Barnes agrees with Morgan to enter into the management of a new subdivision of residential housing. Morgan appoints Barnes as his manager for the duration of the development program. During the course of the construction, Barnes decides to use funds specified for the subdivision for an office-space project that Barnes alone has been interested in completing. Morgan is very angry on learning of Barnes’ actions and terminates the agency. Barnes insists that the agency cannot be terminated in this manner. Is Barnes correct and why or why not?
Barnes is not correct as the agency can be terminated. Mr. Morgan gave Mr. Barnes a verbal authorization by appointment as the new management of the subdivision and for the transaction of all affairs in connection with the subdivision. Mr. Barnes, as acting as a general agent has the incidental authority through an implied agreement to resolve the issues and use the funds that relate to the subdivision. Mr. Morgan cannot terminate the agency on the fact that Mr. Barnes built the new office space, however Mr. Morgan can terminate the relationship with the agency if it violated the responsibility and termination falls within the guidelines of termination with the agency contract. Thus, provided the Barnes has been engaged in misconduct, the discharge of Barnes will be without liability.