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B-1
ALTERNATE CASE PROBLEM ANSWERS
CHAPTER 33
AGENCY LIABILITY AND TERMINATION
33-1A. Respondeat superior
The court held that the dealership was not liable on a theory of respondeat superior for the acts
of its sales representative. The court explained, “An employer may be liable under the theory of
33-2A. Authority of agent
The court concluded that FLB’s attorney had actual authority to settle the case and that the
settlement agreement was thus binding. “It is well settled that actual authority can be created by
the acquiescence of the principal in the actions of the agent.” The court noted that under state
B-2 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 33
33-3A. Apparent authority
The Supreme Court of North Dakota reversed the decision of the trial court (which had directed
a verdict for RRC, holding, among other things, that Kelby failed to give notice of his inability to
perform because Frith was “an independent sales representative” and “not an agent . . . insofar
33-4A. Respondeat superior
The court found that Hallgren was not acting within the scope of employment when she
disclosed Jones’s diagnosis. The court pointed out that under the Region West employee
33-5A. Implied authority
A settlement agreement is most likely enforceable when a client authorizes his or her attorney to
negotiate a final deal, even if the client does not literally consent to all the final negotiated terms.
For example, if a client instructs his or her attorney to settle a case within certain parameters,
and the attorney settles the case according to those instructions, the agreement would not be
unenforceable merely because the client had not “consented” to the final negotiated terms. The
APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 33 B-3
33-6A. Undisclosed principal
The court found that Dunning had agreed to be personally liable for the rent at the outset of his
lease with the Salibas. The court ruled in favor of the Salibas, and Dunning appealed. The
Supreme Judicial Court of Maine affirmed. The state’s highest court pointed out that “for an
33-7A. Liability for employee’s acts
The court ruled in favor of Federated and Jones appealed. The U.S. Court of Appeals for the
Sixth Circuit reversed the ruling of the lower court and remanded the case. The appellate court
stated that “a principal may be vicariously liable for an agent’s tortious conduct based upon an
33-8A. Liability for independent contractor’s torts
The court granted Greif’s motion, holding that even if Pusey’s death was the result of YSP’s
negligence, Greif was not liable because YSP was an independent contractor and, as a general
B-4 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 33
employer is not liable for the harm caused by the negligence of an independent contractor
because the work is “inherently dangerous.” Greif argued that hiring armed guards to protect
property does not create a peculiar risk of harm to others and, therefore, does not fit within the
33–9A. Disclosed principal
In this problem, with respect to the refrigeration-unit contract with Felix, Sclafani was the
principal and “the girl in the office” was his agent. In an agency relationship, one of the parties,
called the agent, agrees to act for the other, called the principal, and the principal agrees to
have the agent so act. Liability for contracts formed by an agent depends on how the principal is
classified and on whether the actions of the agent were authorized. If the agent acts within the
33-10A. A QUESTION OF ETHICS
1. The court noted that “[t]he central question to be decided . . . is which innocent party,
the owner whose agent acted contrary to instruction, or the potential [buyer] who felt the direct
harm of the agent’s discriminatory failure to offer the residence for [sale], will ultimately bear the
burden of the harm caused.” The court concluded that the Fair Housing Act’s “overriding
APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 33 B-5
2. The court acknowledged that punitive damages can be assessed against a principal
under the doctrine of respondeat superior if the principal knew of or ratified the acts of its
employees or agents. But the court found no evidence to suggest that Ernst knew of or ratified
the agents’ discriminatory actions. “In fact, the record reveals that Ernst affirmatively worked
against discrimination in housing. Not only is Ernst a signator of VAMA, he has actively tried to
3. Based on allegations that racial steering by real estate agents destabilized the
community and increased the burden on the city in the form of increased crime and erosion of
the tax base, and that the city’s fair housing agency had to use its scarce resources to insure
compliance with the fair housing laws rather than performing its routine services, the city of
