Exam 20: Agency and Other Methods of Carrying on Business

Knowing that Michele is looking for a house,Fatima negotiated a contract for her to buy a house from Owen.Fatima and Owen have agreed on the price,the deposit,the closing date,and all other relevant terms of the deal.Michele,however,has not authorized Fatima to negotiate this transaction on her behalf and had no knowledge of what Fatima was doing.When Fatima tells her,however,Michele is delighted by the house and all the terms of the contract except for the deposit of $20 000 that Fatima and Owen have agreed to.Is it possible for Michele to accept this contract with Owen,such that it becomes a binding obligation between them,but not accept the deposit requirement to which she did not consent?

Which of the following statements is TRUE with respect to franchises?

Carleton Computer Sales Inc carries on a business of buying and selling computers.Tara is negotiating to sell her computer to Carleton but no agreement has been reached between Tara and Carleton.In anticipation of selling it to Carleton,Tara agreed to leave her computer on a display rack at Carleton's store.Carleton sells Tara's computer to Eli for $1000,telling Eli that Carleton owned the computer.Which of the following best describes Tara's legal position based on the law of agency?

Sureet has a small gardening business.He recently won the lottery and had $50 000 to invest.He went to James,a stock broker,and told him that he would like to invest his money in shares that would give him a high return because he would be relying on this money to fund his retirement.He told James that he had few other assets and needed to grow this investment into a substantial sum if he was to live on it when he retired in 20 years.He said that he was relying on James because he had no investment experience.James recommended investing in options,a strategy which,if successful,would yield high returns.James did not explain to Sureet that there was a substantial risk that he could lose all his money.Sureet,attracted by the prospect of the high returns agreed to give all of the $50 000 to James to invest in options.Within six months all the money was gone.James was not negligent in how he pursued his options trading strategy,it simply was not successful.However,James did not keep Sureet informed on a regular basis about the losses.Sureet is now very angry and frustrated.Does Sureet have any claim against James?

Jennifer is the president and chief executive officer of Starburst Co,a corporation incorporated under the Canada Business Corporations Act carrying on a television production business.She has been discussing a new show with Stein.She enters into an agreement to buy Stein's idea for a new show.The by-laws of the corporation state that the president cannot agree to buy new story ideas without the approval of the board of directors.Jennifer did not obtain the approval of the board to buy Stein's idea.The contract is binding on Starburst nevertheless.

Maja is negotiating to become a Bread King franchisee with Bread King Inc.Maja is interested in getting a location near her home in Hamilton,Ontario.If Maja becomes a Bread King franchisee,which of the following are TRUE?

Explain how a third party can determine the scope of an agent's authority to bind the principal it represents?.In your answer,specifically identify barriers make it difficult for a third party to discover an agent's authority.

Agents have a fiduciary duty to their principals.Which of the following is FALSE with respect to the fiduciary duty?

Orton Corp is incorporated under the Canada Business Corporations Act.It carries on a business running tour boats on the Bow River in Calgary.The articles of the corporation provide that Orton Corp may not enter into a lease unless the board of directors approves it.Joe,the president of the corporation,goes to West End Real Estate Inc,tells West End that he has authority to enter into a lease on behalf of the corporation,and signs a lease for some office space for the business.The board of directors never approves the lease.Which of the following is TRUE?

Laurna hired Ned to act as her stockbroker.Ned purchased certain stocks on Laurna's behalf and at her specific direction.Ned advised her not to buy them,saying that they were too risky,but she insisted.Because those stocks subsequently dropped in value,Laurna has sued Ned for compensation.Which of the following is TRUE?

Jackson is the shipping clerk for Coldpoint Inc,an appliance manufacturer.For five years,Jackson has regularly taken orders from Knight's TV and Appliances Inc for refrigerators.Jackson does not approve the orders himself.He submits them to the sales manager.Once the sales manager has approved the order,an invoice specifying the price and terms of payment is issued and signed by the sales manager.Each invoice is then sent to Knight's.A contract is formed on the terms of the invoice.Jackson then arranges for Coldpoint to ship the refrigerators.In October,Knight's gets an invoice in response to its order for two refrigerators that is signed by Jackson.Knight's calls Jackson and asks about this change in procedure.Jackson says that he has been promoted and he can now approve and sign invoices.Knight's accepts this explanation.In fact,Jackson has not been promoted and invoices still require approval by the sales manager.Can Knight's rely on the invoices a forming a contract for the two refrigerators enforceable by Knight's against Coldpoint?

In the absence of some specific contractual requirement,an agency arrangement may be terminated by

Samantha was the vice-president of purchasing for Amsterdam Books Inc,a chain of retail bookstores.She hired Anthea as a buyer of children's books for the chain.Storm Coast Books Ltd had never dealt with Amsterdam before.Anthea turned up at their offices,told them she was a buyer for Amsterdam and gave out the business cards that Amsterdam had printed for her.Anthea entered into a contract with Storm Coast Books Ltd to buy 5000 copies of a new adventure book.Unfortunately,Samantha had no authority to hire Anthea.A section in the corporation's by-laws provides that only the president of the corporation can hire buyers.The contract is nevertheless enforceable by Storm Coast Books.

I-Jack Inc and Sys/Com Ltd are two large corporations carrying on telecommunications businesses.They want to work together to set up a new business that would develop and sell telephones specifically designed to take advantage of the new Internet services each is offering.Their idea is that the new telephones could be sold with their telecommunications services as a package.Sys/Com will be responsible for the management of the business.This joint venture could be set up as

Orestes was employed as the manager of Coral Gables Horse Farm,a business carried on by Coral Gables Inc.Orestes was responsible for the day-to-day operations of the farm,including the care and maintenance of the horses and the management of the staff.Calum owned all the shares in the corporation and was the sole director and officer of Coral Gables Inc.He was the only one who had authority to buy new horses.In January,Calum asked Orestes to go to the local horse dealer and buy two stallions.Orestes bought the horses.Orestes thought that he had been given a general authority to buy horses for the farm,but that was not Calum's intention.In February,Orestes went to the horse dealer without Calum's permission and purported to buy from the horse dealer two more stallions on behalf of the corporation.When the horse dealer delivered the horses and asked for payment,Calum refused.Can the horse dealer enforce the contract? If not,does the horse dealer have any other remedy?

Mireille recently sold her house in Kitchener,Ontario,through a real estate agent,and she is not very happy about the service she received.The agent,Emily,did not listen to her instructions.For example,Mireille told Emily that she would not allow the house to be shown to people on weekend mornings.Emily showed up with clients on several weekend mornings anyway.Emily was always late for appointments and did not work very hard to sell the house.She never had an open house.Eventually Mireille sold her house to a friend.She feels she got no service of value from Emily and paid a commission of 6 percent of the $300 000 price ($18 000).Is there anything that Mireille can do?

Janus entered into an agreement with Ashley under which he made Ashley his agent for the purpose of selling his car.He agreed to pay Ashley a commission of 5 percent of whatever price she could get for the car.A week later,he cancelled the agency arrangement.At the end of the following week,Ashley showed up at his house with Simon.In front of Simon,she told Janus that Simon was interested in buying the car and asked for the keys so she could show it to him.Janus gave her the keys.An hour late she came back with Simon and told Janus that she had agreed to sell the car to Simon for $10 000.How would you describe Simon's legal rights?

Sherwood entered into a contract to buy some real estate from Idris Real Property Inc.on behalf of Mento Corp,a major developer.Sherwood told Idris that he was the vice-president of acquisitions at Mento.In fact Sherwood is not affiliated with Mento in any way and has no authority to act on behalf of Mento.Sherwood is not liable to Idris under the contract,but would be liable to Idris for breach of warranty of authority.