Clark_11e-AM-Ch32.doc

Clark_11e-AM-Ch32.doc - C HAPTER 3 2 LIABILITY TO THIRD P...

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251 C HAPTER 32 L IABILITY TO T HIRD P ARTIES AND T ERMINATION A NSWERS TO Q UESTIONS AT THE E NDS OF THE C ASES CASE 32.1—(PAGE 657) THE ETHICAL DIMENSION Does a principal have an ethical responsibility to inform an unaware third party that an apparent agent does not in fact have the authority to act on the principal’s behalf? A principal’s ethical duty to notify a third party could depend on the specific circumstances. But if a principal acts to lead a third party reasonably to believe that an agency relationship exists, and the third party changes positions in reliance, it seems fair to impose legal liability on the principal. It seems likewise fair to hold the principal to an ethical responsibility to inform an unsuspecting third party in those same circumstances that no agency actually exists. THE E-COMMERCE DIMENSION Could Amanda have established Drs. Gubin and Ogata’s apparent authority if Desert Hospital had maintained a Web site that advertised the services of the CPSP clinic and stated clearly the physicians were not its employees? Explain. Yes. Although the physicians might have thereby established that they were not the hospital’s employees, they could still have qualified as its independent contractors. An independent contractor can be a principal’s agent. CASE 32.2—(PAGE 662) WHAT IF THE FACTS WERE DIFFERENT? If Selheimer & Company had not had the authority to accept funds for in- vestment, did not authorize its manager to accept such funds, and did not represent that the manager or the firm had this authority, would the outcome in this case have been different? Explain. Probably. A principal’s liability for its agent’s misrepresentation depends on whether the agent was actually or apparently authorized to make representations and whether those representations were within the scope of the agency. Under the facts in this question, the principal could not grant its agent authority to be in a position to defraud clients, because the firm would not have
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252 UNIT SEVEN: AGENCY AND EMPLOYMENT the authority to be in such a position itself. Thus, any such representations would be outside the scope of the agency. THE GLOBAL DIMENSION located in foreign countries. Would those foreign clients be able to sue under U.S. agency law and hold Murphy indirectly liable for the acts of his partner Selheimer? Why or why not? Assuming that the court had jurisdiction and the foreign clients could establish their claims, the law applied in the Selheimer case could support an imposition of liability on Murphy for the acts of his partner. An important consideration, however, is whether those clients could recover. The framework of the proceeding in the Selheimer case is the firm’s involuntary bankruptcy and Murphy was ordered to pay more than $1 million in claims. There may be no further assets. CASE 32.3—QUESTIONS (PAGE 665)
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Clark_11e-AM-Ch32.doc - C HAPTER 3 2 LIABILITY TO THIRD P...

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