Question 1

If an agency is gratuitous, the principal ordinarily may revoke it without liability to the agent.

Accepted Answer

A) True 
 B)False

Question 2

As a general rule, a person may do through an agent whatever business activity he may accomplish personally.

Accepted Answer

A) True 
 B)False

Question 3

Emma contracts with Luke to locate and purchase for her a suitable site for a motocross track. Luke owns a huge parcel of land himself and sells it to Emma at fair market value without disclosing to her that he is the owner. Luke has not breached his fiduciary duty to his principal if it was a fair price.

Accepted Answer

A) True 
 B)False

Question 4

The Restatement's definition of a power given as security includes, but is more extensive than, the rule regarding an agency coupled with an interest.

Accepted Answer

A) True 
 B)False

Question 5

Henry is a sales agent for Nancy.  He may keep the money for Nancy's business sales in his personal bank account until the end of the month, when it is due to her as long as he keeps accurate records of the amounts he must separate out to pay to her.

Accepted Answer

A) True 
 B)False

Question 6

A gratuitous agent has a duty of loyalty but is not liable for any harm caused by his careless performance.

Accepted Answer

A) True 
 B)False

Question 7

The duty of obedience owed by an agent to a principal is not breached and will not result in liability to the principal by an agent's refusal to do an illegal or tortious act for the principal.

Accepted Answer

A) True 
 B)False

Question 8

The principal has a duty to indemnify the agent for losses incurred or suffered while acting as directed by the principal in a transaction which is not illegal or wrongful.

Accepted Answer

A) True 
 B)False

Question 9

Carolyn, a cashier at Tops Supermarkets, may cash checks for up to $20 over a purchase amount. A friend needs money for a dress so Carolyn cashes a check for $50 with no purchase. The check bounces. Carolyn is:

Accepted Answer

A)  liable because she violated her duty of obedience. 
B)  liable because she breached her duty to inform. 
C)  not liable since she has apparent authority to take the check. 
D)  not liable unless she knew her friend did not have the money in the bank. 
A)  liable because she violated her duty of obedience. 
B)  liable because she breached her duty to inform. 
C)  not liable since she has apparent authority to take the check. 
D)  not liable unless she knew her friend did not have the money in the bank.

Question 10

A __________ is a written, formal appointment of an agent.

Accepted Answer

A)  fiduciary 
B)  revocation 
C)  power of attorney 
D)  rescission 
A)  fiduciary 
B)  revocation 
C)  power of attorney 
D)  rescission

Question 11

Prentice and Mercedes are partners in a catering business. The law of agency:

Accepted Answer

A)  has no significance for their business. 
B)  is important to their business because both Prentice and Mercedes are agents of the partnership and as such have the authority to represent and bind the business in all usual transactions of that partnership. 
C)  will only affect their business if they hire employees. 
D)  will only affect their business if they hire independent contractors. 
A)  has no significance for their business. 
B)  is important to their business because both Prentice and Mercedes are agents of the partnership and as such have the authority to represent and bind the business in all usual transactions of that partnership. 
C)  will only affect their business if they hire employees. 
D)  will only affect their business if they hire independent contractors.

Question 12

By the operation of law, the occurrence of certain events will automatically terminate an agency relationship.

Accepted Answer

A) True 
 B)False

Question 13

If Ridley, agent for Luke, finds out one of Luke's customers has become insolvent, she has the duty to communicate this information to Luke.

Accepted Answer

A) True 
 B)False

Question 14

A fiduciary duty, arising out of a relationship of trust and confidence, is one of utmost loyalty and good faith.

Accepted Answer

A) True 
 B)False

Question 15

Authority conferred upon an agent for a specified time does not continue after the specified time.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following agents would not have authority to contract with third parties on behalf of the principal?

Accepted Answer

A)  A salesman who sells his employer's goods. 
B)  A manager who hires employees for the store owner. 
C)  A factory worker hired to operate a machine. 
D)  A buyer who regularly buys merchandise for a store. 
A)  A salesman who sells his employer's goods. 
B)  A manager who hires employees for the store owner. 
C)  A factory worker hired to operate a machine. 
D)  A buyer who regularly buys merchandise for a store.

Question 17

Jones, an agent of Rossi, is authorized to sell Rossi's ownership of wheat on the commodities market on Monday. On Monday, however, the market opens with the lowest prices for wheat in two decades. Jones must go ahead and sell Rossi's wheat on Monday.

Accepted Answer

A) True 
 B)False

Question 18

Mark hires Joe's real estate agency to sell his property, telling Joe he has lost too much money playing the stock market to afford to keep it up. Then Mark wins the three million-dollar lottery! Joe reads this in the newspaper and that afternoon makes a contract with Sharon to sell the property. Is the contract valid?

Accepted Answer

A)  No, the agency terminated because of the change in conditions. 
B)  No, the agent has no right to sell without consent. 
C)  Yes, Mark would have to notify Joe if he wanted to stop the sale. 
D)  Yes, Joe had apparent authority to sell. 
A)  No, the agency terminated because of the change in conditions. 
B)  No, the agent has no right to sell without consent. 
C)  Yes, Mark would have to notify Joe if he wanted to stop the sale. 
D)  Yes, Joe had apparent authority to sell.

Question 19

Steven is a manufacturer's representative for Incell Corporation. One day he receives a big-screen television as a gift from one of the clients he contacts on behalf of Incell.

Accepted Answer

A)  Steven must account to Incell for the gift he has received. 
B)  The big-screen television belongs to Incell rather than to Steven. 
C)  If he keeps the TV without telling Incell, he will have breached his fiduciary duty. 
D)  All of these are correct. 
A)  Steven must account to Incell for the gift he has received. 
B)  The big-screen television belongs to Incell rather than to Steven. 
C)  If he keeps the TV without telling Incell, he will have breached his fiduciary duty. 
D)  All of these are correct.

Question 20

A principal owes to any agent the same duties under tort law that the principal owes to all parties.

Accepted Answer

A) True 
 B)False

Exam 28: Relationship of Principal and Agent

If an agency is gratuitous, the principal ordinarily may revoke it without liability to the agent.

As a general rule, a person may do through an agent whatever business activity he may accomplish personally.

The Restatement's definition of a power given as security includes, but is more extensive than, the rule regarding an agency coupled with an interest.

Henry is a sales agent for Nancy. He may keep the money for Nancy's business sales in his personal bank account until the end of the month, when it is due to her as long as he keeps accurate records of the amounts he must separate out to pay to her.

A gratuitous agent has a duty of loyalty but is not liable for any harm caused by his careless performance.

The duty of obedience owed by an agent to a principal is not breached and will not result in liability to the principal by an agent's refusal to do an illegal or tortious act for the principal.

The principal has a duty to indemnify the agent for losses incurred or suffered while acting as directed by the principal in a transaction which is not illegal or wrongful.

Carolyn, a cashier at Tops Supermarkets, may cash checks for up to $20 over a purchase amount. A friend needs money for a dress so Carolyn cashes a check for $50 with no purchase. The check bounces. Carolyn is:

A __________ is a written, formal appointment of an agent.

Prentice and Mercedes are partners in a catering business. The law of agency:

By the operation of law, the occurrence of certain events will automatically terminate an agency relationship.

If Ridley, agent for Luke, finds out one of Luke's customers has become insolvent, she has the duty to communicate this information to Luke.

A fiduciary duty, arising out of a relationship of trust and confidence, is one of utmost loyalty and good faith.

Authority conferred upon an agent for a specified time does not continue after the specified time.

Which of the following agents would not have authority to contract with third parties on behalf of the principal?

Jones, an agent of Rossi, is authorized to sell Rossi's ownership of wheat on the commodities market on Monday. On Monday, however, the market opens with the lowest prices for wheat in two decades. Jones must go ahead and sell Rossi's wheat on Monday.

Steven is a manufacturer's representative for Incell Corporation. One day he receives a big-screen television as a gift from one of the clients he contacts on behalf of Incell.

A principal owes to any agent the same duties under tort law that the principal owes to all parties.

Introduction to Law

Business Ethics

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

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Product Liability Warranties and Strict Liability

Sales Remedies

Form and Content

Transfer and Holder in Due Course

Liability of Parties

Bank Deposits Collections and Funds Transfers

Relationship With Third Parties

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Nature and Formation of Corporations

Financial Structure of Corporations

Management Structure of Corporations

Fundamental Changes of Corporations

Secured Transactions and Suretyship

Bankruptcy

Securities Regulation

Intellectual Property

Employment Law

Antitrust

Accountants Legal Liability

Consumer Protection

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 Wills

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