MBA630 Carz Bazaar Case Study Arguments in Favor of The Defendant Essay

Question Description

Review Case Two: Carz Bazaar. As you read through the materials, try to begin answering the questions posed below.

You will likely encounter many new legal concepts, so take notes about which sections apply to this case so that you can easily refer back to them when you begin to write your analysis.

In all legal cases, there are disputes about the facts and the law. In this case, we can assume the facts stated in our case file are accurate, so we just need to decide what law applies and how the law can be interpreted to support the plaintiffs’ and defendant’s arguments. The issue of who caused the accident has been settled. Wilson caused the accident, so the issue before us is whether Wilson’s employer can be held responsible for his actions.

What are the arguments in favor of the plaintiffs (the accident victims)?

What are the arguments in favor of the defendant (Carz Bazaar)?

Maintaining company procedure, I’d also like you to meet the following requirements for this deliverable:

  • Please divide your analysis into two parts: Part I: Arguments for the Plaintiffs and Part II: Arguments for the Defendant.
  • Support your conclusion with references to legal principles and laws. Cite references to course materials and cases using APA format.
  • The analysis should be no more than seven pages (double spaced, 12-point font; the reference list does not count towards the page limit).
  • Title your file using this protocol: yourlastname_CarzBazaar _date.

Unformatted Attachment Preview

Carz Bazaar Notice: Contains Confidential Information Colossal Company subsidiary Carz Bazaar, a new and used car dealership, hired Charles Wilson to perform various duties, such as cleaning and gassing vehicles, moving vehicles from one lot to another, and maintaining the showroom and vehicle lots. In this position, Wilson had access to keys to the vehicles through a key-control procedure. Under this procedure, an attendant keeps the keys in a control shack. When any employee wants to move a company vehicle, the attendant inputs information into a template request form. The information includes the date, time, stock number of the vehicle, name of the employee checking out the vehicle, and the destination of the vehicle. For example, the vehicle might be taken to a body shop for repairs, to a gas station, or to a company lot at a different location. Every time an employee checks out a vehicle, the reason must be for company business use. It is not necessary to put the expected return time on the form unless a vehicle was expected to be gone for a long time. Once the attendant has completed the form, she gives the keys to the employee who has requested them. When the vehicle is returned, the attendant indicates in the log that the vehicle was returned and replaces the keys. Sometimes vehicles are gone for more than one day. Some vehicles may be removed permanently if they are sold from another lot. In these cases, the managers of the other lots call to let the attendant know that the vehicle will not be coming back. Sometimes employees drive cars back and leave the keys with other employees to return to the attendant. This practice was acceptable to the dealership. One day when Gina Mitchell was the attendant in charge, Wilson asked her if he could use a car for 30 minutes on his lunch break to go to his mother’s house. The attendant told him it was okay as long as he brought it back because, otherwise, she could get in trouble. Since Wilson only wanted the car for 30 minutes and she trusted him, she did not make any entry about this trip on the computer. Wilson took the car and left. On his way back to the dealership, Wilson rear-ended a car stopped at a stop light, causing injuries to the driver and a passenger. Wilson told a police officer at the scene of the accident that he was on a lunch break from his job and that he had permission to drive the car, but his boss was not aware he had the car. The injured driver and passenger sued Carz Bazaar on the grounds that it was responsible for the injuries caused by Wilson. Legal Responsibilities of Agents and Employees Agency law is a component of civil law and deals with the legal relationship by which one person acts on behalf of another. The agent is the person who acts on behalf of the principal to do something the principal has delegated the agent to do, which the principal him or herself is legally permitted to do. The creation of an agency relationship gives rise to both rights and duties of the agent and the principal, as well as the potential for liability to each other and to third parties. Principals may be held liable by third parties for the acts of their agents under certain, but not all, circumstances. The potential liabilities a principal has to third parties for the agent’s acts often depend on whether the agent is an employee or an independent contractor. Principals face potentially more liabilities to third parties for the acts of their employees than they do for the acts of their independent contractors. Agency and Liability Agency law concerns the legal relationship by which one person acts on behalf of another. This resource will examine the agency relationship and the legal duties owed by principal and agent. It will focus on the scope of the agency relationship—particularly in the context of the employer-employee relationship. It will introduce the concept of vicarious liability and provide the elements necessary for a principal to be held liable for the actions of the agent. This topic will include liability for contracts entered into by the agent and torts committed by the agent. What Is an Agency? An agency relationship is one in which a party acts on behalf of and with the authority of another party. The principal appoints or authorizes the agent to act on her behalf. Thus, she is responsible for the actions of the agent taken in furtherance of her duties or per the instructions of the principal. The agent will interact with third parties on behalf of the principal. The agency relationship requires an understanding of the relationship between principal and agent, agent and third parties, and the principal and third parties’ roles, responsibilities, and rights. For example, I hire Betty to negotiate a business deal on my behalf. I am the principal and Betty is my agent for this purpose. Betty will act as my representative in dealing with the third parties to this business deal. Types of Agents The principal will lay out the scope of the agency, including the responsibilities and limitations of the agent. Agents generally fall into three categories: limited agent—A limited agent has a special purpose and limited authority to act on behalf of the principal. Unless specifically limited by the principal, actions done in furtherance of that purpose are within the scope of the agent’s authority. For example, I hire a real estate agent to represent me in the purchase of a business. She is my limited agent for that purpose. Her authority to act on my behalf is limited to this situation. general agent—A general agent has broad authority to act on behalf of the principal. The scope of the agency is not limited to a special purpose. For example, Arthur is my employee. He serves as operations manager. As such, he is my general agent with regard to all aspects of operations falling under his responsibility. His authority to act as my agent is not limited to a specific task; rather, it is pursuant to his responsibilities in his position. independent contractor—Agency law considers an independent contractor to be a special form of agent of the principal. The independent contractor is hired to perform a service for the principal but is generally not under the direct control or supervision of the principal. In this way, the agent has very limited ability to represent or act on behalf of the principal outside of the context of the services contract. Numerous subcategories of agent exist within these broader categories. For instance, an agent coupled with an interest is a type of special agent who earns compensation through performing her agency duties (rather than receiving compensation directly from the principal). A sales agent who receives a commission on sales may be an agent coupled with an interest. This type of agency is subject to contract rules and cannot be terminated without violating the legal rights of the agent or principal. Other common categorizations of agents include co-agents and subagents. Co-agents are multiple agents who serve a single principal for the same purpose. Subagents are authorized agents of an agent. Employee vs. Independent Contractor An employer hires an employee to work on behalf of the employer as part of or in support of the business’s core functions. The employee generally works exclusively for the business in the functions for which she is hired. The employer exercises extensive control over the nature, time, and manner of work carried out by the employee. As such, the employee is a general agent of the business to the extent of her authority in the position. An individual working on behalf of an employer does not have to be paid to be considered an employee. An unpaid person may be a “gratuitous employee.” This may be the case when individuals are volunteering for nonprofit ventures or working as part of an internship. For example, ABC Corp hires me as an internal accountant. I report to ABC Corp from 8 a.m. to 6 p.m. five days per week. I work on any and all accounting functions assigned to me by my supervisor. An independent contractor is not an employee; rather, she or it is a separate business that is hired to perform services for or on behalf of another person or business. One way of thinking of an independent contractor is that she has her own business that services the employer as a client or customer. The employer does not directly control the manner and method by which an independent contractor carries out her duties. Also, an independent contractor generally has more than one customer or client. As such, the independent contract is only a limited or special agent of the principal employer. For example, I have my own professional accounting practice. I prepare the tax returns for any business or individual who pays me to do so. I do not have any employees. ABC Corp hires me to prepare its annual tax return. I promise to have the return completed within 1 month. I will invoice ABC Corp for my services. I am not an employee of ABC Corp. I am an independent contractor who is hired to perform a specific function for a limited amount of time. While I have a projected deadline, ABC Corp does not control the nature, time, and manner of the services I perform. This distinction is important for determining a principal’s liability for the agent’s actions. Generally, absent specific instructions to do a task leading to liability, an employer is not liable for the actions of an independent contractor taken on behalf of the principal. There are exceptions where an independent contractor may subject an employer to liability for her actions. This is the case when the work performed is inherently dangerous in nature; the tasks performed for the employer are illegal; the work is nondelegable; or the employer ratifies the contractor’s actions. A separate cause of action may exist if the employer was negligent in selecting a contractor to perform the duties. That is, she failed to exercise reasonable care in selecting a particular contractor. This may be the case where past performance demonstrated the contractor was unsuitable for the task. Types of Principals Principals are categorized based upon whether their identity is disclosed to third parties with whom the agent interacts on their behalf: • disclosed principal—A disclosed principal’s identity is known to third parties dealing with the agent. • partially disclosed principal—A partially disclosed principal is known by third-parties to exist, but her exact identity is unknown. This type of relationship exists when there is some benefit to the principal to remain anonymous to third parties interacting with the agent. • undisclosed principal—The existence of an undisclosed principal is unknown to a third party. The third party believes that she is interacting only with the agent. These categorizations of principal are important in determining the rights and duties of the principal, agent, and third party. Ask Yourself • How do you feel about the ability of an agent to act on behalf of a undisclosed and partiallydisclosed principal? Is this fair to a third party? Why or why not? • Winston is a special agent of ABC Corp hired to negotiate the purchase of intellectual property. He seeks to purchase a premium domain name from Alice. Alice is unaware that Winston wants to buy the domain name for some third party, but does not know that he works for ABC. What type of agent is Winston? How would it affect Winston’s status if Alice found out that he works for ABC? What if she did not know he was buying the domain name for a principal? Principal-Agent Relationship Requirements An agency relationship is created in the following manners: • express agreement—A principal and agent may expressly agree to form an agency relationship. The agreement can be oral or in writing. The principal must simply confer the authority upon the agent to act on her behalf. The subject matter of the agency relationship must be legal. The agency has the express authority granted in the agency agreement and the implied authority to undertake tasks incidental to that objective. If the duties of the agent include executing a contract subject to the statute of frauds, the agency relationship may need to be in writing to be enforceable. An express agency relationship is often created pursuant to a legal document known as a power of attorney. The power of attorney may create a general or special agency relationship. • implied agency—An agency may be implied from the facts or circumstances surrounding an individual’s actions on behalf of another. If the principal acts in a way that demonstrates an intent for an individual to act on her behalf, this may imply an agency relationship. The parties to an agency relationship do not need to understand the law of agency or understand what it means to be a principal or agent. • ratification—Ratification is a contract principle. If an individual undertakes actions on behalf of another, these actions may be outside of any express or implied authority. If, however, the principal acknowledges and accepts the agent’s actions, this is known as “ratification” of the agency relationship. The principal ratifies the agent’s actions, after the fact. Agency by ratification is only possible when the principal is fully disclosed. • by estoppel—If a third-party reasonably relies on an agent’s representation that she has authority to act on behalf of the principal, the principal may be bound by the actions of the agent. Generally, the principal must act or fail to act in a manner that causes a third party to reasonably believe that an agency relationship exists, when in fact there is no agency. Agency by estoppel is based upon principles of fairness. It would be unfair to detriment a third party who reasonably believed that the agent had authority to act on behalf of the principle, and the principal was the source or cause of that belief. Agency by estoppel is only possible with fullydisclosed principals. For example, Bill is James’ agent. James terminates the agency relationship. Nonetheless, unbeknownst to James, Bill continues to transact with third parties on James’ behalf. James fails to notify third parties of Bill’s termination. James may be bound to any agreement entered into by Bill. • by necessity—Agency by necessity arises when one party makes a decision on behalf of another person who is unable to do so. The decision must be essential in nature and it must be in the interest of the principal in making that decision. As such, the law will impute a de facto agency relationship where no actual agency exists. For example, Bill is hired to deliver Tom’s goods. He drops the goods off at the fulfillment center. The center says that there is no contract in place and intends to reject the goods. Tom is out of country and cannot be reached. The goods will spoil if not accepted. Bill signs the warehousing agreement on Tom’s behalf. Ask Yourself • How do you feel about the ability to form an agency relationship without a principal expressly authorizing the agent to act on her behalf? What intent should be required before a court can find that an implied agency exists? What constitutes ratification of an agent’s actions by a principal? When is reliance upon an agent’s representations about her authority reasonable? Should a third party be required to verify an agent’s actual authority? How great must the need be for a court to find an agency by necessity? • Terrence hires Joe as a general manager of his business. Joe routinely purchases supplies for the business, though this authority is not in his job description. Terrence never gave Joe the authority to enter into these purchase agreements, but he routinely acknowledges Joe’s actions and keeps the purchased goods. When Terrence falls sick, Joe handles all store operations, including signing some major purchase orders that Joe generally signs. These purchases were necessary to continue business operations. One of the purchase orders, however, is for the wrong type of goods. The error potentially costs Terrence’s business thousands of dollars. When Terrence recovers and learns of the purchase order, he is furious and refuses to honor the purchase agreement. What are the arguments for and against Terrence’s liability for Joe’s errant purchase order? Duties of a Principal? Generally, a principal owes the following duties to the agent: • duty to compensate—An agency relationship may be paid or gratuitous. The terms of an agency may be laid out in the agency agreement. If the agency agreement does not indicate the terms of compensation, the principal is obligated to provide the agent with reasonable compensation. For example, default rules in a relationship with a sales agent dictate that the agent will earn a reasonable commission on sales induced or completed. • duty to reimburse—The principal must reimburse the agent for a reasonable amount expended in carrying out her duties. Reasonable reimbursement includes the cost of travel, meals, lodging, incidental expenses, etc. • duty to indemnify—Generally, a principal must indemnify an agent for liability incurred in the performance of her duties. This generally arises when the instructions of the principal subject the agent to liability to a third party. If an agent exceeds or acts outside of the scope of her authority, the principal may be relieved from the duty to indemnify. If the principal later ratifies the actions of the agent, she will incur the obligation to indemnify the agent against liability. Ask Yourself • How do you feel about the default duties owed by a principal to an agent? Why do you think these are the default standards? Do you believe there should be any other or additional duties of the principal? • Ethan hires Naomi to serve as his buying agent. The employment agreement is very short and lists only Naomi’s primary responsibilities and compensation. Pursuant to her job description, Naomi will make purchases for the business but will not disclose that she is an agent of the business. One of her business deals goes bad and a client sues her for breach of contract. What are Ethan’s responsibilities in this situation? Duties of an Agent Agents generally have the following duties to the principal: • loyalty—An agent has the duty of loyalty to act for the principal’s advantage and not to act to benefit herself at the principal’s expense. An agent is expected to refrain from undertaking actions personally that would conflict with the purpose of the agency. An employee has a lower duty of loyalty with regard to opportunities that are outside of the employee’s duties or responsibilities to the employer. Generally, this means that an agent may not simultaneously represent the principal and another party to a transaction. Employees are agents of the employer. If an employee does not have permission, she violates a duty of loyalty by undertaking activities for a third party that are similar to the duties of the employee in the agency relationship. This is seen as competing with the employer. If, however, she performs services unrelated to or not the type of services the employer would seek to provide to the client, she does not a breach a duty by providing those services. This is true even if the employee provides those services to a client of the employer. For example, I work for ABC Corp as a professional service provider. A potential client comes in to seek the services of ABC Corp. I cannot compete with ABC Corp by trying to convince the client to pay me to serve them personally rather than hire ABC Corp. I also have a side job selling supplies to construction contractors. This is a completely different line of business from ABC Corp. If it does not conflict with ABC Corp’s services, I can offer my su …
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