Business Law question : Bikos was employed by the partnership owning Sagewood Ap
ID: 442718 • Letter: B
Question
Business Law question :
Bikos was employed by the partnership owning Sagewood Apartments in EL Paso, Texas, to manage the apartments. Bikos had recently moved to El Paso from Indiana, where he owed $18000 in gambling debt. Bikos had express authority to collect rents from tenents, but he was not empowered to write checks on the account in which he deposited the rent. To raise money to pay his gambling debt, meet living expenses, and engage in new gambling operations, Bikos solicited some tenents to pay a year's rent in advance in exchange for a small discount on their monthly rent. From the sums thus received, he deposited on month's rent for each participating tenant and used the rest for his own purposes. Soon, Bikos needed more funds to make upcoming monthly rental deposists for the tenants who had already paid in advance. He therefore sold some of the tenants short-term savings certificates paying a very high rate of interest. The certificates were issued in the name of Sagewood Apartment, showing Bikos's name as manager and a fictitious name signed by Bikos as treasurer. Bikos's employers had not expressly authorized him to issue savings certificates to tenant and knew nothing of Bikos's dealing with the tenants. Eventually, Bikos was arrested for felony theft. Then, tenants who had paid Bikos for the worthless savings certificates sued the apartment's owners for the amounts they had paid.
Did Bikos have implied or apparent authority to issue the savings certificates? Did Bikos have implied or apparent authority to collect a year's rent in advance in exchange for the discount on the monthly rent? Why or why not? EXPLAIN !
Explanation / Answer
Implied Authority: An agent's power to act on behalf of a principal, intentionally granted by the principal as a result of the principal's conduct, but without an express agreement. Failure to object after a prior exercise of such power may give rise to implied authority.
Apparent Authority:An agent's power to act on behalf of a principal, even though not expressly or impliedly granted. This power arises only if a third party reasonably infers, from the principal's conduct, that the principal granted such power to the agent. The idea of apparent authority protects third parties who would otherwise incur losses if the agent's signature did not bind the principal after reasonable observers thought that it would.
As evident from the case, Bikos only had express authority to collect rent and no other authority, even the authority to sign and deposit the check. So there were no way he could have sold savings certificate in the name of the owner and the owners are no way gave any implied or apparent authority to him in this regard.
Bikos had the implied authority to collect a years rent in advance as Bikos were authorized to collect rent for the owners. Implied authority entails giving power to act on behalf of a principal, intentionally granted by the principal as a result of the principal's conduct. Nothing was mentioned by the owner in their express warranty about whether he need to collect the rent on monthly basis or yearly basis but he needs to collect rent-therefore, Bikos had all the right to exercise whatever way he thinks to collect rent.
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