Question

In: Operations Management

Lynch was the loan officer at First Bank. Patterson applied to borrow $25,000. Bank policy required...

Lynch was the loan officer at First Bank. Patterson applied to borrow $25,000. Bank policy required that Lynch obtain a loan guaranty from Patterson’s employer, a milk company. The manager of the milk company visited the bank and signed a guaranty on behalf of the company. The last paragraph of the guaranty stated, “This guaranty is signed by an officer having legal right to bind the company through authorization of the Board of Directors.” Should Lynch be satisfied with this guaranty? Would he be satisfied if the president of the milk company, who was also a director, affirmed that the manager had authority to sign the guaranty? Explain.

Ralph owned a retail meat market. Ralph’s agent Sam, without authority but purporting to act on Ralph’s behalf, borrowed $7,500 from Ted. Although he never received the money, Ralph repaid $700 of the alleged loan and promised to repay the rest. If Sam had no authority to make the loan, is Ralph liable? Why?

A guest arrived early one morning at the Hotel Ohio. Clemens, a person in the hotel office who appeared to be in charge, walked behind the counter, registered the guest, gave him a key, and took him to his room. The guest also checked valuables (a diamond pin and money) with Clemens, who signed a receipt on behalf of the hotel. Clemens in fact was a roomer at the hotel, not an employee, and had no authority to act on behalf of the hotel. When Clemens absconded with the valuables, the guest sued the hotel. Is the hotel liable? Why?

Solutions

Expert Solution

Lynch the Loan Officer should be statisfied after taking a written letter of authority signed by Board of Directors that the Manager is authorised to sign on their behalf and provide gurantee on behalf of the company, mere guaranty by the Manager does not complete the process of credit satisfaction.

Though Ralph has not received the money but he has made a repayment of $700 which makes me liable that he accepted the liability to repay as Sam was his agent and has acted on this behalf, so Ralph is liable to repay the loan amount

No, Legally Hotel is not liable for any transaction happening between guests and in this case Clemens was also a guest, it was duty of the guests to ensure that they deal with authorised person seeing their id cards as he was giving them their valuables. But here it is moral responsibility of the Hotel because they allowed the guest to enter into an restricted zone for guest which made Clemens feel that he is Hotel Staff so they should also compensate the guest for their mistake or negligance.


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