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Question 4

(a) This essay will advise in the following matter. Adriane (A) is an agent specialising in the sale of plants and has a general authority to sell any quantity of any species of plant on behalf of Percy (P). Adriane sold a large quantity of Percys carnations to Tang (T) shortly before the market price for carnations fell. Tang is seeking to avoid the contract on the grounds that Adriane (A) did not disclose that she was acting as Percys agent until after the contract had been concluded. Advise Percy (P).

The issue in this case is whether the agency is disclosed or undisclosed. If Tang (T) is aware that Adrian (A) is an agent and hence acting on behalf of someone else, there is a disclosed agency. But if (T) believes that A is acting on his own behalf and not for any other person there is an undisclosed agency. Also, the consent principle allows A to act without disclosing that he is acting for a P or by disclosing the existence but not identity of P. However, the general rule is that there is no difference between the rights, duties and liabilities of disclosed and undisclosed principals. Since Percy (P) can sue or be sued on a contract A made with T within his actual authority; per Wright J in Montgomere v United Kingdom Mutual Steamship Association [1891]1

On the other hand, it can be argued that the agency between Percy (P) and Adrian (A) might be disclosed. Since in according to Bradget, is disclosed where the agent reveals that he is acting for as an agent; it is sufficient that the fact of the agency is revealed, and there is no need for P to be named. Therefore, if there is an indication that Adrian (A) was acting for someone, the contract entered by Adrian (A) and Tang (T), can be binding between Percy (P) and Tang, since there is no need for Percy (P) to be named. As a result, if the contract is held to be binding, none of the parties can discharge from the contract by settling with Adrian (A).

The court might consider the decision in the case of Universal Steam Navigation Co. Ltd v Jane McKelvie & Co [1953],2 as a result it can be argued that it is not enough for an agent to just state that he is acting for P, in order to disclose P. But what is not clear in
1 2

[1891] 1 QB 370 (at 371) [1953] AC 492

this case is the details of the clauses of the contract of which Adrian and Tang signed. This is because if Adrian signed the contract in his own name though the body of the contract makes it clear that he is acting on behalf of someone else; Tudor Marine Ltd v Tradax Export SA, The Virgo [1976]3, the it can be decided that the contract was signed by an undisclosed agency.

Therefore, an undisclosed Percy (P) cannot sue Tang (T) on contract nor can Tang (T) be able to avoid it, where an express or implied term between Adrian (A) and Tang (T) excludes such agency. For example, where A has impliedly stated that he is the sole Principal as in the case of; Humble v Hunter [1848]4.

However, if it can be proved that Tang (T) would not have entered into contract with undisclosed and unnamed Percy (P); per McCardie J in Said v Butt [1920]5; and, if Tang (T) relies on Adrians (A) personal qualities, such as aptitude; per Greer v Downs Supply Co [1927]6, the contract can be avoided. But, it must be noted that the court might also consider whether it is a trade custom that Adrian (A) to take such a duty of concluding contracts in this particular trade, as was considered in the case of; Thornton v Fehr [1935]7

Therefore, if the contract is undisclosed, Tang (T) may seek to avoid the contract, on the basis that Adrian (A), did not act within his actual authority as upheld in the case of Siu Yin Kwan v Eastern Insurance [1994]8, provided that there no limitations which exist either expressly or impliedly; the terms of the agency prove to be inconsistence with the agency; as earlier noted in Humble v Hunter [1848]9. Applying the principle in Teheran-Europe [1968] 10, it can be argued that the contract is disclosed since T should have been willing or lead A to lead A to believe he/she is willing to contract with either A or P. Further more, if Adrian signs the contract, as the owner, and the identity of P or A is of material importance to T, the court might allow the contract to be avoided. However, if

3 4

[1976] 2 Lloyds Rep 135, CA [1848] 12 QB 310 5 [1920] 3 KB 497 (at 503) 6 [1927] 2 KB 28 7 [1935]51 L1L Rep 330 8 [1994] 2 AC 199 9 [1848] 12 QB 310 10 [1968] 2 QB 545

the court decides that the agency is disclosed, there will be a privity of contract between the parties and Tang (T), therefore the contract can not be avoided.


Alfonse, a self-employed commission agent, started negotiations with Ignatius on behalf of Percy for the sale of geraniums but this contract was not concluded. Ignatius has now contacted Percy direct with an offer to buy the geraniums. Percy seeks an advice as to whether he must pay Alfonse the commission for this sale in view of the fact that he now wishes to terminate the agency contract with Alfonse in the light of the discovery of the following two matters. First, that Alfonse accepted 500 from Julius to place a contract for roses with Julius instead of with Hanlon who had offered 1,000 more for the roses. Second, that Alfonse has failed to account to Percy for a gift worth 300 received from Keelson when a contract between Percy and Keelson was concluded. Therefore, this essay will look at the above case.

Alfonso is a commercial commission agent, a commercial agent is defined by the Commercial Agents (Council Directive) Regulations [1993] (SI 1993, No. 3053) as a self employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another person (principal) or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of the principal.11

Alfonse accepted 500 from Julius to place a contract for roses with Julius instead of with Hanlon who had offered 1,000 more for the roses. Alfonse (A) might argue the he accepted an offer of 500 worth of roses from Julius (T), because he genuinely believed it was a better deal. Therefore, could have exercised reasonable care and skill that a dealer in his position would usually have done, as in the case of Kenny v Hall [1976]12. If the court decides so, Percy (P) might not have the right to claim for the loss experienced, as a result of this purchase, as decided in Chaudhry v Prabhakar [1988].13

11 12

Commercial Agents Regulations [1993] (SI 1993, No. 3053), reg 2(1) [1976] 239 E.G 355 13 [1988] 3 All ER 718

On the other hand, Percy might be able to argue that in according to Weigall v Runciman [1916],14 Alfonse (A) could have exercised a reasonable interpretation of the instruction on behalf of Percy (P), by acting reasonably in Percys best interest, could have bought more roses from Hanlon for 1,000. Therefore, the court might have to ascertain whether Alfonse (A) acted in a reasonable interest.

If then Alfonse did not buy from Hanlon in order to favour a relationship between himself and Julius, such act might not be in reasonable interest but rather amount to a conflict of interest,15 as in the case of Robinson v Mollet [1876]16.

Alfonse has failed to account to Percy for a gift worth 300 received from Keelson when a contract between Percy and Keelson was concluded. If it can be proved that Alfonse (A) took any bribe the 300 from Keelson (T) in order to make a secret profit, as in the case of; Boardman v Phipps [1966].17 If that is held to be the case, Alfonse would be estopped from denying Percys (P) title to money or goods. However, unless the secret profit was taken in good faith, as in Hippisley v Knee Bros [1905],18 but Percy (P) will still have the right to claim the secret profit made; Turnbull v Garden [1869]19.

It can also be argued that the 300 from Keelson (T) amounted to a bribe. But in order for a bribe to suffice in according to Industries and General Mortgage Co. Ltd v Lewis [1979],20 the 300 can amount to a bribe a secret profit between Keelson (T) and Alfonse (A) kept secret from Percy (P). Unlike a secret profit, a bribe can not be received in good faith, as was held in the case of Reading v A-G [1951].21 If bribe is found to be the case, Alfonse (A) might be prosecuted under the Prevention of Corruption Acts 1889-1916; he would not be entitled to be paid, and if the payment has already been made, Alfonse (A) must return it; he can also be dismissed even if Percy (P) suffered no loss, as was held

14 15

16 [1876]33 LT 544 (HL) 17 [1966] 2 AC 18 [1905] 1KB 1 19 [1869] 38 LJ Ch 331

[1916] 85 L. J.K.B.1187 Commercial Agents Regulations [ (SI 1993, No. 3053 reg 3(ii)(b)

20 [1979] Bribe means a secret commission which only means (i) that the person making the payment makes it to the agent of the other person with whom he is dealing; (ii) that he makes it to that person knowing that the person is acting as the agent of the other person with whom he is dealing; and (iii) that he fails to disclose to the other person with whom he is dealing that he has made that payment to the person whom he knows to be the other persons agent; [1979] 2 All ER 573. 21

[1951] AC 507

in the case of Boston Deep Sea Fishing & Ice Co v Ansell [1888];22 Percy (P) can repudiate any contract made because of the bribe, whether or not Alfonse was influenced by it; Alfonse (A) will not be entitled to indemnity; Percy (P) can be entitled to claim the amount of the bribe as money had and received, as in Logicrose v Southend United Football Club [1988]23, and damages against either Alfonso (A) or Keelson (T). Percy can also set aside the transaction with Keelson. Since, there is an irrebutable presumption that any business done with the payer of the bribe, was done as a result of the payment of the bribe. But in according to Mahesan v Malaysia Government Officers Co-operative Housing Society Ltd [1978]24 Percy must choose between recovering the bribe or an action for damages. If the bribe constitutes an increase in value, Percy can claim its full value; Attorney General of Hong Kong v Reid [1994]25 Furthermore, Alfonso (A) and Keelson (T) may be liable for prosecution under section (1) of the Prevention of Corruption Act 1916. As a result, there can be some breach of Alfonse (A) duties to Percy (P). Therefore, Alfonses breach can be detrimental to his rights, since Percy (P) may; withhold any commission as was held in Luxor v Cooper [1941]26 due to Alfonso (A) on this transaction and recover any commission already paid; rescind the contract with Keelson (T); Arnistrong v Jackson [1917]27 require either Alfonse (A) or Keelson (T) to account for the amount of the bribe as money had and received; claim damages (in tort of deceit) for loss he suffers as a result of payment of the bribe and entry into the consequent contract, and dismiss him; Boston Deep Sea Fishing [1888]28 Also, Alfonso will also not be entitled to indemnity as in Rhodes v Fielder, Jones and Harrison [1979]29 and a lien in The Borag [1980].30

22 23

[1888] 39 Ch D 339 [1988] 1 W.L.R 1256 24 [1978] 2 All ER 405 25 [1994] 1 AG 324 26 [1941] AC 108 27 [1917] 2 KB 822 28 [1888] 39 Ch D 29 [1979] 89 LJ KB 15 30 [1980] 1 Lloyds Rep 111

3. Optimum Cycles an English company, is hoping to finalise contracts for the supply of bicycles to Sure-cycle in Singapore and to Indi-bike in India. Neither of these companies has exported goods from England before. Optimum obtains its stock by importing bicycles as well as by buying bicycles manufactured in England. This essay will advise Optimum on how its contracts with Sure-cycle and Indi-bike can be performed under contracts on ICC FOB Incoterm 2000 sale terms and ICC CIF Incoterm 2000 sale terms. Also, including an advice explanation of the extent to which the incidents of either of these sale terms could be varied for certain shipments.

Incoterms reflects the commercial practice in which duties of the parties are set out in detail; the latest being the INCOTERMS 200031. Cost, Insurance, Freight (CIF) and Free on Board (FOB) terms are examples of Incoterms. They set out duties of the buyers and sellers, under these duties there are some notable similarities and differences, which must be noted by all the parties to the contract.

FOB is a shipment term; price is for loading the goods, which are delivered on board, at the named port of shipment this is because property in unascertained goods cannot pass until the goods are ascertained; Sale of Goods Act 1979, section 16. Furthermore, in according to INCOTERM FOB A6 S has the obligation for export costs, and per A2 is obliged to pay all costs relating to goods until they are delivered per A41. Under FOB, there is a presumption that property has passes32 to Sure Cycle and Indi-bike (B) on shipment, in according Pearson J in Carlos Federspiel & Co [1957].33 Cycle and Indibike (B) has the duty to contract for the carriage of goods at his own expense and becomes liable for the expenses, as soon as the goods passes the ships rail. Cycle and Indi-bike (B) must in due time also give instructions to Optimum Cycles (S)34 i.e. name or designate a ship; Colley v Overseas Exporters [1921]35 loading port and date of shipment. As INCOTERM FOB B3 the buyer will take out cargo insurance at his own expense if required. However, Sure Cycle and Indi-bike (B) may substitute either the ship; Agricultores F.A.S.C v Ampro SA [1965].36 Normally the month or months
31 32

page 766; Robert Bradgate; Commercial Law; 3 edition; 2005; Oxford Sale of Goods Act 1979, section 16; 33 [1957] 1 Lloyds Rep 240 34 ibid 35 [1921] 3 KB 302 36 [1965] 2 Lloyds Rep 757

shipment must take place; port; Bunge & Co v Tradax England [1975]37; or date; Cargill v Continental Can [1989]38. Optimum Cycles (S) is obliged to load the goods on board the ship nominated by the buyer, within due time. However, the nominated port must be of competence, otherwise Optimum Cycles (S) can be relieved of its duty if it not, as was decided in Turnbull v Mundas [1954]39 and INCORTERM FOB B4. Optimum Cycles (S) must also provide sufficient information from Sure Cycle and Indibike (B) to obtain cargo insurance when loading is complete. 1f as a result Sure Cycle and Indi-bike (B) fails to obtain insurance, the goods will remain at S risk; Wimble, Sons & Co v Rosenburg [1913]40 As a result, Sure Cycle and Indi-bike (B) can only be obliged to accept goods that are delivered properly41and as mentioned under section 51 of the Sale of Goods Act 1979, otherwise breach of contract might suffice per INCORTERM FOB A4. An FOB contract can also be classified under one of the flexible instruments per Devlin J in Pyrene42 extended, classic or strict per Donaldson LJ affirming Devlin in El Amria [1982]43, INCORTERM A7 and section 33(3) Sale of Goods Act 1979. S has no function in carriage and is no party to the contract of carriage made by Sure Cycle and Indi-bike (B). Optimum Cycles (S) only obtains a document in proof of delivery per INCORTERM FOB A8, and then Sure Cycle and Indi-bike (B) can obtain a bill of lading in his name from the carrier. Optimum Cycles (S) may also arrange the carriage for the buyer, if it is advantageous to do so for example a better access to shipment port (strict FOB). However, if Sure Cycle and Indi-bike (B) is arranging his own insurance, he must also contract carriage and then Optimum Cycles (S) be issued with a bill of lading in the name of B (Classic FOB). Optimum Cycles (S) is supplied with a bill of lading which he sends to Sure Cycle and Indi-bike (B). Sure Cycle and Indi-bike (B) can ask S to obtain cargo insurance, S will therefore take the bill of lading in his own name and send it with a policy insurance to Sure Cycle and Indi-bike (B) provided the goods are loaded (Extended FOB). As in CIF, S can obtain payment against the transfer, although it is not exactly an actual CIF, since all the duties are additional and fulfilled on behalf of Sure
37 38

[ 1975] 2 Lloyds Rep 235 [1989] 2 Lloyds Rep 290 39 [1954] 40 [1913] 41 Bunge & Co v Tradax England [1975] 2 Lloyds Rep 235 42 Peter Turnbull & Co Pty v Mundas Co (Australasia) Pty Ltd [1982] 2 Lloyds Rep 198 43 [1982] 2 Ll.L. Rep 28 at 32

Cycle and Indi-bike (B) on separate payment; per Devlin J in Pyrene v Scindia [1954]44. As a result, at Sure Cycle and Indi-bikes risk and expense per INCORTERM CIF A8, bill of lading as an example, S can only be expected to assist with obtaining transport documents.

A CIF contract is an agreement to sell goods at an inclusive price covering the cost of the goods, insurance and freight. Unlike FOB, CIF does not have .a flexibility instrument. S has the duty to provide Sure Cycle and Indi-bike (B) with travel documents per INCORTERM CIF A8 in due time, at hisown expense per Brett M.R in Sanders v Maclean [1882-83]45 and Atkin J in Sharpe v Nosawa [1917]46 for the agreed port of destination also dated within the period of shipment; Bowes v Shand [1877]47 S also has the duty to furnish Sure Cycle and Indi-bike (B) with the insurance policy per INCORTERM CIF A3(b) allowing Sure Cycle and Indi-bike (B) or any person with insurance interest, to claim from the insurer per INCORTERM CIF A8 in the event of loss of damage. An invoice representing the goods and any additional documents within the contract must be tendered by S. Sure Cycle and Indi-bike (B) has the duty to accept documents conforming to the contract and pay the price; Gill & Duffus v Berger [1984]48. But it must be noted that if the buyer does not check the conformity of the documents, he can be estopped from later rejecting the documents; Panchaud Freres [1970].49 However, according to Proctor &Gamble [1988]50 provided the disconformities was concealed and the concealment resulted in a loss to Sure Cycle and Indi-bike (B); per MacCardie J in Manbre Sacchairine [1919]51, Sure Cycle and Indi-bikes burden can relieved.

Therefore, the goods cannot be said to have been delivered if S does not deliver the documents or Sure Cycle and Indi-bike (B) does not accept them, since they represent the

44 45 46

[1954] 2 QB 402 at 422

[1882-83] LR 11 Q.B.D, at 337 [1917] 2KB 814 47 [1877] 2 App Cas 455 48 [1984] AC 282 49 [1970] 1 Lloyds Rep 53 50 [1988] 2 Lloyds Rep 21 51 [1919] 1 K.B 198 at 202

buyers rights and the sellers duty; Manbre [1919].52 When it comes to carriage S has the duty to deliver the goods on board ship at the port of shipment. However, it is the tender of documents53 that fulfils the delivery of the goods; per Hamilton J in Biddell v Clements [1911].54 As a result S is entitled to pay the price on those documents as they represent the goods per Lord Atkins in Johnson v Taylor [1920]55 A sale of goods whilst afloat is also possible since the contract can be performed by the delivery of documents; per Bankes LJ in Karberg [1916]56. If there is a difference of the documents tendered the court will take all terms into account to determine whether there is a conflict with well known incidents; The Julia [1949]57 It must be noted that there are some similarities between S obligations for FOB and CIF are as follows. Under both contracts, it is S duty to tender documents; per Evans J in Concrodia Trading BV [1991]58 Ss also bear the risk of loss or damage of the goods until such time they have passed the ships rail at the named port since INCOTERM A1D, S must provide B with necessary information for procuring any additional insurance and assistance in obtaining any documents or their electronic equivalent issued in country of shipment or origin, which B requires to import the goods or transit them through any country per INCORTERM A5, and Concordia Trading BV [1991]59 and. Also, section 13 SGA [1979]60 imply a condition that the goods must correspond to any description by which they are sold, and it applies to both CIF and FOB. There is also a similarity on both contract terms, since the goods must remain in satisfactory quality until the goods arrive and disposed; Mash & Murrell Ltd v Joseph I Emanuel Ltd [1961].61

(3 652words)

52 53

ibid bill of lading 54 [1911] 1KB 214 at 220 55 [1920] AC 144 HL at 155-6 56 [1916] 1 KB 495 (CA) at 510 57 [1949] 1 All ER 269 HL at 279 58 [1991] 1 Lloyds Rep 475 HL 59 ibid 60 Sale of Goods 1979, Section 13 61 [1962] 1 WLR 16 Court of Appeal


Bowstead and Raynolds on Agency; 18 Ed; 2006; Sweat & Maxwell Ewan Macintyre; Commercial Law; Ed unknown; 1998; Blackstones Robert Bradget; Commercial law; 3 Edition; 2005; Oxford University Press Robert Bradget and Fidelma White; Commercial law; Legal Practice Course Guide; 2008; Oxford University Press

Statute for Question 3

Sale of Goods Act 1979


Statute for Question 4

Commercial Agents (Council Directive) Regulations [1993] (SI 1993, No. 3053)

Prevention of Corruption Acts 1889-1916

Sale of Goods Act 1979

Cases for Question 3 Agricultores F.A.S.C v Ampro SA [1965] 2 Lloyds Rep 757 Bunge & Co v Tradax England [1975] 2 Lloyds Rep 290


Biddell v Clements [1911] 1 KB 516 Carlos Federspiel & Co [1957] 1 Lloyds Rep 240

Cargill v Continental Can [1989] 2 Lloyds Rep 290

Colley v Overseas Exporters [1921] 3 KB 302

El Amria [1982] 2 Ll.L. Rep 28 at 32

Gill & Duffus v Berger [1984] AC 282

Manbre [1919] 1KB 198 Panchaud Freres [1970] 1 Lloyds Rep 53 Proctor &Gamble [1988] 2 Lloyds 21

Pyrene v Scindia [1954] 2 QB 402

Mash & Murrell Ltd v Joseph I Emanuel Ltd [1961] 1 WLR 16 CA

Sanders v Maclean [1882-83] LR 11 Q.B.D Turnbull v Mundas [1954] 2 Lloyds Rep 198

Wimble, Sons & Co v Rosenburg [1913] 1 KB 279

Cases for Question 4

Armstrong v Jackson [1917] 2 KB 822

Boston Deep Sea Fishing [1888] LR 6 Exch 89 11

Chaudhry v Prabhakar [1988] 3 All ER 718

Hippisley v Knee Bros [1905] 1 KB 1

Humble v Hunter [1848] 12 QB 310

Kenny v Hall [1976] 239 E.G. 355

Luxor v Cooper [1941] AC 108

Montgomere v United Kingdom Mutual Steamship Association [1891] 1 QB 402

Robinson v Mollet [1876] 33 LT 544(HL)

Rhodes v Fielder, Jones and Harrison [1919] 89 LJ KB 15

Said v Butt [1920] 3 KB 497

Siu Yin Kwan v Eastern Insurance [1994] 2 A.C. 199 (PC (HK)) The Borag [1980] 1 Lloyds Rep 111

Thornton v Fehr [1935] 51 Ll L Rep 330 Tudor Marine Ltd v Tradax Export SA, The Virgo [1976] 2 Lloyds Rep 135, CA

Turnbull v Garden [1869]

Universal Steam Navigation Co. Ltd v Jane McKelvie & Co [1953] AC 492

Weigall v Runciman [1916] 1 KB 279