Question

Vega, an employee of Beacon Fun Stuff Pty Ltd knows that her employees Algol and Altair Rigel are looking to purchase a new transit van. On her way home one day she spots one parked on the side of the road. The owner, Charon is with the vehicle and he chats with Vega. Vega explains that her work Beacon Fun Stuff Pty Ltd is looking for a new van. The owner Charon agrees with Vega to sell the vehicle to Beacon Fun Stuff Pty Ltd for $28 000. He agrees to have it professionally cleaned and new tyres put on and that he will deliver it to Beacon Fun Stuff Pty Ltd.’s business premises in three days’ time. Charon does as he said he would and arrives at 9am on the appointed day. When he approaches Algol, she tells him she knows nothing about the agreement to purchase a vehicle form him. She confirms that Vega is an employee but not an agent for the company and that therefore there is no contract. Charon has spent $1500 on new tyres and lost a day’s work to deliver the vehicle. He claims that Vega is an agent and that therefore Altair and Algol are obligated to complete the purchase.

Required:

Advise the parties.

Answer 1

The agency relationship between an employee and employer is of fiduciary nature where the employee has to work in the interests of employer on its behalf, as per authority assigned to him /her. This authority must be in writing, failing which any such contract executed by the agent on behalf of the employer is voidable by principal on its discretion.

Firstly, it needs to be examined if the employee had the authority to enter into such contracts, duly endorsed and asisgned by the employer in writing. Secondly, even if such authority was assigned to her, a verbal contract for the purchase of a $28000 vehicle is not enforceable under statute of frauds as it is above $500.

In the light of the issues and facts, the contract is unenforceable in any case. Charon must have examined the credentials of the person and insisted the contract to be in writing. Since he did not take care of this, he is not entitled for any damages towards the changes he made to the vehicle.