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Chapter

Cover Sealy and Hooley's Commercial Law

6. Relations with third parties  

D Fox, RJC Munday, B Soyer, AM Tettenborn, and PG Turner

This chapter examines how contracts made by the agent affect the legal relations of the principal with regard to third parties. When considering the rights and liability arising under a contract made by an agent, it is important to draw the distinction between whether the agent was acting for a disclosed or undisclosed principal, the latter being an important feature of English agency law largely unknown to civil lawyers. This chapter discusses generally the relations between principal and third party, and between agent and third party, in the context of both disclosed and undisclosed agency.

Chapter

Cover Commercial Law

6. Relations between principal and agent  

This chapter discusses the legal relationships that exist between the principal and agent, and, in particular, focuses on the duties that each party owes to the other. The precise scope and content of these duties will depend upon a number of factors, including whether the agency is contractual or gratuitous, whether the agent is acting within the scope of his authority, whether the agent is a specific type of agent upon whom extra duties are placed, and whether the agent is a commercial agent or not. There are legal relationships that can exist between the three parties involved in a typical legal relationship, namely, the relationships between principal and agent, between principal and third party, and between agent and third party. The chapter begins by discussing the duties that an agent owes to his principal.

Chapter

Cover Commercial Law

7. Relations between principal and third party  

This chapter examines the relationship that exists between principal and third party, focusing in particular on the liability that exists between principal and third party, and those instances when they can sue, and be sued by, the other. Liability principally arises in contract and tort, and so these two areas of liability will be discussed, beginning with the contractual liability of the principal and third party. The contractual relationship between the principal and third party, and the extent to which one party can be liable to the other, can be complex and depends upon a number of variables, notably whether the principal is disclosed or undisclosed. In a typical agency relationship an agent will effect a contract between his principal and a third party, after which the agent will ‘drop out’ of the transaction.

Chapter

Cover Sealy and Hooley's Commercial Law

26. Non-possessory security  

D Fox, RJC Munday, B Soyer, AM Tettenborn, and PG Turner

This chapter focuses on non-possessory security. It begins with a discussion of mortgages and their definitions. A mortgage involves the transfer of ownership of property from the mortgagor (the debtor or a third party) to the mortgagee (the creditor) as security for a debt or other obligation. The chapter then considers equitable charges and their definition, which include fixed and floating charges, before moving on to consider equitable liens. The chapter also examines statutory control with respect to non-possessory security, with particular emphasis on the protection of third parties and debtors.

Chapter

Cover Sealy and Hooley's Commercial Law

3. Bailment  

D Fox, RJC Munday, B Soyer, AM Tettenborn, and PG Turner

This chapter deals with bailment, defined as a transaction under which a bailee lawfully receives possession of goods from a bailor for some purpose. Examples of bailment from commercial law include warehousing, carriage, the deposit of property to have work done on it, leasing, and pledge. A buyer under a sale or return transaction is, pending acceptance or rejection, a bailee of the goods. After explaining what a bailment is, the chapter considers types of bailment and three requirements for a bailment: transfer of possession; ownership remaining in the bailor, or at least not passing to the bailee; and consent by the bailee. It then examines the bailee’s liability and the burden of proof with respect to bailment before concluding with an analysis of bailment involving third parties, focusing in particular on sub-bailment.

Chapter

Cover Company Law

11. Directors’ duties II: conflicts of interest  

This chapter focuses on those duties relating to conflicts of interests, before moving on to look at transactions involving directors that require member approval. Section 175 of the CA 2006 provides that a director must avoid a situation in which they have, or can have, an interest that conflicts with that of the company. Section 176 provides that a director must not accept, from a third party, a benefit conferred by reason of their being a director or by doing anything as a director. Meanwhile, section 177 provides that a director who is interested in a proposed transaction or arrangement with the company must disclose the nature and extent of that interest to the other directors. Member approval is required if a director is interested in a ‘substantial property transaction’ involving the company or if a director is to enter into a loan, quasi-loan, or credit transaction with the company.

Chapter

Cover Commercial Law Concentrate

12. The creation of agency and the agent’s authority  

Each Concentrate revision guide is packed with essential information, key cases, revision tips, exam Q&As, and more. Concentrates show you what to expect in a law exam, what examiners are looking for, and how to achieve extra marks. This chapter focuses on the creation of agency and its three main parties: the agent, the principal, and the third party. The primary purpose of the agent is to bring the principal and the third party into direct contractual relations, with the principal taking on the rights and liabilities created by the contracts, provided the agent had authority to act. The chapter looks at several kinds of agent’s authority, including actual authority, apparent authority, and usual authority, and also considers agency of necessity as well as cases where the principal may ratify a transaction.

Chapter

Cover Commercial Law Concentrate

13. The relationships created by agency: the rights and liabilities of the parties  

Each Concentrate revision guide is packed with essential information, key cases, revision tips, exam Q&As, and more. Concentrates show you what to expect in a law exam, what examiners are looking for, and how to achieve extra marks. This chapter focuses on the relationships created by agency, namely, the rights and liabilities of the agent, the principal, and the third party. It first explains disclosed agency as opposed to undisclosed agency with regard to the contract made by the agent, and then, after discussing the rights and liabilities of the principal and the third party, considers the rights of the agent against their principal, including remuneration, indemnity, and lien. The chapter examines the agent’s two kinds of duty to their principal (contractual duty and fiduciary duty) and discusses remedies for breach of fiduciary duty and how an agency may be terminated as well as the effects of termination. It concludes by highlighting the provisions of the Commercial Agents (Council Directive) Regulations 1993.

Chapter

Cover Company Law

12. The constitution of the company: dealing with outsiders  

Titles in the Core Text series take the reader straight to the heart of the subject, providing focused, concise, and reliable guides for students at all levels. This chapter explores the legal aspects of transactions made with those outside the company (called outsiders or third parties), with emphasis on how they are determined to be legitimate and binding on the company. It also discusses the ultra vires doctrine and the three particular issues that make it a very tricky problem for the courts; the inclusion of the benefit of the company criterion to the ultra vires issue; the reform of ultra vires; and the application of the general principles of agency in determining whether the company is bound by a particular transaction. The chapter concludes by analysing reforms in the Companies Act 2006 concerning the authority of directors to bind the company or authorise others to do so.

Chapter

Cover Sealy & Worthington's Text, Cases, and Materials in Company Law

8. Remedies for Maladministration of the Company  

This chapter discusses the functioning of directors and their duties under common law and the Companies Act 2006. Topics covered include: the scope and nature of directors’ general duties; the duty to act within powers; the duty to promote the success of the company; the duty to exercise independent judgement; the duty to exercise reasonable care, skill and diligence; the duty to avoid conflicts of interest; the duty not to accept benefits from third parties; the duty to declare an interest in a proposed or existing transaction or arrangement; remedies for breach of general duties; relief from liability; ratification of acts of directors; relief from liability granted by the court; contracting out of liability; statutory rules requiring special notice or members’ approval for certain transactions; and secondary liability (liability of third parties associated with directors’ wrongs).

Chapter

Cover Banking Law and Regulation

3. Payment methods  

Iris Chiu and Joanna Wilson

This chapter examines payment methods, which refer to the mechanisms, procedures, and organisations that are used to enable parties to discharge their payment obligations. While there are a vast range of different payment mechanisms, the most common methods are cheques, payment cards, and the electronic transfer of funds. A cheque is a written order from an account holder instructing their bank to pay a specified sum of money to one or more named beneficiaries. Meanwhile, payment cards—small pieces of plastic that are used in financial transactions—have revolutionised the way that people pay for goods or services. Lastly, the transfer of funds refers to the movement of a credit balance from one account to another, which occurs by adjusting the balances of the respective party’s accounts. The chapter then looks at recent innovations in the payment services industry relating to open banking and third-party providers.

Chapter

Cover Company Law

10. Derivative claims  

Titles in the Core Text series take the reader straight to the heart of the subject, providing focused, concise, and reliable guides for students at all levels. This chapter examines derivative action as a means of safeguarding minority shareholders against abuses of power and its implications for the principle of majority rule. It begins by analysing the rule in Foss v Harbottle (1843), which translates the doctrine of separate legal personality, the statutory contract, the ‘internal management principle’, and the principle of majority rule into a rule of procedure governing locus standi (that is, who has standing to sue), as well as the exceptions to that rule. It then considers various types of shareholder actions, including personal claims, representative actions (group litigation), and derivative claims. It also discusses derivative claims under the Companies Act 2006, with emphasis on the two-stage process of the application for permission to continue a derivative claim. The chapter concludes by assessing bars to a derivative action, together with liability insurance and qualifying third party indemnity provisions.

Chapter

Cover Company Law

12. Duty to avoid a conflict of interest  

This chapter discusses the director’s duty to avoid a situation in which he has, or can have, a personal interest conflicting, or which possibly may conflict, with the interests of those whom he is bound to protect (the no-conflict rule); and the equally inflexible rule that, without consent, a person in a fiduciary position is not entitled to profit from that position (the no-profit rule or, more accurately no secret profit rule). These key obligations are discussed in detail, exploring the extent of the strict duty to avoid a conflict and the judicial attitude to breaches of duty. The need for disclosure and authorisation is discussed. Benefits from third parties and conflicts from proposed transactions with the company are also addressed.

Chapter

Cover Company Law

9. Duty to act within constitution and powers  

The Companies Act 2006 (CA 2006) requires directors: to act in accordance with the constitution (defined s 257) and to exercise powers for the purposes for which they are conferred. This chapter focuses on s 171. The discussion covers the constitutional division of power within a company, types of authority, statutory protection of third parties, and exercise of a power for an improper purpose. Much of the discussion is of the important agency rules which govern directors’ authority, considering in particular the extent to which third parties can rely on the apparent or ostensible authority of an individual director or directors. The circumstances in which third parties are put on inquiry are considered. The statutory protection afforded to third parties by CA 2006, s 40 is also examined. The proper purpose doctrine is an important constraint on abuse of power by directors and the application of the doctrine is addressed in detail.