Author Question: To establish an agency relationship: a. the procedure in state statutes must be followed b. there ... (Read 54 times)

deesands · **on:** Jun 24, 2018

To establish an agency relationship:
a. the procedure in state statutes must be followed
b. there must be a written contract between the parties c. the principal and agent must agree to form an agency d. all of the other specific choices
e. none of the other choices

Question 2

Wrongful Interference. East Bay Limited Partnership purchased a shopping center for the purpose of renovating the center and reselling it to a third party. The purchase was financed through a loan from American General Life & Accident Insurance Co The parties agreed in writing that during the first six months of the loan, the property could be sold to a buyer approved by the lender and the loan assumed without payment of any fee, but after six months a 1 percent fee would be required. Prepayment of the loan was precluded during the first six years. The written agreement specifically provided that American had the right to approve a proposed buyer based on the buyer's net worth, credit worthiness and management expertise. About one and a half years into the loan, East Bay requested American's approval to sell the shopping center to the James W. Hall Corp In a letter to East Bay, American stated that it would not allow Hall to assume the loan because of the lack of experience of the company buying the property.'' East Bay wished to pay off the loan in full so that it could then sell the shopping center without American's approval. American told East Bay that the latter could pay the loan in full only if a prepayment fee of 24.25 percent was paid. In the end there was no sale and no prepayment. East Bay went into default, and American obtained ownership rights in the shopping center, which had been given as security for the loan. East Bay sued American for, among other things, intentional interference with a business relationship and breach of its duty to act in good faith and deal fairly with East Bay. Will the court hold for East Bay on either of these counts? Discuss.

bob · **Reply #1 on:** Jun 24, 2018

Answer to Question 1

c

Answer to Question 2

Wrongful interference
No. According to the court, American's refusal to approve the sale of the shopping center to the Hall Corp. did not constitute wrongful interference with a business relationship, nor did American breach its duty of good faith in requiring East Bay to pay a prepayment fee of almost 25 percent if it wished to prepay the loan to facilitate the sale. The court found that American had not acted unreasonably in refusing to approve the sale of the shopping center to Hall Corp. Requiring that a prospective purchaser have experience in the management of a shopping center was a reasonable action, in the eye's of the court, especially in view of American's financial stake in the success of the property. The court further found that American had no contractual duty to allow East Bay to prepay the loan and in fact had no duty whatsoever to allow prepayment. The fact that American offered to allow prepayment as long as East Bay paid a prepayment fee of 24.25 percent did not indicate deceit or fraud, or bad faith, on American's part. Even if the fee could be found to be unfair, the court could find no evidence to show that American's conduct was in bad faith.