Exotic Pets, Inc., hired Peterson to be the manager of one of its stores. Exotic sells a wide variety of animals. Peterson was given written authority by Exotic to operate the store, including the right to buy inventory. Peterson was told that any inventory purchase exceeding $2,000 required the approval of Exotic's general manager.

On June 1, Year 1, Peterson contracted with Creatures Corp. to buy snakes for $3,100. Peterson had regularly done business with Creatures on Exotic's behalf in the past, and on several occasions had bought $1,000 to $1,750 worth of snakes from Creatures. Creatures was unaware of the limitations on Peterson's authority to buy inventory.

Peterson occasionally would buy for Exotic a certain breed of dog from Premier Breeders, Inc., which was owned by Peterson's friend. All purchases were for less than $2,000. Whenever Exotic bought dogs from Premier, Premier paid Peterson 5% of the purchase price as an incentive to do more business with Premier. Exotic's management was unaware of these payments to Peterson.

On June 20, Year 1, Mathews went to the Exotic store managed by Peterson to buy a ferret. Peterson allowed Mathews to handle one of the ferrets. Peterson knew that this particular ferret had previously bitten one of the store's clerks. Mathews was bitten by the ferret and seriously injured.

On July 23, Year 1, Peterson bought paint and brushes for $30 from Handy Hardware. Peterson charged the purchase to Exotic's account at Handy. Peterson intended to use the paint and brushes to repaint the pet showroom. Exotic's management had never specifically discussed with Peterson whether Peterson had the authority to charge purchases at Handy. Although Exotic paid the Handy bill, Exotic's president believes Peterson is obligated to reimburse Exotic for the charges.

On August 1, Year 1, Exotic's president learned of the Creatures contract and advised Creatures that Exotic would neither accept delivery of the snakes nor pay for them because Peterson did not have the authority to enter into the contract.

Exotic's president has also learned about the incentive payments Premier made to Peterson.

Exotic has taken the following positions:

• It is not liable to Creatures because Peterson entered into the contract without Exotic's consent.
• Peterson is obligated to reimburse Exotic for the charges incurred by Peterson at Handy Hardware.
• Peterson is liable to Exotic for the incentive payments received from Premier.

Mathews has sued both Peterson and Exotic for the injuries sustained from the ferret bite.

Select from the option list provided whether each statement about liability is correct. Each choice may be used once, more than once, or not at all.