Question

Build-It Construction Company contracts with Classic Beverage Corporation to build Classic Beverage’s corporate headquarters. Build-It Construction contracts with Dependable Tools & Materials Inc. for construction supplies but refuses to pick up the order. Meanwhile, Classic Beverage hires Elmo, a certified public accountant, to work in its cost-accounting division as an employee, with no authority to hire or supervise others. Elmo asks Fayette, an outside experienced accountant, to advise him on certain accounting procedures but fails to pay Fayette for the service. Classic Beverage also contracts with Gloria, a salesperson, to solicit orders for its products in a designated territory. Gloria obtains an order from Highpoint Concessions, Inc., which is assured the order will be filled soon. But Gloria does not follow through with the paperwork and fails to submit the order to Classic Beverage. Highpoint Concessions suffers a loss. Dependable Tools, Fayette, and Highpoint Concessions claim Classic Beverage is liable under agency law. Discuss fully whether an agency relationship was created by Classic Beverage with Build-It Construction, Elmo, or Gloria.

Answer 1

In this case Classic Beverage can be held liable by Dependable Tools, Fayette, and Highpoint Concessions only if an agreemnet in writing was made. The agreement should include in writing that the agents hired also were permitted the authority to act on behalf of Classic Beverage. This determines the liability and whether it is placed on those who Classic hired or Classic itself. If there is a contractual approval for Build-It Construction, Elmo, or Gloria to act on behalf of Classic in the company, then the Company is liable. But if these parties acted on their own terms within the company and did not take the compmany approval or consent then they are liable. It is crucial to make sure to establish such relations properly when involved in such slippery situations.