Bar Exam (Next Generation) Quiz: Agents Duties To Third Parties
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Agents Duties To Third PartiesQuestion 1 of 12

Delia is a courier for Rapid Delivery, Inc. While making a delivery, Delia ran a red light and struck Ramon, a pedestrian. Delia's supervisor had told her the package was urgent and to take the most direct route. Ramon sued Delia for negligence. Delia defended by saying she was acting within the scope of her employment and following Rapid's instructions.

Which legal issue is most directly raised by Delia's defense to Ramon's negligence claim?

Whether Delia owed Rapid Delivery a duty to complete the delivery safely rather than a duty to Ramon.
Whether Rapid Delivery is vicariously liable for Delia's conduct even if Delia is also personally liable.
Whether Delia was acting within the scope of employment when she ran the red light.
Whether Delia's compliance with her employer's instructions can relieve her of personal liability for her own negligent driving.
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Bar Exam (Next Generation) Quiz

Bar Exam (Next Generation) Quiz: Agents Duties To Third Parties

Practice Agents Duties To Third Parties in Bar Exam (Next Generation) with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

What this quiz covers

This quiz focuses on Agents Duties To Third Parties, giving you a quick way to practice the rules, question types, and explanations that matter most for Bar Exam (Next Generation).

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

All questions

Question 1

Delia is a courier for Rapid Delivery, Inc. While making a delivery, Delia ran a red light and struck Ramon, a pedestrian. Delia's supervisor had told her the package was urgent and to take the most direct route. Ramon sued Delia for negligence. Delia defended by saying she was acting within the scope of her employment and following Rapid's instructions.

Which legal issue is most directly raised by Delia's defense to Ramon's negligence claim?

  1. Whether Delia owed Rapid Delivery a duty to complete the delivery safely rather than a duty to Ramon.
  2. Whether Rapid Delivery is vicariously liable for Delia's conduct even if Delia is also personally liable.
  3. Whether Delia was acting within the scope of employment when she ran the red light.
  4. Whether Delia's compliance with her employer's instructions can relieve her of personal liability for her own negligent driving. (correct answer)
Explanation: Whenever you see a torts question involving an employee's on-the-job negligence, separate two questions: Is the employee personally liable? And is the employer vicariously liable? They are distinct, and one does not cancel the other. Delia's defense is that she was "acting within the scope of her employment and following Rapid's instructions." But an employee is always personally liable for her own negligent acts. Following an employer's instructions—even urgent ones—does not transfer liability to the employer or excuse the employee's breach of the duty of care owed to Ramon. So the issue most directly raised is whether Delia's compliance with her employer's instructions can relieve her of personal liability for her own negligent driving. The other choices miss that distinction. Whether Delia owed Rapid Delivery a duty to complete the delivery safely rather than a duty to Ramon is wrong because Delia owed Ramon a duty of reasonable care regardless of any duty to her employer. Whether Rapid Delivery is vicariously liable for Delia's conduct is a real question, but it concerns the employer's liability, not whether Delia can escape her own. And whether Delia was acting within the scope of employment is relevant to Rapid's vicarious liability, but it does not defeat Ramon's negligence claim against Delia personally. Study tip: on the bar exam, remember that "I was just following orders" is not a tort defense. Scope of employment determines employer liability, not employee immunity.

Question 2

Omar managed a small apartment building for its owner, Lena. Omar's duties included collecting rent from tenants and remitting it to Lena. One tenant, Tessa, paid Omar $1,200 in cash for her July rent. Omar deposited the cash in his personal account and, the same day, transferred $1,200 to Lena. Three days later, Tessa learned that Lena had assigned all July rents to a lender, HomeBank, and thus was not entitled to receive the payment. Tessa immediately demanded that Omar return the $1,200, but Omar told her he had already paid it to Lena. Tessa sued Omar.

Section 10 of the Model Agent Liability Act provides: "(a) An agent who receives money or property from a third party for the principal is not liable to the third party for the principal's conduct in the transaction.

(b) The agent is liable to the third party for money or property received for the principal only if, before paying or delivering it to the principal, the agent has notice that the third party asserts a claim to it or that the principal is not entitled to it.

(c) An agent who pays or delivers money or property to the principal before receiving such notice is discharged from liability to the third party."

Should Tessa prevail against Omar?

  1. Yes, because Omar was a fiduciary who received the rent as a constructive trustee for the party entitled to it.
  2. Yes, because Omar should have known that Lena might have assigned the rents and he had a duty to investigate before paying over.
  3. No, because Omar paid the money to Lena before receiving notice of Tessa's claim or Lena's lack of entitlement. (correct answer)
  4. No, because an agent who collects rent is not liable to a tenant for any reason once the money is remitted to the principal.
Explanation: Whenever you see an agency question involving an agent who collects money for a principal, the key timing question is: did the agent pay the money over before receiving notice of a problem? Here, Omar collected Tessa's rent and transferred it to Lena on the same day. Tessa did not learn of HomeBank's assignment and demand return of the money until three days later. Under Section 10, an agent is liable only if, before paying the principal, he has notice that a third party claims the money or that the principal is not entitled to it. Because Omar paid before receiving any such notice, he is discharged from liability. That is why the correct answer is that Tessa does not prevail because Omar paid Lena before notice. The first wrong choice, "fiduciary who received the rent as a constructive trustee," misstates the rule: an agent may be a fiduciary, but the statute protects a paying agent who lacks notice, and no constructive trust arises here. The second, "should have known Lena might have assigned the rents," imposes a duty to investigate that the Act does not create; actual notice before payment is required. The fourth, "not liable for any reason once the money is remitted," is too broad—an agent who pays after receiving notice, or who misappropriates funds, can still be liable. Study tip: in agency-payment questions, build a timeline. If payment occurs before notice, the agent is discharged; if notice comes first, liability may follow.

Question 3

Beacon Foods' owner told Elliot, the warehouse manager, that Elliot had no authority to sell Beacon's delivery trucks. Elliot nevertheless signed a contract with Omar for one truck, writing 'Elliot, for Beacon Foods.' Beacon refused to deliver. Omar asked Elliot to arrange for Beacon to deliver the truck, and Elliot did not do so.

Which additional fact, if true, would most strongly defeat Omar's claim against Elliot?

  1. Elliot did not personally receive any of the sale proceeds from the transaction.
  2. Elliot reasonably believed he had authority because Beacon had named him warehouse manager.
  3. Omar knew Elliot was Beacon's warehouse manager when the contract was signed.
  4. Beacon's owner later ratified the sale after learning its terms and before Omar filed suit. (correct answer)
Explanation: When an agent signs a contract for a principal without actual authority, the third party's claim against the agent is typically for breach of the implied warranty of authority. To defeat that claim, look for facts showing the third party knew the agent lacked authority, or that the principal later ratified the deal. Here, Beacon's owner had expressly told Elliot he had no authority to sell trucks, yet Elliot signed "Elliot, for Beacon Foods." Omar's claim against Elliot personally rests on that warranty. If Beacon's owner later ratified the sale after learning its terms and before Omar filed suit, ratification retroactively validates Elliot's act as if it were authorized from the start. That eliminates the defect in authority and defeats Omar's claim against Elliot. The other choices do not help. The fact that Elliot did not personally receive any sale proceeds is irrelevant: liability for breach of warranty of authority does not require the agent to profit. Elliot's reasonable belief in his authority is also insufficient—and it is undermined by the owner's explicit instruction; apparent authority depends on what the third party reasonably believed, not what the agent believed. Finally, Omar's knowledge that Elliot was warehouse manager cuts the wrong way: a manager's title may suggest some authority, but it does not prove authority to sell trucks, and it does not show Omar knew Elliot lacked authority. For agency questions, check ratification and the third party's knowledge first—those are the strongest defenses to an unauthorized-agent claim.

Question 4

Grant is the on-site supervisor for CleanCo, a janitorial company, and an agent of CleanCo. A CleanCo crew member mopped a floor and left it wet without placing a warning sign. Sienna slipped and was injured. Grant was not present when the floor was mopped, did not know it was wet, and did not instruct the crew member to leave it without a sign. Sienna sues Grant, claiming he is liable because he supervised the crew.

Which issue is most directly raised by Sienna's claim against Grant?

  1. Whether Grant's failure to supervise the crew member breached a fiduciary duty that Grant owed to CleanCo.
  2. Whether CleanCo is vicariously liable for the crew member's negligence even though Grant was not present.
  3. Whether Grant can be held personally liable for the crew member's negligence solely because he supervised the work. (correct answer)
  4. Whether the wet floor was an unsafe condition that CleanCo, rather than Grant, had a duty to correct.
Explanation: When you see a claim against a supervisor for an employee's on-the-job negligence, separate two ideas: vicarious liability and personal liability. Vicarious liability makes the employer liable merely because of the employment relationship. A supervisor, by contrast, is personally liable only for his own tortious conduct—for example, if he directed the act, knew of the danger, or failed in a personal duty. A title alone does not create tort liability. Here, Grant was not present, did not know the floor was wet, and gave no instruction to leave it unsignposted. Sienna's claim rests only on the fact that Grant "supervised the crew." That directly raises whether supervision alone makes Grant personally liable for the crew member's negligence. It does not, because personal tort liability requires some fault by Grant. The other choices miss that point. The claim about Grant breaching a fiduciary duty to CleanCo addresses an internal agency duty owed to his principal, not a duty to Sienna, and she is not CleanCo. Whether CleanCo is vicariously liable for the crew member might be a separate theory against the company, but it does not answer whether Grant can be sued personally. Finally, whether the wet floor was an unsafe condition CleanCo had a duty to correct focuses on the company's premises or operational duty, not on Grant's individual conduct as supervisor. On the exam, when a plaintiff sues an individual agent or employee for another person's negligence, ask: what did this defendant personally do or fail to do? Vicarious liability is the employer's problem, not the supervisor's.

Question 5

Jill, an independent sales representative for Premium Yachts, Inc., negotiated the sale of a used yacht to Marcus. Jill signed the contract in her own name only and did not disclose that she was acting for Premium. Marcus later learned that Premium owned the yacht and sued Premium for breach of contract. After a full trial, Marcus obtained a final judgment for $200,000 against Premium. Premium paid $50,000 and then filed for bankruptcy; Marcus has been unable to collect the remaining $150,000. Marcus now sues Jill on the contract.

The court in Barrow v. Chen, decided in this jurisdiction, held: "When an agent makes a contract in the agent's own name for an undisclosed principal, the third party may, upon discovering the principal, enforce the contract against either the agent or the principal. But the third party is entitled to only one satisfaction. A final judgment against the principal, whether or not satisfied, bars a later action against the agent on the same contract, unless the third party obtained the judgment by consent and expressly reserved the right to proceed against the agent. This rule avoids the burden of a double lawsuit and treats the third party's choice of defendant as a binding election."

Can Marcus recover the remaining $150,000 from Jill?

  1. Yes, because the judgment against Premium has not been satisfied, and the one-satisfaction rule allows Marcus to collect the remaining damages from Jill.
  2. Yes, because Jill was a party to the contract and Marcus did not elect to release her when he filed suit against Premium.
  3. No, because the final judgment against Premium bars a later action against Jill, even though the judgment is unsatisfied. (correct answer)
  4. No, because an agent for an undisclosed principal is never liable on the contract once the principal's identity is discovered.
Explanation: Whenever you see an undisclosed-principal agency question, remember the third party gets one satisfaction, not two lawsuits. The key is that a final judgment on the merits against one party can bar a later suit against the other, even if the judgment remains unpaid. Here, Marcus sued Premium, the undisclosed principal, and obtained a final $200,000 judgment after a full trial. Because that judgment was not by consent with an expressly reserved right to sue Jill, the judgment against Premium bars Marcus from now suing Jill on the same contract. The remaining $150,000 is unfortunate, but the bar is absolute; the law treats Marcus's choice of Premium as a binding election. The wrong answers each miss this rule. "Yes, because the judgment has not been satisfied" misunderstands the one-satisfaction doctrine: it prevents double recovery, but it does not permit a second lawsuit against the agent after a final judgment against the principal. "Yes, because Jill was a party and Marcus did not elect to release her" wrongly implies an explicit release or election is needed; the final judgment itself operates as the bar. And "No, because an agent is never liable once the principal is discovered" is false—an agent for an undisclosed principal is liable on the contract; discovery alone does not erase that liability, though a prior judgment against the principal may. Study tip: distinguish "one satisfaction" from "one final judgment." In this jurisdiction, a final judgment on the merits against either the principal or the agent bars the other, unless it was a consent judgment expressly reserving rights against the other party.

Question 6

Vance, a real estate agent, represents the seller of a house. During a showing, Vance tells Buyer the basement has never leaked. Vance knows this is false because he has seen a waterproofing invoice in the seller's file. The seller did not know Vance would make that statement. Buyer buys the house, later discovers water damage, and wants to hold Vance personally liable.

Which issue is most directly raised by Buyer's claim against Vance?

  1. Whether the seller's failure to tell Vance about the leak prevents Buyer from relying on Vance's statement.
  2. Whether the seller is bound by Vance's statement because Vance had actual or apparent authority to describe the house.
  3. Whether Vance can be personally liable for fraudulent misrepresentation even though the seller did not authorize the false statement. (correct answer)
  4. Whether Buyer's failure to obtain an independent basement inspection was the sole cause of Buyer's damage.
Explanation: When a question asks whether an agent can be held personally liable for a false statement, separate two issues: the agent's own tort liability and the principal's vicarious liability. An agent who commits fraud is liable for his own tort even if the principal did not know about or authorize the statement. Here, Vance knew the statement "the basement has never leaked" was false, made it to induce Buyer to buy, Buyer relied on it, and suffered water damage. That is fraudulent misrepresentation. The seller's lack of authorization does not erase Vance's personal responsibility. The wrong answers test common confusions. "The seller's failure to tell Vance about the leak" is irrelevant because Vance already knew the truth from the invoice; Buyer relied on Vance's statement, not the seller's silence. "Whether the seller is bound by Vance's statement because Vance had actual or apparent authority" is about holding the seller liable, not Vance personally, and authority is not needed for an agent's own tort. "Whether Buyer's failure to obtain an independent basement inspection was the sole cause" misunderstands fraud: contributory negligence is not a defense to intentional misrepresentation, and a buyer may justifiably rely on an expert's false assurance without hiring another inspector. On the bar exam, remember: an agent is always liable for his own torts, even within the scope of agency. Focus on the elements of fraud against the agent, not on the principal's knowledge.

Question 7

Preston listed his lakeside house for sale with Bria, a licensed real estate broker. While showing the house to a prospective buyer, Quinn, Bria told Quinn that the house had "never had any water in the basement." Preston had told Bria that was true, and Bria had no reason to doubt it. In fact, the basement had flooded twice. Quinn bought the house and later incurred $18,000 in water damage. Quinn sued Preston and Bria for misrepresentation.

In this jurisdiction, Section 9 of the Model Agent Liability Act provides: "(a) An agent who makes a fraudulent misrepresentation is liable to the third party for the losses caused by justifiable reliance.

(b) An agent who makes a negligent misrepresentation is liable to the third party for losses caused by justifiable reliance if the agent failed to exercise reasonable care in ascertaining or communicating the facts.

(c) An agent is not liable to a third party for an innocent misrepresentation made within the scope of the agent's authority, even if the principal would be liable for the misrepresentation."

Which of the following best describes Bria's liability to Quinn?

  1. Bria is liable because she made a false statement about the basement that Quinn justifiably relied on.
  2. Bria is liable because, as a licensed broker, she had a duty to verify the condition of the property before repeating the statement.
  3. Bria is not liable because a real estate broker's statements about the condition of property are not attributable to the broker as an agent.
  4. Bria is not liable because her statement was innocent and made within the scope of her authority as Preston's agent. (correct answer)
Explanation: When you see an agency misrepresentation question, first classify the agent's mental state: fraudulent, negligent, or innocent. That classification drives liability under the statute. Here, Bria's statement was innocent. She repeated what Preston told her, had no reason to doubt it, and the basement had in fact flooded twice. Under Section 9(c), an agent is not liable to a third party for an innocent misrepresentation made within the scope of the agent's authority, even if the principal would be liable. So Bria is protected from personal liability, even though Preston may be liable to Quinn. That is why the correct answer is that Bria is not liable because her statement was innocent and made within her authority as Preston's agent. The choice saying Bria is liable because Quinn justifiably relied on a false statement is too broad: reliance alone does not make an innocent agent liable. The choice imposing a duty on licensed brokers to verify property conditions misreads the statute; negligent misrepresentation requires a failure to exercise reasonable care in ascertaining or communicating facts, and Bria had no reason to doubt Preston's assurance. The choice claiming broker statements are not attributable to the agent confuses attribution to the principal with the agent's own statutory shield. Study tip: when a statute defines liability categories, anchor each fact pattern to the exact mental state described—fraud, negligence, or innocent—before picking an answer.

Question 8

Nadia was employed by Med-Courier, Inc. as a delivery driver. While acting within the scope of her employment on a delivery route, she came upon a serious car accident. Med-Courier's employee handbook required drivers to stop and render aid at accident scenes. Nadia, a trained EMT, stopped her van and began treating one of the injured drivers, Felix. After stabilizing him briefly, Nadia left because she was running late for her next delivery. Felix suffered additional injury because he was left unattended for 45 minutes before another motorist called for help. Felix sued Nadia.

The court in Tran v. Medical Transport, Inc., decided in this jurisdiction, held: "An agent who, while acting within the scope of employment, undertakes to render services to a third party owes a duty to that third party to act with reasonable care in performing those services. The agent is subject to liability for physical harm caused by a failure to exercise such care. However, an agent is not subject to liability to a third party for a failure to undertake the services, even if the agent's employment contract or the principal's policies required the agent to undertake them."

Which of the following best describes Nadia's liability to Felix?

  1. Nadia is liable because she began treating Felix and then failed to exercise reasonable care in performing the services she undertook. (correct answer)
  2. Nadia is liable because Med-Courier's handbook required her to stop and render aid, and her failure to complete the rescue was a breach of that duty.
  3. Nadia is not liable because she had no duty to stop and render aid in the first place, and a failure to complete a rescue is not actionable.
  4. Nadia is not liable because her only duty was to Med-Courier, and a third party cannot enforce an agent's duty to the principal.
Explanation: This question tests the "voluntary undertaking" doctrine in tort law. Whenever you see a rescue or aid scenario, distinguish between a pure failure to act and a negligent act after beginning to help. That distinction drives liability here. Nadia is liable because she actually began treating Felix. Once she undertook to render services, she owed Felix a duty to act with reasonable care in performing those services. Leaving a stabilized accident victim unattended for 45 minutes, without arranging for continued care or alerting authorities, supports a finding that she failed to exercise reasonable care and caused additional injury. The court's rule in Tran explicitly says an agent who undertakes services is liable for physical harm caused by a failure to exercise reasonable care. The answer saying Nadia is liable because Med-Courier's handbook required her to stop and "complete the rescue" misframes the rule: the handbook may have created an obligation to Med-Courier, but it is not the source of tort liability to Felix, and the court says failure to undertake is not actionable. The answer claiming Nadia had no duty to stop and that a failure to complete a rescue is not actionable ignores the crucial fact that she did stop and did begin treating Felix. The answer claiming her only duty was to Med-Courier and third parties cannot enforce agent duties misses the point that her voluntary undertaking created a direct duty to Felix. Study tip: when you see an emergency-aid fact pattern, ask two questions—Did the defendant begin rendering aid? If yes, did the defendant then act unreasonably after doing so?

Question 9

Marta owns an art gallery. She orally authorized Theo to buy a particular sculpture for her for up to $50,000 and told him not to disclose her as the buyer. Theo contracted with Wei for $48,000, signing only his own name. Marta later refused to pay, and Wei sued Theo for the price.

Which issue is most directly raised by Wei's claim against Theo?

  1. Whether Theo became a party to the contract because Marta was an undisclosed principal. (correct answer)
  2. Whether Marta's oral authorization made Theo's contract unenforceable under the statute of frauds.
  3. Whether Theo's failure to disclose Marta was a breach of Theo's fiduciary duty to Marta.
  4. Whether Wei's delivery of the sculpture to Theo discharged Marta from liability.
Explanation: Whenever you see a third party trying to hold an agent personally liable after the principal refuses to pay, first classify the principal as disclosed, unidentified, or undisclosed. Marta told Theo not to reveal her, so she was an undisclosed principal. With an undisclosed principal, the third party believes the agent is the real buyer and deals only with the agent, so the agent is a party to the contract and remains liable on it. Theo signed only his own name, so Wei's claim against Theo most directly raises whether Theo became a party because Marta was undisclosed. The oral-authorization choice misses the point: an agency relationship can be created orally, and any statute-of-frauds issue would concern the sales contract itself, not whether Theo is personally bound. The fiduciary-duty choice is also off target—Theo was told not to disclose Marta, so his silence was not a breach to Marta, and in any event a duty to Marta would not determine Theo's liability to Wei. Finally, whether Wei's delivery to Theo discharged Marta confuses the principal's potential liability with the agent's independent liability; even if delivery affected Marta, it would not erase Theo's obligation as the contracting party. On agency questions, name the principal's status before choosing an answer. If the principal is undisclosed, the agent is personally liable on the contract—that is the pattern to remember.

Question 10

Amy, a regional purchasing manager for Beta Manufacturing, Inc., negotiated with Victor to purchase Victor's used industrial press. Amy had been told by Beta's CEO that only the board of directors could approve purchases over $25,000. Amy nevertheless believed her job title gave her authority and signed the contract "Amy, for Beta Manufacturing, Inc." The board had never authorized the purchase. Victor did not know of the board-resolution requirement and did not check a public filing that would have revealed it. Beta refused to honor the contract, and Victor sued Amy for breach of contract and, in the alternative, for negligent misrepresentation.

In this jurisdiction, Section 4 of the Model Agent Liability Act provides: "(a) An agent who, with actual or apparent authority, makes a contract for a disclosed principal is not a party to the contract and is not liable on it.

(b) An agent who makes a contract for a disclosed principal without actual or apparent authority is not a party to the contract and is not liable on it, but may be liable in tort as provided in subsection (c).

(c) An agent who makes a contract without actual or apparent authority is liable to the third party for losses caused by the third party's reliance on the agent's representation of authority if the agent knew or should have known that the agent lacked authority.

(d) A third party's negligence in failing to verify authority is not a defense unless the third party actually knew the agent lacked authority."

Which of the following best describes Victor's rights against Amy?

  1. Victor may recover on the contract against Amy because she signed the contract and lacked authority, making her a party to the contract.
  2. Victor may recover in tort for Amy's negligent misrepresentation because she should have known she lacked authority, but he may not recover on the contract. (correct answer)
  3. Victor may recover in tort only if he proves Amy intentionally misrepresented her authority, because his failure to check the public filing bars a negligence claim.
  4. Victor may not recover from Amy because she disclosed Beta as principal and honestly believed she had authority, so she owed no duty to Victor.
Explanation: This question tests the distinction between an agent's liability on a contract and liability in tort when the agent lacks authority. The Model Agent Liability Act makes that split explicit: a disclosed agent is never a party to an unauthorized contract, but the agent may still owe the third party for losses caused by a false representation of authority. Here, Amy signed "for Beta," so Beta was the disclosed principal. But the board never authorized the purchase, and Amy knew the CEO had told her only the board could approve purchases over $25,000. Therefore she knew or should have known she lacked authority. Under subsection (c), Victor may recover in tort for negligent misrepresentation. Victor's failure to check the public filing does not defeat that claim, because subsection (d) says a third party's negligence is not a defense unless Victor actually knew Amy lacked authority—he did not. Victor cannot recover on the contract itself, because subsection (b) says an agent who makes a contract without authority is not a party to it. The other choices miss these statutory points. Recovering on the contract because Amy lacked authority contradicts subsection (b); lack of authority is exactly why she is not contractually liable. Requiring intentional misrepresentation ignores subsection (c)'s "knew or should have known" standard. And saying Amy owed no duty because she honestly believed she had authority ignores that she should have known better. Whenever you see an unauthorized agent question, separate "liable on the contract" from "liable in tort" and apply the statute carefully.

Question 11

Diego was employed by Metro Delivery, Inc. as a driver. While on a delivery route, Diego negligently ran a red light and struck Nina, who was crossing the street. Nina sued Metro and Diego. Before trial, Nina accepted $300,000 from Metro in settlement and signed a document titled "Release of Metro Delivery, Inc." The release stated that it was "in full settlement and discharge of all claims against Metro Delivery, Inc. only" and did not mention Diego. Nina then brought suit against Diego for damages.

Section 8 of the Model Agent Liability Act provides: "(a) An agent is liable for the agent's own tortious conduct, even if the agent was acting within the scope of the principal's business.

(b) A principal is vicariously liable for torts committed by an agent acting within the scope of the principal's business.

(c) A settlement with or release of a principal does not discharge the agent from liability for the agent's own tortious conduct unless the settlement or release expressly names the agent as a released party.

(d) A payment made by a principal in settlement is credited against any later judgment against the agent to the extent the payment is for the same injury."

Which of the following best states Nina's rights against Diego?

  1. Nina may recover from Diego, but the $300,000 settlement must be credited against any judgment she obtains against Diego. (correct answer)
  2. Nina may recover from Diego, and the settlement payment does not reduce Diego's liability because he was not named in the release.
  3. Nina may not recover from Diego because Metro's vicarious liability was the only basis for holding Diego liable, and Metro has been released.
  4. Nina may not recover from Diego because the settlement with Metro discharged all claims arising out of the accident, including claims against Diego.
Explanation: When you see a settlement-and-release question involving an agent and principal, separate two ideas: who is released from liability and what payment is credited against damages. The statute here does both—an agent remains personally liable for his own torts, but a principal's settlement payment offsets the same injury. Here, Diego was negligent and is liable for his own tortious conduct under § 8(a). Metro's release explicitly covered "Metro Delivery, Inc. only" and did not name Diego, and § 8(c) says a release of the principal does not discharge the agent unless it expressly names him. So Nina may still sue Diego. However, § 8(d) requires that Metro's $300,000 payment be credited against any later judgment against Diego for the same injury. Thus Nina can recover from Diego, but any judgment is reduced by $300,000. The choice saying Nina may recover and the settlement does not reduce Diego's liability because he was not named confuses release with credit—non-release does not prevent the statutory setoff. The choice saying Nina may not recover because Metro's vicarious liability was the only basis fails because Diego has direct liability for his own negligence. The choice saying the settlement discharged all claims arising from the accident ignores both the release's plain language and § 8(c). Remember: releasing one party does not release another unless named, but paying for the same injury always reduces what can be collected. That prevents double recovery while preserving individual accountability.

Question 12

Nina authorized Priya, a commercial broker, to lease Nina's warehouse. Priya negotiated with Calla, telling Calla she represented the owner but refusing to identify the owner. The lease was signed by Priya as agent for the owner. Nina later withdrew, and Calla sued Priya for breach of lease.

Which fact, if true, would be most important in determining whether Priya is personally liable to Calla?

  1. Whether Nina had authorized Priya to lease the warehouse on the agreed terms.
  2. Whether Priya disclosed Nina's identity to Calla before the lease was signed. (correct answer)
  3. Whether Calla knew that Priya was acting as a broker and would receive a fee.
  4. Whether the lease term exceeded one year and was signed only by Priya.
Explanation: This is an agency question about an agent's personal liability on a contract. Whenever a broker or agent signs for an owner, ask: was the principal disclosed? If the other party knows both that the agent is acting for a principal and who that principal is, the agent is generally not personally liable. If the principal is undisclosed or only partially identified, the agent may be treated as a party to the contract. Here, Priya told Calla she represented the owner but refused to name the owner. The most important fact is therefore whether Priya disclosed Nina's identity to Calla before the lease was signed. If she did, Nina was a disclosed principal and Priya is not personally liable. If she did not, Priya may be liable because Calla relied on Priya as the visible party. The wrong answers miss this focus. Whether Nina authorized Priya to lease on the agreed terms affects whether Nina is bound, not whether Priya is personally liable. Whether Calla knew Priya was a broker receiving a fee is not enough—a broker can still be liable when the principal's identity is undisclosed. And whether the lease term exceeded one year and was signed only by Priya raises a Statute of Frauds issue, but an authorized agent's signature is attributed to the principal; it does not by itself make the agent personally liable. Study tip: on agency questions, first classify the principal as disclosed, partially disclosed, or undisclosed. That classification drives liability.