Week 12 Interactive learning LAW101


Action ItemsSubmission InstructionsChoose one of the following cases, then analyze the cases in the Questions and Problems.Case A: Chapter 33 (5 and 6) and Chapter 34 (5 and 6) in Dynamic Business LawCase B: Chapter 33 (7 and 9) and Chapter 34 (8 and 9) in Dynamic Business LawFor each assigned case, write an analysis of the issue based on the following criteria:Identify the parties involved in the case dispute (who is the plaintiff and who is the defendant).Identify the facts associated with the case and fact patterns.Develop the appropriate legal issue(s) in question (i.e., the specific legal issue between the two parties). Provide a judgment on who should win the case – be clear.Support your decision with an appropriate rule of law.Be prepared to defend your decision and to objectively evaluate the other points of view.Grading Criteria0 – 1 pointsChapter 34
Liability to Third
Parties and
Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 34 Case Hypothetical and Ethical Dilemma
Jonathan A. Jacobs has worked diligently all of his life, saved every
penny he could, and is now worth an estimated $2 million. Advanced
in his years (he is now seventy-nine years old), Jonathan recently
executed a general power attorney naming his son, Willard T. Jacobs,
as his “attorney-in-fact” (an attorney-in-fact is the agent named in a
power of attorney relationship.)
Jonathan has recently been dating Mildred Eubanks, who is fifty-seven
years old. Concerned that Mildred is a “gold-digger” and that she will
abscond with the majority (if not all) of his father’s wealth, Willard
created a trust, with the “corpus” (body) of the trust amounting to
$1.75 million (the majority of his father’s wealth.) Willard named
himself as the trustee, and he designated his two children (Jonathan’s
grandchildren), Tobias and Heather, as co-beneficiaries of the trust.
When he created the trust, Willard did not notify his father.
Upon discovering the existence of the trust, Jonathan became furious.
“How dare you go behind my back and steal my money. I worked
hard for that money, it is mine, and I have the right to decide what to
do with it. If I choose to give all of the money to my dear friend
Mildred, that is my decision!”
In exercising the general power of attorney, did Willard T. Jacobs act
appropriately? Upon Jonathan A. Jacobs’s request, should a court
invalidate the trust?
The law firm of Poe, Patterson and Henderson, a general partnership,
represents 20 plaintiffs in a class-action product liability lawsuit, with trial
scheduled to begin Monday of next week. It will be the biggest trial in the
history of the firm, and the partners understand that success will depend, for
the most part, on a collaborative effort on the part of all professionals at the
firm, including partners, associate attorneys, paralegals, and secretarial staff.
It is the Friday before the trail, and there will be no weekend for those working
at Poe, Patterson and Henderson.
The partners and the associate attorneys are reviewing depositions in the
conference room. The clock on the wall shows 11:00 p.m. Partner Henderson
turns to a first-year associate, J. Benjamin Fotheringham, and says “Ben, how
about going to Donovan’s Delicatessen and picking up a few subs for all of us?
Here’s $100.” Donovan’s Delicatessen is a favorite of the firm for “late-night”
trial preparation sustenance, and is located approximately two miles away,
down Chestnut Avenue.
Eager to make a positive impression on senior partner Henderson, and ready to
escape the “tunnel-vision” brought on by twelve hours of deposition review, Ben
heads for his car. In a rush to complete the “deli run” quickly, Ben accelerates
his car to 50 miles per hour. The posted speed limit on Chestnut Avenue is 35
miles per hour.
Fidgeting with his compact disc player in order to listen to an audio-recorded
deposition, Ben inadvertently crosses the center line and collides with an
oncoming automobile operated by Brandi Kernigan. Ms. Kernigan is severely
injured, and experiences $22,000 in medical expenses; her $25,000 Volkswagen
is a total loss. She sues Fotheringham individually, and the law firm
partnership of Poe, Patterson and Henderson. Kernigan also lists Poe,
Patterson and Henderson as individual defendants.
Is the law firm of Poe, Patterson and Henderson liable for Brandi Kernigan’s
Authority of Agent and Liability of

Express Authority: Principal explicitly instructed
agent to perform act

Implied Authority: Relationship inferred from
actions/conduct of parties; authority inferred
from nature of relationship

Apparent Authority and Estoppel: Third party
reasonably believes (based on actions of
principal) that agency relationship exists
between principal and another individual
Contractual Liability of Principal and
Agent For Authorized Agent Acts
“Authorized” Acts: Agent acts within scope of agent’s

Classification of Principal: Must be classified as either
disclosed, partially disclosed, or undisclosed

Disclosed Principal—Agent not liable, principal liable

Partially Disclosed Principal—Agent possibly liable,
principal liable

Undisclosed Principal—Agent liable, principal liable
Contractual Liability of Principal and Agent
for Unauthorized Agent Acts
“Unauthorized” Acts: Acts that go beyond scope of agent’s

Third Party Reasonably Believes Agent Has Authority:

Agent liable

Principal not liable
Third Party Believes Agent Mistaken About His/Her Authority:

Agent not liable

Principal not liable
Tort Liability and the Agency

Agent’s Tortious Conduct—Principle directly responsible if:

Principal directs agent to commit tortious act; or

Principal fails to provide proper instruments, tools, or
adequate instructions

Agent Misrepresentation—If agent misrepresents
himself/herself to third party, principal may be tortiously
liable for agent’s misrepresentation

Respondeat Superior—Principal/employer liable if employee
wrongfully injures third party (not because he/she personally
at fault, but because he/she negligently hired agent)
Questions Regarding “Course and Scope” of

Did employer authorize employee’s act?

Did act occur within time and space limits of employment?

Was act performed (at least in part) on behalf of employer?

To what extent were employer’s interests advanced by act?

To what extent were private interests of employee involved?

Did employer provide the means by which act occurred?

Did employee use force that employer did not expect?

Did employer know that act would involve commission of
Principal’s Liability and
the Independent
General Rule: Individual who hires
independent contractor not liable for
independent contractor’s tortious
actions under doctrine of “respondeat
superior”, unless contractor engages in
hazardous activities
Crime and Agency Relationships

If agent commits crime, agent liable for crime

If agent commits crime in scope of employment
without authorization of principal, principal not
liable for agent’s crime

Principal liable for agent’s crime if principal
authorized agent’s criminal act
Termination of Agency
Termination By Acts of Parties

Lapse of Time

Fulfillment of Purpose

Occurrence of Specific Event

Mutual Agreement

Revocation of Authority

Renunciation By Agent
Termination of Agency
Termination By Operation of Law

Death (Of either principal or agent)

Insanity (Of either principal or agent)

Bankruptcy (Of either principal or agent)

Change in Circumstances

Change in Law

Impossibility of Performance

Disloyalty of Agent

Agency Formation
and Duties
Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Robert “Red” Newman, attorney-at-law, just attended a
pretrial conference for a trial scheduled to begin next week.
The case, Effingham v. Atwater, involves his client, Jessica
Effingham. On September 8, 2009, Jessica sustained serious
injuries in automobile accident when a car driven by Harvey
Atwater (the defendant) struck her car from behind. Jessica
sustained permanent partial disability as a result of the
accident, and Red believes the case is worth $250,000 for his
client’s permanent partial disability, pain and suffering,
medical expenses, and other compensatory/consequential
During the pretrial conference, Atwater’s defense counsel,
Gunner Vader, offered the plaintiff $20,000 in full and final
settlement of the Effingham v. Atwater litigation. Attorney
Vader proclaimed that $20,000 was all of the settlement
authority he had, and his client would not pay a penny more to
settle the case. Judge Clarence Ginsburg strongly
recommended that the plaintiff take the $20,000 settlement
offer, but Red considered the “low-ball” offer to be a personal
insult as well as an affront to his client, and he immediately
rejected the offer.
In rejecting the offer, did Robert “Red” Newman violate his
Chapter 33 Case Hypothetical and Ethical Dilemma
Maximillian Snell is having a very bad Monday at his “pre-owned” car dealership,
Maximillian Motors. Known county-wide for his “eye-catching” (some would say obnoxious)
television advertisements (with staged customers proclaiming “Thanks a million,
Maximillian!”) Snell is having a difficult time attracting and retaining an effective and
reliable sales staff; in fact, not a single salesperson has appeared for work on Monday. The
only employee who does shows up for work that day is his secretary of three years, Daisy
Martinez, whose responsibilities include processing “tax, title and tag” paperwork after the
Business is slow that Monday, with only two “window shoppers” appearing on the lot from
8:00 a.m. to 2:00 p.m. Famished, and eager to try out the new Italian restaurant down the
street, Snell instructs Martinez to tell any prospective customers he will return at 3:30 p.m.
When Snell returns at 3:30, he asks Martinez whether any potential customers visited the lot
in his absence. Daisy beams with pride, and says “why yes, Max, there was a young couple
who came by right after you left. They wanted to buy that red BMW sedan on the front row,
and I knew business was slow, so I went ahead and sold it to them. The contract is here on
my desk. Aren’t you proud of me?!”
Curious, Maximillian examines the contract. It describes the red BMW sedan, and includes
the signatures of both purchasers, as well as Daisy’s signature (indicating “Daisy Martinez,
for Maximillian Motors.”) The contract price is $21,000. Maximillian’s face reddens as he
heads for the car inventory purchase price records on his computer. Computer records
reflect that he purchased the car at auction last Wednesday for $28,000, and that his
established retail price for the car was $31,000. When he confronts Daisy with the facts, she
bursts into tears, saying “please boss, don’t fire me, I’ve made a terrible mistake!” Daisy is
inconsolable, but that is irrelevant to Snell; he is not exactly in the mood for consoling.
Through her tears, Daisy indicates that the couple will return at 5:30 p.m. to take possession
and ownership of the car; they have gone to their bank to retain the $21,000.
Is Snell legally obligated to sell the car to the couple? From an ethical standpoint, should the
couple agree to pay at least Snell’s cost for the car ($28,000?)
Introduction to Agency Law

Agency: Relationship between principal and

Agent: One authorized to act for/on behalf of

Principal: One who hires agent to represent

Fiduciary: One with duty to act primarily for
another person’s benefit
Creation of Agency Relationship

Expressed Agency: Agency formed by making written/oral

Power of Attorney: Document giving agent authority to sign legal
documents on behalf of principal

Durable Power of Attorney: Power of attorney intended to
continue to be effective/take effect after principal incapacitated

Agency By Implied Authority: Agency formed by implication,
through conduct of parties

Agency By Estoppel: Agency formed when principal leads third
party to believe that another individual serves as his/her agent
(although principal had actually made no agreement with
purported agent)

Agency By Ratification: Agency that exists when individual
misrepresents himself/herself as agent for another party, and
principal accepts/ratifies unauthorized act
Requirements for “Agency By

Individual must misrepresent himself/herself as
agent for another party

Principal accepts/ratifies unauthorized act

Principal has complete knowledge of all material
facts regarding contract

Principal must ratify entirety of agent’s act
Agency Relationships

Agency Relationship: Fiduciary relationship (relationship
of trust) in which agent acts on behalf of principal

Principal-Agent Relationship: Employer hires employee to
enter into contracts on behalf of employer; parties have
agreed that agent will have power to bind principal in

Employer-Employee Relationship: Employer hires
employee to perform certain tasks; employer has right to
control conduct of employees

Employer-Independent Contractor Relationship: Employer
hires persons (other than employee) to conduct some sort
of task; employer has no control over details of conduct of
independent contractor
Exhibit 33-3: Independent
Contractor or Employee?

Does worker engage in distinct occupation/independently
established business?

Is work done under employer’s supervision, or does
specialist without supervision complete the work?

Does employer supply the tools?

What skill is required for the occupation?

What is the length of time for which worker employed?

Is worker a regular part of the employer’s business?

How is worker paid?
Principal’s Duties To Agent
 Compensation
 Reimbursement and Indemnification
 Cooperation
 Safe Working Conditions
Agent’s Duties To Principal
 Loyalty
 Notification
 Performance
 Obedience
 Accounting
Principal’s Rights and Remedies
Against Agent
 Constructive Trust
 Avoidance
 Indemnification
Agent’s Rights and Remedies
Against Principal
 Tort and Contract Remedies
 Demand For An Accounting
 Specific Performance

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