The principle makes an employer liable for injury caused to an employee in the course of that employment. X hired a caterer for a party, and when the generator broke down, X personally asked Y, one of the caterer's staff, to fetch a mechanic on his own vehicle and promised to pay Y 1000 for doing it. Y was injured on the way and claims compensation.
Because X personally directed Y to fetch the mechanic and promised to pay him for it, that specific task falls within an employment relationship X created with Y, making X liable for the injury that occurred while Y was carrying it out.
Therefore, the correct answer is X is liable as Y was working in the course of employment offered by X.
The fact that decides this question is who was actually directing Y and paying him for the specific task at the time of the accident, not who Y ordinarily works for. X personally instructed Y to fetch the mechanic and personally promised to pay him 1000 for it, which is what created the employment relationship relevant here.
Testing each option against who directed and paid Y for the actual errand, rather than against Y's general employer or the fact that X hosted the party, leaves only the option finding X liable for the course of employment he created.
Therefore, the correct answer is X is liable as Y was working in the course of employment offered by X.