Legal aspects of business

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Legal Aspects of Business
Legally, there are two types of authority that include actual authority and apparent or ostensible authority. The actual authority is further split into expressed authority and implied or usual authority. The commonplace business dealings, the involved third party at the instance of entering the contract can barely ever rely on the actual authority by the agent. In any case, the information he has regarding the authority should be sourced from the agent, the principal, or both of them (Abers, and Keck, 2013, p. 56). As such, the third party only knows what either the principal or the agent tells them which can either be true or false. In the end, the third party performs an analysis on whether to rely on the information from the representation of the principal which is under the apparent authority or the information from the agent which is a warranty of authority. The representation that results in apparent authority could be in different forms such as conduct representation where the agent is allowed to take different actions while conducting the business transactions of the principle with other people (Bainbridge, 2014, p. 19). As such, the principal represents to all the people that come to the realization that the agent is acting on the principal’s authority and can, therefore, enter into any contract.
Actual Authority
Actual authority is the specific power that is granted by a company or agency to a third party either in written or in oral form.

The powers accorded by the actual authority are either specifically or broadly defined for the agent. An agent that has been accorded actual authority is allowed to participate in decision-making processes as well as act on the agency’s behalf. Moreover, all the authorizations and decisions taken by the party acting by the actual authority are enforceable within the courts since they are legally binding. Despite the fact that no writing is required to have an individual act under actual authority, it is important to have the agreement in writing to avoid any probable legal complications that could arise later. The actual authority that has been put down in writing ensure that there is legal documentation for reference and derivation by the legal powers (Loewenstein, 2014, p.641).
For instance, if the owner of a store permits the night clerk to lower prices on given items, the clerk assumes the authority to do so. As such, in the event of an occurrence such as an employee being fired or the organization suffering losses, the night clerk would be protected by a written actual authority if the store owner claims that they acted outside their scope of assigned responsibilities (Miller-Novak and Bales, 2014, p.411). Written actual authorities are valuable in protecting the employees in cases where the business owners attempt filing civil and criminal charges.
Actual authority needs that the people playing as third parties be officially granted a level of authority allowing them to act on behalf of their organization. There are two different types of actual authority that include implied or usual authority and expressed authority. Nevertheless, both kinds of actual authority necessitate that the agent should have a consensual covenant with their company.
Expressed Actual Authority
It occurs when a third party to an organization is told that they have the permission to take actions on behalf of the organization. The principal gives express authority to an agent by either writing or orally.
Usual/ Implied Actual Authority
It occurs when the third party to an organization takes action that is reasonably needed to express the authority of the organization in question. The implied authority has its contents dependent on the undisputed evidence materials. For instance, it could be determined by the various usages of trade customs or professionalism and business.
The case of Deverell versus Weaver is a good example of actual authority. The case involved Percy Holmes, Eva Weaver, and Priscilla Deverell. At one point, Holmes bought a life insurance policy worth $25,000 at the time. In the policy, Holmes named Weaver, his partner, as the main beneficiary. Holmes and Weaver lived as a couple for more than 20 years with Weaver paying the associated premiums at times. In 2009, Holmes gave Deverell, her daughter, the responsibility for his Power of Attorney (Hillman, 2012, p.55). Consequently, Deverell changed the beneficiary on the policy from Weaver to herself. A year later, Holmes died, and both ladies applied for the benefits that had been stated in Holmes life policy. On realizing that Deverell had changed the beneficiary of the policy, Weaver filed a complaint in court claiming that Deverell had committed fraud. In this case, Weaver argued that Deverell had no authority of making such alterations on the immediate beneficiary because Holmes had a sound mind at the time when these changes were being made. On the other hand, the defender claimed that Holmes had given her the Power of Attorney giving him the actual authority to change the beneficiaries of the policy (Hillman, 2012, p.57). In this case, Deverell employed the doctrine of actual authority as a defense. However, the court disagreed with Deverell’s claims and ruled for Weaver. As expected, Deverell and her attorney began the process to file appeals for the case.
The case of Lockyer and Freeman versus Buckhurst Park is also another example that describes actual authority. Lockyer and Freeman sued the company and its director, Kapoor for failing to pay fees for architectural work done to develop an estate owned by Buckhurst Park Ltd. The Buckhurst Park Ltd claimed that the payment required that all the four directors including Hoon and two other nominees were required to constitute the quorum. While Buckhurst Park Ltd was planned to resell the land they bought, Kapoor went on and acted alone being the managing director of the company and engaged the architects with no appropriate authority. As such, the company made an argument that they were not bound to the agreement with the two architects. However, Judge Herbert held that the company was bound to the agreement. When the company appealed the case, the appellate judge still held that the company was bound by the contract to pay the two architects for their work (DeMott, 2015, p.269). Further, the appellate judge noted that in case actual authority is conferred by a member of the board without any formal resolutions, the whole board is held liable.
The scope of how an agent can use the actual authority is mostly ascertained from the oral and written consensus between the agent and the owner or principal, the line of dealing between the two parties, and also between the customs of the relevant trade. Moreover, in case the agent signs a contract with a third party who in turn pursues his actual authority, then, it is said that both parties have contractual liabilities and rights.
Apparent Authority
Apparent authority is also referred to ostensible authority. Such authority does not need any official processes to grant power. It is one of the concepts used when referencing a situation that comes up in an organization or firm when a third party gets the authorization and then acts on the company’s behalf. However, the agents are never priory appointed to conduct such representations. Apparent authority often arises from the agent making verbal and more often circumstantial representations. For instance, they could present stationary, business cards, or at times state that they represent the company in which they work (Bowstead, Watts, and Reynolds, 2012, p. 23). Unlike actual authority, the actions that are undertaken using apparent authority are never legally binding.
For instance, if a person works for a pizza delivery company, he/she never has the actual authority to make an order on pizza-making materials or even price the pizzas. However, when situations arise, he could give the price quote to one of the customers making a pizza order. While he has no authority to take such an action, the man’s position as a delivery driver gives him the apparent authority (Dougherty, 2015, p.8). As such, the use of apparent authority makes the customers believe that the delivery driver has the authority to give price quotes.
The case between CC Automotive Group and Quinn is also another example that describes apparent authority. In the case, the Appellate Court was faced with the claim that the company was liable for the deceit by its employee. The claimed deceit involved a car sale by an employee to a third party. The company did not own the car on sale. As such, the court was faced with the question of whether there existed any apparent authority while selling the car. At first, the judge discovered that the third party never consulted on whether the employee was acting within the limits of his authority (Ramokanate, 2016, p.179). However, the judge also considered whether any normal third party would make such a consultation on the employee’s authority. When the case was appealed, the judge handling the appealed case held that the first judgment was wrong for applying the inquiry test on the third party. The appellate judge founded the case on whether the third party honestly believed that the employee had the required authority. The appellate judge stated that the representation of the employee’s authority could not be relied on since the buyer could have acted on an honest belief and possible irrationality. Moreover, since the sale of the car fell on the apparent authority of the employee and the third party never doubted the authority upon which the seller was acting, there was no room and need to have an inquiry test from the third party.
An agent assumes apparent or ostensible authority if:
The third party depended on such representations to deal with the agent.
The third party changed their position leading to reliance such as the assumption of obligations presented in a contract by an agent.
The principle made verbal or physical representations to the third party suggesting that the agent has the power to take actions despite the agent not having such authority.
Essentially, ostensible or apparent authority results from the principals inducing third parties to believe that the organization’s agents have authority while they do not. The agent, thus, appears to have authority despite there being no actual authority for them to use in action implementation. All the same, once third parties sign contracts with agents were relying on the representation by the principal, the contracts become legally binding on the part of the principal.
The Legal Capacity to Enter a Contract by Minors
In law, minors are persons that have not attained the legal age of an adult. Legally, minors can enter contracts. Most of the contracts involving minors are voidable. As such, the minor involved in the contract can void the contract. As such, all minors that get into the contract are protected since some of them may not understand the full scope of the consequences that some contracts bear. Minors are perceived to lack the contracting capacities (Shannon and Hunter, 2014, p.1171). As such, the statutes and court system provide the minors with the ability to abandon the contract agreement at their discretion. However, the right only holds for the minor and not for the contracting party. Nevertheless, to avoid the rule being abused and having it result in harsh results, exceptions have been set in place regarding the voiding of the minor’s contract. For instance, if all the contracts involving minors could be voided, most parties could not risk getting into contracts with them. As such, the law provides that there be contracts for certain services that are not voidable. Services and items that are needed for the minor’s safety, as well as health such as food, clothing, and lodging, are considered as necessary. Consequently, some courts will require that the minor’s pay for the services provided by the contractor in the event of voiding.
Additionally, banking agreements are required to be complied with making the minors subject to similar fees and fines as all the other consumers in the bank. In most of the modern industries such as that of entertainment, children have employment contracts. As such, most states have passed legislation that prevents the minors from voiding the employment contracts. In some cases, courts are required first to approve the employment contracts with the minors to prevent the minors from later voiding it. Alternatively, the employers could contract the minor’s parents with the aim of binding the infants (Shannon and Hunter, 2014, p.1171). Other states have listed contracts such as sports, entertainment, and life insurance policies as those that cannot be voided. However, the rules on voiding contracts by minors only hold when they are still minors with a few states allowing for an extension of about six months after their eighteenth birthday.
Minors are only allowed to void contracts in two ways. First, they could file lawsuits requesting that the court voids the contract. Second, they could raise an affirmative defense claim the lack of capacity in case they are sued. Once minor voids any contract, they are required to dissociate themselves from the whole contract. Moreover, the minor is not permitted to choose a section that they find favorable in the package. Also, the courts may require that the minor pays restitution for the received benefits. For example, Job and Jane got married while still minors. They purchased a home after Job lied about his age to obtain the mortgage. After a year, the couple separated, and Jane moved back to her parents’ home. The job then sued the seller of the house to recover the money he had made on mortgage payments. The seller, however, countered and sued to foreclose on Job’s mortgage. Consequently, the court held Job liable for the mortgage payments despite having signed the contract as a minor. The court’s decision was informed by the fact that the house was among the necessaries. As such, despite being a minor, Job could not void his obligations in paying for the mortgage. However, courts are torn in deciding whether minors should pay for damages and repairs in all the goods that they benefited from (Shannon and Hunter, 2014, p.1171).
Minors are contracted in different situations. For instance, during purchases, they are always required to sign as a proof of agreement on the terms and conditions of the sale of a particular product. Additionally, minors enter contracts about goods’ warranties. Employment in the sporting and entertainment industry also require that the minors enter into a contract. Several factors need to be considered when getting into a contract with a minor. First, for the contract to be legally binding, all the contract elements must be present such as an offer, an intention, as well as the acceptance. The law, however, presumes that children under the age of 7 years, mentally challenged persons, as well as people with impaired judgment, are unable to enter into any contract (Bowstead, Watts, and Reynolds, 2012, p. 68). Otherwise, if a minor is legally valid, they cannot be prevented from entering contracts despite there being a presumption that they are not able to fully understand the concepts in a contract. As such, the minors are protected by the law regardless of the inserted clauses and adverse implications to the contracting party.
When contracting minors, it is vital that a provision for a guarantor be provided in the contract. A guarantor is another party that is involved in the contract, and most cases are the parent or guardian. The parents, however, are not liable for the contracts that the minor makes unless they sign the contracts along the minors. For instance, Ken, who is a minor, requires his father to co-sign loan documents with him to enable him to buy a car. In this case, the parent can be held liable even when Ken chooses to void the contract.
When minors who are in contracts reach the majority age, they are allowed to ratify the contracts. Nevertheless, on contract ratification, they are not allowed to change their mind and void the contracts. Ratification involves the different conducts and words by the minor that hint to them being bound by the contract they earlier signed. For instance, John buys a vehicle from the Ford Company for $40,000 when he is at the age of 17. John makes monthly installment payments to finance his car. Two months after his eighteenth birthday, John still makes the payments. However, after the two months past his eighteenth birthday, John has a wreck. As such, he decides to void the contract and get back the $40,000. However, he was barred from voiding the contract by the fact that he had reached the age of majority, continued to make the payments, as well as continued to use the car. John’s conduct resulted from a contract ratification. Most of the courts, however, refuse to acknowledge payment as ratification if no further evidence is provided showing intent to ratify the contract in question.
Bibliography
Abers, R. and Keck, M.E., 2013. Practical Authority: Agency and Institutional Change in Brazilian Water Politics-Excerpts. In APSA 2013 Annual Meeting Paper.
Bainbridge, S., 2014. Agency, Partnerships and LLCs, 2d (Concepts and Insights Series). West Academic.
Bowstead, W., Watts, P.G. and Reynolds, F.M.B., 2012. Bowstead and Reynolds on agency. Sweet & Maxwell.
DeMott, D.A., 2015. Forum-Selection Bylaws Refracted Through an Agency Lens. Ariz. L. Rev., 57, p.269.
Dougherty, J., 2015. Sharing Authority and Agency: A Multilogue Response to Goldenberg’s “Youth Historians in Harlem,” Part 2 of 2. Education’s Histories, 2(1), p.8.
Hillman, R.A., 2012. The richness of contract law: An analysis and critique of contemporary theories of contract law (Vol. 28). Springer Science & Business Media.
Loewenstein, M.J., 2014. Reflections on Teaching Business Associations: The Case for Teaching More Agency and Unincorporated Business Entity Law. Louis ULJ, 59, p.641.
Miller-Novak, M. and Bales, R., 2014. Proposal for Enforcing Minors’ Employment Contracts, A. Whittier L. Rev., 36, p.411.
Ramokanate, L.L., 2016. Distinguishing apparent authority from agency by estoppel: a commentary on the decision of Makate v Vodacom (Pty) Ltd [2016] ZACC 13. Lesotho Law Journal, 24(1), pp.177-190.
Shannon, J.H. and Hunter Jr, R.J., 2014. Principles of Contract Law Applied to Entertainment and Sports Contracts: A Model for Balancing the Rights of the Industry with Protecting the Interests of Minors. Loy. LAL Rev., 48, p.1171.