Question

Ana and Frank asked Ruth John, a real estate salesperson who worked for Exceptional Real Estate, to list for sale their house in Pleasant Valley, Vermont. Diane Griffin, a California resident, visited the house as a potential buyer. Ruth John worked under the supervision of David Krimmer, an officer of Exceptional Real Estate. Krimmer knew, but did not disclose to Ruth or Diane, that the house was subject to frequent and severe winds, that a window had blown in years earlier, and that other houses in the area had suffered wind damage. Krimmer knew of this because he lived in the Pleasant Valley area, had sold a number of nearby properties, and had been Underhill’s zoning officer. Many valley residents, including Krimmer, had wind gauges on their homes to measure and compare wind speeds with their neighbors. Griffin bought the house, and several months later, high winds blew in a number of windows and otherwise damaged the property. Griffin filed a suit in a Vermont state court against Exceptional Real Estate and others, alleging fraud. She argued in part that Krimmer’s knowledge of the winds was imputable to Exceptional Real Estate. Exceptional Estate responded that Krimmer’s knowledge was obtained outside the scope of employment. What is the rule regarding how much of an agent’s knowledge a principal is assumed to know? How should the court rule in this case? Why?

Answer 1

The rule regarding how much of an agent’s knowledge a principal is assumed to know is that the agent must be acting within the scope of his authority i.e. to the areas when his/her authority extends with be imputed to his/her principal.

            In current case, it was the responsibility of the agent to tell about the pros and cons of buying the property and disclose any irregularities in his knowledge.

            Thus, in this case, the courts will rule in favor of the buyer (Diane Griffin). This can be in terms of the compensatory and punitive damages.