Dennegar Liability Business Law

BUSINESS LAW

Business Law: Dennegar Liability

Dennegar’s case is about one person allowing the other to take care of the household finances and handle the mail “in whatever way he chose.” Knuston lived with Dennegar and handled his household finances in which he managed AT&T Universal’s issued credit card. After Knuston was deceased, AT&T sued Dennegar for not paying $14,752.93, which Dennegar said he did not know.

The theory under which Dennegar seems liable is the agency theory (Kopp & Brock, 2021). This theory has some key features under which Dennegar appears liable for the charges AT&T said he has to pay. The theory talks about a general agent who acts on behalf of the principal agent. The general agent was Knutson, who acted in support of the principal agent, Dennegar.

No formal agreement existed between the two since Dennegar only permitted Knutson to handle his affairs at home and gave full authority in responding to the mails in whichever way he deemed best. It implied that Knutson also did not have to ask for Dennegar’s permit each time he replied to an email. This is exactly what he did when AT&T issued the card and notified him through an email. Here came the play of agency relationship in which the agreement was not there, but still there were operations taking place.

Since there was no official contract, the general agent exerted an implied authority on behalf of the principal-agent under this theory. The agent, Knutson, had the power to act in the best interests of the principal agent, Dennegar. The authority was apparent to AT&T since the company was under the impression that if Dennnegar was signing continuous card bills, then he was the one who would be authorized for this very purpose.

The principal-agent relationship between the principal-agent and general agent in Dennegar’s case was the relationship of consent and not the formal agreement or contract. There was no conflict of interest when the two initially decided upon their duties and responsibilities (Chen & James, 2020).

The principal agent himself appointed his general agent for this matter and was satisfied with the actions he would carry out in the future. He gave him full power to control his mails and other financial matters related to home. Although the principal-agent relationship is suggested to be clarified through a certified contract, if not, then it should be suggested through actions, which was exactly the case between Dennegar and Knutson.

Although the agency theory inculcates two problems that arose in Dennegar’s case, Dennegar was held liable for the charges. The first problem is that the principal-agent cannot confirm the actions carried out by the general agent (Eisenhardt, 1989, p. 58). Dennegar could not keep track of Knutson’s actions. He was unaware of the emails he was responding to on Dennegar’s behalf since Knutson was not liable for taking permission from Dennegar when he was to respond to his emails.

It was because Dennegar permitted him in the beginning that he could do whatever he wanted to do with his emails. It could be deduced that it was the relationship of trust that existed between Dennegar and Knutson. Although it is not suggested here that Knutson was trying to be dishonest, in the light of agency theory, it is impossible to keep track of actions that a general agent would conduct.

Secondly, sharing risk between the two agents would be different due to their attitudes towards the risk. For example, one agent thinking one factor as high risk might not be considered a priority by the second agent. The conflict of interest that the theory has to confront would exist, and the same happened with Dennegar. He did not realize that allowing Knutson to respond to his emails without letting him know and whatever way he liked would be charged upon him by the company. He had no information that he would be held accountable for the freedom he gave to Knutson and the charges by the company.

One of the important conditions in agency theory and principal-agent relationship is that there would exist an asymmetry between the two parties. This asymmetry refers to the situation that the principal-agent did not completely discern the actions that the general agent was carrying out on his behalf (Yallew et al., 2018).

It is the same problem that is discussed above. Again, there could be two possibilities for which Knutson took the action of replying to AT&T on Dennegar’s behalf and did not tell Dennegar about it. First, he was using inappropriate methods or tools to take advantage of the situation; second, he was unsure of Dennegar’s intentions or purpose for AT&T’s card and responded in the best possible way. The first circumstance is not implied anywhere in the given case. The second circumstance could be understood since Knutson did not tell Dennegar and replied at his discretion.