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Lucy, Esq.
Lucy, Esq., Attorney
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Can a person be held liable for vouching for a person? Specifically

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Can a person be held liable for vouching for a person? Specifically Person A approaches Person B suggesting they enter into business venture with Person C. Person C would sell different product than Person A currently sells, but do so in same marketplace and on Person B's account and reputation which has been built up the previous 18 months. Person A would receive payment of 10% of total sales of venture. Person B's would benefit from venture by way of being able to purchase a different product at a much discounted rate than currently paying resulting from business connection of Person C. Person B voiced only one concern before entering into agreement, that concern was that his existing business would be financially damaged if Person C did not conduct themselves in proper way. Person A assured Person B that the character of Person C would not tarnish reputation and that they(Person A) would be involved enough that they could prevent this from happening.
30 days into venture Person C has sold $64,000 of his product on the reputation and account of Person B, Person A collects 10% or $6400. The better price on product promised to Person B never materializes.
Within the next few weeks reports that Person C is collecting money but not shipping product or shipping packages with nothing in them.
Within another 2 weeks after more bad reviews sales for both Person B and C drop to near zero due to accusations of scamming customers.
Since Person C made no promises to Person B, but Person A vouched for Person C and assured that something like this wouldn't happen. Can Person A be held liable?
Submitted: 1 year ago.
Category: Legal
Expert:  Lucy, Esq. replied 1 year ago.
Hi,

My name is XXXXX XXXXX I'd be happy to answer your questions today.

Person A would only be liable if he signed something guaranteeing Person C's behavior or promising to pay debts incurred by Person C, or if there is evidence that Person A and Person C conspired to steal money from Person B and defraud him. If he had no reason to believe, based on what he knew, that Person C would behave in this manner, Person A would not be liable. But if the whole thing was something the two of them planned to take money from Person B, absolutely, both A and C are liable.

If you have any questions or concerns about what I've written, please reply so that I may address them. It's important to me that you are 100% satisfied with the service I provide. Otherwise, please rate my service positively so that I get credit for answering your question. Thank you.
Lucy, Esq., Attorney
Category: Legal
Satisfied Customers: 20213
Experience: Lawyer
Lucy, Esq. and 9 other Legal Specialists are ready to help you
Customer: replied 1 year ago.

Thanks so much for your reply. I was under the impression that verbal contracts are as good as a written contract? Person A solicited person B to use his reputation for the purpose of selling a product. Person B voiced only one concern to Person A before agreeing to this venture. This one concern was potential damage to his reputation. Person A assured/guaranteed this would not happen.


Your answer makes sense to me in the situation where the damage done to Person B was unforeseen, not specifically discussed.


There was not any plan by Person A and C to defraud person B, but it was everyone's reason to believe that Person C's actions could damage Person B's reputation.


Person A benefited to the tune of $6400 based on his vouching for Person C. I would seem unjust to me for someone to gain substantially based on his vouching for someone for someone else to take on greater risk, but then not be responsible for that greater risk which he is vouching for. Does that make sense or am I missing something.


 


thanks

Expert:  Lucy, Esq. replied 1 year ago.
There are a few very specific contracts that must be in writing to be enforceable. One of them is a guarantee or promise to pay debts incurred by another person. Most oral contracts are enforceable, but unfortunately not this type.

The unjust enrichment theory only works if Person A knew this would happen. In that case, yes, Person A unjustly enriched himself at Person C's expense. He could be required to repay the $6,400, but wouldn't be responsible for all losses incurred by Person C. The facts that you provided didn't seem to support the idea that Person A unjustly benefited himself. Yes, he got commissions on items that Person B sold, but Person B also got profit for those items (or that's what the question seemed to say).
Customer: replied 1 year ago.

I don't want to take too much of your time and you have been very helpful thus far. I understand what you are saying and it makes sense. Just fyi Person B sold a different product in this market place and did not benefit one penny from this other venture. It was a market place which was very much dependent on sellers reputations to be successful. Person B's business was going great, Person C's additional product was going great, in fact was outselling Person B's (completely different products). But then when person C got both the reputation of scamming people sales of both dropped to near zero. So end result was Persons A and C used B's reputation to make some quick money and then screwed up. Person B made not a single penny off this additional product and had he not done it would still be doing well. From what you have told me so far it might seem like this could fall through the legal cracks. Where while it is obviously not fair, there is nothing legally to force fairness in this situation. or so it seems.

Expert:  Lucy, Esq. replied 1 year ago.
If A and C knowingly and intentionally used B's reputation at to profit at B's expense, they can be responsible. If A made a mistake in recommending C, he's not liable. It comes down to knowledge, intent and what can be proven.

And there could still be a cause of action against C if he was scamming people and destroying B's business to make money. That's a completely separate issue. I was only addressing the potential liability of A.

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