First Principles of Business Law

7. An agent's relations with third parties

7.5. Performing contractual obligations through an agent

Read the facts below, and then answer the questions.

A, in Sydney, employs B as his agent in Melbourne 'to promote and obtain orders for' the products manufactured by A's company. As is the usual practice in this industry, when A receives orders obtained by B, he issues an invoice to the customer on which it is stated that payment should be made directly to A in Sydney. B is instructed not to receive payments on behalf of A. However, one day a customer tells B that he is going on an urgent overseas trip, and that she wants to quickly pay the amount of $1,000 that is owing on a previous order. The customer pays B in cash. B fails to pay this money to A.

1. Has the customer discharged her debt to A by paying the $1,000 to his agent B?

2. Suppose a principal owes money to a third party. The principal gives the money to their agent with instructions that it be paid to the third party. If the agent fails to make the payment as instructed, is the principal's obligation to the third party nevertheless discharged?