Unit 7

A master will not be liable for the torts committed by a servant if the servant was on a ______when the tort was committed.

Frolic

An agent, John, is entitled to indemnification when

He committed a tort while following the instructions of the principal

Ann Agent was hired by Buyer to locate a piece of property suitable for building an office complex. Ann and her cousin jointly owned a piece of property that suited Buyer's needs. Without telling Buyer of her ownership interest, Ann negotiated the purchase on Buyer's behalf. The price for the property was its fair market value. What options are available to Buyer when he learns that Ann was the seller?

He may rescind the contract because Ann violated her duty of loyalty.

In which of the following situations would an employee avoid liability for torts committed while carrying out his employment obligations?

None of the above: everyone has personal liability for the torts he commits.

Apparent authority is also known as _____________authority.

Ostensible

When a third party knows that an agent is acting on behalf of a principal, but does not know the identity of the principal, the principal is

Partially disclosed

Allan, an agent, is working on behalf of Paul (the principal) to sell Paul's office building. Allan is also the agent for Bob who is interested in buying Paul's building. Allan does not tell Paul or Bob that he represents the other person. Allan acted for the best interests of Paul and the contract was as favorable as could be obtained anywhere. After Paul signs the contract to sell the property to Bob, he finds out that Allan also represented Bob. What remedies may Paul seek?

Paul may refuse to pay Allan his commission.

Jim was called to active duty in the military. Knowing that he would be out of the country for a year or more, he gave his sister Peg authority to pay bills in his name, access his bank accounts, buy and sell stock in his brokerage accounts, and incur expenses to maintain his house and car and boat. Because Peg is not compensated for the activities she is performing on her brother's behalf, she owes him

Peg owes Jim all the duties of an agent to a principal.

The legal doctrine that holds the master liable for the torts committed by a servant while acting within the scope of this employment is

Respondeat superior

The well-established legal principal that employers are liable for the torts committed by employees while acting within the scope of their employment is

Respondeat superior

Jim was called to active duty in the military. Knowing that he would be out of the country for a year or more, he gave his sister Peg authority to pay bills in his name, access his bank accounts, buy and sell stock in his brokerage accounts, and incur expenses to maintain his house and car and boat. Jim will be out of the country when a piece of land he sold goes to settlement. He wants to give Peg the authority to convey the deed and sign any necessary settlement papers in his name. To do this he should give Peg _______________.

Special power of attorney

What is the status of an agency agreement when a principal files for Chapter 7 bankruptcy?

The agency terminates by operation of law when the court grants the order for relief.

Sue hired Harry to sell her prized racing filly, YouGoGirl. Harry's commission was to be 20% of the selling price. Before a buyer could be found, YouGoGirl died of an equine virus. What is the status of the agency agreement between Sue and Harry?

The agency terminates by operation of law.

Pat hired Mike, a dealer in livestock, to sell his herd of cattle. Mike was to receive a 20 commission on the sale. Before a buyer could be found, the herd had to be destroyed because of an outbreak of mad cow disease. Which statement best describes the status of the agency agreement?

The agency was terminated by operation of law

Sam is retiring and selling his business to Ed, an employee. They want Larry Lawyer to draw up a sales contract that protects both Sam's interests as the seller and Ed's interests as the buyer. If Larry agrees to this dual agency, which agency duty would he most risk violating?

The duty of loyalty

A principal will not have a duty to reimburse an agent if

The expenses were the result of the agent's negligence

In which of the following situations would an undisclosed principal be liable to the third party on a contract?

The principal is liable in all of the situations above

Which of the following statements is false about a principal's ratification of an authorized contract? The principal must be aware of all material facts surrounding the negotiations and formation of the contract. The principal may not change any of the provisions of the contract. The principal must have been either disclosed or partially disclosed at the time the contract was formed. The third party must not have withdrawn from the contract.

The principal must have been either disclosed or partially disclosed at the time the contract was formed.

Which of the following is not an element of ratification?

The principal was allowed to withdraw from the contract

1. The general legal doctrine that holds one person responsible for the torts committed by another because of the relationship they have to each other is _______________

Vicarious liability

Which legal principal always imposes punitive damages on a master if the wrongful conduct of the servant justifies punitive damages ?

Vicarious liability rule

Which of the following is not a factor in determining if a servant was acting within the scope of his employment?

Was the servant disobeying the instructions of the master when the tort was committed?

The last semester of his senior year, Marc had an unpaid internship in the sales department of a local TV station. When Marc left, he took a copy of the station's client list with him, reasoning that it would prove useful in the future when he graduated and got a permanent job at some other company in sales. Has Marc violated any agency duties?

Yes, Marc violated a duty to protect confidential information

Jim was called to active duty in the military. Knowing that he would be out of the country for a year or more, he gave his sister Peg authority to pay bills in his name, access his bank accounts, buy and sell stock in his brokerage accounts, and incur expenses to maintain his house and car and boat. Jim received several dividend checks from his stock broker while he was gone. Peg deposited the checks in her own bank account because her funds were low. Several weeks later she made out a personal check for the amount of the dividends and deposited it into Jim's account. Has Peg breached any agency duties?

Yes, she breached her duty to account.

A principal whose identity is known to a third party is an _____________principal.

disclosed

Whether or not a principal has, through his actions, ratified a contract is a question of _________to be decided by the _________.

fact jury

1. Whether or not a servant was acting in the scope of his employment when he injured a third party is a question of __________ to be decided by the ______.

fact, jury

A principal may terminate the agency of a disloyal agent only if the principal suffered a financial loss because of the agent's disloyalty.

false

Agency agreements must always be in writing

false

An agent operating under a written power of attorney is called an attorney- at-law.

false

An employer is responsible for the torts committed by an employee while the employee is on a frolic, but not for those torts committed while the employee is on a detour.

false

Apparent authority is created when a third party reasonably believes, based on the agent's conduct, that an unauthorized agent has the authority to act for the principal.

false

Assume that you hire an independent contractor to transport hazardous chemicals for your company. If he negligently causes damages to a third part while carrying out the job, you will not be liable because of his status as an independent contractor.

false

Officers of corporations have unlimited actual authority to sell the real property and intangible assets of the corporation.

false

The doctrine of respondeat superior does not apply when the employees are highly trained professionals, such as doctors and airline pilots.

false

The standard the agent must meet in carrying out the work of the principal is "extraordinary care and diligence."

false

Undisclosed principals have no liability to third parties for contracts negotiated by their agents.

false

Whether or not a principal has ratified a contract is a question of law to be decided by the judge at trial.

false

When a servant completely abandons the master's work to pursue his own interests, the servant is on a ___________.

frolic

A principal is obligated to pay any judgments against an agent who incurred liability to a third party while carrying out the principal's orders. This duty to hold the agent "harmless" is the duty to___________.

indemnify

A proprietor will be liable for damages caused by an independent contractor if the work the independent contractor was hired to do was

inherently dangerous to the community illegal a duty that the proprietor could not delegate

When a third party knows that an agent is acting on behalf of a principal, but dies not know the identity of the principal, the principal is________________.

partially disclosed

Conan, an outstanding college pitcher, hired Masters to represent him in negotiations with a major league team. Masters may only negotiate a contract for Conan; he has no authority to make investments or purchase property on Conan's behalf. Masters would be classified as a (n) __________.

special agent

The major distinction between a servant and an independent contractor is that

the employer has the right to tell a servant how to do the job, while an independent contractor has exclusive control over the manner in which the job is done

A person who breaches a duty that is neither a contractual duty nor a crime commits a ____________.

tort

A master can normally avoid liability for damages caused by a servant even if he can show that the servant misunderstood his instructions.

true

A master can normally avoid liability for damages caused by a servant if he can show that the servant misunderstood his instructions.

true

A minor may act as an agent for an adult principal.

true

A person who enters into a contract with an independent contractor is called a proprietor.

true

A plaintiff who sues the employer and the employee in joint and several liability is limited to only one recovery.

true

A principal has the duty to notify third parties when an agency terminates.

true

A principal whose identity is known to a third party is a disclosed principal.

true

A proprietor will be liable for the torts of an independent contractor if the duties that the contractor is hired to perform are inherently dangerous to the public.

true

A third party must use reasonable care and diligence to make sure that an agent is acting within the scope of his or her employment.

true

Agents are personally liable to third parties on contracts when the principal was undisclosed.

true

Agents of undisclosed principals are entitled to be indemnified if held personally liable on contracts that were within the scope of their authority.

true

An agency will terminate by operation of law if the principal files for Chapter 7 bankruptcy.

true

An agent who is wrongfully terminated may sue the principal for damages.

true

An agent's duty to protect confidential information continues even after the agency relationship ends.

true

An agent's knowledge is imputed to the principal

true

If an agent gets a monthly advance against future commissions, the advances are treated as a minimum salary and need not be returned if the commissions on sales are not earned.

true

If the agent dies, the agency agreement terminates by operation of law.

true

If the principal dies, the agency agreement terminates by operation of law.

true

In a multiple listing agreement, real estate is listed with several brokers who divide the commission on the sale.

true

Masters and servants have only joint liability for torts committed by the servant in the course of his employment.

true

Respondeat superior is a firm of vicarious liability

true

Respondeat superior is a firm of vicarious liability.

true

The general manager of a business will have the implied actual authority to perform duties that are not expressly authorized in the employment agreement

true

The principal is a fiduciary of the agent.

true

The secret formula for a soft drink is an example of a trade secret

true

Under the family-car doctrine, any family member becomes an agent of the parent-owner while the family member is using the car.

true

When a principal files for Chapter 7 bankruptcy, all agency appointments end when the court grants an order of relief.

true

if an agent gets a monthly advance against future commissions, the advances are treated as a minimum salary and need not be returned if the commissions on sales are not earned.

true

Pat hired Mike to manage his deli, but the agency agreement did not state how much Mike is to be paid. In this situation,

A court will read in a reasonable salary based on the comparable positions in the business community

A proprietor will not be liable for damages caused by an independent contractor if the work the independent contractor was hired to do was

A duty an employee could have performed

Carla was the agent for Newco, a New York company that wanted to relocate its corporate offices to New Jersey. Carla was given the authority to purchase 600 acres of New Jersey farmland, but was not allowed to tell the sellers that she represented Newco. She was only allowed to say that she represented an out- of- state corporation. After the contracts were signed, Newco's board decided not to relocate and wants to rescind the contacts. Which of the following statements is true about the liability of the parties?

Carla is personally liable on the contracts, but Newco must indemnify her because she was acting within the scope of her authority.

Tucker hired SoClean, a house washing service, to power wash his house and deck. SoClean's status is that of a(n)

Independent contractor

Tucker hired SoClean, a house washing service, to power wash his house and deck. SoClean's status of that of a (n) ________________________.

Independent contractor

The primacy source of law governing the relationship between the principal and the agent is

State common law case law

Which of the following would not terminate an agency by operation of law?

The merger of the subagency and the goods

Which legal rule will not impose punitive damages on a master for the torts of his servants unless the master himself took some part in the wrongful action?

complicity rule

Ruth had a contract to sell a vacation home she owned in North Carolina. Rather than make the trip from Oregon for the closing, she gave her brother Ian, who lived in North Carolina, the authority to represent her at the closing and to sign all the necessary papers. The notarized document that confers this authority on Ian is a (n) __________________; and Ian is a (n) _____________.

pecial power of attorney--------------------Attorney in fact

When a principal decides to adopt and be bound on a contract that his agent did not have the authority to form, the principal _______________ the contract.

ratifies

1. Another term for ostensible authority is _______________authority.

Apparent

An agent is not entitled to indemnification when

Both A and B his own negligence caused the damage for which he is being held responsible he was acting outside the scope of his authority

In some states, a parent-owner is liable for any damages caused by a family member operating the vehicle. This is the __________doctrine.

Family car

Tom telephoned Mike's Boat Marina and Yacht Club about purchasing a boat. The person on the telephone told Tom to contact George, the Harbor Master at the Yacht Club, when he arrived if he wanted to view the boats for sale. George's duties at the club included renting slips, pumping fuel, keeping the grass and grounds cleaned, and hauling boats in and out of the water. Upon arriving at the marina, Tom and George inspected the first boat that was for sale without incident. They then proceeded to the second boat for sale docked at the Marina, the "Lovie Dovie." When they reached the "Lovie Dovie," they discovered the interior cabin of the boat was locked. George told Tom he would break into the boat to allow them to inspect the internal cabin, to which Tom protested. George, who lived in a vessel docked in the slip next to the "Lovie Dovie," assured Tom it was okay to break into the boat because "they don't have a problem with us doing this." After entering and inspecting the inside cabin, George removed the hatch cover so Tom could inspect the bottom of the boat. Tom then accidentally stepped into the hole where the hatch cover was located and sustained physical injury after falling through the opening. Tom filed a negligence action against Mike's Marina and Yacht Club. How would a court rule?

A court would find that no reasonably prudent person would believe George had the authority to break into the "Lovie Dovie," irrespective of George's statements to the contrary, which are irrelevant for purposes of the apparaent authority inquiry.

Alan is the general manger of a restaurant. Although not mentioned in his employment contract, as part of carrying out his management duties he has the authority to buy supplies, hire employees, put ads on the radio, engage a cleaning service, pay bills, etc. These duties are expressions of his _____________authority.

Actual implied

An agent incurs personal liability on a contract with a third party when

All of the above would impose personal liability on the agent