Juan, the CEO of Hogtown Corp., has retained Don to act as the agent for Hogtown
ID: 425010 • Letter: J
Question
Juan, the CEO of Hogtown Corp., has retained Don to act as the agent for Hogtown Corp in a55 purchase and sale transaction for widgets with YYZ Inc. Juan calls Elena, the CEO of YYZ Inc., to advise her that Don will be in touch to conduct the negotiations, as the agent of Hogtown Corp. Privately, Juan tells Don that the maximum purchase price he is authorized to pay per widget is $0.55. In the current market conditions, it is not uncommon for companies to pay as much as $0.70 per widget.
Don and Elena engage in negotiations. Ultimately, Don signs a contract on behalf of Hogtown, committing Hogtown to purchasing the widgets at a purchase price of $0.62/widgets.
Juan is furious. Juan wants to know if Hogtown will be bound by this contract.
Conduct on IRAC analysis based on these facts. Use full sentences. Each individual must submit his/her/their own answers to receive credit for this activity.
Explanation / Answer
Issue - Whether the company is bound by the contracts made by its agents employed for this purpose, on behalf of it.
Rule - In agency contract, the relationship between the agent and principal can be defined as " he who acts through another is deemed in law to do it himself." Going by this definition, the acts of agent will be deemd as the ones executed by the principal himself / herself.
Application - Don, as he was authorised by his principal ( Juan) to execute the contract on his behalf, was authorised to make a contract, which he made in accordance to the prevaling market conditions ( the prevailing prices were more than the prices indicated by Juan.). Since Juan has engaged him as agent, all contracts made by him as as good as the ones executed by Juan himself.
Conclusion - Juan and his company is bound by the contracts executed by their agent.
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