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Question
Consists of legal proposition(s)/ principle(s) (hereinafter referred to as 'principle') and facts. Such principles may or may not be true in the real and legal sense, yet you have to conclusively assume them to be true for the purposes of this Section. In other words, in answering these questions, you must not rely on any principle except the principles that are given herein below for every question.
Further, you must not assume any facts other than those stated in the question. The objective of this section is to test your interest in the study of law, research aptitude, and problem-solving ability, even if the 'most reasonable conclusion' arrived at may be absurd or unacceptable for any other reason. It is not the objective of this section to test your knowledge of the law.
Therefore, to answer a question, the principle is to be applied to the given facts and to choose the most appropriate option.
Principle: A master shall be liable for the fraudulent acts of his servants committed in the course of employment. However, the master and third parties must exercise reasonable care in this regard.
Facts: Rahul was a door to door salesman with United Manufacturing Company (the Company). The Company was manufacturing Water Purifiers. Rahul, along with the Company’s products, used to carry Water Purifiers manufactured by his Cousin in a local Industrial Estate. He used to sell the local product at a lower rate giving the impression to the buyers that he is offering a discount on the Company’s product. Company Management detected the fraudulent activity of Rahul and dismissed him from service. Rahul still continued to carry on with his activity of selling the local product pretending that he was still a salesman of the Company. Several customers got cheated in this process. The fraud was noticed by the Company when the customer began to complain about the product. The customers demanded the Company to compensate for their loss.
Options
The Company is liable to compensate all the customers as it did not inform the public about Rahul's fraudulent conduct and the subsequent dismissal.
The Company is not liable as Rahul was dismissed by the Company
The Company is liable to the customers who purchased the local product from Rahul only till he remained as a salesman of the Company
The liability rests with the local manufacturer as it was a defective product.
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Solution
The Company is liable to compensate all the customers as it did not inform the public about Rahul's fraudulent conduct and the subsequent dismissal.
Explanation:
The company is liable to compensate all the customers as it did not inform the public about Rahul's fraudulent conduct and the subsequent dismissal. The company (Master) was liable for the acts of employee Rahul during his employment which was fraudulent in nature. The company also had a duty to inform the public of the fraudulent acts of Rahul and about his dismissal.
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