Vicarious liability of the principal — MCQs

Three architects formed a general partnership without a written partnership agreement. One contributed 60% of the initial capital, and the other two each contributed 20%. The partners agreed to share profits equally but did not discuss voting rights. Six months later, the partner who contributed 60% proposed admitting an outside investor as a fourth partner. That partner voted in favor of admission, but the other two partners opposed it. No partner has withdrawn, and the partnership remains solvent. Under generally accepted default rules governing general partnerships, which of the following best states how management votes and admission of the investor should be handled?

A heating company employed a technician to perform residential furnace inspections. The company instructed technicians not to repair unrelated appliances during inspection visits. While inspecting a customer’s furnace, the technician noticed a broken ceiling fan. Hoping to earn a personal tip, the technician offered to repair the fan after clocking out. The customer agreed. The technician used his own tools, accepted payment personally, and damaged the ceiling while attempting the repair. The customer knew that the written furnace appointment covered only inspection services, but believed that the technician remained a company employee. The customer sued the company under respondeat superior for the ceiling damage. Which of the following is the company’s strongest argument against vicarious liability?

A corporation operates six bakeries. Its board adopted a bylaw requiring advance board approval for any equipment purchase exceeding $50,000, and the corporation's standard master supply agreements informed suppliers of this requirement. The president, without board approval, signed a purchase order for a $70,000 commercial oven from a supplier with which the corporation had no prior master agreement and no history of prior dealings. The supplier had no knowledge of the approval requirement and began manufacturing a custom oven. When the oven was delivered, the board learned that the president had not obtained approval, but the board inspected the oven, installed it in one of its bakeries, and used it for six weeks without objecting to the supplier or attempting to return it. The corporation then argued that it was not bound because the president lacked authority to place the order. Which of the following is the supplier's strongest argument that the corporation is bound?

A hardware store corporation hired a purchasing manager and told her privately that she could order no more than $8,000 of tools per month. For two years, the corporation allowed the manager to place larger orders with a hardware supplier, paid every invoice, and listed her on its website as “Purchasing Manager.” When the corporation later decided that the manager should stop ordering from that supplier, it sent the supplier a signed letter stating that the manager no longer had authority to order on its behalf and removed her title from the website. Despite receiving this notice, the manager ordered $12,000 of tools in the corporation’s name. The supplier, having received the corporation’s letter, shipped the tools anyway, claiming it still believed she was authorized. The corporation refused delivery and denied that the manager could bind it. Which of the following is the corporation’s strongest argument that it is not bound?

A beverage company appointed an employee as its purchasing manager but privately limited the manager to purchases under $25,000. For two years, the company allowed the manager to negotiate ingredient purchases, use a company email address bearing the title “Purchasing Manager,” and sign contracts that the company performed. The company never disclosed the dollar limit to suppliers. The manager then signed a $40,000 ingredient contract with a supplier that had previously completed three smaller transactions through the manager. The supplier knew only the manager's title and the company's prior performance. When market prices fell, the company refused delivery and asserted that the manager lacked authority. The supplier seeks payment under the contract. Which of the following is the supplier's strongest argument that the company is bound?

Before any corporation was formed, a promoter signed a two-year office lease that stated, "Tenant: BrightPath, Inc., a corporation to be formed, by Elena Ortiz, promoter," and further provided, "Landlord agrees that Elena Ortiz signs solely as promoter for the corporation and shall have no personal liability under this lease once the corporation is formed and adopts the lease." The landlord knew that BrightPath did not yet exist. After incorporation, BrightPath's board learned of the lease, moved the company into the office, and paid rent for six months. The corporation later stopped paying rent. The landlord sued both the corporation and the promoter for unpaid rent. Which of the following best states the parties' potential liability?

Two founders signed and filed articles of incorporation for Bright Labs Corporation, believing in good faith that the filing was complete and valid. Unknown to them, the filing was rejected by the secretary of state's office for a technical defect, though they were never notified. Believing the corporation existed, the founders operated the business as Bright Labs Corporation, signed a supply contract in the corporate name, and dealt with a supplier who believed it was contracting with a validly formed corporation. The supply contract went unpaid. The supplier now seeks to hold the founders personally liable, arguing that Bright Labs Corporation never legally came into existence. Which of the following best states the founders' liability under generally accepted corporate principles?

A real estate agent, acting without any actual or apparent authority, signed a contract on behalf of a landowner to sell a parcel of land to a buyer for $200,000. The landowner did not learn of the contract until after it was signed. Upon learning of the contract, the landowner accepted a $20,000 deposit check from the buyer and instructed her attorney to begin preparing closing documents. Two weeks later, the landowner changed her mind, returned the deposit, and refused to close. The buyer sues to enforce the contract. Which of the following best states whether the landowner is bound?