9.You have been operating a very profitable consulting business in which you have offered consulting services to the public. Your clients are individuals and business entities of all types. You have not in the past had any other employees and have conducted your business as a proprietorship.
You have decided to expand your business by hiring Joe Hotshot, who will work for you as an employee and also offer consulting services to your clients.
On his first sales call to a new client, Joe advises the client that your company will provide information technology consulting services and at the request of the client, includes in the proposal which he submits to the client that your company will guarantee the results and will continue to perform additional services beyond the number of hours specified in the proposal, without any limit, until the client is satisfied. With those provisions included in the proposal, the client accepts the proposal and commits to purchase the consulting services for a fixed fee of $725,000.
Joe is so pleased with his first sale that he stops in a bar to celebrate his success, before coming back to the office to give the client accepted proposal to you. After several celebratory drinks, Joe leaves the bar and is on his way to the office when he negligently runs over Mary Oldgal as she is crossing the street at an intersection. Mary is severely injured as a result of Joe’s negligence.
a.Are you obligated to perform the consulting service contract that Joe entered into on your behalf, including the commitment to continue to perform services under the guarantee until the client is satisfied?
b.Would it make any difference if you had expressly instructed Joe Hotshot that he had no authority to enter into contracts on your company’s behalf if the dollar amount exceeded $50,000?
c.Are you liable for the injuries to Mary Oldgal?
d.What difference would your answer be to a, and c, if prior to hiring Joe, you had incorporated your consulting practice?