Deck 34: Liability to Third Parties and Termination

Question 1

A special type of express agent authority is known as a power of attorney.

Answer 1

True

Question 2

Insolvency of either the principal or agent always terminates the agency relationship.

Answer 2

False

Question 3

When making decisions about an agency relationship's liability to third parties, courts must first identify whether property damage or personal injury, or both, is at issue.

Answer 3

False

Question 4

Which of the following allows an agent to conduct all business for the principal?

A) Special power of attorney
B) General power of attorney
C) Acknowledged power of attorney
D) Durable power of attorney
E) Equal power of attorney

Question 5

There are two basic types of power of attorney: special and allocated.

Question 6

Which of the following was the result in Larry S. Lawrence v. Bainbridge Apartments, the case in the text in which the window washer argued that he was entitled to recover against the building owner for his injuries in a fall?

A) The window washer was entitled to workers' compensation as an employee.
B) The window washer was entitled to a recovery in tort based on the inherently dangerous activity at issue and the defendant's failure to take sufficient precautions.
C) The window washer was entitled to recovery for breach of contract.
D) The window washer was not entitled to recover because he took insufficient precautions for his own safety.
E) The window washer was entitled to no recovery based on his status as an independent contractor.

Question 7

The principal may terminate an agency coupled with an interest.

Question 8

Bobby wants to purchase a lot next door to Sarah's home that is owned by Sarah. Bobby knows Sarah will not sell the lot to him because of his barking dogs that she dislikes. Bobby agrees with Susie that Susie will purchase the lot from Sarah for him. Susie and Sarah reach an agreement and enter into a contract whereby Sarah is to sell the lot to Susie for a price within the scope of Susie's authority. Susie tells Sarah nothing about her plan to later transfer the lot to Bobby. Before title to the lot is transferred to Susie, Bobby tells Susie that he no longer wants the lot. Susie tells Sarah about Bobby. Sarah tells Susie that as far as she is concerned, Susie has bought a lot. Sarah says that she plans to move anyway and really does not care whether Susie or Bobby end up with the lot. She just wants her money and is unconcerned about barking dogs. They will be the next owner's problem. Which of the following is true regarding whether Susie is personally bound on the contract with Sarah?

A) Susie is not personally bound because she was acting on behalf of Bobby.
B) Susie is personally bound unless she can establish that Sarah would not have sold her the lot if she had known that Bobby was involved; and the contract is, therefore, void.
C) Susie is personally bound unless she can establish that Bobby has the funds with which to pay Sarah.
D) Susie is not personally bound unless Bobby has legally filed for bankruptcy.
E) Susie is personally bound.

Question 9

If an agent commits a crime in the scope of employment for a principal without the authorization of the principal, the principal is not liable for the agent's crime.

Question 10

As discussed in the text, which of the following is true regarding electronic contracts and agency authority in Singapore?

A) In Singapore because of the fear of fraud, agents are not allowed to engage in electronic transactions on behalf of principals.
B) Singapore relies on a type of law similar to U.S. common law in addressing agency authority in regard to electronic transactions.
C) Singapore passed a law providing that a principal must countersign any electronic transaction engaged in by an agent.
D) Singapore passed a law providing that each employer must post a list electronically of all its agents with authority to act on its behalf.
E) Singapore passed a law by which lack of awareness of a principal for an agent's acts is not recognized as a defense.

Question 11

Agents who go beyond their authority when the principal is disclosed or partially disclosed are liable to third parties for breach of contract, not breach of implied warranty.

Question 12

A special power of attorney grants the agent express authority over specifically outlined acts.

Question 13

Actual notice of agency termination may not be given orally.

Question 14

Which of the following was the result on appeal in In re Estate of Kurrelmeyer, the case in the text in which the decedent's son sued the wife of the decedent alleging that in violation of the power of attorney that she held, she invalidly transferred the decedent's home into a trust?

A) That because no extrinsic evidence existed to clarify the meaning of the power of attorney, the transfer was invalid.
B) That because no extrinsic evidence existed to clarify the meaning of the power of attorney, the transfer was valid.
C) That because the power of attorney did not specifically give the wife the power to transfer property into the trust, the transfer was invalid.
D) That based on extrinsic evidence showing the decedent's intent, the power of attorney included the power to transfer the property.
E) That based on extrinsic evidence showing the decedent's intent, the power of attorney did not include the power to transfer the property.

Question 15

Which of the following represented the position of the Supreme Court of Tennessee in the Case Opener in which the plaintiff attempted to hold a hospital vicariously liable for her injuries?

A) That a defendant in the position of the hospital is vicariously liable for injuries received within its premises without a need for further proof.
B) That because the plaintiff dismissed the hospital's alleged agent from the lawsuit, she could not proceed even though she had sued the hospital before dismissing the agent.
C) That the plaintiff was barred from proceeding because vicarious liability is not recognized in the medical malpractice arena.
D) That the plaintiff could proceed but only because she had already established liability on the part of the physician employees involved.
E) That the hospital could be held vicariously liable if the plaintiff established that a wrongful act harming her occurred within the scope of the agent's employment.

Question 16

As set forth in the text, which of the following is true regarding respondeat superior in Iraq?

A) Iraq applies the same concept of respondeat superior as the U.S.
B) Iraq's law is influenced in part by classical Islamic law which suggests that those who cause harm should repair it.
C) Iraqi law contains no exceptions under which respondeat superior principles are permitted.
D) Through a specific enactment, government municipalities may not be held liable for acts of employees.
E) The concept of respondeat superior is irrelevant in Iraq because civil actions for injury are not allowed.

Question 17

Which of the following specifies that the agent's authority is intended to continue beyond the principal's incapacitation?

A) Special power of attorney
B) Durable power of attorney
C) Nonterminable power of attorney
D) Permanent power of attorney
E) Living power of attorney

Question 18

Mary is an agent for ABC Photography, owned by Phil. Without disclosing her agency status, Mary agrees by contract to take Polly's wedding photographs. When Phil finds out, he explains the agency relationship he has with Mary to Polly and says that he wants to take the photographs because a lady he wants to ask out on a date is expected to be at the wedding. When Polly finds out, she says "No way - I choose Mary." Which of the following is true regarding the rights of the parties?

A) Polly has a right to insist that Mary take the photographs because Polly's contract required Mary's services.
B) Phil has a right to take the photographs only if his contract with Mary expressly provides that he can take over her photo shoots.
C) Phil has a right to take the photographs.
D) Phil has a right to take the photographs only if the contract is in an amount over $500.
E) Phil has a right to take the photographs unless the contract Mary has with Polly is in writing in which case Polly has the right to insist that Mary take the photographs.

Question 19

Which of the following was the result in Angela & Raul Ruiz v. Fortune Insurance Co., the case in the text in which the plaintiffs claimed that the defending insurer was liable to them for a loss to their mobile home although the agency to which plaintiffs' premium was remitted no longer had an agency relationship with the defendant; and the defendant had not received the payment nor renewed the plaintiffs' policy?

A) The defendant was held liable to the plaintiffs because they had not been notified of the agency termination and the nonrenewal.
B) The defendant was held liable to the plaintiffs because even if the defendant sent a notice of nonrenewal, the plaintiffs did not receive it.
C) The defendant was held liable to the plaintiffs because its former agent was in possession of funds meant for the defendant, and it was up to the defendant to obtain the funds from the former agent.
D) The defendant was not held liable to the plaintiffs because of proof it had mailed the notice of nonrenewal, even if the plaintiffs did not receive it or did not read it.
E) The court ruled that a jury question existed as to whether the plaintiffs understood the meaning of the notification of nonrenewal and that if the plaintiffs did not understand its meaning, then they were entitled to recover from the defendant.

Question 20

In order to terminate a principal's responsibility, actual notice of agency termination must be given to third parties who have had business interactions with the agent.

Question 21

Which of the following is true regarding the origin and meaning of the phrase respondeat superior?

A) It is a Latin phrase meaning "release the agent."
B) It is a French phrase meaning "agency liability."
C) It is a German phrase meaning "liability without fault."
D) It is a Latin phrase meaning "let the superior speak."
E) It is a French phrase meaning "let the agency stand."

Question 22

Which of the following holds the principal-employer liable for any harm caused by the agent-employee during the time that the agent-employee is working for the principal?

A) Vicarious liability
B) Responsible liability
C) Comparative liability
D) Contributory liability
E) There is no such concept

Question 23

Which of the following is false regarding the relationship between a principal and an independent contractor?

A) An independent contractor is not an employee of the principal.
B) The principal does not control the details of the independent contractor's performance.
C) An individual who hires an independent contractor cannot be held liable for the independent contractor's tortious actions under the doctrine of respondeat superior.
D) A principal is not liable for extremely dangerous actions engaged in by the independent contractor.
E) If an independent contractor commits a crime without the authorization of the principal, the principal is not liable for the agent's crime.

Question 24

The doctrine of ______ applies in the context of the principal/employer-agent/employee relationship in relation to liability of the principal/employer for acts of the agent/employee.

A) Superior respondeat
B) Respondeat superior
C) Stare decisis
D) Res superior
E) Supre superior

Question 25

Which of the following is false regarding classification of principals?

A) If the third party is aware of the principal's existence but not his or her identity, the principal is classified as a disclosed principal.
B) When the third party is aware that the agent is making an agreement on behalf of a principal and also knows who the principal is, the principal is a disclosed principal.
C) An unidentified principal is in the same classification as a partially disclosed principal.
D) If the third party does not know that an agent is acting on behalf of a principal, an undisclosed principal is involved.
E) Classification of the principal is important because it helps determine the principal's liability.

Question 26

An employee's significant deviation from the employer's business is often referred to as a _______.

A) Spree of his own choosing
B) Romp against instruction
C) Leisure against direction
D) Pleasure seeking spree
E) Frolic of his own

Question 27

Which of the following is false regarding agency law in the United Arab Emirates (UAE)?

A) UAE Commercial Transaction Law is relevant in regard to agents.
B) The UAE Civil Code is relevant in regard to agents.
C) Registered agents may seek compensation when an agency ends even if the termination occurs in accordance with the terms of the agency agreement.
D) Only registered agents are entitled to seek compensation in the event of termination.
E) In regard to disputes about compensation of agents, court-appointed experts are usually the entities that are responsible for determining compensation amounts.

Question 28

Which of the following is true regarding an agent's liability when the agent commits a tort while acting as an agent for a principal?

A) The agent is personally liable only if the agent was on a mission for an unidentified principal.
B) The agent is personally liable only if the agent was on a mission for an identified principal or a partially disclosed principal.
C) The agent is liable regardless of the classification of the principal or the liability of the principal.
D) The agent is not liable if the principal is liable.
E) The agent is not liable unless the principal is insolvent.

Question 29

Which of the following was the result in Iglesia Cristiana La Casa Del Senor Inc., Etc. v. L.M., the case in which an alleged victim sued the former pastor and a church alleging the pastor had sexually assaulted her when she was a minor?

A) That the assault did not occur within the scope of the pastor's employment and that the church was not vicariously liable for his act.
B) That the assault occurred within the scope of the pastor's employment and that the church was vicariously liable for his act.
C) That although the assault did not occur within the scope of the pastor's employment, the church was vicariously liable for the act because of its criminal nature.
D) That the church was vicariously liable because it knew of the criminal act but did nothing.
E) That regardless of whether or not the assault occurred within the scope of the pastor's employment, the church was vicariously liable because it had negligently hired the priest.

Question 30

Which of the following is true regarding liability of an agent acting within his or her authority on a contract involving an undisclosed principal?

A) The law will likely hold the agent liable for the agreement.
B) The law will hold the agent liable for the agreement unless the contract the agent had with the principal expressly provided that the agent would not be held liable in such cases.
C) The law will hold the agent liable for the agreement unless the contract the agent had with the principal impliedly or expressly provided that the agent would not be held liable in such cases.
D) The law will hold the agent liable for the agreement unless a contract for under $1,000 is involved in which case only the principal would be held liable.
E) The law would not hold the agent liable on the agreement.

Question 31

If an agent makes _____ from the course of the employer's business, the employer is not liable.

A) A substantial departure
B) Any departure
C) A minute departure
D) An absolute departure
E) An unauthorized departure

Question 32

According to the text, which of the following are factors considered by courts in determining whether an act committed by an employee occurred within the course and scope of employment?

A) Whether the employer authorized the employee's act.
B) Whether the employer provided the tools by which the act occurred.
C) Whether the employer knew that the act would involve the commission of a serious crime.
D) Whether the employee had worked for the employer for a substantial amount of time.
E) Whether the employee used force not expected by the employer.

Question 33

When a principal is classified as a[n] ______ principal, a third party is aware that an agent is making an agreement on behalf of a principal, and the third party also knows the identity of the principal.

A) Acknowledged
B) Permitted
C) Disclosed
D) Revealed
E) Uncovered

Question 34

Which of the following is true if a third party comes to know of an undisclosed principal's identity and obtains a judgment against the principal?

A) The agent remains liable to the third party.
B) The agent remains liable to the third party unless the dispute involves an amount less than $1,000 in which case the agent is released.
C) The agent remains liable to the third party unless the dispute involves an amount less than $500 in which case the agent is released.
D) The agent is released from liability to the third party.
E) The agent is released from liability to the third party unless the principal resides in another state and has not paid the judgment within 30 days from when it was rendered.

Question 35

Which of the following is true if an agent has no authority to act on behalf of a principal, but the agent still enters into a contract with a third party?

A) The principal is bound only if the principal is a disclosed principal.
B) The principal is bound only if the principal is an unidentified principal.
C) The principal is bound only if the principal is a partially disclosed principal.
D) The principal is bound unless the principal can establish clearly and convincingly that the agent was expressly barred from engaging in the conduct at issue.
E) The principal is not bound unless the principal ratifies the agreement.

Question 36

Which of the following is true under the UCC regarding liability of a principal if the agent enters into a contract that is a negotiable instrument?

A) The principal is liable to the same extent as if no negotiable instrument were involved because the negotiable instrument has no effect on the principal's liability.
B) The principal cannot be held liable unless the principal's name is on the instrument.
C) The principal cannot be held liable unless the agent's signature indicates that it was made in a representative capacity.
D) The principal cannot be held liable unless the principal's name is on the instrument or the agent's signature indicates that it was made in a representative capacity.
E) The principal cannot be held liable unless the principal's name is on the instrument or the agent's signature indicates that it was made in a representative capacity, or the agent has been ruled insolvent.

Question 37

Which of the following is true regarding the relevance of whether a tort committed by an employee occurred within the time and space limits of employment?

A) It is relevant on whether the agent is liable for the tort or whether the principal alone is liable.
B) It is relevant on whether the principal is liable for the tort or whether the agent alone is liable.
C) It is relevant on the issue of what percentage of harm the agent must bear as opposed to the principal.
D) It is relevant in regard to whether equitable relief is available.
E) It is not relevant.

Question 38

Which of the following is true regarding liability of a principal if a contract an agent makes with a third party expressly excludes the principal from the contract?

A) The principal is liable on the contract because it is unconscionable to exclude a principal from a contract.
B) The principal is liable on the contract only if the principal is an unidentified principal.
C) The principal is liable on the contract only if the principal is a partially disclosed principal.
D) The principal is liable on the contract unless the principal gave the agent authority in writing to make the agreement with the third party.
E) The principal is not liable on the contract.

Question 39

When an employee commits a tort within the scope of the agency, which of the following is true regarding liability of a principal who controls the employee's behavior?

A) The employer is liable.
B) The employer is not liable because as a matter of public policy, a person is singularly liable for his or her torts.
C) In order to give the employer a chance to evaluate the employee, the employer is liable only if the employee has worked for the employer for at least thirty days.
D) In order to give the employer a chance to evaluate the employee, the employer is liable only if the employee has worked for the employer for at least seven days.
E) In order to give the employer a chance to evaluate the employee, the employer is liable only if the employee has worked for the employer for at least six months.

Question 40

Which of the following is true regarding the rights of an employer who is held liable and pays a third party, not because of the employer's negligence, but under the doctrine of respondeat superior based upon negligence of an employee?

A) The employer has no right to receive any reimbursement from the negligent employee.
B) The employer has a right to recover only 50% of any amounts paid from a negligent employee.
C) The employer has a right to recover all amounts paid from the negligent employee.
D) The employer can recover all amounts paid from a negligent employee but only if it can be shown that the employee's negligence was based upon the violation of a statute.
E) The employer can recover 50% of any amounts paid from a negligent employee but only if it can be shown that the employee's negligence was based upon the violation of a statute.

Question 41

Which of the following is false regarding termination of agency in the Netherlands?

A) The agent is entitled to compensation if his or her duties are concluded within a reasonable time after termination.
B) Compensation is due if the agent received the orders for a certain action before the termination of the contract.
C) The agent is entitled to goodwill compensation in certain situations.
D) An agent is not entitled to additional compensation based on bringing the principal new customers or because agreements with clients obtained by the agent remain profitable.
E) There are requirements on the agent in regard to time limits in filing for certain compensation.

Question 42

"Unreliable Boyfriend." Bobby needs a business law book. He hears that Gwen has one for sale. Bobby asks his girlfriend Susie to buy it for him from Gwen if Susie can get it for under $40. Susie sees Gwen in the hall and asks if she will sell the book for $30, and Gwen agrees. They are between classes, and Susie does not mention that the book is for Bobby although all the parties were on good terms, and the identity of the buyer should not have affected Susie's agreement. Later, however, Polly agrees to give Bobby her used business law book. Bobby tells Susie that he no longer wants the book. Susie tells Gwen about the situation with Bobby. Gwen replies that she does not care if Bobby wants the book or not. Gwen says that she passed up a couple of opportunities to sell the book because she thought she already had it sold and that she wants her money from either Gwen or Bobby - she doesn't care who pays.

-What type of principal is Bobby?

A) Disclosed
B) Undisclosed
C) Partially disclosed
D) Unidentified
E) Legally nonexistent

Question 43

Which of the following is an agency agreement created for the agent's benefit, not for the principal's?

A) Agency interest principle
B) Agency coupled with an interest
C) Agency benefit interest
D) Agency compensation principle
E) Agency entitlement principle

Question 44

"The Big Sale." Christy, the owner of ABC department store, needed to hire a number of employees in a hurry because of a big summer sale she was planning. Bob was hired by Christy to run a cash register and to assist customers with taking large purchases to their cars. Bob encountered a particularly annoying customer, Frank. Frank started complaining the minute he saw Bob. Frank complained about having to wait for Bob to assist him with carrying his television purchase to his car, about the merchandise in the store, and about the quality of the store's employees. Bob tried to control himself while he carted Frank's television to the car. The final straw, however, came when Bob told Frank that he should get the earring out of his ear, cut his hair, and act professionally. Bob threw the television to the ground and punched Frank in the nose. Frank did investigation and discovered that Bob has been fired from his previous three jobs for taking violent action against customers. Two of his former employers are willing to testify that if Christy had called them, they would have disclosed Bob's tendencies to her. Bob listed the former employers on his application, but because she was in a hurry to hire employees, Christy did not take the time to check with the former employers. Another problem confronting Christy during the big sale is that Susie, a long-time employee of Christy who had never caused any problem before, accidentally, but negligently, dropped a box on the foot of Greg, a customer. Greg had to have an X-ray and is threatening to sue both Christy and Susie.

-Which of the following is true regarding whether Greg has any right of recovery against Christy for his injured foot?

A) Greg has no right of recovery against Christy because Susie had not dropped any boxes before, and Christy had no reason to suspect she would injure Greg.
B) Greg has a right of recovery against Christy only if Susie is insolvent.
C) Greg has a right of recovery against Christy, but only for 50% of his damages.
D) Greg has no right of recovery against Christy unless he is able to establish wrongdoing on her part in hiring Susie.
E) Greg has a right of recovery against Christy.

Question 45

Which of the following is false regarding termination of agency based on operation of law?

A) Impossibility of performance terminates the agency relationship.
B) An agency agreement is terminated whenever the agent, unknown to the principal, acquires an interest against the principal's interest.
C) The agency agreement is terminated if the agent breaches the duty of loyalty he or she has to the principal.
D) A change in law passed subsequent to the formation of an agency agreement may not result in termination of the agency agreement.
E) If there is an unusual change in circumstances that leads the agent to believe that the principal's instructions do not apply, the agency relationship terminates.

Question 46

"The Big Sale." Christy, the owner of ABC department store, needed to hire a number of employees in a hurry because of a big summer sale she was planning. Bob was hired by Christy to run a cash register and to assist customers with taking large purchases to their cars. Bob encountered a particularly annoying customer, Frank. Frank started complaining the minute he saw Bob. Frank complained about having to wait for Bob to assist him with carrying his television purchase to his car, about the merchandise in the store, and about the quality of the store's employees. Bob tried to control himself while he carted Frank's television to the car. The final straw, however, came when Bob told Frank that he should get the earring out of his ear, cut his hair, and act professionally. Bob threw the television to the ground and punched Frank in the nose. Frank did investigation and discovered that Bob has been fired from his previous three jobs for taking violent action against customers. Two of his former employers are willing to testify that if Christy had called them, they would have disclosed Bob's tendencies to her. Bob listed the former employers on his application, but because she was in a hurry to hire employees, Christy did not take the time to check with the former employers. Another problem confronting Christy during the big sale is that Susie, a long-time employee of Christy who had never caused any problem before, accidentally, but negligently, dropped a box on the foot of Greg, a customer. Greg had to have an X-ray and is threatening to sue both Christy and Susie.

-Which of the following is true regarding whether Greg has any right of recovery against Susie for his injured foot?

A) Greg has no right of recovery against Susie because of her status as an employee.
B) Greg has no right of recovery against Susie because she did not intentionally harm him.
C) Greg has a right of recovery against Susie only if Christy cannot be located for service of process.
D) Greg has a right of recovery against Susie only if Christy is bankrupt.
E) Greg has a right of recovery against Susie.

Question 47

Which of the following is true regarding notice of termination of an agency relationship?

A) Notice of termination of an agency relationship must be given by actual notice.
B) Depending on the circumstances, notice of termination can be actual or constructive.
C) Notice of termination of an agency must be given in writing.
D) Actual notice of termination of an agency relationship is not needed once 30 days have passed since the termination because at that point notice is presumed.
E) Actual notice of termination of an agency relationship is not needed once 60 days have passed since the termination because at that point notice is presumed.

Question 48

Which of the following is false regarding revocation of the authority of an agent and renunciation by an agent?

A) At any time a principal can revoke an agent's authority.
B) A principal's revocation of an agent's authority may result in a breach of contract entitling the agent to damages.
C) An agent can terminate the agency relationship by renouncing the authority given to the agent.
D) An agent's wrongful ending of the agency relationship may be a breach of contract entitling the principal to damages.
E) If an agent has breached a fiduciary duty to the principal, the principal can revoke the agent's authority; but the agent may be entitled to damages.

Question 49

"Furniture Store Woes." Manny was hired by John to deliver furniture purchased from John's furniture store, Good Furniture. John had authorized Manny to drive the delivery truck home from work, but Manny was not authorized to use the truck for any personal errands. Manny decided to help his friend Helen move believing that John would never find out. Unfortunately, while moving Helen's furniture to her new home, Manny was speeding and hit Bobby's vehicle in the rear causing whiplash to Bobby. Bobby is threatening to sue both John and Manny. Then, on his way to work in the same truck the next day, Manny again bumped a car driven by Joan who is threatening to sue both Manny and John. John also has another problem involving Connie, his niece, an aspiring interior designer who John hired to provide design services to customers. Both Connie and John were aware that customers would likely have no interest in the services of Connie if they knew she had no experience and no training in design. Therefore, they inflated her accomplishments to customers telling them that she had both training and experience. In reliance on those claims, Beth agreed to have Connie do the interior design work for her new business building while Beth was out of town on an extended business trip. Unfortunately, Connie did a terrible job. For example, she put in purple carpeting and painted the walls orange. Beth was outraged when she returned. She found out from Sandy, a disgruntled employee of John, that Connie actually had no training or experience in interior design. Sandy wants to sue both Connie and John.

-If John pays for the damage to Joan's car, does he have any remedy against Manny?

A) If John covers Joan's damages, then John may receive full reimbursement from Manny based upon the right of indemnification.
B) If John covers Joan's damages, then John is not entitled to any reimbursement from Manny.
C) If John covers Joan's damages, John is only entitled to reimbursement from Manny for 50% of whatever he paid.
D) Any recovery John receives from Manny will be based upon principles of comparative negligence.
E) Any recovery John receives from Manny will be based upon principles of contributory negligence.

Question 50

"Furniture Store Woes." Manny was hired by John to deliver furniture purchased from John's furniture store, Good Furniture. John had authorized Manny to drive the delivery truck home from work, but Manny was not authorized to use the truck for any personal errands. Manny decided to help his friend Helen move believing that John would never find out. Unfortunately, while moving Helen's furniture to her new home, Manny was speeding and hit Bobby's vehicle in the rear causing whiplash to Bobby. Bobby is threatening to sue both John and Manny. Then, on his way to work in the same truck the next day, Manny again bumped a car driven by Joan who is threatening to sue both Manny and John. John also has another problem involving Connie, his niece, an aspiring interior designer who John hired to provide design services to customers. Both Connie and John were aware that customers would likely have no interest in the services of Connie if they knew she had no experience and no training in design. Therefore, they inflated her accomplishments to customers telling them that she had both training and experience. In reliance on those claims, Beth agreed to have Connie do the interior design work for her new business building while Beth was out of town on an extended business trip. Unfortunately, Connie did a terrible job. For example, she put in purple carpeting and painted the walls orange. Beth was outraged when she returned. She found out from Sandy, a disgruntled employee of John, that Connie actually had no training or experience in interior design. Sandy wants to sue both Connie and John.

-Which of the following is true regarding John's liability to Bobby?

A) John will likely be held liable for Bobby's injuries because while Manny was acting outside the scope of his duties at the time of the accident, he had not substantially departed from the course of his employer's business.
B) John will likely be held liable for Bobby's injuries because Manny was driving John's truck at the time of the accident.
C) John will likely be held liable for Bobby's injuries because Manny allowed John to take the truck home regardless of John's instructions regarding the use of the truck.
D) It is unlikely that John will be held liable for Bobby's injuries because Manny had substantially departed from the course of his employer's business.
E) It is unlikely that John will be held liable for Bobby's injuries unless it can be proven that Manny had no insurance and lacks the ability to pay.

Question 51

"Unreliable Boyfriend." Bobby needs a business law book. He hears that Gwen has one for sale. Bobby asks his girlfriend Susie to buy it for him from Gwen if Susie can get it for under $40. Susie sees Gwen in the hall and asks if she will sell the book for $30, and Gwen agrees. They are between classes, and Susie does not mention that the book is for Bobby although all the parties were on good terms, and the identity of the buyer should not have affected Susie's agreement. Later, however, Polly agrees to give Bobby her used business law book. Bobby tells Susie that he no longer wants the book. Susie tells Gwen about the situation with Bobby. Gwen replies that she does not care if Bobby wants the book or not. Gwen says that she passed up a couple of opportunities to sell the book because she thought she already had it sold and that she wants her money from either Gwen or Bobby - she doesn't care who pays.

-Which of the following is true regarding whether Susie is personally bound on the contract with Gwen?

A) Susie is not personally bound because she was acting on behalf of Bobby.
B) Susie is personally bound unless she can establish that Gwen would not have sold her the book if she had known that Bobby was involved.
C) Susie is personally bound unless she can establish that Bobby has the funds with which to pay Gwen.
D) Susie is not personally bound unless Bobby is legally insolvent.
E) Susie is personally bound.

Question 52

"Unreliable Boyfriend." Bobby needs a business law book. He hears that Gwen has one for sale. Bobby asks his girlfriend Susie to buy it for him from Gwen if Susie can get it for under $40. Susie sees Gwen in the hall and asks if she will sell the book for $30, and Gwen agrees. They are between classes, and Susie does not mention that the book is for Bobby although all the parties were on good terms, and the identity of the buyer should not have affected Susie's agreement. Later, however, Polly agrees to give Bobby her used business law book. Bobby tells Susie that he no longer wants the book. Susie tells Gwen about the situation with Bobby. Gwen replies that she does not care if Bobby wants the book or not. Gwen says that she passed up a couple of opportunities to sell the book because she thought she already had it sold and that she wants her money from either Gwen or Bobby - she doesn't care who pays.

-Which of the following is true regarding whether Bobby is liable to Susie for the cost of the book if Susie pays Gwen the purchase price?

A) Bobby is liable to Susie for the cost of the book.
B) Bobby is liable to Susie for the cost of the book only if Susie had Bobby sign a document affirming his liability before Susie paid Gwen.
C) Bobby is liable to Susie only if she resells the book and is unable to recover as much as she paid for it.
D) Bobby is not liable to Susie for the cost of the book.
E) Bobby can avoid liability to Susie only if he can establish that his actions constituted "justifiable expectations" under the law absolving him from liability.

Question 53

Which of the following is the most typical way in which to provide constructive notice of agency termination?

A) By telephone
B) By letter
C) By posting a notice at the courthouse
D) By newspaper publication
E) By e-mail

Question 54

If a manager has business transactions in one of the European Union countries and wants to terminate an agency relationship, he or she would want to have access to knowledge about which of the following?

A) Chapter IV of the Agency Relationship Law
B) Chapter VII of the Employment Relationship
C) Article VI of the European Union Regulations
D) Article VII of the European Union Regulations
E) Section X of the Agency Regulations

Question 55

"Furniture Store Woes." Manny was hired by John to deliver furniture purchased from John's furniture store, Good Furniture. John had authorized Manny to drive the delivery truck home from work, but Manny was not authorized to use the truck for any personal errands. Manny decided to help his friend Helen move believing that John would never find out. Unfortunately, while moving Helen's furniture to her new home, Manny was speeding and hit Bobby's vehicle in the rear causing whiplash to Bobby. Bobby is threatening to sue both John and Manny. Then, on his way to work in the same truck the next day, Manny again bumped a car driven by Joan who is threatening to sue both Manny and John. John also has another problem involving Connie, his niece, an aspiring interior designer who John hired to provide design services to customers. Both Connie and John were aware that customers would likely have no interest in the services of Connie if they knew she had no experience and no training in design. Therefore, they inflated her accomplishments to customers telling them that she had both training and experience. In reliance on those claims, Beth agreed to have Connie do the interior design work for her new business building while Beth was out of town on an extended business trip. Unfortunately, Connie did a terrible job. For example, she put in purple carpeting and painted the walls orange. Beth was outraged when she returned. She found out from Sandy, a disgruntled employee of John, that Connie actually had no training or experience in interior design. Sandy wants to sue both Connie and John.

-Which of the following is true regarding any liability John has to Sandy?

A) John has no liability to Sandy.
B) John has liability to Sandy under the theory of misrepresentation but only if Connie is insolvent.
C) John is liable to Sandy under the theory of negligence.
D) John is liable to Sandy for only 50% of any damages she can prove.
E) John is liable to Sandy under the theory of misrepresentation.

Question 56

"The Big Sale." Christy, the owner of ABC department store, needed to hire a number of employees in a hurry because of a big summer sale she was planning. Bob was hired by Christy to run a cash register and to assist customers with taking large purchases to their cars. Bob encountered a particularly annoying customer, Frank. Frank started complaining the minute he saw Bob. Frank complained about having to wait for Bob to assist him with carrying his television purchase to his car, about the merchandise in the store, and about the quality of the store's employees. Bob tried to control himself while he carted Frank's television to the car. The final straw, however, came when Bob told Frank that he should get the earring out of his ear, cut his hair, and act professionally. Bob threw the television to the ground and punched Frank in the nose. Frank did investigation and discovered that Bob has been fired from his previous three jobs for taking violent action against customers. Two of his former employers are willing to testify that if Christy had called them, they would have disclosed Bob's tendencies to her. Bob listed the former employers on his application, but because she was in a hurry to hire employees, Christy did not take the time to check with the former employers. Another problem confronting Christy during the big sale is that Susie, a long-time employee of Christy who had never caused any problem before, accidentally, but negligently, dropped a box on the foot of Greg, a customer. Greg had to have an X-ray and is threatening to sue both Christy and Susie.

-Which of the following is true regarding Christy's liability, if any, for her own conduct in regards to Frank's injury?

A) Christy would likely be held liable for negligent hiring.
B) Regardless of whether she did anything to directly cause injury to Frank, Christy would likely be held liable on a strict liability theory because her customer was injured.
C) Christy would likely be held liable for breach of customer warranty.
D) Christy would likely be required to split the damages with Bob because Bob was her employee.
E) There is no theory on which Christy could be held liable for her own conduct in this situation.

Question 57

While making a delivery, Barry, a delivery driver for XYZ Company, went through the drive through at a local restaurant to get a cup of coffee and bumped into the car in front of him doing some damage to the car's bumper. Which of the following is true regarding the liability of XYZ Company for the damage to the car?

A) As a matter of law, XYZ Company is not liable because Barry was acting on his own behalf.
B) As a matter of law, XYZ Company is not liable because only property damage is involved.
C) As a matter of law, XYZ Company is liable because a company is liable for any torts committed by an employee during working hours.
D) Whether or not XYZ Company is liable depends on whether Barry's acts are seen as substantial departure from his work.
E) Whether or not XYZ Company is liable depends on how long Barry has worked for the company.

Question 58

How long does an agent's apparent authority continue once an agency relationship is terminated?

A) It ends immediately
B) 24 hours
C) 7 days
D) 30 days
E) Until the principal notifies third parties that the agency relationship has ended.

Question 59

Which of the following refers to an employer's right, if any, to recover from an employee damages the employer paid a third party as a result of the employee's negligence?

A) The right of recompense
B) The right of reimbursement
C) The entitlement to equity
D) The right of indemnification
E) There is no such right

Question 60

Which of the following is not necessarily a means may an agency relationship be terminated?

A) Fulfillment of purpose
B) Occurrence of a specific event
C) Revocation of authority
D) Insolvency of the principal
E) Renunciation by the agent

Question 61

Set forth the options of an injured third party when a principal is found liable for a misrepresentation made by an agent.

Question 62

List and define the two basic types of power of attorney. Also discuss in what way a durable power of attorney is different from a power of attorney not so designated.

Question 63

Set forth the rationale behind the doctrine of respondeat superior and discuss whether ethically you believe is an appropriate doctrine for our society.

Question 64

Trudy, who was angry with her business law teacher, Tom, because of a hard test, angrily watched him come into the fast food restaurant where she worked as a cashier. She noticed that he had on his new designer suit, the one he wore when he wanted to impress the chancellor. Trudy completely lost her temper, threw a milkshake on Tom, and then reached across the counter and punched him in the eye. The police were called. Tom says that he wants both Trudy and the owner of the restaurant, Sally, arrested. Assuming that Trudy committed the crimes of assault and battery, is Sally also criminally responsible? Set forth reasoning in support of the conclusion.

Question 65

Set forth in detail the conditions under which a principal is directly responsible for his or her own tortious conduct.