Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

Exercise 6

Williams v. Pike
Court of Appeal of Louisiana, Second Circuit, 58 So.3d 525 (2011).
www.lacoa2.org a
FACTS Bobby Williams bought a car for $3,000 at Sherman Henderson's auto repair business in Monroe, Louisiana. Although the car's owner was Joe Pike, the owner of Justice Wrecker Service, Henderson negotiated the sale, accepted Williams's payment, and gave him two receipts. Williams drove the car to Memphis, Tennessee, where his daughter was a student. Three days after the sale, the car began to emit smoke and flames from under the hood. Williams extinguished the blaze and contacted Henderson. The next day, Williams's daughter had the vehicle towed at her expense to her apartment's parking lot, from which it was soon stolen. Williams filed a suit in a Louisiana state court against Pike and Henderson. The court awarded Williams $2,000, plus the costs of the suit, adding that if Williams had returned the car, it would have awarded him the entire price. Pike and Henderson appealed.
ISSUE Can the buyer of a defective car hold both the agent and principal liable when the agent sold that car for the undisclosed principal?
DECISION Yes. A state intermediate appellate court affirmed the ruling of the lower court, including its judgment and the assessment of costs against both defendants. The appellate court added the costs of the appeal to the amount. Both Pike and Henderson-the undisclosed principal and his agent-were liable to Williams.
REASON The court noted that a state permit to sell the car had been issued to Pike, and it showed that Joe Pike was the owner. The car was displayed for sale at Henderson's business, however, and he actually sold it. The court reasoned that this made Pike the principal and Henderson his agent. The fact that their agency relationship was not made clear to Williams made Pike an undisclosed principal. Williams could thus choose to hold either Pike or Henderson liable for the condition of the car, which constituted a breach of implied warranty because the car did not fulfill the purpose for which it was intended. The loss of the use of the car, the "inconvenience" caused by the defect, the price, and the cost of the tow were among the factors that supported the award.
WHAT IF THE FACTS WERE DIFFERENT? Suppose that Henderson had fully disclosed the fact of his agency relationship and the identity of his principal. Would the result have been different? Why or why not?