Law, Business 7e (Cheeseman)
Chapter 30 Liability of Principals and Agents
1) An agent has a duty to notify the principal of information he or she learns from a third party if
that information is important to the principal.
Answer: TRUE
Diff: 1
Topic: Agent's Duty of Loyalty to the Principal
2) A lawyer who claims to be a specialist in securities law will be held to the standard of a
reasonable specialist in securities law.
Answer: TRUE
Diff: 1
Topic: Agent's Duty of Loyalty to the Principal
3) A third party can assume that if he tells something to an agent, the information is forwarded to
the principal.
Answer: TRUE
Diff: 2
Topic: Agent's Duty of Loyalty to the Principal
4) An agent acting as a dual agent is not always in breach of the duty of loyalty.
Answer: TRUE
Diff: 1
Topic: Agent's Duty of Loyalty to the Principal
5) An agent can usurp an opportunity available to the principal.
Answer: FALSE
Diff: 1
Topic: Agent's Duty of Loyalty to the Principal
6) Misuse of confidential information is not considered to be a breach of the duty of loyalty as
long as it benefits the agency.
Answer: FALSE
Diff: 1
Topic: Agent's Duty of Loyalty to the Principal
7) Because the agent is hired to exercise the agent's skills and judgment, the agent has a duty of
obedience to the principal.
Answer: TRUE
Diff: 1
Topic: Agent's Duty of Loyalty to the Principal
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8) The agent owes the duty of accountability to the principal, but the principal does not owe this
duty to the agent.
Answer: TRUE
Diff: 2
Topic: Agent's Duty of Loyalty to the Principal
9) An agent generally is not liable on contracts made in connection with a fully disclosed agency.
Answer: TRUE
Diff: 1
Topic: Contract Liability to Third Parties
10) An undisclosed agency exists where the third party is aware that the party he is dealing with
is an agent, but does not know the identity of the principal.
Answer: FALSE
Diff: 2
Topic: Contract Liability to Third Parties
11) In an undisclosed agency, both the principal and the agent are liable on the contract with the
third party.
Answer: TRUE
Diff: 2
Topic: Contract Liability to Third Parties
12) An agent can be held liable on any contract negotiated by the agent on behalf of the
principal.
Answer: FALSE
Diff: 2
Topic: Contract Liability to Third Parties
13) In an undisclosed agency, both the principal and the agent are liable on the contract with the
third party.
Answer: TRUE
Diff: 2
Topic: Contract Liability to Third Parties
14) A principal's liability for the tort of an agent depends on the degree of disclosure of the
agency relationship.
Answer: FALSE
Diff: 3
Topic: Tort Liability to Third Parties
15) An agent may not be liable for the tortuous conduct of his or her principal if he or she merely
indirectly participated in the principal's conduct.
Answer: FALSE
Diff: 2
Topic: Tort Liability to Third Parties
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16) A principal's liability for his/her agent's conduct within the scope of their employment is
based on the legal theory of vicarious liability.
Answer: TRUE
Diff: 2
Topic: Negligence
17) The basic rule for whether the principal is liable for negligence of an agent is whether the
agent intended to commit the tort.
Answer: FALSE
Diff: 2
Topic: Negligence
18) The frolic and detour rule states that an agent is liable to the principal for damages resulting
from the agent going on a frolic and detour.
Answer: FALSE
Diff: 2
Topic: Negligence
19) Under the coming and going rule, the principal is not liable for the negligence of the agent
when commuting to or from the place of work.
Answer: TRUE
Diff: 2
Topic: Negligence
20) Generally, a principal is liable for the acts of her agents while on the way to and from work if
the principal supplies a car to the agent.
Answer: FALSE
Diff: 2
Topic: Negligence
21) When an agent is acting partly for himself or herself and partly for the principal, the agent
will be held totally liable if the agent injures someone while on such a mission.
Answer: FALSE
Diff: 2
Topic: Negligence
22) If an agent commits an intentional tort within a work-related time or space, the principal is
liable for any injuries caused by the agent's intentional torts.
Answer: TRUE
Diff: 2
Topic: Intentional Torts
23) If an agent's motivation in committing an intentional tort is to promote the principal's
business, the principal is relieved of liability for any injury caused by the tort.
Answer: FALSE
Diff: 2
Topic: Intentional Torts
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24) The degree of skill necessary to complete a task has little to do with whether someone is an
independent contractor or not.
Answer: FALSE
Diff: 2
Topic: Liability for Independent Contractor's Torts
25) A principal is not liable for injuries caused by independent contractors.
Answer: TRUE
Diff: 2
Topic: Liability for Independent Contractor's Torts
26) A principal who hires an unqualified independent contractor remains free of liability if that
person injures someone while on the job.
Answer: FALSE
Diff: 1
Topic: Liability for Independent Contractor's Torts
27) All of the following are duties of the agent to the principal except:
A) loyalty
B) notification
C) reimbursement
D) obedience
E) accountability
Answer: C
Diff: 1
Topic: Agent's Duties
Skill: Legal Concepts
28) An agent's obligation to perform in accordance with the terms of the agency arrangement is
the agent's duty of:
A) obedience
B) loyalty
C) indemnification
D) performance
E) nonbreach
Answer: D
Diff: 2
Topic: Agent's Duties
Skill: Legal Concepts
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29) An agent's duty of notification can best be described as a duty to:
A) notify any third parties that the agent is acting as an agent
B) notify any third parties as to the identity of the principal
C) notify the principal about any material information that the agent learns relative to the subject
matter of the agency
D) notify the principal in a reasonable period of time in advance of terminating the agency
arrangement
E) both A and B
Answer: C
Diff: 2
Topic: Agent's Duties
Skill: Legal Concepts
30) Information that comes to the knowledge of an agent:
A) is required to be communicated to the principal in all circumstances
B) is imputed to the principal
C) an be disclosed to the principal only with the third party's consent
D) will result in termination of the agency arrangement if it is not communicated to the principal
Answer: B
Diff: 2
Topic: Agent's Duties
Skill: Legal Concepts
31) An agent's competing with the principal is generally a breach of the duty of:
A) performance
B) loyalty
C) accounting
D) indemnification
E) obedience
Answer: B
Diff: 2
Topic: Agent's Duties
Skill: Legal Concepts
32) Which of the following is not one of the common ways in which the duty of loyalty can be
breached?
A) self-dealing
B) dual agency
C) usurping an opportunity
D) failing to follow the principal's instructions
E) competing with the principal
Answer: D
Diff: 2
Topic: Agent's Duties
Skill: Legal Concepts
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33) The duty of loyalty is generally a duty of:
A) the principal only
B) the agent only
C) both the principal and agent
D) neither the principal nor the agent
Answer: B
Diff: 2
Topic: Agent's Duties
Skill: Legal Concepts
34) Which of the following is not a duty of the agent in a principal-agency relationship.
A) loyalty
B) obedience
C) accountability
D) performance
E) indemnification
Answer: E
Diff: 2
Topic: Agent's Duties
Skill: Legal Concepts
35) What distinguishes the duties of reimbursement and indemnification?
A) Reimbursement is an agent's duty and indemnification is a duty of the principal.
B) Reimbursement is a principal's duty and indemnification is a duty of the agent.
C) Reimbursement relates to expected expenditures by the agent, and indemnification relates to
losses suffered.
D) Reimbursement relates to third parties and indemnification relates to the principal.
E) Reimbursement applies only to actions that were within the scope of the agency whereas
indemnification relates to all actions of the agent.
Answer: C
Diff: 3
Topic: Principal's Duties
Skill: Legal Concepts
36) The principal's duty of cooperation requires that:
A) the principal assist the agent and not interfere with the agent in the performance of her duties
B) the principal take reasonable steps to accomplish what the principal has agreed to do
C) the principal promptly pay any agreed-upon compensation to the agent upon the agent's
completion of his duty
D) the principal pay the agent for any expenses incurred in connection with the agency
arrangement
E) the principal not hold the agent liable for torts that the agent commits in connection with the
agency arrangement
Answer: A
Diff: 2
Topic: Principal's Duties
Skill: Legal Concepts
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37) Which of the following is not a duty that the principal owes to the agent?
A) compensation
B) reimbursement and indemnification
C) obedience
D) cooperation
E) providing a safe work place
Answer: C
Diff: 2
Topic: Principal's Duties
Skill: Legal Concepts
38) The duty of a principal to indemnify her agent can best be described as a duty to:
A) pay to the agent any loss the agent suffers because of the principal
B) promptly pay the agreed compensation in the agency arrangement
C) give the agent adequate instructions to properly carry out the duties of the agency
D) prevent the agent from having personal responsibility for torts that the agent commits while
acting within the scope of the agency
Answer: A
Diff: 3
Topic: Principal's Duties
Skill: Legal Concepts
39) A principal has a duty of compensation:
A) in all agency arrangements
B) only in agency arrangements that expressly provide for compensation
C) in all agency arrangements except for gratuitous agency arrangements
D) to pay the agent prior to the agent performing the duties of the agency
E) to pay the agent even where the agent failed to produce the required result under a contingent
fee arrangement
Answer: C
Diff: 2
Topic: Principal's Duties
Skill: Legal Concepts
40) The degree to which an agent disclosed the agency relationship affects:
A) the agent's liability on a contract that the agent negotiates
B) the agent's liability for a tort committed by the agent
C) the principal's liability for a tort committed by the agent
D) the principal's liability on a contract that the agent negotiates
E) All of these are correct.
Answer: A
Diff: 2
Topic: Contract Liability to Third Parties
Skill: Legal Concepts
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41) The degree to which an agent disclosed the agency relationship affects the contract liability
of:
A) the agent only
B) the principal only
C) both the agent and the principal
D) neither the agent nor the principal
Answer: A
Diff: 2
Topic: Contract Liability to Third Parties
Skill: Legal Concepts
42) When an agent negotiates a contract on behalf of the principal, the liability of the principal
will depend on if:
A) the agent was motivated by the principal's best interests
B) the agency arrangement was fully disclosed
C) the agency arrangement was express or implied
D) the agent was authorized to enter into this particular transaction
E) the agency arrangement was agreed to in writing
Answer: D
Diff: 3
Topic: Contract Liability to Third Parties
Skill: Legal Concepts
43) Why is the agent able to be held liable on a contract when the existence of the agency
arrangement was not disclosed?
A) so that the outcome in a contract situation is the same as that for a tort
B) to discourage the use of undisclosed agency arrangements
C) to offset the fraud frequently present in this situation
D) because the third party could rely on the reputation of only the agent when entering into the
contract
E) to ensure that the principal fulfills its obligations under contracts negotiated by authorized
agents
Answer: D
Diff: 3
Topic: Contract Liability to Third Parties
Skill: Legal Concepts
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44) In an agency relationship involving a principal, an agent, and a third party, whether or not the
agency relationship has been disclosed to the third party is a crucial issue. This would affect:
A) the contract liability of the principal to the third party for a tort of the agent
B) the tort liability of the principal to the third party for a tort of the agent
C) the tort liability of the agent to the third party for the agent's tort
D) the contract liability of the agent to the third party on a contract made by the agent on the
principal's behalf
E) the liability of the principal to compensate the agent for the agent's services
Answer: D
Diff: 2
Topic: Contract Liability to Third Parties
Skill: Legal Concepts
45) Where an agent has disclosed that she is an agent, but has not disclosed the identity of the
principal, who can be held liable on an authorized contract entered into by the agent on the
principal's behalf?
A) the agent only
B) the principal only
C) both the principal and agent
D) neither the principal nor the agent
E) only the agent prior to disclosure of the principal's identity, and only the principal thereafter
Answer: C
Diff: 2
Topic: Contract Liability to Third Parties
Skill: Legal Concepts
46) An agent who wishes to avoid liability on contracts he enters into on behalf of the principal
should make sure that the principal is:
A) undisclosed
B) partially disclosed
C) either partially disclosed or fully disclosed
D) fully disclosed
E) the degree of disclosure is irrelevant
Answer: D
Diff: 1
Topic: Contract Liability to Third Parties
Skill: Legal Concepts
47) When is an agent liable for a tort committed by the principal?
A) when the agency is undisclosed
B) when the tort was committed with the scope of the agency
C) when the agent ratifies the action
D) when the agent has aided or abetted the principal's tortious conduct
E) both A and D
Answer: D
Diff: 2
Topic: Tort Liability to Third Parties
Skill: Legal Concepts
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48) For which types of misrepresentations of an agent is the principal liable, assuming that the
misrepresentation was made within the scope of the agency?
A) intentional misrepresentations only
B) innocent misrepresentations only
C) both intentional and innocent misrepresentations
D) neither intentional nor innocent misrepresentations
Answer: C
Diff: 2
Topic: Negligence
Skill: Legal Concepts
49) Under which circumstance will a principal not be responsible for the tort of the agent?
A) if the agent was violating the instructions of the principal in committing the tort
B) if the agency agreement between the agent and principal says that the principal will not be
responsible for the agent's torts
C) if the tort was committed outside the scope of the agency arrangement
D) if the tort is an unintentional tort
Answer: C
Diff: 2
Topic: Negligence
Skill: Legal Concepts
50) The significance of a "frolic and detour" is which of the following?
A) The employee can be liable to an employer if the frolic and detour is not authorized.
B) It determines if an employee can be liable on a contract made on the employer's behalf.
C) It can determine if someone working for a business is an employee or independent contractor.
D) It can determine if an employer is liable for the negligence tort of an employee.
E) It can determine if an employee is liable for torts he commits on the job.
Answer: D
Diff: 2
Topic: Negligence
Skill: Legal Concepts
51) If an agent negligently injures a third party while acting within the scope of employment,
which of the following is true?
A) The agent will be liable to the third party.
B) The principal will be liable to the third party.
C) The agent will be liable to the principal.
D) All of the above are true.
Answer: D
Diff: 3
Topic: Negligence
Skill: Legal Concepts
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52) What is the effect on the tort liability of an agent when it is determined that an intentional
tort was committed within the scope of the agency?
A) The agent is released from liability.
B) The agent will be 50 percent liable, and the principal will be 50 percent liable.
C) The liability of the agent to the injured party is unaffected.
D) The agent will be liable only if the principal is unable to pay.
E) The principal acquires the opportunity to use the contributory negligence defense.
Answer: C
Diff: 2
Topic: Negligence
Skill: Legal Concepts
53) The coming and going rule provides which of the following?
A) Agents are not liable for torts that they commit when going to or from work.
B) Principals are not liable for torts committed by their agents while going to or from work.
C) Commuting to or from work is considered within the scope of an agency.
D) Commuting to or from work is considered to be a dual purpose mission.
E) A principal is liable for any tort of an agent that occurs between the time the agent comes to
work and the time the agent goes home.
Answer: B
Diff: 2
Topic: Negligence
Skill: Legal Concepts
54) The "motivation" test and the "work-related" test are used to determine whether:
A) an employer is responsible for the intentional tort of an employee
B) an employer is responsible for the negligence tort of an employee
C) an employee is responsible for the contract entered into on behalf of an employer
D) an employee is responsible for the tort he commits while on the job
Answer: A
Diff: 2
Topic: Intentional Torts
Skill: Legal Concepts
55) Which of the following is true about the tests used to determine whether a principal is
responsible for the intentional torts of his agent?
A) The work-related test and motivation test are two names for the same test.
B) In most states the plaintiff can choose which test to use.
C) The work-related test will find that the employer is liable in more circumstances than the
motivation test.
D) Under either of these tests, the plaintiff must also prove that the agency was fully disclosed in
order to recover.
Answer: C
Diff: 3
Topic: Intentional Torts
Skill: Legal Concepts
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56) In which of the following circumstances can a principal be held liable for the torts of an
independent contractor?
A) in no circumstances
B) in the same circumstances as the principal would be held liable for the torts of an agent
C) when the principal is negligent in selecting the independent contractor
D) when the independent contractor is hired to undertake a dangerous activity
E) both C and D
Answer: E
Diff: 2
Topic: Liability for Independent Contractor's Torts
Skill: Legal Concepts
57) An agent has been hired to buy land for the principal for use as a factory site. The agent finds
a good parcel for the purpose, and proposes it for purchase to the principal. The principal
declines to purchase the property because it is too far from the interstate highway. The agent then
buys this land for himself as an investment. What, if anything, has the agent done wrong?
A) usurped an opportunity
B) nothing
C) engaged in self-dealing
D) competed with the principal
E) misused confidential information
Answer: B
Diff: 3
Topic: Agent's Duties
Skill: Factual Application
58) A principal hires an agent to place advertising in publications to reach certain target
audiences. The agent places 45 percent of the advertising in a magazine of which he is the
owner. The principal could probably recover from the agent on the grounds of:
A) the agent breaching the duty of accountability
B) the agent usurping an opportunity
C) the agent competing with the principal
D) the agent breaching the duty of obedience
E) the agent engaging in self-dealing
Answer: E
Diff: 3
Topic: Agent's Duties
Skill: Factual Application
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59) A Boulder manufacturer of computer disk drives has contracted with you for you to be its
agent in finding customers for their products. You arrange (without the principal's knowledge) a
sale of the disk drives to a computer assembly business that you and your sister own. You have:
A) not violated any of an agent's duties
B) violated the duty of loyalty by usurping an opportunity
C) violated the duty of loyalty by competing with the principal
D) violated the duty of loyalty by self-dealing
E) violated the duty of loyalty by engaging in a dual agency
Answer: D
Diff: 3
Topic: Agent's Duties
Skill: Factual Application
60) Paul, who collects old cars, hires Andy to find and purchase a 1965 Ford Mustang on his
behalf. Andy sees a car advertised that might be what Paul has in mind. Andy examines the car
and falls in love with it. He decides to purchase it himself. Andy has:
A) usurped an opportunity
B) engaged in self-dealing
C) competed with the principal
D) not violated the duty of loyalty
Answer: A
Diff: 3
Topic: Agent's Duties
Skill: Factual Application
61) Paulette appointed Angie to be her agent to purchase a building lot for a warehouse in a large
city. Angie owns several suitable lots, and a week after the agency arrangement was entered into,
said to Paulette, "You know, I own a couple of lots that might work and that I might be willing to
sell." Angie and Paulette then agree on a price for Paulette to buy one of the lots. Angie has:
A) not violated any of an agent's duties
B) violated the duty of loyalty by usurping an opportunity
C) violated the duty of loyalty by competing with the principal
D) violated the duty of loyalty by self-dealing
E) violated the duty of loyalty by engaging in a dual agency
Answer: A
Diff: 3
Topic: Agent's Duties
Skill: Factual Application
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62) An agent enters into an authorized contract on behalf of the principal. The principal breached
the contract and the agent was held to be liable due to the breach of the principal. The agent can
seek to recover from the principal based on the principal's duty of:
A) reimbursement
B) cooperation
C) compensation
D) indemnification
E) contribution
Answer: D
Diff: 2
Topic: Principal's Duties
Skill: Factual Application
63) Agent enters into a contract with Third Party on behalf of Principal. Agent told Third Party
that this contract was being entered into on behalf of someone else, but did not identify Principal
to Third Party. A couple of weeks later, Principal disappears and Third Party wants to hold
Agent to the contract. Third Party can:
A) not recover from Agent because Agent had disclosed the existence of Principal
B) not recover from Agent because Third Party must first try to recover from Principal
C) recover from Agent because Agent had a duty to ensure that Principal performed on the
contract
D) recover from Agent because Agent did not disclose the identity of Principal
E) recover from Agent because Agent acted on behalf of an undisclosed principal
Answer: D
Diff: 3
Topic: Contract Liability to Third Parties
Skill: Factual Application
64) Pedro hires Andrea to negotiate the purchase of a sailboat for Pedro. Andrea decides to buy
from Sally a sailboat meeting Pedro's specifications. Andrea tells Sally that the purchase is really
being made by Pedro, and Andrea and Sally sign a written contract, with Andrea signing on
Pedro's behalf. Based on all this:
A) Pedro is not liable on this contract, but Andrea is liable
B) neither Andrea nor Pedro can be held liable on this contract
C) Andrea is not liable on this contract, but Pedro is liable
D) either Andrea or Pedro could be held liable on this contract
Answer: C
Diff: 2
Topic: Contract Liability to Third Parties
Skill: Factual Application
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65) John has been hired by Bubbaweiser Beer Company to purchase an airplane. He approaches
Sam who has a Cessna for sale. John does not mention that he is making this purchase on behalf
of someone else. He negotiates a deal. Two weeks later, Sam learns that John did not negotiate
the deal for himself, but was acting as an agent. Bubbaweiser declares bankruptcy and cannot
buy the plane. John:
A) can be held liable on the contract because this was an undisclosed agency
B) can be held liable on the contract because this was a partially disclosed agency
C) can be held liable on the contract simply because he is an agent
D) cannot be held liable on the contract
E) can be held liable on the contract unless he was on a frolic and detour
Answer: A
Diff: 3
Topic: Contract Liability to Third Parties
Skill: Factual Application
66) Jane takes her car to Joe's Garage, leaving it there for repairs. Ted, one of Joe's employees,
takes the car for a joy ride, without Joe's permission. In fact, Joe has a very strict rule that his
employees cannot drive customers' cars except to diagnose or test them. Ted crashes into another
car, driven by Mary. Mary is injured and sues Jane, Ted, and Joe. Which of the following is true?
A) Only Ted is liable.
B) Only Jane and Ted are liable.
C) Jane, Ted, and Joe are all liable.
D) Only Ted and Joe are liable.
E) Only Joe is liable.
Answer: D
Diff: 2
Topic: Negligence
Skill: Factual Application
67) Bob sells real estate in Knoxville for a real estate sales company. One afternoon, he shows a
client two homes in Knoxville and the client tells Bob that there is a great cabin for sale in
Gatlinburg, about 40 miles from Knoxville. Bob drops the client off in Knoxville and goes to
Gatlinburg to check out this property because he wants a place for his family to go on weekends.
As he is entering Gatlinburg, he accidentally hits and injures a pedestrian. In determining
whether Bob's employer can be held liable, a court will:
A) apply the work-related test and find the employer liable
B) not find the employer liable under the coming and going rule
C) use the frolic and detour rule to determine the employer's liability
D) determine the outcome based on the degree of disclosure of the agency relationship
Answer: C
Diff: 3
Topic: Negligence
Skill: Factual Application
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68) An employee of Slap-em-up Construction Company negligently drops some materials and
injures a pedestrian on the sidewalk below. The liability of the employer to the injured pedestrian
depends on:
A) if the employee was within the scope of employment when the materials were dropped
B) if the agency arrangement was fully disclosed
C) the motivation of the employee in dropping the materials
D) whether the employee intended to drop the materials
E) None of the above.
Answer: A
Diff: 2
Topic: Negligence
Skill: Factual Application
69) Rocky Mountain Mall hired George to be a Santa Claus in the mall. After a tough day of
demanding kids, George stops at a bar in the mall for a cold beer. Before he knows it, he's had
six beers and heads home still wearing his Santa suit. While driving, he injures a pedestrian. The
injured pedestrian sues the owner of the shopping mall. Which of the following is true?
A) Because he is still in uniform he would probably be found to be within the scope of
employment and the mall owner would be liable.
B) The only way the mall could avoid liability here is to prove that he was on a frolic and detour
at the time of the accident.
C) The coming and going rule would probably protect the owner of the mall from liability.
D) The pedestrian must show that George intended to get drunk in order to recover.
E) The mall owner would probably be liable because the bar was in the same mall where George
worked as Santa.
Answer: C
Diff: 3
Topic: Negligence
Skill: Factual Application
70) Edward is an employee of Huge Corporation who works in one of the company's stores. One
day Edward sees one of his ex-girlfriends, who jilted him, in the store. He is still mad at her for
this, so he goes over and slugs her in the face. She sues Edward and Huge Corporation. If the
state applies the motivation test, which of the following is true?
A) Huge and Edward could each be liable for the tort.
B) Huge, but not Edward, would be liable for the tort.
C) Edward, but not Huge, would be liable for the tort.
D) Neither Edward nor Huge would be liable for the tort.
E) Huge and Edward could each be liable for the tort, but the plaintiff must first seek recovery
from Edward.
Answer: C
Diff: 3
Topic: Intentional Torts
Skill: Factual Application
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71) As the Wyoming Tetons are playing the Missouri Ozarks in a baseball game, a fan who is
sitting near the Tetons' dugout starts yelling at Micky Macho, one of the relief pitchers, that his
pink minivan makes him look like a suburban family man. Macho, because he feels insulted,
picks up a nearby bench and throws it at the fan, who gets injured by this action. The fan then
sues the Tetons. The fan could recover from the Tetons:
A) under the work-related test but not under the motivation test
B) under the motivation test but not under the work-related test
C) under either the motivation or the work-related test
D) under neither the work-related test nor the motivation test
Answer: A
Diff: 3
Topic: Intentional Torts
Skill: Factual Application
72) Eric works for a construction company. He drives his own vehicle to a job-site that is
designated by the company on a daily basis. While driving to work one morning, he is dancing to
music on the radio and spills coffee on his lap. As a result, he swerves his truck into an
oncoming car, which causes significant physical injuries to the occupants of the other vehicle.
The injured parties sue Eric and the construction company. Will the case be successful?
A) The case will be successful against Eric for driving negligently, and the case will also be
successful against the company because he was acting within his scope of employment by
driving to work.
B) The case will not be successful against Eric because he was not driving negligently, but the
case will be successful against the employer due to the doctrine of respondeat superior.
C) The case will be successful against Eric for driving negligently, but the case will not be
successful against the company due to the coming and going rule.
D) The case will not be successful against either Eric or the company.
Answer: C
Diff: 3
Topic: Intentional Torts
Skill: Factual Application
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73) Eric works for a construction company. He drives his own vehicle to a job-site that is
designated by the company on a daily basis. As a favor, his boss asks that he pick up some other
employees to bring to the job-site the next morning. After picking up the employees, and while
driving to work, he is dancing to music on the radio and spills coffee on his lap. As a result, he
swerves his truck into an oncoming car, which causes significant physical injuries to the
occupants of the other vehicle. The injured parties sue Eric and the construction company. Will
the case be successful?
A) The case will be successful against Eric for driving negligently, and the case will also be
successful against the company because he was acting with a dual purpose in his drive to work.
B) The case will not be successful against Eric because he was not driving negligently, but the
case will be successful against the employer due to the doctrine of respondeat superior.
C) The case will be successful against Eric for driving negligently, but the case will not be
successful against the company due to the coming and going rule.
D) The case will not be successful against either Eric or the company.
Answer: A
Diff: 3
Topic: Intentional Torts
Skill: Factual Application
74) Jerry and Elaine dated for a long time. She recently broke up with him. Jerry is working at
the checkout counter of a local hardware store, when he looks up to see Elaine enter with her
new boyfriend. Jerry becomes enraged and punches the new guy boyfriend right in the nose. Is
the employer liable for the actions of Jerry?
A) The employer would not be liable under either the motivation test or the work-related test.
B) The employer would be liable under the motivation test, but would not be liable under the
work-related test.
C) The employer would not be liable under the motivation test, but would be liable under the
work-related test.
D) The employer would be liable under both the motivation test and the work-related test.
Answer: C
Diff: 3
Topic: Intentional Torts
Skill: Factual Application
75) Generally, if an agent negligently injures a third party within the scope of the agency, the
principal can be held liable even if the agent was violating the instructions of the principal. Is this
fair to the principal? What is the justification for this rule?
Answer: If the principal could avoid liability simply by having a rule against certain conduct,
there would be no incentive for the principal to see that the rule is followed. This also gives an
incentive to hire persons who will follow such rules.
Diff: 3
Skill: Ethics and Policy
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76) Why does the law in some states hold principals liable for the intentional torts of employees
under the work-related rule for torts motivated by personal concerns? Aren't these matters that an
employer does not have control over? Which do you think is the better rule for employer liability
for intentional torts of employees? Why?
Answer: This rule provides various incentives that reduce the risk of these injuries. Employers
have an incentive to try to screen out violent persons in the hiring process. The rule also
encourages employers to train employees to minimize the risk of these acts, and to assign
employees likely to engage in such an act to areas where they do not interact with the public.
Diff: 2
Skill: Ethics and Policy
77) With the increasing incidence of workplace violence, what should the rule be for employer
liability for violent acts of their employees? Should it be any different than for intentional torts
generally? Why might you want a different rule in these cases?
Answer: In some of these situations, the violent act is one that could not have been foreseen by
anyone, including the employer, even with the most thorough screening process. The work
history of the individual often provides no warning to the employer.
Diff: 2
Skill: Ethics and Policy
78) Why would an agent not disclose the existence and identity of the principal when negotiating
a contract, given that doing so would avoid agent liability on the contract? What should an agent
do when the principal does not want to be disclosed?
Answer: There are many business situations where it is in the principal's interest for his or her
identity to remain unknown. An agent should be aware of the liability risk and factor that into the
amount of compensation charged. Alternatively, the agent might be able to put a liability release
clause into any contracts with third parties, although this would not be possible in an undisclosed
principal situation.
Diff: 2
Skill: Ethics and Policy
79) Does the frolic and detour rule make sense? Is it too subject to manipulation and subjective
interpretation? Is there a more workable rule that you can think of?
Answer: A more precise rule would be difficult to formulate because of the variety of situations
where an employee negligently injures a third party.
Diff: 1
Skill: Ethics and Policy
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80) Anne was hired by Peter to sell a condominium in San Francisco. The asking price for the
modest two-bedroom unit was $2,300,000. Peter told Anne he would go as low as $2,100,000,
but no lower, but that she should try to get as high a price as possible. If he couldn't get that
much for it, he said he would use it as rental property. A good friend of Anne's was in the market
for a two-bedroom condominium in San Francisco. In fact, this friend had come to Anne to help
her find a place and negotiate for it. Anne's friend said that she could absolutely not spend more
than $2,000,000. When Peter hired Anne to sell his condominium, Anne told her friend about it
and the asking price. Anne told her friend, "Don't even bother. He won't go below $2,100,000,
that is his bottom price." Anne's friend accepted that. Anne then proposed to her friend that they
go in together, with Anne fronting some money through her friend, but not having Anne's name
on the contract as purchaser. Before they could work out the details, Anne's friend received a
raise and decided to buy the condominium. Anne negotiated a price of $2,100,000 on Peter's
behalf. Peter later found out that Anne had told her friend about his bottom price, and about the
plan for Anne to help buy the house. What claims, if any, does Peter have?
Answer: Anne at least started to violate the duty of loyalty by self-dealing. Her disclosure of the
bottom dollar price was also a violation, even though it appeared that the friend could not have
bought the property. This is because the friend could have passed the information further, and
circumstances can change, as they did here, and because the actual contract was negotiated with
the buyer having knowledge. Anne improperly acted as a dual agent.
Diff: 3
Topic: Agent's Duties
Skill: Factual Application
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81) Abe is an associate (employee) with that famous Denver law firm, Dewey, Cheatem, & How.
One Thursday Abe and another associate, Gabe, had to go to western Colorado for a client's
deposition. The deposition is unexpectedly over in midmorning and they start driving back to
Denver. As they approach Vail, Gabe reminds Abe that the partners are in Aspen for 2 days and
how it would be nice to be a partner. Abe says, "If they're in Aspen, that means they're not in the
office in Denver. I hear the slopes calling for a half-day of skiing." They pull off I-70 and are
skiing by 1 p.m. By chance, Abe runs into a client from Denver and they ski together and discuss
the client's latest legal matters. As Abe is skiing with this client, Abe and the client both ski
through a beginner ski lesson group as the beginner students practice their snowplow technique.
Abe and the client each injure one skier. Five claims are filed:
1. Abe's victim sues Abe.
2. Abe's victim sues the law firm.
3. The client's victim sues the client.
4. The client's victim sues Abe.
5. The client's victim sues the law firm.
Discuss the outcome of each claim, assuming Abe was solely negligent with respect to his victim
and the client was solely negligent with respect to his victim.
Answer: 1. Abe is liable for his own negligence to his victim.
2. The law firm's negligence depends on if Abe was on a frolic and detour.
3. The client is liable for his own negligence.
4. Abe is an agent for his client, and is an independent contractor. Generally speaking, an agent
is not liable for the torts of his principal.
5. The law firm is not liable here because Abe is not liable.
Diff: 3
Topic: Contract Liability to Third Parties
Skill: Factual Application
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82) Philip wanted to buy a new car. Philip did not know much about cars, but his 17-year-old
daughter Andrea did because she had recently started driving and had drooled over new cars
since she was 12 in anticipation of the day she would start driving. Andrea said she would go out
and make the purchase on Philip's behalf if he would let her have the new car once a week. Philip
agreed because he figured she'd probably manage to talk him out of any car at least once a week.
Philip told Andrea, "I don't want anything fancy. Something like a Ford Pinto should be
sufficient."
"Oh, Dad!" Andrea said, "They quit making Pintos in 1980. You know you don't want
anything that small anyway. You even complained about the Taurus being too small."
Philip responded, "That's right, I guess. But, I don't need anything with all that power
equipment and fancy stereos. Just get me a good, basic, comfortable car that isn't too small."
"I can do that," responded Andrea. "I'll find you the best car for your wants and needs."
"It's a deal," said Philip.
Andrea shopped around and ended up at a Pontiac dealer. Throughout the entire experience, she
kept thinking that her dad needed a more sporty image. She was tempted to get him a Trans Am
but thought this might be too much. Because she knew he wouldn't be comfortable in a small car,
she decided on a full-size Bonneville sedan. After explaining to the salesperson that this car
would be for her father, the salesperson talked Andrea into the sport model, which had a more
powerful engine, special wheels, and suspension.
Philip was initially upset with this choice, but after Andrea correctly explained that the sport
model was only about $1,500 extra, and that all Bonnevilles came with power windows and
such, Philip cooled off and started driving the car. Six weeks later he returned the car to the
dealer, explaining that his daughter was supposed to buy a basic model and the sport suspension
on this car rode too roughly.
1. Can the dealer hold Philip to the contract? Give all reasons why or why not.
2. Can the dealer hold Andrea to the contract? Give all reasons why or why not.
Answer: 1. If there was authority for the transaction, Philip can be held to the contract.
Andrea, as a minor, can act as an agent. There was probably not authority for the transaction, but
by driving the car for several weeks, Philip probably ratified the contract.
2. Although Andrea disclosed the identity of the principal, which normally would protect her
from liability on the contract, she exceeded her authority and she could be held liable.
Diff: 3
Topic: Contract Liability to Third Parties
Skill: Factual Application
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83) Billy owns a bike shop in a coastal California town. His shop sells and repairs bikes. One of
his employees was repairing a bike with one of those pesky intermittent problems that would
never occur when the repair technician was around. The customer said that the gears periodically
would not shift properly. The employee took the bike out for a test ride hoping to replicate the
problem. The problem did not appear. Because it was approaching noon, the employee decided
to ride the bike home to have lunch. On the way back to the shop, the employee hit a small child
and injured her. Discuss the liability of the employee and Billy's bike shop for the injuries to the
child.
Answer: The employee is liable for his tort, as are all tortfeasors. The liability of the bike shop
would be determined using the scope of employment test, considering all the facts and
circumstances. On one hand, the employee was testing the bike, which would be in the scope of
employment. On the other hand, the employee was returning from lunch (home) which would
not be within the scope of employment.
Diff: 2
Topic: Negligence Torts
Skill: Factual Application
84) Pat is the owner of Tarantula Skiwear of Boulder, Colorado. Tarantula is a new company that
makes top-of-the-line products. Angela is the salesperson whose territory is the state of Utah. In
an ordinary week, Angela, a Boulder resident, goes to the company office on Monday morning,
takes care of paperwork, and in the late morning takes off for Utah. She stays in Utah until
sometime on Friday, the exact time changing from week to week. Sometimes, she will stay in
Utah for the weekend to ski and save the drive to Boulder and back. More often, she will drive
partway back to Boulder on Friday evening, stopping to ski at one of the larger Colorado resorts,
and return to Boulder on Saturday or Sunday. In order to make a sale, Angela must often
negotiate a discount from the standard wholesale prices.
Tarantula wants to maintain the exclusivity of its line in Vail, thus the company has a policy of
selling at full wholesale list price in Vail and not negotiating. The salesperson, who covers Vail,
follows the policy rigidly and, as a result, Tarantula Skiwear is available in only two Vail stores.
Angela thinks she could make a large sale by only cutting the list price slightly. One Thursday
she drives from Salt Lake City to Vail. Friday morning she called on a large retail outlet in Vail.
The owner said he would love to have the Tarantula line, but just couldn't pay the full wholesale
price. Angela takes the owner skiing, with both, of course, wearing Tarantula wear. Angela is
demonstrating how good Tarantula Skiwear looks at high speed when she skis into someone just
beginning to snowboard. The snowboarder sues Angela and Tarantula Skiwear. Assuming that
Angela was, in fact, negligent, can the plaintiff recover from Tarantula? Discuss the likely issues
to arise and their likely resolution.
Answer: The issue is whether Angela was within the scope of employment when the injury
occurred. On one hand, she was trying to sell the company's product, but this was not her
territory. A court might find either the coming and going rule to apply, or folic and detour.
Diff: 3
Topic: Negligence Torts
Skill: Factual Application
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85) Jerry was employed as a blackjack dealer in a Las Vegas casino. One evening as he dealt, a
patron became more and more abusive, insulting Jerry, using profanity, and finally making
personal insults about Jerry's appearance. Jerry became very angry and hit the patron. The patron
sued both Jerry and the casino. Discuss the liability of Jerry and the casino, assuming that Jerry's
actions were not justified.
Answer: Jerry, like everyone, is liable for his own torts. The liability of the casino for this
intentional tort of Jerry's depends on which test is applied by the state. The casino would not be
liable under the motivation test, but would be liable under the work-related test. The casino
might also be liable if its own negligence (such as improper supervision, or seeing Jerry get
abusive, but failing to act) was a cause of the injuries.
Diff: 3
Topic: Intentional Torts
Skill: Factual Application
86) Tim played first base for a minor league baseball team, the Salamanders. During a home
game, a fan for the visiting team was seated near first base and heckling Tim. The fan said that
Tim's mother wore army boots, and that Tim played like he was in Little League. Finally, Tim
had had enough, and threw his right shoe at the fan, injuring him. An hour after the game in a
nearby bar, a drunk fan was threatening the Salamanders' right fielder, also their star hitter.
Although this person was too drunk to have inflicted injury, Tim punched him a couple of times
in order to protect his friend and star. Discuss the liability of the Salamanders for these injuries.
Answer: The Salamanders would be liable for the injury during the game under the work-related
test. If Tim threw the shoe because the heckling was interfering with his playing baseball, the
Salamanders would also be liable under the motivation test. The Salamanders would not be liable
under the work-related test for the injury in the bar, but might be under the motivation test. The
court might find, though, that the injury was too far-removed from work for liability.
Diff: 2
Topic: Intentional Torts
Skill: Factual Application
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2010 Pearson Education, Inc. publishing as Prentice Hall