Reference no: EM131398068

Assignment

Juana was the sole owner of Cal Fashions, a business which designed and manufactured women's clothing. The products of Cal Fashions were sold through high-end stores.

Juana appointed her sister Maria as Vice-President for purchasing. Juana said to Maria: "I want you to have total power to buy things which the business needs --- you decide where to get what we need to buy". Juana then sent a letter to all firms which had supplied materials to Cal Fashions in the past. The letter said: "Maria is our new Vice-President for Purchasing. She has full authority to make purchases on behalf of me and my business Cal Fashions".

Juana suspected that Maria was having an affair with Juana's husband Philip. On 25 May 2002, after an angry confrontation, Juana said to Maria: "I don't ever want to see you again. You're fired. Don't ever show up again at the office. I terminate any authority I ever gave you". On the day after the confrontation between the sisters, Maria placed an order with Tippy Textiles Inc. to purchase several different types of fabrics; the total price of this order was $1 million. (Tippy Textiles had sold fabric to Cal Fashions several times in 2000 and 2001; each time they had made the arrangements to sell fabrics to Cal Fashions through dealings with Maria.)

On 25 August 2002 Juana's sister Isabel attended a fashion industry convention held in Houston. Before Isabel left for Houston Juana said to her: "You are only going to make a presentation at the convention - you do NOT have authority to make any contracts on my behalf. If you meet anyone who wants to do business with Cal Fashions tell them that they must contact me to discuss it".

While in Houston, Isabel met with the owners of several fashion boutiques in the Houston area; Chris was among the owners who met with Isabel. Chris (the owner of a boutique in Houston's most upscale mall) asked if he could buy certain Cal Fashions products to sell in his store. He and Isabel agreed on the terms of a sales contract; this contract was put into writing and signed by Chris and Isabel.

When Isabel returned to Los Angeles she told Juana about the contract she had negotiated with Chris. Isabel gave the written contract to Juana. Juana then sent an e-mail to Chris that said: "Although my sister Isabel did not have authority to sell our merchandise, I would love to have you be one of our fashion outlets. I hereby confirm the arrangements which you made through Isabel".

Juana owned a house in Palm Springs; she decided to sell it. She entered into an arrangement with Melinda, a realtor in Palm Springs, authorizing Melinda to attempt to find a buyer and to negotiate a sale of the property. The terms of this agreement were placed in a written document and sent to Melinda along with the keys to the house. Melinda entered into a contract in writing to sell the house to Steve. Melinda and Juana believed that Steve was acting on his own account. In fact Steve was representing Leonora. (Steve had been authorized by Leonora in a written document to purchase a house in Palm Springs on behalf of Leonora.)

(a) Is the sales agreement arranged by Maria with Tippy Textiles for the purchase of fabrics binding on Juana? Explain.

(b) Is there a binding contract between Juana and Chris for the sale of Cal Fashions products? Explain.

(c) Juana did not receive payment for the house in Palm Springs. She sued both Steve and Leonora for breach of contract. Will they be held liable to Juana under the contract to purchase the house in Palm Springs? Explain.