ALTERNATE CASE PROBLEM ANSWERS
CHAPTER 32
AGENCY FORMATION AND DUTIES
32-1A. Agent’s duties to principal
(Chapter 32—Pages 631–633)
Yes. Kademenos has breached his duty of loyalty to Equitable Life. Under principal-agent law, an agent
owes a duty of loyalty to the principal, and it is the agent’s duty in all dealings affecting the subject
matter of the agency to act with the utmost good faith, in loyalty, for furtherance and advancement of
32-2A. Employee versus independent contractor
(Chapter 32—Pages 625–627)
The court surmised that “the significant factors supporting Island’s contention that Aymes was an
employee include Island’s right to control the means of CSALIB’s creation and Island’s right to assign
other projects. The significant factors supporting Aymes’s argument that he was an independent
contractor include: the level of skill needed to create CSALIB; the decision of Island not to offer him
benefits; and his payment of his own social security taxes.” Regarding other factors as to whether a
party is an employee or an independent contractor, the court decided that they were “either indetermi-
B-134 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 32
32-3A. Agency relationship
(Chapter 32—Pages 629–630)
32-4A. Agent’s duties
(Chapter 32—Pages 631–633)
32-5A. Principal’s duties
(Chapter 32—Page 633)
The question of whether Landers had a duty to compensate Tarver rested on the issue of whether
Tarver was the “selling agent” in this case. If so, by their contract terms, Tarver would be entitled to her
commission. The appellate court affirmed the trial court’s holding that Tarver was the selling agent and
32-6A. Employee versus independent contractor
(Chapter 32—Pages 625–627)
Peirson is correct. The court found Webster to be an employee of L.M.T. and not an independent
contractor. The court held that one of the most significant factors in determining whether an individual
is an employee or an independent contractor is the employer’s right to control the individual’s work
32-7A. Principal’s duties to agent
(Chapter 32—Pages 631–633 & 635)
No. Douglas had breached his fiduciary duty to Aztec, and for this reason, Aztec was not required to
32-8A. Employee versus independent contractor
(Chapter 32—Pages 625–627)
The Supreme Court of Nebraska held that Hemmerling and Happy Cab had an employment relationship
primarily on the basis of control. The contract between the parties “vests the exclusive control,
supervision, and possession of the taxicab in Happy Cab. * * * Happy Cab had the right to control the
methods or means used by Hemmerling in the course of operating the taxicab by virtue of its exclusive
control over the taxicab.” Happy Cab “exercised such control,” by establishing and enforcing a variety of
rules relating to the use of the cab, solicitation of fares, and so on. Other factors supporting the exis-
32-9A. Agent’s duties to principal
(Chapter 32—Page 631)
The court held Smith Bell liable for the wind damage. Smith Bell appealed to the Vermont Supreme
Court, which affirmed the judgment of the lower court. The state supreme court explained that Crane
B-136 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 32
other local factors that may affect the value, marketing and sale of property. Such information is
32-10A. A QUESTION OF ETHICS
1. One of the factors that a court will consider in determining whether agency by estoppel can
be found is whether the plaintiff had an independent relationship with the physician prior to entering
the hospital. Brackens stated in an affidavit that she had never met Dr. Taras or Dr. Tobes before she
was admitted to the hospital. Also, as this question indicated, Brackens stated that she had no reason to
2. A basic ethical precept underlying the law is that persons should be held responsible for their
actions (or lack of action). In regard to agency law, this precept is expressed in the concept of agency by
3. The same reasoning applies here as in the answer to question 2 above. It would be unfair to
hold a person liable for an action if that person was in no way responsible for the action. For example,