Question

Assume that We Are Toys actually hired Boris as a sales representative, and that Boris has now been working for We Are Toys for five years, during which time he has been handling the Target account. We Are Toys discovers that Boris has been padding his expense accounts and has been using certain sales tactics that are prohibited by company policy. We Are Toys therefore fires Boris. Boris immediately goes to the Target buyer and informs the buyer that We Are Toys is just coming out with a hot new toy and convinces Target to carry the toy. A contract is signed (as before) and Target gives Boris a down payment on the shipment. Boris pockets the down payment (later forges an endorsement and cashes the check) and disappears for parts unknown. Is We Are Toys liable to Target on this contract? Explain.

Answer 1

We Are Toys is NOT liable to Target on the contract signed by Boris for the following reasons:

1. Since Boris dishonestly made a false representation and abused a position of trust with the intent of personal gain (and by wilfully causing loss to another party), the act can be classified as 'Fraud'.

2. Secondly, Boris' actions were post termination of his employment, & hence his employer cannot be held liable/responsible for the wrongful conduct.   

3. Lastly, it can be argued that We Are Toys neither had the knowledge of, nor ever intended to sign this particular contract. Also, Boris had no authority to act on their behalf (especially after his dismissal). Hence, We Are Toys cannot be deemed liable.