Exam 36: Third-Party Relations of the Principal and the Agent

Dart Corp. dismissed Ritz as its general sales agent. Dart notified all of Ritz's known customers by letter. Bing Corp., a retail outlet located outside of Ritz's previously assigned sales territory, had never dealt with Ritz. However, Bing knew of Ritz as a result of various business contacts. After his dismissal, Ritz sold Bing goods, to be delivered by Dart, and received from Bing a cash deposit for 20 percent of the purchase price. It was not unusual for an agent in Ritz's previous position to receive cash deposits. In an action by Bing against Dart on the sales contract, which of the following is true?

Exculpatory clauses that try to relieve a principal of liability for an agent's misrepresentations usually insulate the principal from tort liability and prevent the third party from rescinding the contract.

_____ arises when the principal's manifestations cause a third party to form a reasonable belief that the agent is authorized to act in a certain way.

Phillips hires Addis, who had sixteen prior convictions for the use of hallucinogenic drugs, as an air traffic controller for his private airport. Phillips could easily have discovered the convictions had he bothered to make a routine criminal record check, but this was just too much trouble. Phillips knew nothing whatsoever about the job of an air traffic controller, and, when he hired Addis, merely told him to "get the planes in safely the best way you know how; the details are up to you." One day, Phillips held a private birthday party for a celebrity and invited 20 of his rich and famous friends, all of whom were to arrive by a private jet. As it turned out, Addis was under the influence of drugs on this day and, as a result, all 20 of Phillips's friends were killed. After this national tragedy, Phillips and Addis were sued for negligence by the estates of these people. In this case:

A principal will not be liable to a third party for a tort committed by an agent:

Ordinarily a principal is not made liable for any of the torts committed by:

It is always necessary for an agent to disclose the identity of the principal to any third person with whom he is contracting; else the contract becomes void.

The state of Indiana hires the Reliable Construction Company to do some excavation work on an interstate highway. The state lays out the general objectives that Reliable has to achieve, but the details of the job are up to Reliable. The job involves digging holes ten feet deep, the whole way, across the highway. Given the nature of the job, it's important that Reliable be especially careful in putting up flashers and warning signs to steer oncoming motorists onto a detour. Reliable, however, does not do an adequate job in this regard and motorists are continually driving their cars into the construction area at high speed. One of these drivers, Tim, is unable to stop in time, and drives his car into the hole, suffering severe personal injury and damage to his car. Tim sues Reliable and the state for Reliable's negligence. In this case:

Ratification is a process whereby a principal binds himself to an unauthorized act done by an agent, or by a person purporting to act as an agent.

Implied ratification arises when:

Adam hired Kim as his agent to drive a cab. On his first day on the job, Kim hit a pedestrian who suffered serious injuries. The pedestrian wants to file a suit against both Adams and Kim. Can he file a single suit against both of them?

Ordinarily, an agent is not liable for unauthorized acts made on behalf of a principal if:

The doctrine of respondeat superior means:

Direct liability is also known as respondeat superior liability.

Cyrano hired Roxanne to purchase a yacht. Cyrano did not want sellers to know that he was the buyer because he was very rich and he thought that sellers would demand a higher price if they were aware of this. So he instructed Roxanne to inform the sellers that she was acting for an anonymous buyer. Roxanne followed these instructions and entered into a contract to purchase a yacht from Richard. However, Cyrano did not like the yacht that Roxanne selected and refused to pay the purchase price. Richard insisted that Roxanne herself pay the purchase price. If Richard sues Roxanne to enforce the contract against her, what will be the outcome?

Maple hired Birch to work as a taxi driver for Maple. After a long, hot summer day of city driving and dealing with other rude drivers, Max, another driver, cut Birch off and slightly dented Birch's taxicab. An enraged Birch pulled Max out of the car and hit him with a brick that was lying on the road. Max suffered serious and permanent injuries and wants to sue. Who is liable in this situation?

An agent is not liable for making an unauthorized contract if:

Principals may try to escape liability for an agent's misrepresentations by including _____.

To be within the scope of employment, the employee's conduct must have been completely motivated by the desire to serve his employer.

The process by which a principal binds himself to an unauthorized act done by an agent, or by a person purporting to act as an agent, is called ______.