Free Essay

Emile’s Used Car Emporium

In: Business and Management

Submitted By Sylvi
Words 1890
Pages 8
Policy: Emile owns Emile’s Used Car Emporium. Several people work for him at the Emporium. When Emile is gone, he leaves one of his best salespersons, Dorothy, in charge. Over the years, Emile has given Dorothy the authority to contract with vendors, negotiate sales, and conclude car sales contracts in his name. One August, Emile takes a long vacation, leaving Dorothy in charge. While he is gone a hurricane hits Florida where the Emporium is located, causing severe damage. Because Emile is floating down the Amazon, Dorothy cannot reach him for instructions. She decides that rather than leave the place in shambles, she will hire people to repair the Emporium. Dorothy hires a carpenter to rebuild a wall that was blown down by the storm. Phil, the carpenter, is busy at work on his scaffold when Dorothy’s Scottish terrier TuTu, who she keeps with her at work, plows into the scaffolding while chasing a cat. Phil is knocked off the scaffold and falls ten feet to the ground, suffering a broken leg. Please address any and all issues you spot in this problem. You may need to make a few assumptions, if so... please state what those assumptions are.
According to www.businessdictionary.com, an agent’s duties are to act on behalf of and be subject to the control of the principal, act within the scope of authority delegated by the principal, use duties with appropriate care, avoid conflict with personal interests and those of the principal, and promptly hand over to the principal all monies collected on principal’s behalf. The principal’s duties are to compensate the agent as agreed and to cover the agent against claims, liabilities, and expenses incurred in using duties assigned by the principal.

The relationship between the principal and the agent is the agreement that the agent will act on the behalf of the principal. The agent assumes an obligation of loyalty to the principal. The agent will not intentionally act improperly or negligently in their responsibilities to the principal. The agent has the obligation to follow the instructions given by the principal and must use reasonable care in performing their duties. The principal leaves the agent with power due to the trust and confidence that the agent has earned in the eye of the principal (http://www.ruf.rice.edu/~schuler/principal-agent.html).
There are several aspects of this problem that must be taken in consideration before we arrive at conclusions. First and foremost, we need to analyze the agency relationship between Emile and Dorothy. It is a given point that the Emile is the principal; he is the one with authority to make decisions for Emile’s Used Car Emporium.
Over the years, Emile gave Dorothy express authority to “contract with vendors, negotiate sales, and conclude car sales contracts in his name”. Dorothy had express authority to act as Emile’s special agent, and probably acted on fully disclosed agency to third parties. In those situations, Dorothy had actual authority to act as Emily’s agent, even if the authorization happened through a verbal authorization, which formed a verbal contract. Dorothy was not the owner of the company, but was a representative of the company. Since the contractor received direction from Dorothy who was a company representative, the contractor would have had no way of knowing that Dorothy was not authorized to give direction on behalf of the company. This is called implied authority.
That August when the hurricane hit Florida, Emile left Dorothy “in charge”. We can then assume that, by leaving on a long vacation to a place that he knew that he could not be reached, Emile left Dorothy with express authority to be his general agent. This is an important point to be made, because the general notion of “leaving someone in charge” may be interpreted differently from person to person. Our group assumes that, by leaving Dorothy “in charge”, Emile’s intention was that Dorothy executed all transactions connected with his business, making her his general agent. This will be a very important point when we analyze Dorothy’s role on the accident the contractor suffered.
At the point that Emile was on vacation, Dorothy may have acted on fully disclosed agency to third parties, may have partially disclosed the principal, or may even have not disclosed the principal at all. Being a general agent of Emile, Dorothy may simply have felt that she did not have the need to disclose to third parties that she was acting as an agent of a principal. She was simply “in charge”, and nobody needed to know any further than that. This is yet another critical point to be made, because Dorothy’s conduct in disclosing or not that she was Emile’s agent will have full impact on the liabilities to third parties. For the sake of argument, out team assumes that Dorothy did not disclose that she was acting as Emile’s agent. For all intents and purposes, on Emile’s absence, Dorothy was the principal of Emile’s Used Car Emporium. While she did not purposely made third parties believe that she was the owner of the Emporium, our team assumes that Dorothy did not go out of her way to say that Emile was the owner of the shop and that she was left in charge. Our team will assume that she was simply fully “in charge” and then performed acts with an undisclosed principal. However, our team will also assume that if the third parties asked who “Emile” from the business name “Emile’s Used Car Emporium” was, Dorothy fully disclosed the fact that Emile was the owner, but that he was on vacation and she was in charge, fully disclosing the principal. Dorothy allowed her dog to roam free and her dog ran into the contractor’s ladder causing the contractor to fall and be injured.
Our team assumes that when Dorothy took the decision to repair the shop, she actually believed that she had full authority to make such decision. After all, she was “in charge”, and had the duty to perform on the principal’s best interest. The principal’s best interest was to have the shop up and running and generating profits, but in order to do that, the building needed to be repaired. The nature of Dorothy’s role at the emporium also gave her incidental authority to contract with carpenter because the express agency agreement did not provide enough detail to cover contingencies that may arise during the performance of the agency. She also had the duty to notify the principal and to account for her acts. She figured that she would keep records of her decisions and acts, and she would notify Emile on the first opportunity she had. At the time the shop was destroyed by the hurricane, Dorothy is mostly concerned in doing what Emile would expect her to do, and decides to hire the contractor. At that point, it is debatable whether she had authority to hire the contractor or not. Our team assumes that, because she had express authority to act as a general agent, Dorothy did have the authority to hire the contractor. One can argue that Dorothy had authority to simply run the business, that she was not a universal agent of Emile and therefore could not hire a contractor as that would surpass her powers as an agent. To that argument, our team answers that in order to keep the shop running and keep generating profits, a responsible agent not only would have the power, but the obligation, of putting in place a plan to repair the damage the shop suffered. Our team assumes that without repairing the “severe damage” the shop suffered, business would have to stop, meaning no revenues to pay employees and no profits being turned. That would have been a bad business decision, so Dorothy did the right thing in calling a contractor to repair the shop. We do not believe that Dorothy exceeded the scope of her authority. The responsibilities or duties of the principal are to compensate, reimburse, indemnify, and cooperate with the agent. An agent has the duties to perform, notify, and account to the principal. Emile’s policies would have a lot to do with whether Dorothy was able to have Tutu in the office much less roaming free. From Dorothy’s behavior it seems as if it was acceptable by Emile to have Tutu with her at work. On the other hand, Dorothy could have taken advantage of Emile’s absence and decide to have Tutu there with her to keep her company. If that is the case then Dorothy may be liable for the injuries the carpenter sustained.
Last but not least, a final question must be asked: Did Dorothy disclose that she was an agent to the contractor, or did she prefer to deal with the contractor without revealing that she was an agent, hence acting with an undisclosed principal? Our team will assume that Dorothy would have told the contractor the entire story – that she was an employee, but indeed the employee in charge, while her boss Emile was on vacation. Our team will assume that she made clear to the contractor that the shop was not hers and that she was simply trying to do “the right thing”. After all, there is not reason leading us to believe that Dorothy would have acted differently. She worked for Emile for several years and he obviously had full trust on her. Otherwise, he would not leave for vacation leaving her in charge. Therefore, by disclosing the principal, Dorothy made Emile liable for the injuries the contractor sustained, but she is not liable. Nobody can say for sure whether or not Emile allowed dogs to run free or to what extent she allowed dogs to run free, and since she was gone, Dorothy could have taken advantage of the rules and let Tutu run free. If that is the case, then Dorothy would be personally liable. Emile would have liability insurance on the company which would cover the contractor’s medical expenses and injuries.
An additional aspect regarding TuTu’s role on the accident must be analyzed. Should Dorothy be liable for TuTu’s pushing the scaffolding, which resulted in the contractor’s injury? Our team believes that Emile will once again have a large responsibility on how this question will be answered. Nobody can say for sure whether or not Emile allowed dogs to run free on the shop. If it was Emile’s policy to allow employees to bring their dogs into the shop and allow the dogs to freely circulate in the space, then Dorothy is not liable and Emile is responsible. However, being a place of business, we can assume that, even if employees were allowed to bring their dogs to work, they were expected to control their pets, either keeping them securely under leash or inside cages. If that is the case, then we can assume that Dorothy could have taken advantage of the rules and let Tutu run free, or accidentally left the dog free. In either case, intentionally or by negligence, Dorothy would be personally liable for TuTu’s actions and subject to damages in court.

References:
Cheeseman, H. (2010). The legal environment of business and online commerce, 6th edition. Upper Saddle River, NJ: Prentice Hall. www.businessdictionary.com http://www.ruf.rice.edu/~schuler/principal-agent.html

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