Reference no: EM1387369

Duchess Cruise Lines, Inc. dry-docked a ship, intending to have maintenance done. Melinda, the ship's supply manager, decided to purchase some needed supplies from Marine Equipment Services, Inc., on the ship's behalf while it was in dry-dock. She charged the supplies to her personal credit card. The supplies were delivered and used, but the cruise line refused to reimburse Melinda for the cost of the supplies because she hadn't obtained the required approvals before making the purchase. Melinda takes the position that doing so would have delayed the purchase of the materials, because the person who normally grants approvals was on leave for several weeks. The cruise line takes the position that someone else would have handled the matter promptly if Melinda had simply followed company procedure. Melinda is threatening to sue to obtain reimbursement.

Meanwhile, Steve, a member of the ship's maintenance crew, on shore leave for a day, came back to the ship late, after drinking to excess. Before retiring for the night, Steve turned several wheels on the dry-dock's wall, which resulted in a flooding of the tanks on one side of the dry-dock. The ship listed, slid off the blocks holding it up, then crashed against the dry-dock wall, ruining much of the dry-dock. The dry-dock owner is suing Duchess Cruise Lines, Inc., for reimbursement of the damages to the dry-dock.

Paul was hired by Duchess Cruise Lines, Inc. as an independent project manager to coordinate the dry-dock maintenance project. He was not an "employee" of Duchess Cruise Lines, Inc. and was not authorized to make any purchases or enter into any contracts on the cruise line's behalf. All of his proposals were to be submitted to a management team for approval. After Steve caused the ship to slide off the blocks and crash into the dry-dock wall, Paul met on the site with a crane company owner, Al, telling Al that he was Duchess' project manager and requesting a bid from Al's company to move the ship to a new dry-dock facility for repair. At the time, Paul was wearing a Duchess Cruise Lines, Inc. jacket and directing various employees on the dock. Al provided a bid, Paul accepted it, and Paul signed a services contract with Al's company, signing his name followed by the words, "Project Manager, Duchess Cruise Lines, Inc." Duchess Cruise Lines, Inc. did not approve the hiring of Al's company and refuses to pay Al's company on the contract. Paul claims he has no personal liability because he was acting on Duchess' behalf in an emergency.

What agency law issues does this scenario raise? How should the courts decide these disputes? Why? How could all of this have been handled to prevent some of these issues?