Question

Paul, who runs a retail jewelry store, went with Jane, to whom he was engaged to be married, to a wholesale jewelry store. Paul had no express, written agreement with Jane by which she was his agent. The wholesaler jeweler, Pam, asked Paul if Jane was buying for him. Paul did not want to embarrass Jane so he nodded in agreement. A few minutes later Paul whispered to Jane, outside the hearing of the wholesaler, that she should not make any purchases. Paul and Jane had a big disagreement over money that evening, and Jane broke off their engagement. The next day Jane went back to the wholesale jeweler and purchased a string of pearls for $2,000. Jane also purchased a fur jacket for $3,000 from a store, owned by Harry, that was next door to the jewelry store. She told Harry that Paul wanted a fur for a model in his store and that Paul would be glad to pay Harry for the jacket.Which of the following is the most likely result if Pam, the wholesaler jeweler, sues Paul for the price of the pearls?A. Pam will lose because it was her responsibility to ask Paul for written documentation that Jane was his agent.B. Pam will win only if she can show that through reasonable investigative efforts on her part Jane cannot be located.C. Pam will win assuming that she can prove that she reasonably believed, based on Paul's conduct, that Jane was acting as his agent.D. Pam will win only if she can show that Jane has no assets with which to pay for the necklace.E. Pam will lose unless it can be established that Jane at some time in the past had actual authority to act as Paul's agent.

Answer 1

Answer:

C) Pam will win assuming that she can prove that she reasonably believed, based on Paul's conduct, that Jane was acting as his agent.

Explanation:

A principal-agent relationship can be created through expressed agency, implied authority, apparent agency, and ratification.

When the principal leads a third party to believe that someone is acting as his/her agent, it is called apparent agency. Apparent agency is valid even if the principal has made no agreement with the "agent".

Therefore if Pam can prove that Paul lead her to believe that Jane was in fact working for him, then Pam will win the lawsuit.