Case: Montoya Vs. Grease Monkey International, Inc.

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Nick Montoya and Aver Montoya vs. Grease Monkey Holding Corporation and Grease Monkey International, Inc is an interesting case about egregious abuse of the agent principal relationship. The agent principal relationship is an express or implied authority for one person or legal entity to act on the behalf of another person or legal entity specifically focused around conducting business and entering into contractual relationships (Miller, 2014). This particular case focuses on where liability exists when the agent appears to be but in fact acts beyond the scope of those responsibilities. In addition many lessons can be learned in regards to both corporate and individual protection against such egregious acts. Nick Montoya, plaintiff, met Arthur…show more content…
The first stated that because Mr. Sensenig was acting within his rights as agent and abused them, “When one of two innocent persons must suffer from the acts of a third, he must suffer who put in power the wrongdoer to inflict the injury.” (GREASE MONKEY INTERN., INC. v. MONTOYA, 1995) Because Grease Monkey empowered Mr. Sensenig with these rights they bear the burden in the case. The second ruling concluded that, “ a principal is subject to liability for loss caused to another by the other’s reliance upon a tortious representation of a servant or other agent”. In both instances and held against appeal Grease Monkey was found responsible. The rulings here bring up a very interesting liability when as a principal one employs the use of an agent, how can you prevent an agent from misrepresenting the principal? The answer is not so simple, while there are many ways of holding the agent responsible for their actions if they act outside their responsibilities it is difficult to resolve the principal of the liability themselves if the agent acted with implied or apparent authority. For this reason it is critical to have a system of published and agreed upon checks and balances in order to prevent the liability in the first place. In the instance of Grease Monkey, they should have had a published investor relations portion of their website that was also referenced on many of their marketing materials. This could outline what an investor should and should not expect when investing in the company. Likewise the company should always require two or more signatures for any financial transaction over a significant amount of money. In this case requiring the company treasurer to also sign any investment agreements may have prevented a portion of the liability as well as prevented the issue in the first

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