Question 1

The purpose of an agency relationship is to allow principals to extend their business activities.

Accepted Answer

A) True 
 B)False

Question 2

Ordinarily, an agent may delegate his duties to an equally qualified subagent.

Accepted Answer

A) True 
 B)False

Question 3

An agent is personally liable for the torts he commits while in the scope of his employment.

Accepted Answer

A) True 
 B)False

Question 4

Seth grants express authority to Reba to enter contracts on his behalf. If Reba discloses to third parties that she is an agent for Seth, she has liability on a contract in all but which of the following situations?

Accepted Answer

A)  Reba makes a contract in her own name. 
B)  Reba makes a contract within the scope of her authority and discloses that she is acting for Seth. 
C)  Reba co-makes a contract with Seth. 
D)  Reba guarantees that Seth will perform the contract. 
E)  Reba cannot be held liable on a contract when she discloses she is Seth's agent as long as the contract is within her scope of authority. 
A)  Reba makes a contract in her own name. 
B)  Reba makes a contract within the scope of her authority and discloses that she is acting for Seth. 
C)  Reba co-makes a contract with Seth. 
D)  Reba guarantees that Seth will perform the contract. 
E)  Reba cannot be held liable on a contract when she discloses she is Seth's agent as long as the contract is within her scope of authority.

Question 5

An employer may have criminal liability for the acts of his employee.

Accepted Answer

A) True 
 B)False

Question 6

Charles states he has authority to contract for Wyatt and that he will be personally liable if he does not in fact have the authority to bind Wyatt. Identify the name and effect of Charles's statement. If Charles enters the contract without making such a statement, is there a way the same effect could result?

Accepted Answer

Charles's statement is an express warran

Question 7

Discuss whether the principal is liable in each of the following situations. Explain your answer.
a. Andrew hires Patricia, an attorney, to negotiate a contract to purchase some property. He agrees to pay her $75 an hour for her services, and she agrees to use her own office and secretarial staff to negotiate and draft the agreement. One day, Patricia is driving her own automobile to a meeting with Edward to discuss the purchase of the land that he owns. Patricia drives too fast for conditions and has a minor traffic accident that results in $600 damage to the other vehicle.
b.George owns a retail store. He hires Carolina to work for him as a salesclerk in the small appliance department. George instructs Carolina to make certain representations to customers regarding a microwave oven, which Carolina sells. George knows these misrepresentations are false, but Carolina does not. Henrietta buys a microwave in reliance on the misrepresentations. 
c.George owns a retail store. He hires Carolina to work for him as a salesclerk. George doesn't specifically tell Carolina to make misrepresentations, but he gives ambiguous instructions to her that led her to believe she should make such misrepresentations. Henrietta buys a microwave based upon the mistaken information conveyed to her by Carolina.
d.Megaborne Corporation hires Ed as an outside salesman and instructs him to call on customers in a specified territory and to solicit orders for their products. One day Ed is driving the company car to call on a client. He accidentally drives the wrong way on a one-way street and has an accident with another vehicle that results in $6,000 in property damage and $30,000 in medical expenses.
e.The Advanced Business Machines Company (ABMC) hires John as an outside salesman for its computers. It sets high sales quotas for him and instructs him to beat up salesmen from competing firms in order to keep them away from ABMC customers. In order to meet his monthly sales quota, John roughs up Ralph, who is a salesman for a competing firm and then tells Ralph to find his own customers and to stay away from John's territory.

Accepted Answer

a.Andrew is the principal and Patricia i

Question 8

Richard writes a letter to Sarah authorizing her to sell his car and sends a copy of the letter to Timothy, a prospective purchaser. If the next day Richard sends a letter to Sarah revoking her authority, but he fails to notify Timothy, Sarah:

Accepted Answer

A)  has actual authority to sell the car to Timothy. 
B)  has implied authority to sell the car to Timothy. 
C)  has apparent authority with respect to Timothy to sell the car. 
D)  is empowered under the doctrine of respondeat superior to negotiate the contract. 
A)  has actual authority to sell the car to Timothy. 
B)  has implied authority to sell the car to Timothy. 
C)  has apparent authority with respect to Timothy to sell the car. 
D)  is empowered under the doctrine of respondeat superior to negotiate the contract.

Question 9

Constructive notice of termination of an agency may not occur by mere publication in a newspaper.

Accepted Answer

A) True 
 B)False

Question 10

The Second and Third Restatements are the same regarding when an agent's apparent authority ceases.

Accepted Answer

A) True 
 B)False

Question 11

Apparent authority may arise in all but which of the following ways?

Accepted Answer

A)  The acts are customary of an agent in similar positions in an organization. 
B)  The principal has acquiesced to prior similar transactions between the agent and the third party. 
C)  The agent shows the third party a power of attorney from the principal authorizing the agent to enter such a transaction. 
D)  An agent tells the third person she has the authority to transact such business on behalf of the principal. 
A)  The acts are customary of an agent in similar positions in an organization. 
B)  The principal has acquiesced to prior similar transactions between the agent and the third party. 
C)  The agent shows the third party a power of attorney from the principal authorizing the agent to enter such a transaction. 
D)  An agent tells the third person she has the authority to transact such business on behalf of the principal.

Question 12

An agent who makes a contract with a third person on behalf of a disclosed principal usually is not a party to the contract.

Accepted Answer

A) True 
 B)False

Question 13

Pat bought a cotton sweater at Ivey's Fashion Store. Sue, the salesperson, told her the sweater was guaranteed not to shrink if washed in cold water by hand. Pat washes the sweater as directed and it shrinks. Which of the following is correct?

Accepted Answer

A)  Pat has no recourse against the store, because it was only the salesclerk who misrepresented the sweater. 
B)  Sue has apparent authority to make warranties such as the one that she made. Therefore, the store is bound. 
C)  If Sue is only a part-time employee, Ivey has no responsibility for misrepresentations she makes. 
D)  Salesclerks are usually independent contractors. Thus, there is no liability on the part of Ivey. 
A)  Pat has no recourse against the store, because it was only the salesclerk who misrepresented the sweater. 
B)  Sue has apparent authority to make warranties such as the one that she made. Therefore, the store is bound. 
C)  If Sue is only a part-time employee, Ivey has no responsibility for misrepresentations she makes. 
D)  Salesclerks are usually independent contractors. Thus, there is no liability on the part of Ivey.

Exam 20: Relationship With Third Parties

The purpose of an agency relationship is to allow principals to extend their business activities.

Ordinarily, an agent may delegate his duties to an equally qualified subagent.

An agent is personally liable for the torts he commits while in the scope of his employment.

Seth grants express authority to Reba to enter contracts on his behalf. If Reba discloses to third parties that she is an agent for Seth, she has liability on a contract in all but which of the following situations?

An employer may have criminal liability for the acts of his employee.

Richard writes a letter to Sarah authorizing her to sell his car and sends a copy of the letter to Timothy, a prospective purchaser. If the next day Richard sends a letter to Sarah revoking her authority, but he fails to notify Timothy, Sarah:

Constructive notice of termination of an agency may not occur by mere publication in a newspaper.

The Second and Third Restatements are the same regarding when an agent's apparent authority ceases.

Apparent authority may arise in all but which of the following ways?

An agent who makes a contract with a third person on behalf of a disclosed principal usually is not a party to the contract.

Pat bought a cotton sweater at Ivey's Fashion Store. Sue, the salesperson, told her the sweater was guaranteed not to shrink if washed in cold water by hand. Pat washes the sweater as directed and it shrinks. Which of the following is correct?

Introduction to Law

Business Ethics and the Social Responsibility of Business

Civil Dispute Resolution

Constitutional Law

Administrative Law

Criminal Law

Intentional Torts

Negligence and Strict Liability

Introduction to Contracts

Mutual Assent

Conduct Invalidating Assent

Consideration

Illegal Bargains

Contractual Capacity

Contracts in Writing

Third Parties to Contracts

Performance, Breach, and Discharge

Contract Remedies

Relationship of Principal and Agent

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Products Liability: Warranties and Strict Liability in Tort

Sales Remedies

Form and Content

Transfer and Holder in Due Course

Liability of Parties

Bank Deposits, Collections, and Funds Transfers

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Nature, Formation, and Powers

Financial Structure

Management Structure

Fundamental Changes

Secured Transactions and Suretyship

Bankruptcy

Protection of Intellectual Property

Antitrust

Consumer Protection

Employment Law

Securities Regulation

Accountants Legal Liability

Environmental Law

International Business Law

Introduction to Property, Property Insurance, Bailments, and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

Trusts and Decedents Estates

the Legal Environment of Business

Contracts

Agency

Sales

Negotiable Instruments

Unincorporated Business Associations

Corporations

Debtor and Creditor Relations

Regulation of Business

Property

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