Cengage Advantage Books: Business Law 13th Edition by Roger LeRoy Miller

Exercise 11

Agent's Duties to Principal. John Warren wanted to buy a condominium in California. Hildegard Merrill was the agent for the seller. Because Warren's credit rating was poor, Merrill told him he needed a co-borrower to obtain a mortgage at a reasonable rate. Merrill said that her daughter Charmaine would "go on title" until the loan and sale were complete if Warren would pay her $10,000. Merrill also offered to defer her commission on the sale as a loan to Warren so that he could make a 20 percent down payment on the property. He agreed to both plans.
Merrill secured the mortgage in Charmaine's name alone by misrepresenting her daughter's address, business, and income. To close the sale, Merrill had Warren remove his name from the title to the property. In October, Warren moved into the condominium, repaid Merrill the amount of her deferred commission, and began paying the mortgage. Within a few months, Merrill had Warren evicted. Warren subsequently filed a suit against Merrill and Charmaine.
?
(a) The first group will determine who among these parties was in an agency relationship.
(b) The second group will discuss the basic duty that an agent owes a principal and decide whether that duty was breached here.