Question

Adam is a traveling salesperson for Peter Petri Plumbing Supply Corp. Adam has express authority to solicit orders from customers and to offer a 5 percent discount if payment is made within thirty days of delivery. Petri has said nothing to Adam about extending credit. Adam calls on a new prospective customer, John's Plumbing Firm. John tells Adam that he will place a large order for Petri products if Adam will give him a 10 percent discount with payment due in equal installments thirty, sixt, and ninety, days from delivery. Adam says he has authority to make such a contract. John calls Petri and asks if Adam is Authorized to make contracts giving a discount. No mention is made of payment terms. Petri replies that Adam has authority to give discounts on purchase orders. On the basis of this information, John orders $10,000 worth of plumbing supplies and fixtures. The goods are delivered and are being sold. One week later, John receives a bill for $9,500 due in thirty days. John insists he owes only $9,000 and can pay it in these equal installments, at thirty, sixty, and ninety days from delivery. Discuss the liability of Petri and John only.

Answer 1

Answer:

Explanation:

Liability of Petri:

On all the purchases, if payment is made within 30days from delivery, Petri gave the authority of a 5% discount to Adam. Upon extension of credit to customers,  no terms were given to Adam.

In the case under consideration, Adam explicitly gave a false representation of his authority to get more sales on his account and thus, Petri is NOT accountable to John on his terms with Adam.

Liability of John:

Being a customer to Petri, John has to discover the detailed terms on discount and other payment terms with Petri when he called Petri. John is also accountable to make clarifications whether Adam has the authority to give a 10% discount and making payment in three installments.

In the case under consideration, John has failed to find the exact details on whether Adam has the authority to give a 10% discount. Thus, he is accountable to make the payment of $9500 in 30days.