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BUSINESS LAW
Business Law: Dennegar Liability
Dennegars 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 Universals 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 Dennegars 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 Dennegars case was the relationship of consent and not the formal agreement or contract. There was no conflict of interest when the two...…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 Dennegars 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 Dennegars intentions or purpose for AT&Ts 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.
Therefore, under agency theory, it is clarified that the mutual benefit of both the agents, Dennegar and Knutson, existed, and they were both motivated for their concerns (Sherman, 2020). There was an optimization of benefits for both the parties utilities (Garcia, Rodriguez-Sanchez & Fdez-Valdivia, 2014). Hence, implied authority and consent for carrying…
References
Chen, J. & James, M. (2020, July 25). Principle-agent relationship. Investopedia. https://www.investopedia.com/terms/p/principal-agent-relationship.asp
Eisenhardt, K.M. (1989). Agency theory: An assessment and review. The Academy of Management Review, 14(1), 57-74. https://doi.org/10.2307/258191
Garcia, J.A., Rodriguez-Sanchez, R. & Fdez-Valdivia, J. (2014). The principle-agent problem in peer review. Journal of the Association for Information Science and Technology, 66(2), 297-308. https://doi.org/10.1002/asi.23169
Kopp, C.M. & Brock, T. (2021, September 4). Agency theory. Investopedia. https://www.investopedia.com/terms/a/agencytheory.asp
Sherman, F. (2020, July 16). The agency theory in financial management. Small Business Chron. https://smallbusiness.chron.com/principalagent-relationship-32117.html
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