Unformatted text preview: Week Ten - Chapter 12
Liability and the Sale of Alcohol.
*The sale and consumption of alcoholic beverages
is regulated by state law.
*In most states, much of the power to license and
regulate the restaurants and bars that sell alcohol,
has been given over to the local (town, city or
*This regulation includes who can sell alcohol, on
what days and at what times, and how it can be
*Some of the power has been retained by the state
government, such as the drinking age restrictions
and dram shop acts.
*Alcoholic Beverages and the Hospitality Industry
*Business with liquor licenses are in the business of
selling alcoholic beverages, because there is a
relatively high profit margin on such sales.
*On the other hand, there are many ways that the
sale of alcohol can give rise to liability for the seller.
*There are also specific laws that increase that
liability risk, and they must be understood.
*Failure to comply with the law can result in a
number of serious consequences:
*Suspension or revocation of a liquor license.
*Criminal penalties for serving an underage drinker.
*In order to sell alcohol, a business must first be
licensed. In the case of restaurants or bars, the
license is usually obtained from the applicable local
*After a license is granted, it still be revoked or
suspended by the same licensing agency or board,
often for the violation of the laws governing alcohol
*To qualify for a license, the applicant may have to
prove that they:
*Have not abused liquor in the past, as a
consumer, seller, driver, or otherwise;
*Have not been convicted of a felony, or perhaps
even charged with one;
*Have not made illegal sales of alcohol in the past;
*Are otherwise of good character.
*In most states, illegal alcohol sales would include
those made to:
*Anyone who is under the age of 21.
*Anyone who is visibly intoxicated.
*Known habitual drunkards, though any case I
found for this situation involved a drinker who was
also visibly intoxicated at the time.
also *As to the law regarding under age drinkers, the
age to drink is generally 21.
*It is the responsibility of the restaurant or bar to
ask for acceptable identification.
*Management must determine what qualifies as
acceptable, but may include:
*State-issued driver’s license.
*State-issued non-driver identification card.
*Military identification card.
*If a patron uses a fake ID, that appears to the
reasonable trained eye to be legitimate, the
business might not be liable for the sale.
*Conversely, if the age of the drinker should have
been questioned, but they were served anyway, the
business violated the law.
*Use of a minor’s book to show that the sller
questioned the credentials of the drinker before
they were served would generally have no
beneficial effect and may even have the opposite
effect as documented evidence that the seller
knew, or should have known, that the patron should
not be served.
*If alcohol is sold to someone who is of sufficient
age, who then provides it to an underage drinker,
the seller would not be liable, unless
*The seller knew or should have known that the
purchaser would provide it to the underage drinker.
*This may occur if the alcohol is sold to a family
having dinner and they ask for glasses for their
*If the seller knew of the liquor going to the
underage drinker, the seller is liable as if they sold
*Sales to those who are visibly intoxicated.
*A person’s appearance or actions may indicate
that they are intoxicated.
*Bloodshot, glassy, or watery eyes
*Aggressive behavior or changes in behavior.
*With the existence of small portable breathalyzers,
a blood alcohol level test can also be an indicator,
though such a test cannot be forced upon a patron.
A BAC—blood alcohol content - of .08 or higher, is
generally considered legally intoxicated.
*Even if there is some question of whether a patron
is intoxicated, the seller can refuse them service, as
there is no law that requires all be served, so long
as the seller is not discriminating in violation of
state or federal civil rights law.
*Students in this course will have usually taken some sort of liquor sales certification class, and as
employers, they are held to a higher standard of
recognizing intoxication before others might.
*Employees must also be trained in the same
manner as the employer shall be liable for illegal
sales made by an employee.
*Liability can result from the failure to train
employees, the failure to set internal policies as to
the manner of serving alcohol, or the failure to
support employees who shut off patrons who the
server believes is visibly intoxicated.
*Under common law, a seller was not generally
liable for damages caused when it served alcohol
illegally and that patron was injured or caused
injury to another.
*The patron was responsible for their own harm
and for the harm they caused to others.
*As to the seller of the alcohol, the harm to others
was too remote and therefore not generally
foreseeable for negligence liability.
*Many states felt that the law did not do enough to
encourage a server to prevent patrons from
*Another problem was that many intoxicated
persons who cause injury have little money with
which to compensate those they injure, but the
owner of a restaurant or bar is more likely to have
insurance and assets to compensate injured
*Most states created new laws called “Dram Shop
*Dram shop acts impose liability on restaurants and
bars for certain injuries resulting from illegal sales.
*In a majority of states, selling to a visibly
intoxicated person who then harms themselves and
an innocent third party, will result in the seller’s
liability for the damages sustained by the third
party, but not to the drinker.
*A minority of states make the seller liable also to
the wrongfully served drinker.
*A very small minority of states have no Dram Shop
Act, and the only potential liability would be under
the common-law negligence, which would be a
much tougher case to prove.
*Dram shop act liability does not require a car
accident, and can result from a fight or other
conduct involving the illegally served patron.
*The damages that result from dram shop liability
can be substantial and can put the seller out of
*Even defending the lawsuit can cost more than
many businesses can afford.
*Under the dram shop majority rule, if a passenger purchased alcohol or encouraged driver to drink,
that passenger could not recover for their injuries.
*If the passenger did not contribute to driver’s
intoxication, the bar or restaurant may be liable for
passenger’s injuries, as they are considered an
innocent third party.
*If more than one seller serves a visibly intoxicated
patron, any seller proven to have serve them
illegally can be liable for the harm caused.
*Even though more than one seller can be liable for
the harm caused, a damages party cannot get
multiple recoveries. If the total damage is $10,000,
that is all the plaintiff can get. They cannot recover
$10,000 each from every defendant found to be
*If the drinker was not visibly intoxicated until he
arrived at the second bar, the first bar will not be
*In some states, comparative negligence applies
and a seller can reduce its liability by the
percentage of liability attributed to the driver.
*Similarly, if the third party injured contributed to the
cause of the accident, the injured person’s recovery
may be reduced accordingly.
*A dram shop act can also include civil damage
liability for harm caused by any illegally served
patron, including under-age drinkers and habitual
*Depending upon the state, a promoter or company
may be liable under dram shop, for harm caused by
an illegal sale by a venue or licensed liquor seller
that the promoter contracted with to provide alcohol
to attendees at the promoter’s, or company’s,
*Miscellaneous Liquor Regulations
*Age of alcohol servers – generally a minimum age
of 18 or 19, though bartenders may have to be 21.
*State or local restrictions on alcohol sales on
certain days or at certain time must be followed.
*Gambling, fighting, prostitution or other illegal
conduct on premises is prohibited and can result in
loss of license, even if the premises was not
participating in the conduct.
*Maintenance of prescribed records is necessary
for income tax, sales tax and other compliance
*Restrictions on the type of alcohol sold – the seller
must comply with their license, whether it is a full
license, beer/wine or whatever.
*Proximity to school or church – if the business is
located near a school or church, the obtaining of a
liquor license may be complicated.
liquor *Limitations on sales promotions
*Happy hour is usually the selling of cheap drinks
for a short period of time.
*In many states, happy hours are now illegal as
they encourage heavy drinking for a short time,
after which the patrons drive home when the prices
go up and cause car accidents.
*Depending upon the state, other alcohol sales
promotions may also be illegal under these laws.
*Some bars provide nude or sexually explicit
entertainment in the form of dancers or strippers.
*This is a form of speech which is entitled some
constitutional protection, though the protection is
relatively low, when compared to other forms of
*Because of this protection, government restrictions
must further an important government interest
unrelated to suppression of free speech.
*For this reason, a government can restrict this
form of entertainment, but cannot prohibit it
*A typical form of government restriction would be
requiring a venue, using this form of entertainment,
to be located in one confined area where similar
businesses are located, often an industrial zone.
*The restrictions must not be broader than is
necessary to achieve the stated government
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This note was uploaded on 11/06/2011 for the course LAW 2010 taught by Professor Davidspatt during the Fall '11 term at Johnson & Wales University- Charlotte.
- Fall '11