Solution Manual
Book Title
Business Law with UCC Applications 14th Edition

978-0077733735 Chapter 22 Solution Manual

April 10, 2019
Part 6 Agency, EmploymenT, and Labor Law
Chapter 22 Agency Law
Opening Case Questions
1. According to the text: “Agency is a legal relationship in which one party, the agent, transacts
business for and under the control of the second, the principal. The third party is that individual with
2. Vicarious liability is a legal doctrine that determines when a master (generally referred to in
4. Negligent retention occurs when an employer retains a dangerous or incompenet employee after
5. The First Amemdment might be involved whenever the employer is a religious institution and the
employee is a religious employyee and the actions complained of have a connection to the employee’s
Clergy Malpractice, the First Amendment, and Charitable Immunity
Special Directions to the Instructor: Instructors are often baffled by the diverse and sometimes
contradictory responses that learners invent to answer this ethical question, particularly since the
learners are given a choice as to which ethical theory to use (market value ethics, social contract ethics,
Questions for Review and Discussion
1. Agency is a legal relationship between two persons. In an agency relationship one person is the
agent of the other. The agent is empowered to act for and under the control of the principal. The agent’s
job is generally to negotiate and make contracts for the principal with a third party. An agency
2. Vicarious liability is the legal theory that is used to hold the master liable for the torts of his or her
servant. To establish vicarious liability two elements are needed: (1) a master-servant relationship,
generally shown by demonstrating that the alleged master had control over or the right to exercise
3. The different types of principals include disclosed, undisclosed, and partially disclosed principals.
In the case of a disclosed principal, the third party knows both the existence of the agency and the
identity of the principal. In the case of a partially disclosed principal, the third party knows that the
4. The different types of agents include general agents and special agents. A general agent is a
person who is given broad authority to conduct business on behalf of the principal. A special agent is a
5. There are two kinds of actual agency authority: express actual agency authority and implied
actual agency authority. Express authority is the authority that the principal voluntarily and specifically
sets forth as oral and written instructions to the agent. Implied authority is the agent’s authority to
6. An agent has the duty to obey all instructions, to be loyal to the principal; to exercise
reasonable judgment, prudence, and skill; to account for all money and property belonging to the
8. An agency relationship can be terminated by an act of the parties (fulfillment of the purpose
9. Actual notice is required when the third party has extended credit to the principal through
10. The Uniform Computer Information Transactions Act (UCITA) establishes a cyber-agent as a
computer program that acts without human intervention to begin an activity, to answer cyber-messages,
to deliver or accept e-mail, or to enter cyber-contracts, as a representative of an individual who does not
Cases for Analysis
1. Yes. The court found that the three level test for sovereignty had been followed properly. The
school district had first established that it had sovereign immunity under the state statute. The parents
2. No. In this case the court held that vicarious liability did not apply. The court held that, although
the driver was a servant of the Evening Star, he was not operating within the scope of employment
3. Yes on both counts. The power to grant contracts to employees can be implied from the
president’s power to preside over the union’s administrative matters. Also, the past acceptance by the
4. The New Jersey Court found that the record revealed evidence of active wrongdoing on the part
of Mularchuk in the wounding of McAndrew. It concluded that the Borough of Keansburg was
responsible for that shooting, having authorized Mularchuk when on duty to carry a revolver without
5. The decision was for Chicken Delight, Inc. Although Carfiro’s act of delivering food under the
Chicken Delight name did enhance the financial interests, reputation, and good will of the company,
such was not sufficient reason to establish an agency relationship. The court reasoned that an essential
6. No. The actions of the prison guard in striking the inmate were within the scope of his
7. The court will rule in favor of Pierce and Global. Since Global extended credit to Super through
8. Decision for LaPage. The court relied upon the doctrine of apparent authority involving the
accountability of an agent when the principal conveys to a third party that the agent may act on the
9. The judgment was for Fortune Furniture. The court held the sending of the memo was chargeable
to Castle Fabrics, Inc., under the doctrine of apparent authority. Having clothed the agent with the
10. As an agent, Lloyd had the duty to keep a separate account of each principal’s funds. Whatever
money Lloyd received during and as a result of the principal relationships could have been held in trust
for each of the principals. An accounting should have been given to the principals within a reasonable
11. The judgment was for Clifton. The court held that Clifton had been authorized to act for Ross as

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