Question

WDR, LLC, hires Amelia to act as its agent to buy a certain tract of land from Ethan for $2,500 per acre. WDR, LLC does not want Ethan to know that it is the principal or that Amelia is its agent. WDR wants to use the land to erect an establishment that sells alcohol, and believes that Ethan may not sell the land for that purpose, or may demand a premium price if he knows that WDR is the buyer. Amelia makes the purchase, signing only her name to the contract as the buyer and not disclosing to Ethan the agency relationship. The transfer of the deed is to occur on February 1. Ethan learns of WDR’s identity on January 15.

1. Can Ethan legally refuse to deed the property on February 1? Explain.
2. If WDR only authorized Amelia to purchase the land for $2,400 per acre, but she contracted with Ethan to purchase the land for $2,500, could WDR avoid the transaction with Ethan? Explain.

Answer 1

When a person acquires or owns an immovable proprty, the law also gives him/her the right to use, lease, sell, rent or transfer/gift of the land. The owner also has the right to mortgage his immovable property as a security for loans. However, there are some laws which restrict the type of use of land can be put to, e.g., a land may be used only for residential or commercial purposes to prevent haphazard/unorganised growth of cities or towns. Some laws like the Registration Act 1908, also lays down provisions governing registration of property transactions so as to keep proper records of Ownwership of Property in public domain.

There are essential elements which defines a term valid contract i.e.,

• Proper offer and Proper Acceptance
• Lawful Consideration
• Competent to contract or capacity
• Free consent
• Lawful object and agreement
• Agreement not declared Void or illegal
• Intention to create Legal relationship

In the given case following essential elements are missing which makes the contarct Voidable and also Ethan legally refuse to deed the property on those basis:

1. Free Consent: "Two or more person are said to be consented when they agree upon the same thing in the same senses. A consent is said to be free when it is not caused by the coercion or undue influence or fraud or misrepresentation or mistake ".WDR, LLC does not want Ethan to know that it is the principal or that Amelia is its agent as WDR believes that Ethan may not sell the land i.e., not agreed upon the same thing in same senses.
2. Lawful object and agreement: The object of the agreement must not be illegal or unlawful. In this case WDR wants to use the land to erect an establishment that sells alcohol that is illegal.
3. Agreement not declared Void or illegal: Agreements which have been expressly declared void or illegal by law are not enforceable at law, hence they do not constitute a valid contract.
4. Intention to create Legal relationship: There must be intention to create legal relationship between them if there is no such intention on the part of the parties there is no contract between them; agreements of a social or domestic nature do not contemplate legal relationship; as such they are not contracts. In this case Amelia makes the purchase, signing only her name to the contract as the buyer and not disclosing to Ethan the agency relationship i.e., no intention to create legal relationship.

Hence, Ethan can legally refuse to deed the property on February 1 as he learns of WDR's identity before entering into a contract.

If WDR only authorized Amelia to purchase the land for $2,400 per acre, but she contracted with Ethan to purchase the land for $2,500, then in this case WDR could avoid the transaction with Ethan as his agent Amelia Charges extra Consideration against the consideration decided by WDR to make extra profit for her own in addition to Commission Income.