Business Law Chapter 33 Homework The Use His Personal Car Has Effect

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CHAPTER 33

AGENCY LIABILITY AND TERMINATION

ANSWERS TO QUESTIONS

AT THE ENDS OF THE CASES

CASE 33.1—QUESTIONS (PAGE 642)

THE ETHICAL DIMENSION

The TILA is essentially a consumer-protection law. How does allowing a credit card company to avoid

liability—if a card user has apparent authority to use the card—protect consumers? Indeed, the

CASE 33.2—QUESTIONS (PAGE 644)

THE ETHICAL DIMENSION

Does a principal have an ethical responsibility to inform an unaware third party that an apparent agent

(ostensible) does not in fact have the authority to act on the principal’s behalf? A principal’s ethical duty

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to notify a third party could depend on the specific circumstances. But if a principal acts to lead a third

party reasonably to believe that an agency relationship exists, and the third party changes positions in

reliance, it seems fair to impose legal liability on the principal. It seems likewise fair to hold the principal

to an ethical responsibility to inform an unsuspecting third party in those same circumstances that no

agency actually exists.

CHAPTER 33: AGENCY LIABILITY AND TERMINATION 287

THE E-COMMERCE DIMENSION

Could Amanda have established Drs. Gubin and Ogata’s apparent authority if Desert Hospital had

maintained a Web site that advertised the services of the CPSP clinic and stated clearly the physicians

were not its employees? Explain. Yes. Although the physicians might have thereby established that they

CASE 33.3—QUESTIONS (PAGE 649)

1A. Why should Hoggatt be personally liable if he merely followed the instructions of his employer,

SDI, given that the employer is better able financially to pay the judgment and may have insurance that

covers the matter? Like any employee, Hoggatt must assume responsibility for his actions. He had been

instructed that the spray must be applied properly. His not doing so caused serious problems, so from

the perspective of other members of society it is better that employees assume some of the burden of

negligent acts rather than just passing the blame upstairs.

ANSWERS TO QUESTIONS IN THE REVIEWING FEATURE

AT THE END OF THE CHAPTER

1A. Doctrine

The doctrine of respondeat superior, under which employers may be held liable for the actions of their

agents or employees, would apply in this situation. The concept of respondeat superior is based on the

assumption that employers are usually in a better position to absorb the costs that may result from

agents’ or employees’ torts.

3A. Potential liability

Buy-Mart would be liable in either case under the doctrine of respondeat superior, which does not

distinguish between the two types of torts. If Watts’s wrongful conduct occurred in the scope of

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CHAPTER 33: AGENCY LIABILITY AND TERMINATION 289

ANSWER TO DEBATE THIS QUESTION IN THE REVIEWING FEATURE AT

THE END OF THE CHAPTER

The doctrine of respondeat superior should be modified to make agents liable for some of their

tortious acts. Because of the doctrine of repondeat superior, some agents may act more recklessly

because they know that the principal will pay all damages for their irresponsible behavior. If all agents

knew that they would be financially liable for at least some of the damages their tortious conduct

caused, they would behave in a more responsible manner.

ANSWERS TO QUESTIONS AND CASE PROBLEMS

AT THE END OF THE CHAPTER

33-1A. Agent’s authority

(Chapter 33—Page 639)

The general rule in agency law is that contracts made within the scope of authority of the agent are

binding on the principal and the third party. Authority of an agent can be express, implied, or apparent.

33-2A. QUESTION WITH SAMPLE ANSWER: Unauthorized acts

As a general rule, a principal and third party are bound only to a contract made by the principal’s agent

within the scope of the agent’s authority. An agent’s authority to act can come from actual authority

given to the agent (express or implied), apparent authority, or authority derived from an emergency.

33–3A. Ratification by principal

(Chapter 33—Pages 644–645)

Dubychek may very well be correct in his claim. Implied ratification by a principal of an agent’s

unauthorized action occurs when a principal accepts the benefits of the unauthorized transaction and/or

does not object to or repudiate the action within a reasonable time. It is essential, however, that the

33-4A. Respondeat superior

(Chapter 33—Page 650)

As a general rule, an employer (principal) is liable for the negligent actions of the employee (agent), if

such acts are committed while the employee (agent) is acting within the scope of employment. This

theory of liability is based on the doctrine of respondeat superior, which holds that the liability of the

33-5A. Liability for independent contractor’s torts

(Chapter 33—Page 651)

The plaintiff’s best argument that Dean is responsible for BSP’s actions may be that work such as BSP

was hired to perform creates a peculiar risk of harm to others. When armed guards are hired to deter

33-6A. Principal’s liability for contracts

(Chapter 33—Page 646)

Smith was, in this case, the agent of WLS. In the lease, the identity of the principal was disclosed, Smith

33-7A. CASE PROBLEM WITH SAMPLE ANSWER: Apparent authority

The court held Dennegar liable for the debt plus interest, and on Dennegar’s appeal, a state

intermediate appellate court affirmed this judgment. “The general rule is that a principal is accountable

for the conduct of his agent acting within the scope of his authority even though the conduct is

33–8A. Undisclosed principal

(Chapter 33—Page 646)

The disclosure of a principal by an agent who is acting within the scope of his or her authority when

entering into a contract with a third party absolves the agent of liability for the nonperformance of the

33–9A. Liability based on actual or apparent authority

(Chapter 33—Pages 639 & 641–644)

The subcontractors should have filed liens before the church made its final payment to NCS. Their liens

were not timely. NCS was not the agent of the church such that the church could be held liable to the

33-10A. A QUESTION OF ETHICS: Power of attorney

(a) In any type of agency, there is always a chance of fraudulent conduct by the principal’s

agent. In a case involving a power of attorney, the chief danger is the possibility that an attorney-in-fact,

acting under a durable power of attorney, will engage in self-dealing with regard to the principal’s

property. Although this circumstance did not apparently exist in the Jones case, the court recognized

entitled to the proceeds of the CD.

A dissenting opinion in the case disagreed with the majority’s reasoning and the consequent

result. The dissent repeatedly emphasized that Ansell was the only source for a number of significant

facts—Davis’s intent to “take care” of Brandt outside his will and Davis’s request to change the

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power of attorney when those provisions are considered in concert.” The court pointed out that a

certificate of deposit is an instrument for deposit, which the power of attorney specifically authorized

Ansell to “sign, endorse or assign.” The court also reasoned that a certificate of deposit “including the

designation of the beneficiary POD is a contract between the depositor and the bank relating to personal

property.” Referring to the provision in the power of attorney granting Ansell the authority to act “as