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THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN IRELAND

LEGAL FRAMEWORK
FORMATION 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 purchasing
a property. Ten years later, Clare decides to sell her property, but to her horror discovers that there is a
defect in the title, which means that she never actually owned the property in the first place. Clare is
distraught 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 FRAMEWORK
FORMATION I EXAMINATION - AUGUST 2005

SOLUTION 1

Tutorial Comments
The aim behind this question is to examine students’ knowledge of the various sources of law in Ireland, and to
explain what these sources are in detail. Students are expected to engage in a descriptive type answer. The
subject matter of the question is relatively straightforward. Students should set out and explain the general sources
of law. While the question pertains to Irish law as such, students are also expected to identify European Law and
indeed international law as forming sources of law in the Irish jurisdiction. Extra marks will be awarded where
students 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 hÉireann, case law, statutes/legislation,
European and international law. In addition to these sources of law, the rule of law remains the bedrock of the
whole 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 principles
of law that are applicable in that system. A lawyer must be familiar with these sources and know where to find them
in order to find the relevant law which is applicable to problems with which they are presented. In addition, lawyers
must know exactly where different rules fit into the overall scheme and in the case of a conflict between rules and
legal principles, they must know which will take precedence. There is a hierarchical system of laws in the Irish
legal 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 hÉireann 1937 (The Irish Constitution)
Legislation or statute Law
Common Law
European Community Law
International Law

Bunreacht na hÉireann 1937


The Constitution is the most fundamental source of law in this jurisdiction. All Irish laws are derived from the
Constitution 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 of
the jurisdiction and so it enjoys a higher legal status than all other national laws. If legislation does not comply with
the 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 the
relationship between these institutions by setting out the balance of power between them. The Constitution does
this by means of the separation of powers between the three branches of government – the legislature, the
executive and the judiciary. The Constitution also regulates the relationship between these organs of government
and the citizens of Ireland.

In addition to setting out the balance of power between the organs of government, the Constitution also contains
provisions 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 legislation
Article 15.2 of Bunreacht na hÉireann 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 Oireachtas
are known as primary legalisation and have to go through both houses of parliament, the Dáil and the Seanad.
Each act or statute must be compatible with the Constitution, and may be referred to the Supreme Court by the
President to judge on the compatibility of any particular Bill. Article 25 of Bunreacht na hÉireann 1937 states that
all 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. There
are then subsections, and paragraphs.

In addition to primary legislation, secondary legislation can be created in Ireland by means of regulatory orders or
statutory instruments. These do not go through both houses of the Oireachtas but are introduced by government
ministers. A statutory 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 600
statutory instruments are passed each year. Many are of a technical nature. However, there are strict limits to
these powers, which according to Cityview 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. A
large number of statutory instruments are made in relation to European legislation, by virtue of the European
Communities Act 1972 to enact European directives into Irish law.

Common Law
Common 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 of stare decisis the decisions of
earlier cases in superior courts will be followed by lower courts, and this hierarchy of courts acts to limit discretion
of 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 a
particular set of circumstances is binding on other courts in later cases, where the facts are the same or largely
similar. However, no two cases are the same and different facts may lead to different outcomes in what appear to
be 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 Norman
conquest 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 system
did not exist until the standard of law reporting was improved by the creation of the Council of Law Reporting in
1865 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 a
persuasive precedent is one to which respect is paid, but it is not binding. Whether a court is bound by a
precedent will depend on the status of the court relative to the court which established the precedent. Again, the
general 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 Supreme
Court etc. A decision of an earlier court at the same level of the system is binding on a later court unless that court
has good reason not to follow it.

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European Law
Since 1972, the law of the European Union has direct application in many areas of the Irish law. Article 29
Bunreacht na hÉireann was amended to ratify the Treaty of Accession incorporating the European Treaties into
Irish 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 capital
have primary legislative force. European Union Law overrides Irish law and where existing Irish law is incompatible
with 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 or
measures necessary under Community obligations. The EU Treaty and EU legislation (with the exception of
directives) 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 Law
Ireland 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 of
the 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 international
level.

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

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SOLUTION 2

Tutorial Comments
This question is designed to see if students understand the differences between joint property and tenancy in
common in the area of real property. Students are expected to set out the general meaning of both before going
on to explain the concepts in more detail and differentiate between them. The answer therefore demands a
descriptive 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 students
grasp the distinction between the two. Any reference to case law and relevant secondary legislation will also result
in extra marks being awarded.

SOLUTION
Co-ownership of property means that two or more persons have concurrent interests in the property. This means
that they hold interest in the property at the same time. Joint tenancy and tenancy in common are the two major
forms of co-ownership. They share the fundamental characteristic of concurrent ownership and simultaneous
entitlement to possession of the whole property. It is not the case that where there are two owners each owner is
entitled 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 tenancy
in common need not necessarily be in occupation of the property. They may rent the property and be in receipt of
income by way of rent or profits from the property. If the property is sold, the joint owners or co-owners in tenancy
in common share the proceeds from the sale.

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

Right of Survivorship
This 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 until
eventually the last surviving tenant will be the outright owner of the land and will be free to dispose of it by sale or
by will as he wishes. Joint tenants cannot defeat the right of survivorship by will. This means that where there are
for example three joint tenants, it would not be possible for either of the first two to die and as a result defeat the
right of survivorship by leaving the property in their wills to somebody else. The last survivor, however, as the
outright 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 die
simultaneously if it is uncertain as to which died first. In this case, the heirs of the joint tenants succeed as joint
tenants. In Bradshaw 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 5
of the Succession Act 1965.

The Four Unities


In 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 land
as being ‘his’ or ‘hers’ to prevent the other(s) from taking an appropriate share of the rents and profits
derived from the land.

(ii) Unity of Interest: this follows from the proposition that each is wholly entitled to the whole. The interest of
each joint tenant must be the same in extent, nature and duration. Joint tenancy cannot therefore exist
between 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 put
his/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 Common
The distinguishing features of a tenancy in common are that tenants hold land in undivided shares, there is no
right of survivorship and only unity of possession is required.

Holding land in undivided shares


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

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

Only Unity of Possession is required


Unity of possession means, as in the case of joint tenants, that each tenant in common is as much entitled as any
other tenant in common to the possession of the entire co-owned land. Each tenant has the right to exercise acts
of 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 demand
compensation in respect of the simultaneous enjoyment of the land by a fellow tenant in common except where
the 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 deal
with the relevant case law in the area of negligence and specify the additional rules that apply to professional
negligence. The problem question is generally designed to test both students’ knowledge and their understanding
of 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 asserting
that the law would apply or not apply to the problem at hand, many students omit to do so and therefore fail to
perform well in problem questions. Extra marks will be awarded for good application of the law to the problem at
hand.

SOLUTION
This question deals with the issue of professional negligence. Under the common law of negligence, there are a
number of elements that must exist in order to establish negligence. These elements must also be shown in the
case 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, there
must 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 no
definitive definition of ‘profession’, but generally speaking, professions enjoy the characteristics of carrying out
some 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 of
providing specialised legal advice, he owes a duty to Clare, and indeed the community at large, and no doubt his
profession 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 she
got from Mr. Clever pertaining to the purchase of her property. Firstly, she would have to show that Mr. Clever
owed her a duty of care to protect her against unreasonable risk, including obviously defective title. She would
then have to show that the duty of care had been breached resulting in loss or damage to her (financial loss as
she cannot sell the house because she does not own it and yet paid for it herself twenty years ago) and she would
have to prove a causal link between the breach of duty and her resulting loss or damage. The fundamental test
underlying all of this is the test of the reasonable foreseeability and a question to be asked is whether the injury
suffered is of a type that ought to have been foreseen. Certainly, Mr. Clever should have carried out a proper
search as part of the conveyance, and not having done so, it is reasonably foreseeable that Clare does not own
the house due to the defective title.

In Blyth v Birmingham Waterworks Co. (1856) 11 Exch 781, a definition of negligence was offered, when the court
held 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 in Donoghue v. Stevenson [1932] AC 562, where
the 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 that
the person responsible for that act ought reasonably to have held them in contemplation as being so affected when
carrying out the act or omission called into question. This definition denotes a relationship of proximity, and this
test 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 in Finlay v
Murtagh [1979] IR 249, it was established that a solicitor owes a duty of care to his or her client. So there is no
doubt that Mr. Clever owes a duty of care to Clare. We must now establish if he in fact breached his duty. It is
Clare’s responsibility to ascertain that her duty was breached and that this has caused her injury. The test is
whether a reasonably careful man would have been aware of the defect in the circumstances. At the time of
carrying out the conveyance, Mr. Clever was a recently qualified solicitor, so he ought to have been aware of the
defect in title. In Byrne 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 of
professional people is at issue, it is expected that such a professional person should show a fair and reasonable
and competent degree of skill. This means that they must exercise due care when carrying out their profession; it
does 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 of
unreasonableness of behalf of Mr. Clever); gravity (where the potential injury is high the creation of the slightest
risk will amount to negligence); the social utility of the Mr. Clever’s 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 conveyance
and Clare relied on him to do so. He did so negligently and caused her damage and therefore he is liable. While
Clare suffered neither personal injury nor any injury to her property, she has suffered an economic loss and
therefore Mr. Clever is guilty of legal malpractice as in Finlay v Murtagh [1979] IR 249. There is a fiduciary
relationship between solicitor and client. In the Finlay case, the plaintiff relied on the solicitor’s special skill and
trusted 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 the
professional 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. Students
are expected to identify the distinction between both. Extra marks will be awarded where students give practical
examples 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 relationship

SOLUTION
This question deals with the situation where a person enters into a contract, which if not influenced by another
person, they probably would not have done. This means that the contract is made due to some external pressure
or interference. In the law of contract, a contract will be voidable if made under duress or undue influence. If a
person can show that they were pressurised into signing a contract then the contract is void and cannot be
enforced.

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 person
forced 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 of
economic duress. It now seems that any threat of an unlawful act, including a tort or a breach of contract can in
fact amount to duress. Where the threat is not of a criminal nature, there is a requirement that the person
threatened 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 actual
undue influence. Both types of undue influence involve a situation where one of the parties to the contract is in a
position to influence the other person with the result that the second person enters into an agreement that may be
disadvantageous to them. In certain relationships, it is presumed that an element of influence exists and hence
the concept of presumed undue influence. Where no such relationship exists, the party attempting to get out of
the 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 but
not between a husband and wife. In these relationships, one person puts their trust and confidence in the other
and 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 a
situation of actual undue influence, it is the burden of the person alleging influence to prove it. Actual undue
influence, unlike presumed undue influence can exist between a husband and wife. The fundamental nature of
actual undue influence is similar to that of presumed undue influence – the person influenced must have acted on
the basis of their trust in the person who has allegedly influenced them without turning to an independent third
party for advice.

Under both types of undue influence, it is not sufficient to just show influence – the overall result must be that the
person influenced entered into an agreement that was manifestly disadvantageous to them. This is the test used
to 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 the
Unfair 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 employee
once he or she has been unfairly dismissed.

SOLUTION
The Unfair Dismissals Act applies to those ‘employees, working for an employer, under a contract of employment
who have been dismissed’. The term ‘employee’ includes all employees, including agency employees, for a least
a year’s continuous service. Prior to the Protection of Employees (Part Time Workers) Act 2001, employees would
have to have worked a minimum of 8 hours a week (part time employees) to be covered by the Act. This is no
longer 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 in
the 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 where
working in the family home or the family farm, members of the Defence Forces and the Garda Síochana. Likewise,
persons employed under ‘statutory’ apprenticeship contracts (for 6 months after commencement of apprenticeship
or within a month of completing apprenticeship) are excluded. There is a further exception for in the case of fixed
term or fixed purpose contracts where the dismissal takes place when the contract ends and where the contract
specifically 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 Rights
Commissioner believes it to done to avoid the scope of the Act. The one year’s continuous service will not apply
where an action is taken for unfair dismissal arising out of the employee’s trade union activities, or for a breach of
the Maternity, Adoptive, or Parental Leave Acts, or for matters relating to the Carer’s Leave Act 2001 or National
Minimum Wage Act 2000. Those employees under 16 years of age or over 66, or those that have reached the
normal retirement age for that profession (if under 66) are not covered by the Act. Also excluded from the scope
of the Acts are employers who are subject to diplomatic immunity. In terms of the types of contract of employment
covered, 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 the
employee to be dismissal) or by non-renewal of fixed term or specified purpose of the contract or by dismissal by
reason 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 circumstances
there 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 or
criminal 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. In
bringing 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 fairly
selected). Incapability refers to the physical or mental ability to carry out a job. It arises in cases of prolonged
absence, 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 in
deliberate 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 else
when on sick leave.

As for dismissal for conduct outside the workplace, a ratio must be established between the seriousness of the
offence and the status of the employee and the trust that the employee holds. Regard must be had to the nature
of the offence, its frequency and how it will affect the employee’s 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 a
contract of agency can be created between an agent and a principal. Students are expected to set out the purpose
of 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 to
deal with each in more detail. Additional marks will be allocated if students are able to refer to any relevant case
law 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 representative
of another, the principal. It has a vital role in commercial activity - commerce would come to a standstill if
businessmen 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 have
various reasons for appointing an agent; the agent may have special skills or expertise; he may have special
knowledge 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 a
contract unless he is a party to the contract. Agency is an exception to this rule of privity. This is because the agent
concludes the contract on behalf of the principal and therefore the agent is treated as if he were the principal. The
principal 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 has
power 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 what
is known as actual authority. As a general rule no formalities are required. However, if the agent will be required
to 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. For
example, if the principal asks the agent to lease out his house for him, the agent will have express authority to
sign the lease on behalf of the principal. He will also have authority to do whatever is reasonably necessary to
carry out the principal's instructions. Therefore he will have implied authority to advertise that the house is to let
and to show prospective tenants around the house.

An agent may sometimes act without any authority from his principal. The principal may later adopt these acts
done in his name by ratifying them. If he does ratify the actions, the result is as if the agent has always been
authorised; in other words, the ratification operates retrospectively. This is agency by ramification. There are
further 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 and
intending to bind the principal. Usually the agent will be required to name the principal, but it will be sufficient if the
principal is identifiable in the circumstances. According to Wilkes J. in Watson 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 have
been competent. This means that the principal must have had the capacity to enter the contract at the time it was
made. Therefore, if the principal were a minor or lunatic or an enemy alien at the time the contract was made, he
may not ratify it, even if he does have capacity at the time of ratification. Finally, there must be an act capable of
ratification. 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 them
and consented to be bound. He may also be bound by acts done by another person on his behalf without his
consent, or even acts done in breach of an express prohibition if his words and actions give the impression that
he has authorised them. This type of authority is known as apparent or ostensible authority. The following
elements 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 the
representation 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 a
presumption 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 to
rebut 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 or
interests of another and may therefore be treated as an agent of that person, with the result that his action will be
deemed to be authorised even if no actual authority were given. Agency of necessity only arises in extreme
circumstances; there must be an actual and definite commercial necessity for the agent's actions. The agent must
show that he has satisfied four requirements: there has been an emergency; as a result, it was impossible to
obtain instructions from the principal; the agent acted bona fide in the interests of the principal, rather than in his
own interests and the agent acted reasonably in the circumstances.

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SOLUTION 7

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

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

The European Commission


The Commission is provided for in Articles 211-219 EC Treaty. The Commission is the EC’s nearest equivalent of
the 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 her
home 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 not
representatives of the Member State governments. The Commission is the institution that protects the interests of
the 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 general
in its aims. It is the responsibility of the Community legislators to add in the necessary legislation in most
circumstances on a proposal from the Commission. So, the Commission has the power to initiate and set
the tone of Community legislation.

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

3. Advisory body: in certain circumstances under the Treaty, the Commission’s opinion must be sought
before 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 Court
of Justice under Article 226 EC Treaty. In addition, in the area of competition law, the Council of Ministers
has delegated responsibility for the formulation and enforcement of competition law to the Commission
under Regulation 1/2003.

5. Community Representative: the Commission represents the Community on the international stage and
acts as a negotiator e.g. GATT/WTO negotiations. While the Commission acts as negotiator, it is the Council
of 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 is
where 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 Council
meeting, it is the foreign ministers that meet. In the case of a specific area, then the national ministers with
responsibility for that area in the home state meet. So for example, if the matter for discussion or review were
agriculture, then it would be the Ministers for Agriculture from the fifteen Member States that would sit at the
Council 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 relation
to Community legislation. It can usually only act on a proposal from the Commission. So, the Commission
proposes and the Council disposes. The Council exercises this power in conjunction with the European
Parliament. The Council of Ministers concludes agreements with third countries and along with the European
Parliament, the Council of Ministers decides on the Community’s 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 with
European 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 general political guidelines for that
development. It is a form of last resort. If no agreement can be reached at the Council of Ministers, the issue will
be held over for the Heads of Government to decide.

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