Cases For Week 9

1. Rich v Brookville Carriers

Pierce, the owner of a tractor, “leased” it to Brookville Company & drove it for business with Brookville only. Car
accident between Pierce & Rich while conducting Brookville business.
- IRAC
The issue is whether Brookville company has a vicarious liability when Pierce undergo car accident while
conducting Brookville Business
According to the rule of vicarious liability, employers may be held legally responsible for unauthorized torts
committed by their employees while acting within the scope of their employment. This is known as the
respondeat superior doctrine. If someone is hired as an employee, the employer must have the right to control.
This right exists when an employer has control over an employee’s work. Also, the employee must be paid by the
employer, and there should be a term of employment.
In this case, Pierce only drove a tractor while conducting Brookville business. He doesn’t have authority about
carrying goods on his own or use a tractor for other purposes.
So, Pierce was an employee of Brookville company and company has vicarious liability.

2. William & Stacey

William needed money and Stacey knew this. To help William, Stacey contracted to sell one of William’s paintings
to Courtney for $298. Later that day, Stacey told William about the contract with Courtney. William says nothing.
But he helps Stacey wrap the painting for delivery to Courtney. The next morning, a favorable news article about
William’s paintings dramatically increases the value of all his paintings. William now wants to argue that this
contract with Courtney is invalid. He argues that he never expressly authorized the contract with Courtney. Is
this contract legally binding between William and Courtney?
- IRAC
The issue is whether the contract between Courtney & William is legally binding when Stacey contracted with
Courtney without William’s expressed authority under the rule of ratification of agency.
Under the rule of ratification of agency, an agent’s unauthorized act can become a legally binding contract if it
is later ratified. To ratify a certain action, the principal must have the intention to ratify, and the agent must have
acted for the principal’s benefit. The principal should be fully informed about all material facts relating to the
contract and have the capability of authorizing the act.
In this case, Stacey worked for William and he knew about the deal between Stacey and Courtney. Also he was
capable not to authorize the deal but he didn’t. He even helps Stacey wrap the paintings.
In conclusion, the contract between Courtney and William is legally binding through ratification.

3. Daniels & Julian

Daniels and Julian are close friends. Both of them go to Werlein’s Music Store to open a credit account. With
Daniel’s authorization and in front of Daniels, Julian applies for credit using Daniels’s name and credit history.
Later, Julian goes to the music store without Daniels, and buys a TV under Daniels account, in installments.
Daniels sees the new TV and is told that it was charged to Daniels account at the music store. Daniels tells Julian
to “keep making payments.” Payments are late. Music store calls Daniels about this. Daniels says “money has
been sent, in the mail”. Later, Daniels calls the store asking for the “balance.” Four months later, Daniels tells the
music store that she had never “authorized the purchase of the TV” nor “ratified the purchase.” The music store
sues Daniels for the unpaid balance. Who pays?
- IRAC
The issue is whether Daniels has to pay the unpaid balance when Julian buys without Daniel’s expressed
authority under the rule of ratification of agency.
Under the rule of ratification of agency, an agent’s unauthorized act can become a legally binding contract if it
is later ratified. To ratify a certain action, the principal must have the intention to ratify, and the agent must have
acted for the principal’s benefit. The principal should be fully informed about all material facts relating to the
contract and have the capability of authorizing the act.
In this case, although Daniels didn’t authorize the purchase of TV set, the evidence shows that she ratified the
unauthorized signing of her name to the K for the purchase of the TV set by Julian. Instead of taking immediate
action to repudiate what had been done in her name, Daniels simply told Julian to continue making payments.
And when contacted by Store’s credit manager, she replied that a money order was in the mail.
In conclusion, Daniel’s conduct manifested a clear intention to ratify. So she is bound by the unauthorized
signature.
4. Question
Able, on behalf of Pix Corp., entered into a contract with Sky Corp., by which Sky agreed to sell computer
equipment to Pix. Able disclosed to Sky that she was acting on behalf of Pix. However, Able had exceeded her
actual authority by entering into the contract with Sky. If Pix wishes to ratify the contract with Sky, which of the
following statements is correct?
a. Pix must notify Sky that Pix intends to ratify the contract.
b. Able must have acted reasonably and in Pix’s best interest.
c. Able must be a general agent of Pix.
d. Pix must have knowledge of all material facts relating to the contract at the time it is ratified.

5. Question
If a store owner places Joe as manager and gives him a special nametag, customers may assume that Joe has
______ from the owner.
a. Apparent authority
b. Ratification powers
c. Special agency
d. Universal agency

6. Question
- Arlis left Marvin, a friend, at her fruit and vegetable stand with instructions only to tell customers that the stand
would open two hours late because of an emergency. While Arlis was gone, Marvin sold fruit and vegetables to
several customers. ____ - B
- Beaty signed a three-year written contract to manage Richard’s Tour Guide Agency in New York City. ____ - A
- Downs asked Erlman to purchase a stereo and charge it to her (Downs’s) account with her credit card. She asked
Erlman to pay no more than $750. Erlman charged a stereo that cost $1,000. When the bill arrived, Downs paid
it in full. ___ - C
à A. agency created by K / B. Agency created by appearance / C. Agency created by ratification

7. Question
Simmons, an agent for Jensen, has the express authority to sell Jensen’s goods. Simmons also has the express
authority to grant discounts of up to 5 percent of list price. Simmons sold Hemple a 10 percent discount. Hemple
had not previously dealt with either Simmons or Jensen. Which of the following courses of action may Jensen
properly take?
a. Seek to void the sale to Hemple.
b. Seek recovery of $50 from Hemple only.
c. Seek recovery of $50 from Simmons only.
d. Seek recovery of $50 from either Hemple or Simmons.

8. Platt v Agent
Platt inherited $50,000. She hired an agent and gave the agent specific instructions to invest the money in land.
Instead, the agent invested the money in stock, thinking that Platt would get a better return on her money. Is the
agent entitled to compensation?
A : No, agent’s act was not authorized by the Principal, Platt.

9. Paul v Plymouth – Apparent Authority

Paul was an optician in the city of Duluth and used only the products of Plymouth Company, a national
manufacturer of optical products. Plymouth has offices all throughout the country, except in the city of Duluth.
To increase business, Paul renovated his office and changed the sign to “Plymouth Optical Co.” Paul did business
this way for more than three years – advertising, paying bills with checks, listing in phone directories all under
the name “Plymouth Optical Co.” Plymouth had known Paul was doing this from the very beginning, but didn’t
see any reason to stop Paul from using the “Plymouth” name. Paul contracted with the city newspaper Duluth
Tribune to advertise his business. But when the advertising bill wasn’t paid, Duluth Tribune sued Plymouth
Optical Company for payment. Plymouth argues that it never authorized Paul to do business under the name,
nor authorized him to make a K with the newspaper
- IRAC
The issue is whether Paul was authorized by the Plymouth company to do business under their name when it
was not an agent of the principle under the rule of agency creation.
 According to the agency, it can be created expressly or impliedly by agreement, under the doctrine of apparent
authority or by operation of law. Actual authority may be express or implied by the parties’ conduct. A principal
may still be bound if the agent’s act is something an agent would usually have authority to do. An agent must
follow their principal’s instructions.
In this case, Paul had apparent authority which made it seem that he worked or acted for the company. This
principal made the company liable regardless of the fact that Paul was not authorized to act in such much manner
because the company did nothing to stop this apparent authority since they knew he was using their company
name for over 3 years.
Therefore, the Plymouth is liable to plaintiff as principal under the theory of apparent authority.

10. Principal vs Company – Secret Limitation

Principal told managers that they were not allowed to purchase blue jeans for the new season sale. A manager
purchased blue jeans from a company. The principal refused to pay the company because she explicitly told the
managers no blue jeans
- IRAC
The issue is whether the principal can refuse to pay the company when explicitly told the manager some
limitation under the rule of apparent authority and secret limitation.
According to the apparent authority, if there are acts that make 3rd parties believe that agent has authority,
agents can get apparent authority regardless of the fact. Due to the secret limitation of an agent’s authority, the
secret limitation given by a principal on the agent’s action cannot be binding on 3rd parties who are unaware of
them.
In this case, the principal’s expressly said “no blue jeans”, so the manager's actual authority to purchase denim
outfits then was explicitly prohibited. But an agent may still bind the principal through apparent authority. Here,
the principal placed the manager in the position of store manager, allowing each manager to make purchases
for each store. The principal thus created in the manager the appearance of authority (apparent authority) to
purchase clothing, including the blue jeans, and the company had no knowledge of the principal's "secret
directions" for the manager not to buy blue jeans. When the manager bought the blue jeans from the company,
the company believed that the manager was authorized to do so.
Therefore, the principal may be held liable under apparent authority given to her manager of the store.

11. Phil vs SK Broadband – Duty of Loyalty

Phil is a service representative for SK Broadband Company. At the request of a customer, Phil goes to the
customer’s home to inspect TV service that was not operating properly. Phil told the customer that the remote
control needed to be replaced and that the company price was 100,000 KRW. Phil also told the customer that he
sold remote controls as a side business and that he could give a more modern one for only 70,000 KRW. The
customer agreed to this price, and Phil, without SK Broadband's knowledge, sold the new remote control. Was
Phil disloyal to SK Broadband? Can the company demand any money from Philbin? Can SK Broadband fire Philbin?
- IRAC
The issue is whether SK Broadband demand money from Phil when he did his own business while working as a
service representative for SK Broadband under the rule of Duties and Liabilities of Agent.
According to the rule of the general duties owed by an Agent to a Principal, first duty of the agent to principal
is follow the Principal’s instructions. Failure to follow instructions might make the agent liable for damages to
the principal. Second duty is to use reasonable care diligence and skill. Standard is that which a reasonable
person would expect an agent of the type in question to exercise in the circumstances. Third duty is to act in the
Principal’s interest. Principal’s interest must be given priority over the agent’s own interest and there must be no
conflict of interest, as principal has placed his/her trust and confidence in the agent. Last duty is not to make
secret profits. In these kinds of circumstances, the agent is obliged to make full disclosure to the principal. They
must also show that the principal was fully aware of all the facts of the transaction and had given consent to it.
In this case, Phil tried to sell his remote controls by advertising his control is cheaper than SK Broadband’s one.
This means he promotes his interests rather than principal’s one. It can be a breach of duty of loyalty.
Therefore, SK Broadband can demand money from Phil and can fire him too.

12. Donald vs Ellison – Duty of Loyalty

Real estate broker, Donald, had a contract that gave him the exclusive right to sell Ellison’s farm for at least
$200,000. Donald told Ellison that a buyer was found. The buyer, Cora, agreed to pay $380,000 for the Ellison
farm. Donald told Ellison the sale price was $200,000 ▪Cora paid $380,000 however, and Donald kept the
difference. (380K-200K) When Ellison later found out, he sued Donald for the $180,000. Donald argues that he
did nothing wrong since he found a buyer who paid the amount that Ellison wanted.
- IRAC
The issue is whether Ellison can sue Donald when he kept the difference of money that earned from Ellison’s
farm under the rule of duties and liabilities of Agent.
According to the rule of duties and liabilities of the agent, agents are under a duty to obey all lawful instructions
of the principals. Also agents must be loyal to the principal. It can be breached when agents promote their own
interests over principals’.
In this case, Donald didn’t informed of all facts that he received from the buyer, Cora. It is a breach of the duties
and liabilities of agent. Also, he made secret profits by making money at the principal’s expense which is a conflict
of interest, and owes the principal. It can be a breach of duty of loyalty.
Therefore, Ellison can sue Donald for the breach of duties and liabilities of agent.

13. Question
Charles gave Halston authority to sell several household items for her for $175 in a garage sale. Halston sold the
items for $200 and kept the additional $25 for herself. May Charles recover the $25?
A. Yes, all money collected for the Principal must be turned over to the Principal.

14. Question
An example of a situation that would terminate an agency by operation of law would be
a. A postal strike
b. Nonpayment of the agent
c. Death of the agent
d. Nonrenewal of the agency contract.

15. Moore v Lera Development, Inc

William Moore, a fire chief for the city of San Francisco, suffered severe head injuries in a fall while fighting a fire.
Moore sued the building owner, Lera, for negligence. The attorneys for the parties held a conference and reached
a settlement at 5:15 p.m. Unknown to them, Moore had died at 4:50 p.m. on that day. Was the settlement
agreement binding?
A : No. Death of plaintiff make the settlement agreement invalid.

16. Sam v Nicole – Duty of Loyalty

Sam hires Nicole as an agent to sell a piece of his property. Sam states that the selling price should be at least
3000. Nicole discovers that because a shopping center is planned for the area of Sam’s property, the fair market
value of the property was at least 5000 or higher. Nicole forms a real estate partnership, Nicon Realty, with her
cousin Jon and enters into a contract on Sam’s behalf to sell the property to Nicon Realty for 3200. Nicole does
not reveal her interest in Nicon Realty. Nicon Realty later sells the property to an investor for 5500. Discuss what
action (if any) Sam could take against Nicole.
- IRAC
The issue is whether Nicole breached her duties to Sam in relation to the sale of Sam’s property to Nicon Realty
under the rule of duties and liabilities of principal and agent.
According to the rule of the general duties owed by an Agent to a Principal, first duty of the agent to principal
is follow the Principal’s instructions. Failure to follow instructions might make the agent liable for damages to
the principal. Second duty is to use reasonable care diligence and skill. Standard is that which a reasonable
person would expect an agent of the type in question to exercise in the circumstances. Third duty is to act in the
Principal’s interest. Principal’s interest must be given priority over the agent’s own interest and there must be no
conflict of interest, as principal has placed his/her trust and confidence in the agent. Last duty is not to make
secret profits. In these kinds of circumstances, the agent is obliged to make full disclosure to the principal. They
must also show that the principal was fully aware of all the facts of the transaction and had given consent to it.
In this case, the facts show that there is no question as to the existence of an agency relationship. Sam expressly
entered into an agreement with Nicole to sell, on his behalf, a piece of property. She had Express Actual Authority
and Implied Actual Authority to carry out that instruction. The main question to be resolved here is whether or
not Nicole breached any of her duties to Sam in the process of carrying out those instructions and exercising
her Actual Authority. Nicole did follow the principal’s instructions (sell the property for at least 3000).
However, Nicole (the agent) has a duty to act in the best interests of Sam (the principal). There should be no
conflict of her (the agent’s) interests with the principal’s interests. When Nicole did not disclose her direct
interest in Nicon Realty (the third party buyer) and made secret profits, these acts breached her duties to her
principal Sam. Specifically, Nicole as agent for Sam breached her duties to act in good faith, to have no conflict
of interest, and not to make a secret profit.
Since Nicole made a secret profit acting as an agent to Sam, she has to give to him the profit made on Nicon
Realty’s sale of the property, 2300.

17. ABC vs XYZ

Caroline was employed as a receptionist for ABC Corporation. Her desk was located at the entrance of the
corporate office and her duties were to greet customers, answer telephone calls, sort mail, and respond to
general requests for information about ABC. One day, while all the managers of ABC were out of the office, a
representative of XYZ Insurance Co. stopped by to solicit ABC as a new client. He told Caroline that he wanted to
find out whether ABC might be interested in canceling its present employee health insurance plan and adopting
a plan provided by XYZ. Although Caroline explained that none of the ABC managers were in the office, the XYZ
representative nevertheless described his company’s health insurance plan in detail. When Caroline reacted by
stating that XYZ’s plan sounded better than the current ABC plan, the XYZ representative immediately produced
a contract for Caroline to sign. Reluctantly, Caroline signed the contract accepting the offer to adopt XYZ’s
insurance plan. If XYZ seeks to enforce the contract against ABC, is ABC bound to the contract?
- IRAC
The issue is whether the insurance contract is binding on ABC Corp. when Caroline accepted the contract with
XYZ Insurance Co. under the rule of actual or apparent authority.
According to the rule of actual authority, it is the agent’s power or responsibility expressly or impliedly
communicated by the principal to the agent. Express actual authority includes the specific instructions and
directions from the principal. Implied actual authority is the agent’s ability to do whatever is reasonable to
assume that the principal wanted the agent to do to carry out his or her express actual authority. And according
to the apparent authority, it arises when the principal’s conduct, past dealings, or communications cause a 3rd
party to reasonably believe that the agent is authorized to act or do something.
In this case, ABC did not communicate to XYZ that Caroline had authority to enter into an insurance contract,
and no facts suggest that ABC and XYZ had done business in the past. The nature and typical responsibilities of
Caroline’s position as a receptionist does not make it reasonable for the XYZ representative to conclude that she
was empowered to select and approve health insurance plans for ABC’s employees. Also, Caroline’s express
authority was to answer phones, direct messages, collect and sort the daily mail, greet visitors, and schedule
appointments for the company managers. Her implied authority was to do anything reasonably related to
performing those duties. She was not given any express authority to sign contracts, and signing contracts was
not related to or implied in her duties as a receptionist.
Therefore, Caroline had no apparent authority to authorize the contract. Because Caroline did not have either
actual or apparent authority to sign the contract, it is not binding on ABC Corp.