authority usually confided to an agent
of that character, notwithstanding limitations, as between the principal and the
agent, put upon that authority. It is said that it is only so where there has been a
holding out of authority…But I do not think so. Otherwise in every case of
undisclosed principal, or at least in every case where the fact of there being a
principal was undisclosed, the secret limitation of authority would prevail and
defeat the action of the person dealing with the agent and then discovering that he
was an agent and had a principal”.
A further reason pointing to the Watteau decision being correct is outlined by

Cohen (1998) “If agency law did not step in, the undisclosed principal could collude
with the agent to misrepresent not only the creditworthiness of the principal, but
also the creditworthiness of the agent…If the case [Watteau] had come out the
other way, undisclosed principals would be able to hire insolvent agents to make
contracts for them, then claim that the contracts were unauthorized while secretly
splitting the goods or money with the agent”.
As the third party contracts in the first instance with the agent and not the
undisclosed principal, it is not surprising to discover that the agent may sue and
be sued on that contract . In Muldoon v WoodSir John Knox, described in the CA
63
that the effect of the agent may be sued on the contract as ‘elementary law'. For
instance, if the agent sues the third party on the contract, the third party can set up
against him any defence which would have been available against the undisclosed
principal.
Finally, in most cases the rights and duties of an agent derive either from a
contract made between the principal and agent or from the fiduciary nature of their
relationship. However, they may also derive from other sources, such as tort,
statute or the law of restitution. Most of the agencies are consensual. But some
arise because of the apparent or usual authority of the agent. Such agencies are
non-consensual and it remains uncertain as to whether they give rise to the normal
incidents of a principal-agent relationship. Be implied
Apart from any particular rights conferred on the agent by the contract of
agency, the common law recognizes the common law recognizes three general
right to remuneration (usually based on A's standard terms and where there is no
agreement, terms may b implied, e.g. under s.15 SGSA 1982). A leading case is
Luxor Ltd v Cooperwhere estate agents were instructed to sell two cinemas.
Commission of £10, 000 was payable on a sale and the agents introduced a buyer,
but the owners decided not to proceed. The agents claimed damages for breach
of an implied term that the owners should not refuse to sell to a buyer introduced
by the agents. The HL refused to imply such as terms. A term can only be implied
in order to give business efficacy to the contract; the agents were therefore held to
have assumed the risk that the sale would not be completed.
All agents, whether acting under a contract of agency or not, are entitled to
be reimbursed expenses and indemnified against expensed incurred in the course
of performing their duties. The right to indemnity covers all expenses and liabilities
necessary incurred by the agent whilst acting within his actual authority, including
64
contractual and tortuous liabilities, but does not cover any liabilities incurred due
to the agent's own fault, nor any liabilities in respect of acts which the agent knew
to be unlawful or illegal. On the other hand, In order to protect his rights to
remuneration or indemnity, an agent may be entitled to a lien over property
belonging to the principal which is in his possession. A lien is a right to retain
property by way of security until some debt is paid.
An agent is subject to a number or duties imposed by the general law as

legal incidents of the agency relationship. Where the agency is contractual, some
of the duties ma take effect as implied terms in the contract, or be modified by its
express terms. Although the fiduciary duties imposed on agents arise in equity it
seems that their scope may be determine by reference to the terms of any
underlying contract between principal and agent and the surrounding
circumstances. Some example of the duties of the agent is to obey instructions, to
exercise case and skill, fiduciary duties, not to make secret profit and not to take a
bride.
An agent's authority can be terminated at any time. If the trust between the
agent and principal has broken down, it is not reasonable to allow the principal to
remain at risk in any transactions that the agent might conclude during a period of
notic
Reference:
https://www.lawteacher.net/free-law-essays/commercial-law/agents-play-a-
vital-role.php
Bibliography
1. Adams, A. (2006). Law for Business Students. (4th Edition). Essex:
Pearson Education Limited.
65
2. Bradgate, R. (2000). Commercial Law. (3rd Edition). London: LexisNexis

Butterworths.
3. Cracknell, D.G. (1998). Commercial Law. (2nd Edition). London: Old
Bailey Press.
4. Handley, P. et al (1996). An active learning approach: Business Law.
Oxford: Blackwell Publishers Ltd.
5. Keenan, D. and Riches, S. (2005). Business Law. (7th Edition). Essex:
Pearson Education Limited.
6. McKendrick, E. (2003). Contract Law. (5th Edition). London: Palgrave
Macmillan.
7. Salzedo, S. et al (2004). Brief case on Contract Law. (4th Edition).
London: Palgrave Macmillan.
8. Sealy, LS. And Holley, RJA. (2003). Text, Cases and Materials:
Commercial Law. (3rd Edition). London: LexisNexis Butterworths.
Articles/ Journals
1. Onetto, A.E. (2007). Agency Problems and the Board of Directors. Journal
of International Banking and Financial Law. JIBFL 414.
2. Newark, S. (2007). The different roles of agents. De Voil Indirect Tax
Intelligence. 132, (23).
https://www.eaa.org.hk/en-us/Information-Centre/Publications/Agency-Law/-2-
Definition-of-agent
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Westmead International School

School of Economics Business and Accountancy

Presented to the Faculty of the

A legal form of business operation between two or more individuals who

One of the major advantages of a partnership is the tax treatment it enjoys.

partnership.In the absence of a written agreement, partnerships end when one

The dissolution of partnership is allowed, provided such dissolution does

A partnership must have a lawful object or purpose, and must be

Obligations of the Partners

Every partner is a debtor of the partnership for whatever he may have

If there is no agreement to the contrary, in case of an imminent loss of the

Property Rights of a Partner

A partner has an equal right with his partners to possess specific

Obligations of the Partners with Regard to Third Persons

Dissolution and Winding Up

The dissolution of a partnership is the change in the relation of the partners

Limited Partnership and General Partnership

A limited partnership is one formed by two or more persons under the

A person may be a general partner and a limited partner in the same

Role of Partnership in Business

It is relatively easy to form a partnership, but, as noted above, the business

Requirements for Joining a Partnership

An individual can join a partnership at the beginning or after the partnership

The Importance of a Partnership Agreement

To ensure your business partnership stays on course, follow these tips.

1. Share the same values.

2. Choose a partner with complementary skills.

3. Have a track record together.

Succeeding as business partners doesn’t require having run a business

4. Clearly define each partner’s role and responsibilities.

An informal organization where each partner does what’s needed at that

5. Select the right business structure.

You can organize a partnership as a general partnership, limited partnership

7. Be honest with each other.

Formally Structure Your Small Business

Another option is a “limited liability partnership (LLP)”. Professional partners, such

Decide on How You’ll Split Profits

Put Everything in Writing with a Partnership Agreement

A partnership agreement is the business version of a prenuptial agreement and

Things to include in the agreement include the following:

 Contributions to the partnership – If either partner contributes any assets

How Business Partnerships are Taxed

Read more about a partnerships tax obligation on SBA.gov.

Plan Ahead for a Happy and Profitable Partnership

Protecting yourself before you start a business partnership is your best

Republic of the Philippines

The praise "doing business" shall include soliciting orders, service

Small and medium-sized domestic market enterprises with paid-in

A sales contract that is Unconscionable may be struck down in whole or in part

Issues Arising Prior to Performance

Sometimes performance may be made impracticable. If the goods are completely

In some cases the purpose of a sale may be frustrated by circumstances beyond

If a party unequivocally declares an unwillingness to perform prior to the ti

Generally, the seller's primary obligations are to transfer ownership of the

In the context of the sale of goods, a Warranty is concerned with identifyin

An express warranty is any representation or affirmation about the goods

Implied warranties are warranties that are imposed on sellers by law. A wa

Another implied warranty recognized by courts is the warranty of fitness fo

re, and custody of goods rightfully rejected; anycommercially reasonable charges

If a seller tenders nonconforming goods, or goods that do not meet the sp

A buyer may elect to reject nonconforming goods. To reject goods, the bu

The resale of wrongfully rejected goods presents a few special problems.

elivery or on similar terms, or if thecontract provides for payment before inspectio