Greg and Erin Downey sold their home and invested the net proceeds of $100 000 with Wayne Davis. They contacted him as he had previously placed their life insurance and RRSPs with Manulife Financial and was known to them as a Manulife investment advisor. The Downeys were unaware that Davis had a non-exclusive agency agreement with Manulife, which provided that he could not bind Manulife without written authorization. The Downeys gave Davis a cheque for $100 000 and Davis filled in the payee as Darwin Capital Corporation. The Downey's believed that they were investing in a Manulife product or one guaranteed by Manulife because they believed that Davis was a Manulife employee and sold only Manulife products. When the investment became due, the Downey's received a cheque from Darwin Capital, which was dishonored. It turned out that Darwin Capital was a sham, and the Downeys lost their entire investment. In a subsequent legal action, Manulife was held liable for the Downeys’ losses even though Davis was not an agent of Manulife and had no actual authority to bind Manulife. On what basis do you think that Manulife was liable for the investment losses of the Downeys? What would the Downeys have needed to establish to hold Manulife liable for their losses? Explain. How can companies like Manulife minimize the risk of liability for the actions of salespeople like Davis? How can companies gain the benefits that accrue from representation without incurring the risk of liability?