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THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN IRELAND

LEGAL FRAMEWORKFORMATION I EXAMINATION - AUGUST 2005

Time Allowed: 3 Hours and 10 minutes to read the paper Number of Questions to be answered: FIVE(Only the first five questions answered will be marked)All questions carry equal marks

(Note: Case Law and Statute, should, where appropriate, be mentioned)

1. Describe in detail the sources of law in the Irish legal system.[Total: 20 marks]

2. Discuss the differences between joint tenancy and tenancy in common.[Total: 20 marks]

3. Mr. Clever is a solicitor. When recently qualified, he gave advice to a client, Clare, when she was purchasinga property. Ten years later, Clare decides to sell her property, but to her horror discovers that there is adefect in the title, which means that she never actually owned the property in the first place. Clare isdistraught and seeks your advice as to what she can do. Advise Clare.

[Total: 20 marks]

4. Explain the differences between duress and undue influence in the law of contract.[Total: 20 marks]

5. Outline and discuss to whom and in what circumstances the Unfair Dismissals Act 1977 (as amended)applies.

[Total: 20 marks]

6. Explain how the relationship of agent and principal arises.

[Total: 20 marks]

7. Explain in detail the functions of the Commission and the Council of Ministers as European Institutions.

[Total: 20 marks]

END OF PAPER

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SUGGESTED SOLUTIONS

LEGAL FRAMEWORKFORMATION I EXAMINATION - AUGUST 2005

SOLUTION 1

Tutorial CommentsThe aim behind this question is to examine students knowledge of the various sources of law in Ireland, and toexplain what these sources are in detail. Students are expected to engage in a descriptive type answer. Thesubject matter of the question is relatively straightforward. Students should set out and explain the general sourcesof law. While the question pertains to Irish law as such, students are also expected to identify European Law andindeed international law as forming sources of law in the Irish jurisdiction. Extra marks will be awarded wherestudents deal with the rule of law and the hierarchy of the sources of law in Ireland.

SOLUTION

The sources of Irish law derive from the Irish constitution, Bunreacht na hireann, case law, statutes/legislation,European and international law. In addition to these sources of law, the rule of law remains the bedrock of thewhole structure, and the values of the rule of law transcend and permeate the various sources of law, statute,common law, delegated legislation etc. The sources of law in any legal system are the rules and legal principlesof law that are applicable in that system. A lawyer must be familiar with these sources and know where to find themin order to find the relevant law which is applicable to problems with which they are presented. In addition, lawyersmust know exactly where different rules fit into the overall scheme and in the case of a conflict between rules andlegal principles, they must know which will take precedence. There is a hierarchical system of laws in the Irishlegal system and from this system, it is possible to tell which laws prevail over others.

The main sources of law in Ireland are:Bunreacht na hireann 1937 (The Irish Constitution)Legislation or statute LawCommon LawEuropean Community LawInternational Law

Bunreacht na hireann 1937The Constitution is the most fundamental source of law in this jurisdiction. All Irish laws are derived from theConstitution because it sets up the various bodies which create the law, interpret the law and enforce the law.Ultimately, all Irish laws must be in conformity with the Constitution. The Constitution is the primary legal text othe jurisdiction and so it enjoys a higher legal status than all other national laws. If legislation does not comply withthe terms of the Constitution, the Irish Courts can invalidate it.

The Constitution regulates the structures and functions of the main organs of government and also regulates therelationship between these institutions by setting out the balance of power between them. The Constitution doesthis by means of the separation of powers between the three branches of government the legislature, theexecutive and the judiciary. The Constitution also regulates the relationship between these organs of governmentand the citizens of Ireland.

In addition to setting out the balance of power between the organs of government, the Constitution also containsprovisions guaranteeing fundamental rights of citizens such as equality before the law, property rights, personal

liberty and freedom of religion.The Courts are responsible for interpreting the provisions of the Constitution. This function is a very important one.

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Statutes and legislationArticle 15.2 of Bunreacht na hireann 1937 designates the Oireachtas as the sole law making body in the State:The sole and exclusive power of making laws for the state is hereby vested in the Oireachtas: no other legislative authority has power to make laws for the State.

Some 30 to 40 new statutes are enacted each year by means of an Act of the Oireachtas. Acts of the Oireachtasare known as primary legalisation and have to go through both houses of parliament, the Dil and the Seanad.

Each act or statute must be compatible with the Constitution, and may be referred to the Supreme Court by thePresident to judge on the compatibility of any particular Bill. Article 25 of Bunreacht na hireann 1937 states thatall acts must be in both official languages, and in the case of conflict of interpretation the Irish version prevails.Statutes have long and short titles, and are divided into sections, and in the case of longer acts into parts. Thereare then subsections, and paragraphs.

In addition to primary legislation, secondary legislation can be created in Ireland by means of regulatory orders orstatutory instruments. These do not go through both houses of the Oireachtas but are introduced by governmentministers. Astatutory instrument is defined under the Statutory Instruments Act 1947 as an"order, regulation, rule,scheme or bye-law, made in the exercise of a statutory power." Most legislation allows a Minister or subordinate

body to bring in detailed orders and commencement orders to give effect to the legislation, and some 400 to 600statutory instruments are passed each year. Many are of a technical nature. However, there are strict limits tothese powers, which according toCityview Press Ltd v. An Chomhairle Oiliuna [1980] IR 381 are"mere giving effect to principles and policies which are contained in the statute itself." Statutory instruments are "laid before"one or both Houses of the Oireachtas, and after a certain time if no objections are raised they becomes law. Alarge number of statutory instruments are made in relation to European legislation, by virtue of the EuropeanCommunities Act 1972 to enact European directives into Irish law.

Common LawCommon law is made up of hundreds of thousands of decisions delivered by the courts over centuries and through

the doctrine of precedent these decisions have binding force. Under the principle ofstare decisis the decisions ofearlier cases in superior courts will be followed by lower courts, and this hierarchy of courts acts to limit discretionof judges and leads to a coherent body of law.

The principle underlying the doctrine of binding precedent is that a decision made by a court in a case involving aparticular set of circumstances is binding on other courts in later cases, where the facts are the same or largelysimilar. However, no two cases are the same and different facts may lead to different outcomes in what appear tobe similar situations, previous similar cases can be distinguished.

The idea of judges making use of previously decided cases dates back to the formation of the common law by the

royal justices out of English customary law. English common law was introduced to Ireland following the Normanconquest in 1167. It was not until the 19th Century that the general principle of judicial consistency in decision-making developed into a more rigid system of binding precedents. The necessary conditions for such a systemdid not exist until the standard of law reporting was improved by the creation of the Council of Law Reporting in1865 and a hierarchy of courts was established by the Supreme Court of Judicature (Ireland) Act 1877.

Precedents may be either binding or persuasive. A binding precedent is one which a court must follow, while apersuasive precedent is one to which respect is paid, but it is not binding. Whether a court is bound by aprecedent will depend on the status of the court relative to the court which established the precedent. Again, thegeneral rule is that the decisions of superior courts are binding on lower courts. Therefore, the decisions of the

Supreme Court are binding on all lower courts, but decisions of the High Court are not binding on the SupremeCourt etc. A decision of an earlier court at the same level of the system is binding on a later court unless that courthas good reason not to follow it.

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European LawSince 1972, the law of the European Union has direct application in many areas of the Irish law. Article 29Bunreacht na hireann was amended to ratify the Treaty of Accession incorporating the European Treaties intoIrish law. The new Article 29.4.3 (as it was then) created a new source of law in Ireland - European Union law.European laws to facilitate the internal market and freedom of movement of goods, persons, services and capitalhave primary legislative force. European Union Law overrides Irish law and where existing Irish law is incompatiblewith European Union Law, the latter will take precedence. This only happens however in areas of EU competence.

This applies even with Irish constitutional provisions and no provision of the constitution can override acts ormeasures necessary under Community obligations. The EU Treaty and EU legislation (with the exception ofdirectives) have direct application in Ireland and citizens can rely on Community law in their national legal systems.The primary sources of European Union Law are the Treaties, followed by secondary legislation (regulations,directives and decisions, recommendations and opinions), and case law.

International LawIreland has signed and ratified a number of international treaties, which have the force of law at international level.However, because Article 29.6 of the Irish Constitution provides that no international agreement may form part ofthe domestic law of the State, unless the Oireachtas has made it part of Irish law (with the exception of European

Community law), there are few opportunities to draw upon the wealth of jurisprudence developed at internationallevel.

The major exception here is the Council of EuropesEuropean Convention on Human Rights and Fundamental Freedoms 1950 (ECHR). Any person residing in any of the ratifying States (including Ireland) can appeal directlyto the European Court of Human Rights at Strasbourg, after exhausting the national remedies.

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SOLUTION 2

Tutorial CommentsThis question is designed to see if students understand the differences between joint property and tenancy incommon in the area of real property. Students are expected to set out the general meaning of both before goingon to explain the concepts in more detail and differentiate between them. The answer therefore demands adescriptive content. Extra marks will be allocated where students are engage in a discussion about these

differences as this is very much the emphasis of the question; such an analysis will clearly show whether studentsgrasp the distinction between the two. Any reference to case law and relevant secondary legislation will also resultin extra marks being awarded.

SOLUTIONCo-ownership of property means that two or more persons have concurrent interests in the property. This meansthat they hold interest in the property at the same time. Joint tenancy and tenancy in common are the two majorforms of co-ownership. They share the fundamental characteristic of concurrent ownership and simultaneousentitlement to possession of the whole property. It is not the case that where there are two owners each owner isentitled to one half of the property. Each is entitled to possession of the entire property. One co-owner may not

therefore exclude another co-owner from any particular part of the property. Joint owners or co-owners in tenancyin common need not necessarily be in occupation of the property. They may rent the property and be in receipt ofincome by way of rent or profits from the property. If the property is sold, the joint owners or co-owners in tenancyin common share the proceeds from the sale.

Joint tenancy has two characteristics that distinguish it from a tenancy in common. These characteristics are theright of survivorship (ius accrescedni) and the four unities.

Right of SurvivorshipThis means that when one joint tenant dies, his undivided share in the land passes to the surviving joint tenants.

If there are three joint tenants in a piece of land and one dies, his share will pass to the other two and so on untileventually the last surviving tenant will be the outright owner of the land and will be free to dispose of it by sale orby will as he wishes. Joint tenants cannot defeat the right of survivorship by will. This means that where there arefor example three joint tenants, it would not be possible for either of the first two to die and as a result defeat theright of survivorship by leaving the property in their wills to somebody else. The last survivor, however, as theoutright owner, will be able to dispose of the property by will.

The principle of commorientes also applies in the case of a joint tenancy. Two or more persons are deemed to diesimultaneously if it is uncertain as to which died first. In this case, the heirs of the joint tenants succeed as jointtenants. InBradshaw v Toulmin [1784], it was held that"if one or more persons, being joint tenants, perish by the same blow, the estate would remain in joint tenancy in their respective heirs" . This rule is preserved by section 5of the Succession Act 1965.

The Four UnitiesIn order for a joint tenancy to exist, the four unities must also be in existence:(i) Unity of Possession: this means that each joint tenant is as much entitled to possession of every part of the

co-owned land as the other joint tenant(s). S/he may not physically delineate any part of the co-owned landas being his or hers to prevent the other(s) from taking an appropriate share of the rents and profitsderived from the land.

(ii) Unity of Interest: this follows from the proposition that each is wholly entitled to the whole. The interest oeach joint tenant must be the same in extent, nature and duration. Joint tenancy cannot therefore existbetween a leaseholder and a freeholder. It means that the full legal estate in jointly owned property cannot

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be conveyed to a third party without the active participation of all the joint tenants each of whom must puthis/her signature to the transfer document.

(iii) Unity of Title: this means that all joint tenants must derive their title from the same act or instrument.

(iv) Unity of Time: this means that interest of each joint tenant must vest at the same time.

Tenancy in CommonThe distinguishing features of a tenancy in common are that tenants hold land in undivided shares, there is noright of survivorship and only unity of possession is required.

Holding land in undivided sharesThis requirement does not mean that a tenant in common owns any particular part of the property. It means thatthe tenant owns a certain share in the property which has not (yet) been divided up. This means that two peoplecould each be entitled to one-half share in a piece of property or one could be entitled to a one-quarter share andthe other to a three-quarters share.

No right of survivorshipThere is no right of survivorship between tenants in common. The size of the share of each tenant is a fixedquantum which cannot be altered by the death of any other tenant in common. In the absence of the right ofsurvivorship, the share of each passes on death in accordance with the terms of his will or according to the rulesof intestate succession.

Only Unity of Possession is requiredUnity of possession means, as in the case of joint tenants, that each tenant in common is as much entitled as anyother tenant in common to the possession of the entire co-owned land. Each tenant has the right to exercise actsof ownership over the whole property subject, of course, to the qualification that, in so doing, he may not interfere

with the right of any other co-owner. As a general rule, no tenant in common has any right to demandcompensation in respect of the simultaneous enjoyment of the land by a fellow tenant in common except wherethe other has received"more than comes to his just share or proportion!"

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SOLUTION 3

Tutorial Comments

This question deals with the issue of professional negligence in the area of tort law. Students are expected to dealwith the relevant case law in the area of negligence and specify the additional rules that apply to professionalnegligence. The problem question is generally designed to test both students knowledge and their understandingof the issue, which will be evident from their application of the law to the facts of the problem question. Application

is therefore of utmost importance in a problem question and while it may just be a simple question of assertingthat the law would apply or not apply to the problem at hand, many students omit to do so and therefore fail toperform well in problem questions. Extra marks will be awarded for good application of the law to the problem athand.

SOLUTIONThis question deals with the issue of professional negligence. Under the common law of negligence, there are anumber of elements that must exist in order to establish negligence. These elements must also be shown in thecase of professional negligence. First, there must be a duty of care to protect others against unreasonable risk.Second, there must be a breach of that duty. Third, there must be loss or damage to the plaintiff and finally, theremust be a causal link between the breach of duty of care and the loss or damage suffered.

Clare will need to ensure that she is dealing with professional negligence in the first place. There has been nodefinitive definition of profession, but generally speaking, professions enjoy the characteristics of carrying outsome sort of specialised intellectual work, having duties to the client and the community, and a high social status.This being the case, the legal profession falls within the definition. Mr. Clever is certainly in the business ofproviding specialised legal advice, he owes a duty to Clare, and indeed the community at large, and no doubt hisprofession is of a high social status.

Clare has to show a number of things in order to prove professional negligence in respect to any legal advice shegot from Mr. Clever pertaining to the purchase of her property. Firstly, she would have to show that Mr. Cleverowed her a duty of care to protect her against unreasonable risk, including obviously defective title. She wouldthen have to show that the duty of care had been breached resulting in loss or damage to her (financial loss asshe cannot sell the house because she does not own it and yet paid for it herself twenty years ago) and she wouldhave to prove a causal link between the breach of duty and her resulting loss or damage. The fundamental testunderlying all of this is the test of the reasonable foreseeability and a question to be asked is whether the injurysuffered is of a type that ought to have been foreseen. Certainly, Mr. Clever should have carried out a propersearch as part of the conveyance, and not having done so, it is reasonably foreseeable that Clare does not ownthe house due to the defective title.

InBlyth v Birmingham Waterworks Co. (1856) 11 Exch 781, a definition of negligence was offered, when the courtheld that"negligence is the omission to do something which a reasonable man, guided upon those considerations which ordinarily regulate the conduct of human affairs, would do, or do something which a prudent and reasonable man would not do."

The duty of care and the neighbour principle were established inDonoghue v. Stevenson [1932] AC 562, wherethe Court stated that individuals"must take reasonable care to avoid acts or omissions which [they] can reasonably see would be liable to injure [their]neighbours."

The court went onto to define the concept of neighbour as a person so closely and directly affected by an act thatthe person responsible for that act ought reasonably to have held them in contemplation as being so affected whencarrying out the act or omission called into question. This definition denotes a relationship of proximity, and thistest is favoured in Ireland.

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In the Peabody case, it was held that it must be just and reasonable to impose a duty of care, and inFinlay v Murtagh [1979] IR 249, it was established that a solicitor owes a duty of care to his or her client. So there is nodoubt that Mr. Clever owes a duty of care to Clare. We must now establish if he in fact breached his duty. It isClares responsibility to ascertain that her duty was breached and that this has caused her injury. The test iswhether a reasonably careful man would have been aware of the defect in the circumstances. At the time ofcarrying out the conveyance, Mr. Clever was a recently qualified solicitor, so he ought to have been aware of thedefect in title. InByrne v McDonald, it was held that"the act or omission must be judged in light of the knowledge,

actual or imputed, which the plaintiff has, for if there is or should be no knowledge that the act or omission involves dangers, and then the plaintiff cannot be convicted of failing to take reasonable care. To every adult is imputed the knowledge of risks which the ordinary reasonable man may be assumed to have." When the negligence ofprofessional people is at issue, it is expected that such a professional person should show a fair and reasonableand competent degree of skill. This means that they must exercise due care when carrying out their profession; itdoes not mean that they must be 100 per cent right.

Other indicators of negligence include probability of injury (the greater the damages, the more likely a finding ofunreasonableness of behalf of Mr. Clever); gravity (where the potential injury is high the creation of the slightestrisk will amount to negligence); the social utility of the Mr. Clevers conduct (which would include an assessment

of the objective of his conduct) and the cost of eliminating the risk.

The question will arise as to whether Mr. Clever had an affirmative duty. He elected to perform the conveyanceand Clare relied on him to do so. He did so negligently and caused her damage and therefore he is liable. WhileClare suffered neither personal injury nor any injury to her property, she has suffered an economic loss andtherefore Mr. Clever is guilty of legal malpractice as inFinlay v Murtagh [1979] IR 249. There is a fiduciaryrelationship between solicitor and client. In theFinlay case, the plaintiff relied on the solicitors special skill andtrusted him to exercise due care. It would appear that Mr. Clever has not exercised due care, even though Clare,as his client relied on his special skill as a lawyer and trusted that he would exercise due care in relation to theprofessional work he carried out for her.

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SOLUTION 4

Tutorial Comments

Students are expected to deals with the issues of duress and undue influence in the area of contract law. Studentsare expected to identify the distinction between both. Extra marks will be awarded where students give practicalexamples of duress and undue influence. A further issue that students are expected to identify is whether there

can be undue influence between a husband and wife, given the nature of their relationshipSOLUTIONThis question deals with the situation where a person enters into a contract, which if not influenced by anotherperson, they probably would not have done. This means that the contract is made due to some external pressureor interference. In the law of contract, a contract will be voidable if made under duress or undue influence. If aperson can show that they were pressurised into signing a contract then the contract is void and cannot beenforced.

Duress covers a threat in other words where a person is threatened with some action unless they agree to enter

the contract. A contract made under duress will be voidable as there is no real agreement on behalf of the personforced into the contract. This means that the person subject to the threat will not be held or bound to the contract.Duress can also be expressed in terms of a person acting involuntarily as such.

The courts have extended the definition of the meaning of threat to beyond unlawful threats of physical violence.Any threat of a criminal nature will constitute duress, but the courts have also acknowledged situations ofeconomic duress. It now seems that any threat of an unlawful act, including a tort or a breach of contract can infact amount to duress. Where the threat is not of a criminal nature, there is a requirement that the personthreatened must prove that s/he has no alternative but to agree.

In terms of undue influence, there are two categories of undue influence presumed undue influence and actualundue influence. Both types of undue influence involve a situation where one of the parties to the contract is in aposition to influence the other person with the result that the second person enters into an agreement that may bedisadvantageous to them. In certain relationships, it is presumed that an element of influence exists and hencethe concept of presumed undue influence. Where no such relationship exists, the party attempting to get out ofthe contract will have to prove as a matter of fact that he was acting under the influence of the other party.

Presumed undue influence exists in relationships between the parent/child, doctor/patient, and solicitor/client butnot between a husband and wife. In these relationships, one person puts their trust and confidence in the otherand so is likely to act on the basis of what the other suggests without seeking advice from an independent third

party. In other instances, a relationship may develop over time in such a way that influence may be presumed for example between a banker and a customer.

Actual undue influence covers all situations that do not fit into the category of presumed undue influence. In asituation of actual undue influence, it is the burden of the person alleging influence to prove it. Actual undueinfluence, unlike presumed undue influence can exist between a husband and wife. The fundamental nature ofactual undue influence is similar to that of presumed undue influence the person influenced must have acted onthe basis of their trust in the person who has allegedly influenced them without turning to an independent thirdparty for advice.

Under both types of undue influence, it is not sufficient to just show influence the overall result must be that theperson influenced entered into an agreement that was manifestly disadvantageous to them. This is the test usedto determine if the influence has in fact been undue.

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SOLUTION 5

Tutorial Comments

This is a general, straightforward question designed to test students familiarity with and understanding of theUnfair Dismissals Act 1977 as amended. Issues of pertinence that students need to discuss include the application

of the act to employees and any exceptions; the application of the act in cases of unfair and constructive dismissal;and situations where a dismissal will be fair. Students are also expected to deal with what happens to an employeeonce he or she has been unfairly dismissed.

SOLUTIONThe Unfair Dismissals Act applies to those employees, working for an employer, under a contract of employmentwho have been dismissed. The term employee includes all employees, including agency employees, for a leasta years continuous service. Prior to the Protection of Employees (Part Time Workers) Act 2001, employees wouldhave to have worked a minimum of 8 hours a week (part time employees) to be covered by the Act. This is nolonger the case. The Unfair Dismissals Act does not apply to employees working outside the State unless the

employee is ordinarily resident in the State or domiciled in the State and whose employer is ordinarily resident inthe State or has principal place of residence in the State.

There are a number of exceptions under the Act. It specifically excludes civil servants employed under statute,fulltime officers of health boards, officers of VECs, independent contractors, close relatives of the employer whereworking in the family home or the family farm, members of the Defence Forces and the Garda Sochana. Likewise,persons employed under statutory apprenticeship contracts (for 6 months after commencement of apprenticeshipor within a month of completing apprenticeship) are excluded. There is a further exception for in the case of fixedterm or fixed purpose contracts where the dismissal takes place when the contract ends and where the contractspecifically states that the Act will not apply, is in writing and has been signed by both parties. The Act will not

apply where a second contract is signed within 26 weeks of the first contract expiring where the RightsCommissioner believes it to done to avoid the scope of the Act. The one years continuous service will not applywhere an action is taken for unfair dismissal arising out of the employees trade union activities, or for a breach ofthe Maternity, Adoptive, or Parental Leave Acts, or for matters relating to the Carers Leave Act 2001 or NationalMinimum Wage Act 2000. Those employees under 16 years of age or over 66, or those that have reached thenormal retirement age for that profession (if under 66) are not covered by the Act. Also excluded from the scopeof the Acts are employers who are subject to diplomatic immunity. In terms of the types of contract of employmentcovered, the contract can be written or oral.

The Act applies in the case of an unfair dismissal. Dismissal can take the form of actual dismissal (by the employer

with notice); summary dismissal (by the employer without notice); constructive dismissal, (must be shown by theemployee to be dismissal) or by non-renewal of fixed term or specified purpose of the contract or by dismissal byreason of a lockout or strike.

Under section 6 of the Act, a dismissal will be deemed to be unfair unless having regard to all the circumstancesthere were substantial ground justifying the dismissal. The Act provides situations where a dismissal cannot be justified and also provides the substantial grounds that will justify a dismissal.

Unfair grounds of dismissal include trade union membership or activities, religious or political views, civil orcriminal proceedings, race, colour, sexual orientation, age, membership of the travelling community, pregnancy,

maternity, adoption, parental leave, or force majeure leave. Other unfair grounds include unfair procedures. Inbringing an action of dismissal against an employee and employer must make use of fair procedures.

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Fair grounds of dismissal include incapability, qualifications, incompetence, conduct, and redundancy (if fairlyselected). Incapability refers to the physical or mental ability to carry out a job. It arises in cases of prolongedabsence, regular or recurrent absence, or total disability.

Employees can be dismissed for their conduct, including violence, alcohol abuse in the workplace,insubordination, clocking offences (where there is clear misconduct and a breach of trust), theft, acting indeliberate conflict to the interests of the employer (there is a duty not to compete with the employer and not to

divulge confidential information or trade secrets) and abuse of sick pay schemes, e.g. working for someone elsewhen on sick leave.

As for dismissal for conduct outside the workplace, a ratio must be established between the seriousness of theoffence and the status of the employee and the trust that the employee holds. Regard must be had to the natureof the offence, its frequency and how it will affect the employees position within the workplace.

The redress available for unfair dismissal includes reinstatement, reengagement, and compensation.

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SOLUTION 6

Tutorial Comments

The purpose of this question is to determine if students can identify and explain the various ways in which acontract of agency can be created between an agent and a principal. Students are expected to set out the purposeof an agency contract and identify the doctrine of privity as well as outlining that agency can occur by express

appointment, by ratification, by estoppel, by cohabitation and by necessity in their introduction, before going on todeal with each in more detail. Additional marks will be allocated if students are able to refer to any relevant caselaw or give practical examples of the different means to create an agency relationship.

Solution

Agency is a legal relationship which arises where one person, the agent, is appointed to act as the representativeof another, the principal. It has a vital role in commercial activity - commerce would come to a standstill ifbusinessmen could not employ brokers and had to do everything themselves.

The role of the agent is to negotiate and conclude contracts on behalf of the principal. The principal may havevarious reasons for appointing an agent; the agent may have special skills or expertise; he may have specialknowledge of a particular market or area or the principal may be too busy to make the contract personally.

As a general rule, the doctrine of privity of contract prevents a person from acquiring rights or liabilities under acontract unless he is a party to the contract. Agency is an exception to this rule of privity. This is because the agentconcludes the contract on behalf of the principal and therefore the agent is treated as if he were the principal. Theprincipal then steps into the shoes of the agent, and he becomes a party to the contract via the agent.

There is no single definition of the concept of agency. An agent is in general one who can be recognised in law as

having the power to affect the legal rights and liabilities and commercial relationships of another. An agent haspower to bind his principal in five situations: by express appointment, by ratification, by estoppel, by cohabitation,and by necessity.

Agency by express appointment arises where the agent is appointed either orally or in writing. He then has whatis known as actual authority. As a general rule no formalities are required. However, if the agent will be requiredto execute a deed, he must be appointed by deed. This is known as the power of attorney.

Where the agent is expressly appointed, the scope of his authority will depend on the terms of his appointment.As well as having authority to do whatever is expressly set out in the appointment, the courts may also imply terms

into the agency agreement. The agent's express authority may therefore be expanded by implied authority. Forexample, if the principal asks the agent to lease out his house for him, the agent will have express authority tosign the lease on behalf of the principal. He will also have authority to do whatever is reasonably necessary tocarry out the principal's instructions. Therefore he will have implied authority to advertise that the house is to letand to show prospective tenants around the house.

An agent may sometimes act without any authority from his principal. The principal may later adopt these actsdone in his name by ratifying them. If he does ratify the actions, the result is as if the agent has always beenauthorised; in other words, the ratification operates retrospectively. This is agency by ramification. There arefurther requirements that must be fulfilled in this type of agency. The agent must state that he is contracting on

behalf of the principal. At the time the agent is making the contract he must state that he is acting on behalf of andintending to bind the principal. Usually the agent will be required to name the principal, but it will be sufficient if theprincipal is identifiable in the circumstances. According to Wilkes J. inWatson v. Swann (1862)"it is not necessary

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that he should be named but there must be such a description of him as shall amount to a reasonable description of the person intended to be bound by the contract. At the time the contract was made, the principal must havebeen competent. This means that the principal must have had the capacity to enter the contract at the time it wasmade. Therefore, if the principal were a minor or lunatic or an enemy alien at the time the contract was made, hemay not ratify it, even if he does have capacity at the time of ratification. Finally, there must be an act capable ofratification. If the contract is void ab inito, there is nothing to ratify.

In agency by estoppel, the principal is bound by the authorised acts of his agent because he consented to themand consented to be bound. He may also be bound by acts done by another person on his behalf without hisconsent, or even acts done in breach of an express prohibition if his words and actions give the impression thathe has authorised them. This type of authority is known as apparent or ostensible authority. The followingelements are necessary for the creation of agency by estoppel: there must be a representation that the "agent"has authority, the representation must be made by the principal or by someone acting on his behalf and therepresentation must be relied upon by the party alleging the apparent authority.

In relation to presumed agency in the case of cohabitation, where a woman is living with a man, there is apresumption that she is entitled to pledge his credit for necessaries. The liability of the husband is subject to a

proviso that the goods are suitable and reasonable in kind and quantity. The only way out for the husband is torebut the presumption that his wife had any authority to pledge his credit.

Agency of necessity occurs in circumstances where a person acts in an emergency to preserve the property orinterests of another and may therefore be treated as an agent of that person, with the result that his action will bedeemed to be authorised even if no actual authority were given. Agency of necessity only arises in extremecircumstances; there must be an actual and definite commercial necessity for the agent's actions. The agent mustshow that he has satisfied four requirements: there has been an emergency; as a result, it was impossible toobtain instructions from the principal; the agent acted bona fide in the interests of the principal, rather than in hisown interests and the agent acted reasonably in the circumstances.

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SOLUTION 7

Tutorial CommentsThe purpose of this question is to test students knowledge in relation to the general operation of the EuropeanCommunity/Union by asking them to explain what the functions of the two institutions are. Students are expectedto identify these institutions at the outset and deal with their functions in the main body of their answer. Extra markscan be achieved by identifying any relevant EC Treaty provisions.

SOLUTIONThe European Community/Union has a number of bodies that help it to function. The European Parliament is thebody that represents the citizens of the Community. The Council of Ministers is the body that represents thegovernments of the Member States. The European Commission is a body composed of independent MemberState nominees, who represent the Community interest. Article 7 EC Treaty provides for these institutions.

The European CommissionThe Commission is provided for in Articles 211-219 EC Treaty. The Commission is the ECs nearest equivalent ofthe executive or national government and civil service. It represents the interests and ambitions of the EC as

opposed to the national member governments. Each Commissioner has to be totally independent of his or herhome state. The Commissioners owe their allegiance only to the Commission and under Article 213(2) EC Treaty;they must neither seek nor take instructions from any government or from any other body. They are notrepresentatives of the Member State governments. The Commission is the institution that protects the interests ofthe Community. It has five main functions.

1. Policy-maker and Co-ordinator: the Treaty of Rome is very much a framework Treaty and is very generalin its aims. It is the responsibility of the Community legislators to add in the necessary legislation in mostcircumstances on a proposal from the Commission. So, the Commission has the power to initiate and setthe tone of Community legislation.

2. Decision-maker: this is usually the function of the Council of Ministers, who makes its decisions on thebasis of proposals from the Commission, but the Commission can take legislative decisions in twocircumstances: where the Treaty provides the Commission with the power to adopt legal acts and where theCommission exercises delegated power under Article 211 EC Treaty.

3. Advisory body: in certain circumstances under the Treaty, the Commissions opinion must be soughtbefore action can take place.

4. Law enforcer: under Article 10 EC Treaty, the MS governments are legally obliged to comply with their

obligations of membership. If they fail to do so, the Commission can take them before the European Courtof Justice under Article 226 EC Treaty. In addition, in the area of competition law, the Council of Ministershas delegated responsibility for the formulation and enforcement of competition law to the Commissionunder Regulation 1/2003.

5. Community Representative: the Commission represents the Community on the international stage andacts as a negotiator e.g. GATT/WTO negotiations. While the Commission acts as negotiator, it is the Councilof Ministers that has the ultimate power to conclude international agreements.

The Council of Ministers (The Council of the European Union)

This is the body that has the greatest direct involvement by the national Member State governments and it iswhere their interests find the most expression. Membership of the Council is not fixed or limited to one particular

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government minister; it fluctuates depending on the issue under discussion. In the case of a general Councilmeeting, it is the foreign ministers that meet. In the case of a specific area, then the national ministers withresponsibility for that area in the home state meet. So for example, if the matter for discussion or review wereagriculture, then it would be the Ministers for Agriculture from the fifteen Member States that would sit at theCouncil meeting.

Under Article 202 EC Treaty, the Council is to ensure that the objectives set out in the Treaty are attained. The

Council of Ministers is also the main decision-making institution of the EU. It is the final decision-maker in relationto Community legislation. It can usually only act on a proposal from the Commission. So, the Commissionproposes and the Council disposes. The Council exercises this power in conjunction with the EuropeanParliament. The Council of Ministers concludes agreements with third countries and along with the EuropeanParliament, the Council of Ministers decides on the Communitys budget.

The European Council (Heads of Government/State)In December 1974, it was agreed that regular meetings of heads of government should take place to deal withEuropean Community law and political co-operation.

Article D (now Article 4) TEU states that the European Council shall provide the Union (not just the Community)with the necessary impetus for its development and shall define the generalpolitical guidelines for thatdevelopment. It is a form of last resort. If no agreement can be reached at the Council of Ministers, the issue willbe held over for the Heads of Government to decide.

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