Deck 26: Operation and Termination of an Agency

Question 1

What are the consequences if an agent deposits the money of the principal in a bank in the agent's name?

Answer 1

Agent:
An agent is defined as an individual who is authorized to act for another individual known as the principal, through employment by an agreement or apparent authority. The agent can create liability or bind the principal, if he suffers any loss during the scope of the agency.
Principal:
A principal is defined as the chief person involved in the business, or the employer who appoints the agents for performing their tasks in the business. The principal during the scope of the agency can recover the loss from the agent if the loss is abnormal.
Consequences if the agent deposits the money of the principal in a bank in the agent's name:
• It is the responsibility of the agent to keep track and document the accounting transactions related to the agency.
• The agent should make all the accounting transactions in the bank in the name of the principal.
• If the transactions are in the name of the agent, and the bank fails, then the agent is liable for any lose.• The agent should keep his personal property separate from the principal's property.

Question 2

On September 21, under a power of attorney from Nell Pickett, Harold Johnson contracted for her to sell 181 acres of land to Bruce Kirkland. The sale was to close on December 15. Pickett died after the contract was executed but before the sale was completed. By the terms of her will, the land was to go to Kenneth and Betty Pearl Van Etten, while most of the rest of her estate went to nieces and nephews, including Johnson. Kirkland asked the court to require the executor to carry out the contract. Was the contract for sale voided by Pickett's death because the contract was executed under a power of attorney?

Answer 2

Agency principal relationship is automatically implied to be terminated with the death of either the agent or the principal. Hence the power of attorney cannot execute the side on behalf of the dead principal.

Question 3

May an agent enforce a principal's promise to pay a bonus to the agent for information secured by the agent in the performance of agency duties?

Answer 3

Principal:
A principal is defined as the chief person involved in the business, or the employer who appoints the agents for performing their tasks in the business. The principal during the scope of the agency can recover the loss from the agent if the loss is abnormal.
Explain if the agent can enforce a principal's promise to pay the bonus:
• No , the agent cannot enforce a principal's promise to pay the bonus amount to the agent regarding the information which is been secured by the agent while performing the duties and responsibilities of the agency because it was the right of the principal to gather the information. Thus, the promise was not been supported by consideration.
• It is the responsibility of the agent to update the principal all the information which is related to the contract and the information that protects the interest of the principal.

Question 4

Frank King had Alzheimer's disease, and his wife, Doris, was terminally ill with cancer. Her doctor, Phillip Sellers, pressed her to get in touch with someone to make arrangements for Frank's care after her death. Doris did not have a good relationship with Frank's daughter, Sherry Albert, and did not want her to get any of her money; however, under their wills, Albert would inherit from them. Doris said she trusted Kimzie Cowart, Frank's nephew. When Cowart visited, he found that Doris was in the hospital, and Sellers told him the Kings needed help. Doris asked Cowart to draw up a power of attorney, which she signed, authorizing Cowart to transact her banking business, including drawing checks, endorsing them, and making deposits. Doris signed a written request to open a joint checking account in Cowart's and her names to pay the Kings' medical bills. Cowart opened the account. They had previously signed an agreement to create a right of survivorship for any future joint accounts. At Doris' s request, Cowart transferred half of the Kings' money, $460,000, into the account, leaving the other half for Frank's care. After Doris died, he paid her funeral expenses and then withdrew $450,000 from the new account. After Frank died, Albert sued Cowart alleging breach of his duty of loyalty and good faith because he made a gift to himself. Did Cowart breach his duty as an agent?

Question 5

Must a principal reimburse an agent for all expenses incurred by the agent while carrying out the agency?

Question 6

Stephen Heintzelman contracted with Stanwade Metal Products Inc. to purchase a storage tank for $19,258.26. Stanwade sent the bill to Environmental Construction. As the sole shareholder and principal officer of Environmental Construction, Heintzelman had the tank delivered to Garner Transportation Group Inc. He issued an invoice to Garner under the trade name "All-American Construction dba The Home Medic." Garner paid Heintzelman $19,258.26. Heintzelman had three checks for $5,000 each bearing the trade name "The Home Medic" issued to Stanwade. The checks bounced. Stanwade sued Heintzelman and Environmental Construction, alleging that the company had sold the equipment to Environmental and that Heintzelman issued an invoice to Garner Trucking under the trade name of "All-American Construction dba The Home Medic." Heintzelman admitted these allegations and that All-American Environmental Inc. had received payment from Garner, that he was the sole shareholder and principal officer of All-American, and that "The Home Medic" was a trade name of All-American Environmental Inc. Should Heintzelman be personally liable?

Question 7

When are agents personally liable on contracts and for wrongs?

Question 8

Having been diagnosed with Alzheimer's disease, Lorraine Batner executed a power of attorney to her son, David. She also executed a will leaving her property equally to David and his sister, Kimberly. About two years later, Lorraine moved in with Kimberly. Lorraine did not have her checkbook and her bank statements were mailed to David. After Lorraine's death, Kimberly sued David to require him to account for the funds in her mother's checking account during the time Lorraine lived with her, saying Lorraine had not gone shopping and did not know what was going on. Should David be required to account for Lorraine's funds?

Question 9

What is the test of when an agent has apparent authority?

Question 10

Why does the relationship of agent and principal call for a higher degree of faith and trust than do most contractual relationships?

Question 11

How may a principal terminate the agency?

Question 12

Astra Tech Inc. (Astra) purchased Atlantis Components Inc. (Atlantis). The parties put $6.3 million in an escrow fund to reimburse Astra if it had to pay claims against Atlantis. The parties chose a shareholders' agent to represent the stockholders and approve or challenge claims by Astra on the escrow. They set aside $100,000 for the agent's fees and expenses. The escrow was to be paid to the former Atlantis stockholders about a year later. Nobel Biocare USA, LLC (Nobel) claimed that Atlantis had infringed on its patents. Because it did not know the amount of Nobel's claim, Astra demanded the entire $6.3 million. Astra and Robert Stockard, the shareholders' agent, each claimed the escrow fund. Stockholders representing 39 percent of the shares agreed to settle with Astra by getting 39 percent of the escrow released and dividing it among them. Stockard claimed he had an agency coupled with an interest so the settlement should not be approved by the court. Did Stockard have an agency coupled with an interest?

Question 13

What are the potential consequences to an agent for acting in bad faith?

Question 14

Lincoln Apartment Management Limited Partnership (Lincoln) was the property manager of Woodchase Village Apartments (Woodchase) for its owner, Terrell Mill Associates, LLC (Mill). Lincoln hired Grand Master Contracting, LLC (Grand) to renovate and repair Woodchase. Before Grand did any work, Lincoln had it sign an agreement that stated it "understands and agrees that the legal owner of the community is responsible for the payments of any services... performed... and not Lincoln, which is the property management company and Agent for the Owner." This agreement did not state that Mill owned Woodchase, but it required Grand to add the owner as an insured on all insurance policies. The liability insurance certificate issued to Grand included Mill as an insured. When Grand was not paid for all its work, it sued Lincoln, alleging that it had not made a valid disclosure of its principal. Should Lincoln be liable?

Question 15

How obedient must an agent be to routine instructions from the principal?

Question 16

State Farm Insurance hired James Falls as an agent trainee. After completing an internship phase, he was given an "agent start up kit." He hired Michelle Quinlan, who had to pass online computer tests to be licensed to work for a State Farm agent. A problem with the Internet kept the tests from being marked as completed on her transcript. She told Falls, who contacted Yolanda Wilson, another State Farm employee, for help. They could not solve the problem. Since Quinlan was not working the next day, she gave Falls her coursework user name and password in case he needed to get into the online transcripts. The next day, Wilson told Falls that Quinlan's transcripts were still not showing up as completed. Falls logged onto Quinlan's account and completed coursework she had not completed. When State Farm later found out that Falls had completed the coursework, it terminated him. Falls sued State Farm for breach of contract. State Farm alleged that Falls had failed to act in good faith and thus it was justified in ending their agreement. Was State Farm so justified?

Question 17

Must a principal reimburse an agent for all expenses incurred by the agent while carrying out the agency?

Question 18

Mission Energy, L.L.C. owned two mineral leases. Justin Sutton acted as Mission's sole manager. The estate of Lavinia Reott loaned Mission $160,000 that Mission did not repay, so Reott obtained a judgment against Mission. Sutton executed mineral lease assignment forms purporting to transfer all of Mission's leasehold rights to Wasatch Oil Gas, L.L.C. The assignments were signed by Sutton on the line designated for "Lessee-Assignor" and did not identify Sutton as the manager of Mission or as a person authorized to act on Mission's behalf. On the back of the assignments, Wasatch agreed to accept the assignment from Mission. Reott purchased two other judgment interests against Mission and sought enforcement of all three judgments against Mission's leasehold interests. A sheriff's sale was held. As the only bidder, Reott obtained a certificate of sale for Mission's leases for a bid of $1.00. After learning of the sale, Wasatch filed a redemption notice, tendered a check in the amount of $1.06, and sued to quiet title in it to the leases. The trial court said Wasatch did not have title because the assignments failed to identify Sutton as a person authorized to execute assignments on Mission's behalf; therefore, they did not bind Mission. Could the assignment be binding on Mission?