Dennegar Liability
Published on Jul 30, 2020
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PRESENTATION OUTLINE
Agenda
- Case Review
- Agency Theory and Agency Law
- Agency Relationship
- Agency & Corporate Liability
- Conclusion
- References
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Lee Dennegar and Mark Knutson lived together in a house owned by Mr. Dennegar. While the finances used to pay the mortgage and bills were Mr. Dennegar’s, Mr. Knutson managed the expenses and mail with Mr. Dennegar’s full consent. Approximately in February 2001, Mr. Knutson opened a credit card with AT&T Universal in the name of Lee Dennegar. With statements sent to the correct address of Mr. Dennegar, he was unaware of a credit card in his name and the balance associated with it. Upon Mr. Knutson’s death in June 2003, a defaulted balance of $14,752.93 was owed and transferred to New Century Financial Services, Inc.
New Century Financial Services is seeking repayment of the credit card balance in full plus legal costs.
Mr. Dennegar, admitting giving consent to Mr. Knutson to handle all household mail and financial obligations on his behalf, claims he never applied for or used the credit card and should not be liable for its debt. He trusted Mr. Knutson to act within his best interests when it came to his financial affairs.
Agency theory is a contract between agents and principals, where principals delegate work to the agents and anticipate the agent will complete the tasks in the principal’s best interest (Bendickson, Muldoon, Liguori, & Davis, 2016). This theory can cover multiple situations with business and personal contracts.
In the case of New Century Financial Services Inc. vs. Dennegar, liability can fall on Mr. Dennegar through the theory of Agency Law. Agency Law is when one party, known as the principal, provides consent to another party, known as the agent, to act on their behalf (Rauterberg, 2020).
An agent acts in the name of another, having been given some degree of authority to do so (Mayer, Warner, Siedel, & Lieberman, 2017). In this situation, Mr. Dennegar is the principal, and Mr. Knutson is the agent acting on behalf of Mr. Dennegar.
Mr. Knutson and Mr. Dennegar have an agency relationship because one party (Mr. Dennegar) has granted permission to the other party (Mr. Knutson) to act on his behalf (Dionne, n.d.).
There are different types of authority given when acting as an agent in a relationship: express, implied, and apparent.
Express authority is an agent's power to act on behalf of the principal, with permission given per an agreement between the agent and principal (Cornell Law School, n.d.). This authority allows the agent to take care of the principal's needs through a mutual agreement and understanding.
Implied authority applies when the agent receives the power to act on behalf of the principal and is evident by their actions (Murray, 2019). Since there is no written contract giving consent to an agent, the agent can act on behalf of the principal in ways he sees fit.
An agent acts with apparent authority when they conduct transactions without the principal's expressed authorization; however, a third party has a reason to believe the agent has the power to do so (Barnes & Oldham, 2019).
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The relationship between these two men is considered a legal relationship and holds the principal liable for the terms of the contract or agreement. Mr. Dennegar acted with express authority when he permitted Mr. Knutson to manage the household finances and mail, including access to personal information and check-writing abilities. This case, however, indicates apparent authority was given to Mr. Knutson when he signed a contract with a third party, AT&T Universal, on behalf of Mr. Dennegar.
The extent of Mr. Dennegar’s and Mr. Knutson’s liability is based on the agency relationship created between them and the scope on which Mr. Knutson acted as the agent. Vicarious liability finds that Mr. Dennegar is financially obligated to New Century Financial Services because, as the principal, he selected an agent, he delegated specific responsibilities to that agent, and he granted authority to the agent to conduct individual acts (Law Teacher, 2019). Corporate liability does not fall on AT&T Universal due to the apparent power given to Mr. Knutson.
Conclusion
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Under Agency Law, Mr. Dennegar granted Mr. Knutson approval to act on his behalf regarding his financial affairs. Mr. Knutson served within this authority area, making Mr. Dennegar responsible for payment of $14,752.93 owed to New Century Financial Services, Inc. The judge, in this case, sited that Mr. Dennegar did, in fact, grant permission to Mr. Knutson to act on his behalf, and Mr. Knutson was within those rights to sign a contract with AT&T. Mr. Dennegar was found liable for the amount owed to New Century Financial Services plus costs for the trial.
References
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Barnes, V., & Oldham, J. (2019). The legal foundations of Apparent Authority. Journal of Corporation Law, 44(4), 649–664. Retrieved from https://94101d702-mp03-y-https-web-a-ebscohost-com.proxy.lirn.net/ehost/pdf...
Bendickson, J., Muldoon, J., Liguori, E., & Davis, P. E. (2016). Agency theory: the times, they are a-changin'. Management Decision, 54(1), 174-193. doi:http://dx.doi.org/10.1108/MD-02-2015-0058
Cornell Law School. (n.d.). Express authority. Retrieved from https://www.law.cornell.edu/wex/express_authority
Dionne, G. (n.d.). Who is liable, me or the business? Agency liability issues your business should know. Retrieved from https://www.invigorlaw.com/liable-business-agency-liability-issues-business...
Law Teacher. (2019, August 6). Vicarious liability of principal for acts of agent. Retrieved from https://www.lawteacher.net/free-law-essays/commercial-law/vicarious-liabili...
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