Question 1

Gary hires Doug to burn off his fields to kill the weeds.If the fire gets out of control because of Doug's negligence and the fire damages Philip's wood fence:
A)Gary has no liability because Doug was an independent contractor.
B)Doug bears sole responsibility for damage to the fence because it was his negligence that caused the fire to escape the intended boundaries.
C)Gary is vicariously liable because he authorized an abnormally dangerous activity.
D)Philip cannot hold Gary liable unless Gary was personally involved in the act of burning the fields.

Accepted Answer

Gary authorized an abnormally dangerous activity (burning fields) and therefore can be held vicariously liable for any damages caused by Doug's negligence.

Question 2

Sarah is planning to incorporate a new landscaping company,"Evergreen and Growin'." She has held herself out as an agent for Evergreen and has contracted to buy a truck,tools,fertilizer,and seed and also has entered into a lease on behalf of Evergreen for an office.When she fails to get the loan from the bank,she cannot start the business,so she cancels all the contracts.What are the consequences?
A)Sarah can cancel all the contracts with no personal liability if she told them she was acting as an agent and expressly warranted that she would not be responsible.
B)Sarah may be held personally liable on the contracts because she misrepresented to third parties that she had authority to make contracts on behalf of a non-existent corporation.
C)Since the company never existed, she gave no implied warranty.
D)Sarah will be held liable for the contracts only if she ever gets the loan.

Accepted Answer

Sarah may be held personally liable on the contracts because she misrepresented to third parties that she had authority to make contracts on behalf of a non-existent corporation. Even though she held herself out as an agent for Evergreen, the company did not yet exist and therefore she did not have the authority to enter into contracts on its behalf. As a result, she may be held personally liable for any damages or expenses incurred by the other parties due to her misrepresentation.

Question 3

Sam is a sales representative for the Incman Corporation.Sam has a terrible driving record and has had his driver's license revoked,but nevertheless he continues to drive the company car for his job.One day he drives too fast for conditions,goes through a red light,and strikes a pedestrian.The accident happened despite the fact that Sam's supervisor at Incman had repeatedly reprimanded him and advised him to drive more cautiously.Incman:
A)has no liability, because they did not authorize Sam to drive carelessly.
B)has no liability, because Sam's actions were not a tort.
C)is liable even though it did not authorize Sam to drive carelessly, because it employed an improper person as its agent.
D)has no liability, because it has adequately supervised Sam as its agent.

Accepted Answer

Incman is liable even though it did not authorize Sam to drive carelessly, because it employed an improper person as its agent. It is the responsibility of the employer to ensure that its agents are competent and qualified to perform their duties. In this case, Sam's terrible driving record and revoked license indicate that he is not a competent driver. Additionally, Incman's failure to take appropriate action (such as terminating Sam or revoking his driving privileges) despite repeated reprimands and warnings from his supervisor also indicates negligence on their part. Therefore, Incman can be held liable for the pedestrian's injuries.

Question 4

Regarding the effect of termination of agency on authority,the general rule of the Third Restatement is that:
A)it is reasonable for third parties to assume that an agent's actual authority continues unless and until the third party has notice of circumstances that make it unreasonable to continue that assumption.
B)the termination of actual authority automatically terminates any apparent authority held by the agent.
C)apparent authority ends only upon actual notice, either oral or written, to the third party.
D)apparent authority continues until the third party with whom the agent has previously dealt on credit receives constructive notice of termination.

Accepted Answer

The Third Restatement of Agency states that third parties may assume an agent's actual authority continues unless there is notice indicating otherwise. Therefore, the termination of agency does not automatically terminate an agent's actual authority. Rather, it is reasonable for third parties to continue assuming the agent's authority until they receive notice that circumstances have changed.

Question 5

The court in the Schoenberger v.Chicago Transit Authority case held that:
A)the actual authority of an agent may be founded on the acts or words of the agent.
B)implied authority is such authority as the principal knowingly permits the agent to assume.
C)actual authority is such authority as a reasonable, prudent person, exercising diligence and discretion, in view of the principal's conduct, would naturally suppose the agent to possess.
D)ZuChristian had neither actual nor apparent authority to make an offer of a specific salary or to make a promise of additional compensation.

Accepted Answer

The court found that ZuChristian, the agent in question, did not have either actual or apparent authority to make specific salary offers or promises of additional compensation, emphasizing the limitations on the agent's power to bind the principal in such matters.

Question 6

An agent may agree to become liable on a contract between a principal and a third party in all but which of the following ways?
A)Making the contract in the agent's own name.
B)Co-making the contract with the principal.
C)Disclosing the principal's name and the agency relationship.
D)Guaranteeing that the principal will perform the contract between the third party and the principal.

Accepted Answer

An agent becomes liable on a contract between a principal and a third party when they make the contract in their own name, co-make the contract with the principal, or guarantee the principal's performance. However, merely disclosing the principal's name and the agency relationship does not make the agent liable on the contract.

Question 7

Compare and contrast ratification and adoption of unauthorized contracts.

Accepted Answer

The answer of Compare and contrast ratification and adoption of...

Question 8

Discuss the fundamental rules of contractual liability between a principal and the third party.

Accepted Answer

The answer of Discuss the fundamental rules of contractual liability...

Question 9

Dan,an agent for Ramona,sees what he thinks is a good deal for Ramona.Without asking whether he has authority to negotiate the deal,Dan enters into a contract on Ramona's behalf.Ramona says later that she isn't interested.Is Ramona liable on the contract? Is Dan liable on the contract?

Accepted Answer

The answer of Dan,an agent for Ramona,sees what he thinks...

Question 10

An agent who makes a contract for a disclosed principal whose contracts are voidable for lack of contractual capacity:
A)is never liable to the third party.
B)can be liable to the third party under certain circumstances.
C)is liable to the third party only if the agent warrants the principal has capacity.
D)is ordinarily personally liable to the third party if the principal avoids the contract.

Accepted Answer

An agent who makes a contract for a disclosed principal whose contracts are voidable for lack of contractual capacity can be liable to the third party under certain circumstances. The agent will only be liable if the third party can prove that the agent knew or should have known that the principal lacked capacity at the time of the contract. If this is proven, the agent can be held personally liable to the third party if the principal avoids the contract.

Question 11

Jack was fired by Bob but decided to try to win back his job as agent by getting a big new contract.He approached Sharon,a new client,and made a pitch to sell Bob's product.Sharon agreed to buy 100.Jack tells Bob.What are the legal consequences?
A)Bob has to hire Jack again and then make the deal.
B)Bob would have to ratify the deal to get the benefit of the contract.
C)Bob would have to negotiate the deal with Sharon himself.
D)Jack would forfeit his commission if Bob took the contract.

Accepted Answer

Since Jack was fired by Bob, he did not have the authority to bind Bob to any new contracts. However, if Bob chooses to ratify the deal, he can still benefit from the contract. This means he will have to approve the deal and agree to its terms in order for the contract to be valid. Jack may still receive a commission on the sale, but it is ultimately up to Bob to decide whether or not he wants to honor the deal.

Question 12

In the Parlato v.Equitable Life Assurance Society of the United States case,the court held:
A)the duty is on the party with whom an agent deals to discover the principal's identity.
B)the agent's disclosure of a trade name and the plaintiff's awareness of that name are sufficient to protect an agent from personal liability on a contract.
C)a principal is not responsible for torts its former agent commits after termination of the agency relationship against a third party unknown to the principal.
D)apparent authority of an agent is always terminated at the same time as the termination of the agent's actual authority.

Accepted Answer

The answer of In the Parlato v.Equitable Life Assurance Society...

Question 13

An undisclosed principal may result in which of the following?
A)Liability of the agent for any contract made on behalf of such a principal.
B)The agent's being declared incompetent by a court of law.
C)A declaration order by the court for the principal to show a guarantee.
D)All of the above.

Accepted Answer

An undisclosed principal refers to a situation where an agent makes a contract on behalf of a principal without disclosing the identity of the principal to the other party. In such a case, the agent may be held liable for any contracts made on behalf of such a principal. Options B and C are not relevant to an undisclosed principal.

Question 14

For a ratification to be effective,the principal:
A)must have knowledge of all material facts concerning the transaction.
B)must communicate her intent to ratify to the third party.
C)must have been in existence when the act was done.
D)Both (a) and (c) are correct.

Accepted Answer

For a ratification to be effective, the principal must have knowledge of all material facts concerning the transaction, as well as have been in existence when the act was done. Additionally, the principal must communicate her intent to ratify to the third party. Therefore, both (a) and (c) are correct.

Question 15

Which of the following is correct with regard to a contract entered into with a third person by an agent of an undisclosed principal?
A)The agent has no liability to the third person if the agent has acted within the scope of her authority.
B)The agent is personally liable upon the contract.
C)The undisclosed principal has no liability on the contract, even if her existence and identity are discovered by the third person.
D)If the third party obtains a judgment against the principal and the judgment is satisfied, the agent may still have liability to that third party.

Accepted Answer

In a contract entered into with a third person by an agent of an undisclosed principal, the agent is personally liable upon the contract. This is because the third person believes they are contracting with the agent as a principal, and the undisclosed principal is not bound to the contract. Therefore, the agent cannot rely on the principal to fulfill the obligations of the contract and is thus personally liable. Option A is incorrect because the agent is liable to the third person if the principal is undisclosed. Option C is incorrect because if the existence and identity of the principal are discovered by the third person, the principal will be held liable. Option D is incorrect because if the judgment is satisfied, the agent will not have liability to the third person.

Question 16

Respondeat superior:
A)imposes vicarious liability on the principal.
B)makes a principal liable for the acts of independent contractors.
C)makes a principal liable for the unauthorized acts of employees committed within the scope of employment.
D)Both (a) and (c) are correct.

Accepted Answer

Respondeat superior is a legal doctrine that holds a principal liable for the actions of their agent or employee performed within the scope of their employment or agency. This imposes vicarious liability on the principal for the acts of their employees and makes them accountable for any damages caused as a result of the employee's actions, even if the employer did not personally engage in the wrongful conduct. Therefore, both options (a) and (c) are correct.

Question 17

The court in Connes v.Molalla Transport System,Inc.found:
A)the tort of negligent hiring imposes a duty on employers to ensure its employees will not engage in violent acts.
B)the scope of an employer's duty to exercise reasonable care in hiring bears no relationship to the anticipated degree of contact the employee will have with others.
C)employers have a duty to investigate all potential employees to make sure they will not create an undue risk of harm to others.
D)the employer had no duty to independently investigate this potential employee's criminal background because the employer had no reason to foresee that hiring the person would create an unreasonable risk of harm to others.

Accepted Answer

The court in Connes v. Molalla Transport System, Inc. found that the employer had no duty to independently investigate the potential employee's criminal background because the employer had no reason to foresee that hiring the person would create an unreasonable risk of harm to others. The court's decision suggests that an employer's duty to exercise reasonable care in hiring employees is not boundless and must be balanced against the employer's ability to predict the likelihood of harm.

Question 18

Under the Second Restatement,except in cases of death or incapacity,or where the performance of an authorized act becomes impossible,actual notice of termination of agency is required to the third party if she is one:
A)with whom the agent has dealt on credit.
B)to whom the agent has been specially accredited.
C)with whom the agent has begun to deal, as the principal should know.
D)All of the above.

Accepted Answer

According to the Second Restatement, actual notice of termination is required in all three situations - when the third party is one with whom the agent has dealt on credit, to whom the agent has been specially accredited, and with whom the agent has begun to deal as the principal should know. Therefore, the best answer is D - all of the above.

Question 19

Frank,acting as a promoter for Garleen Co.,a corporation not yet in existence,makes a contract with Towne Supplies.When Garleen Co.is formed,it may:
A)adopt the contract, but Frank would not be released from potential liability on the contract.
B)in all states, ratify the contract, thereby releasing Frank from potential liability.
C)adopt the contract, thereby making it retroactive.
D)ratify all or part of Frank's contract.

Accepted Answer

If Garleen Co. adopts the contract, it will become responsible for fulfilling its contractual obligations with Towne Supplies. However, Frank, as the promoter, may still remain potentially liable for any actions or representations he made during the formation of the contract. Therefore, option A is the best choice.

Question 20

Discuss whether the principal is liable in each of the following situations.
a.Patricia hires Andrew, an attorney, to negotiate a contract to purchase some property. She agrees to pay him $75 an hour for his services, and he agrees to use his own office and secretarial staff to negotiate and draft the agreement. One day, Andrew is driving his own automobile to a meeting with Edward to discuss the purchase of the land that he owns. Andrew drives too fast for conditions and has a minor traffic accident that results in $600 damage to the other vehicle.
b.Mel owns a retail store. He hires Sarah to work for him as a clerk in the home furnishings department. Mel instructs Sarah to make certain representations to customers regarding a microwave oven. Mel knows these misrepresentations are false, but Sarah does not. Henrietta buys a microwave from Sarah in reliance on the misrepresentations.
c.ABC Inc. hires Keith as an outside salesman and instructs him to call on customers in a specified territory and to solicit orders for its products. One day Keith is driving the company car a little too fast for conditions on his way to call on a client. He accidentally drives the wrong way on a one-way street and has an accident with another vehicle that results in $6,000 in property damage and $30,000 in medical expenses.
d.The A & B Machine Company (ABMC) hires John as an outside salesman for its computers. It sets high sales quotas for him and instructs him to beat up salesmen from competing firms in order to keep them away from ABMC customers. In order to meet his monthly sales quota, John roughs up Ralph, who is a salesman for a competing firm and then tells Ralph to find his own customers and to stay away from John's territory.

Accepted Answer

The answer of Discuss whether the principal is liable in...

Quiz 29: Relationship With Third Parties

Gary hires Doug to burn off his fields to kill the weeds.If the fire gets out of control because of Doug's negligence and the fire damages Philip's wood fence:

Regarding the effect of termination of agency on authority,the general rule of the Third Restatement is that:

The court in the Schoenberger v.Chicago Transit Authority case held that:

An agent may agree to become liable on a contract between a principal and a third party in all but which of the following ways?

Compare and contrast ratification and adoption of unauthorized contracts.

Discuss the fundamental rules of contractual liability between a principal and the third party.

Dan,an agent for Ramona,sees what he thinks is a good deal for Ramona.Without asking whether he has authority to negotiate the deal,Dan enters into a contract on Ramona's behalf.Ramona says later that she isn't interested.Is Ramona liable on the contract? Is Dan liable on the contract?

An agent who makes a contract for a disclosed principal whose contracts are voidable for lack of contractual capacity:

Jack was fired by Bob but decided to try to win back his job as agent by getting a big new contract.He approached Sharon,a new client,and made a pitch to sell Bob's product.Sharon agreed to buy 100.Jack tells Bob.What are the legal consequences?

In the Parlato v.Equitable Life Assurance Society of the United States case,the court held:

An undisclosed principal may result in which of the following?

For a ratification to be effective,the principal:

Which of the following is correct with regard to a contract entered into with a third person by an agent of an undisclosed principal?

Respondeat superior:

The court in Connes v.Molalla Transport System,Inc.found:

Under the Second Restatement,except in cases of death or incapacity,or where the performance of an authorized act becomes impossible,actual notice of termination of agency is required to the third party if she is one:

Frank,acting as a promoter for Garleen Co.,a corporation not yet in existence,makes a contract with Towne Supplies.When Garleen Co.is formed,it may: