Question 1

a.Explain how an agency relationship comes to an end.
b.Is an agency relationship ever irrevocable? Explain.

Accepted Answer

a.Agency is terminated by: (1) acts of the parties (time lapse, purpose achieved, an agent's renunciation of authority, mutual agreement to terminate, a principal's revocation of authority); or (2) operation of law (death of the agent or death of the principal upon notice to the agent, incapacity of the principal upon notice to the agent, changed circumstances).Termination of agency means the agent no longer has the actual authority to bind the principal.
b.Yes, some states recognize an agency coupled with an interest, which is irrevocable.The reason is that interest is not created for the benefit of the principal.It occurs when the agent has a security interest in the subject matter of the agency.

Question 2

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

Accepted Answer

A) True 
 B)False  True

Question 3

Mark (age 16) appoints Joe (age 21) as his agent to purchase a digital camcorder from Electronic World.The transaction is:

Accepted Answer

A)  voidable by Electronic World because Mark is a minor. 
B)  voidable by Mark because he is a minor. 
C)  not voidable because Joe is not a minor. 
D)  void because Mark is a minor. 
A)  voidable by Electronic World because Mark is a minor. 
B)  voidable by Mark because he is a minor. 
C)  not voidable because Joe is not a minor. 
D)  void because Mark is a minor. B

Question 4

The power of a gratuitous agent to affect the principal's relationship with third parties is the same as that of a paid agent.

Accepted Answer

A) True 
 B)False

Question 5

An agent has breached his fiduciary duty in which of the following situations?

Accepted Answer

A)  All of the following choices are correct answers. 
B)  Where the agent makes a secret profit. 
C)  Where the agent uses information obtained in the course of the agency for his own benefit. 
D)  Where the agent competes with the principal. 
A)  All of the following choices are correct answers. 
B)  Where the agent makes a secret profit. 
C)  Where the agent uses information obtained in the course of the agency for his own benefit. 
D)  Where the agent competes with the principal.

Question 6

Because the authority given to an agent by a principal is strictly personal, an individual agent's death terminates the agent's actual authority.

Accepted Answer

A) True 
 B)False

Question 7

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

Question 8

Which of the following is not a breach of an agent's duty of obedience?

Accepted Answer

A)  Improperly delegating her authority. 
B)  Committing a tort for which the principal is now liable. 
C)  Entering into an unauthorized contract for which his or her principal is then liable. 
D)  Not following a principal's instruction to misrepresent the quality of a competitor's goods to a potential customer. 
A)  Improperly delegating her authority. 
B)  Committing a tort for which the principal is now liable. 
C)  Entering into an unauthorized contract for which his or her principal is then liable. 
D)  Not following a principal's instruction to misrepresent the quality of a competitor's goods to a potential customer.

Question 9

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 10

An agent may not make a secret profit from any transaction subject to the agency.

Accepted Answer

A) True 
 B)False

Question 11

After an agency terminates, the agent is free to disclose to third persons any information acquired during the agency relationship.

Accepted Answer

A) True 
 B)False

Question 12

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

Question 13

A person who engages an independent contractor to do a specific job has the right to control the details of the conduct and activities of the independent contractor as it applies to the specific job.

Accepted Answer

A) True 
 B)False

Question 14

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

Question 15

If an agent receives a gift from a third person with whom he is dealing on behalf of the principal, he can keep it without notifying the principal.

Accepted Answer

A) True 
 B)False

Question 16

Bob owns a business delivering coffee and donuts within the downtown area of the city.Smith Co.calls him to deliver a large quantity of his products to their local office.While taking a coffee urn through the Smith Co.'s office, Bob drops it on Lester, scalding him.Who is liable?

Accepted Answer

A)  Smith Co. and Bob are liable. 
B)  Lester has to absorb the cost himself since he assumed the risk by working at Smith Co. 
C)  Bob alone is liable. 
D)  Only Smith Co. is liable. 
A)  Smith Co. and Bob are liable. 
B)  Lester has to absorb the cost himself since he assumed the risk by working at Smith Co. 
C)  Bob alone is liable. 
D)  Only Smith Co. is liable.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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 19

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

Accepted Answer

A)  A manager who hires employees for the store owner. 
B)  A buyer who regularly buys merchandise for a store. 
C)  A factory worker hired to operate a machine. 
D)  A salesman who sells his employer's goods. 
E)  All agents have authority to contract with third parties on behalf of their principals. 
A)  A manager who hires employees for the store owner. 
B)  A buyer who regularly buys merchandise for a store. 
C)  A factory worker hired to operate a machine. 
D)  A salesman who sells his employer's goods. 
E)  All agents have authority to contract with third parties on behalf of their principals.

Question 20

A gratuitous agent:

Accepted Answer

A)  is subject to the same duty of loyalty as other agents. 
B)  is a paid agent. 
C)  need not be reimbursed for her expenses. 
D)  has no duty of diligence. 
A)  is subject to the same duty of loyalty as other agents. 
B)  is a paid agent. 
C)  need not be reimbursed for her expenses. 
D)  has no duty of diligence.

Exam 28: Relationship of Principal and Agent

a.Explain how an agency relationship comes to an end. b.Is an agency relationship ever irrevocable? Explain.

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

Mark (age 16) appoints Joe (age 21) as his agent to purchase a digital camcorder from Electronic World.The transaction is:

The power of a gratuitous agent to affect the principal's relationship with third parties is the same as that of a paid agent.

An agent has breached his fiduciary duty in which of the following situations?

Because the authority given to an agent by a principal is strictly personal, an individual agent's death terminates the agent's actual authority.

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

Which of the following is not a breach of an agent's duty of obedience?

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

An agent may not make a secret profit from any transaction subject to the agency.

After an agency terminates, the agent is free to disclose to third persons any information acquired during the agency relationship.

A person who engages an independent contractor to do a specific job has the right to control the details of the conduct and activities of the independent contractor as it applies to the specific job.

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:

If an agent receives a gift from a third person with whom he is dealing on behalf of the principal, he can keep it without notifying the principal.

Bob owns a business delivering coffee and donuts within the downtown area of the city.Smith Co.calls him to deliver a large quantity of his products to their local office.While taking a coffee urn through the Smith Co.'s office, Bob drops it on Lester, scalding him.Who is liable?

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

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.

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

A gratuitous agent:

Introduction to Law

Business Ethicspart Ii: the Legal Environment of Business

Civil Dispute Resolution

Constitutional Law

Administrative Law

Criminal Law

Negligence and Strict Liabilitypart Iii: Contracts

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 Remediespart Iv: Sales

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Product Liability: Warranties and Strict Liability

Sales Remediespart V: Negotiable Instruments

Form and Content

Transfer and Holder in Due Course

Liability of Parties

Bank Deposits, Collections, and Funds Transferspart Vi: Agency

Relationship With Third Partiespart Vii: Business Associations

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 Corporationspart Viii: Debtor and Creditor Relations

Secured Transactions and Suretyship

Bankruptcypart Ix: Regulation of Business

Securities Regulation

Intellectual Property

Employment Law

Antitrust

Accountants Legal Liability

Consumer Protection

International Business Lawpart X: Property

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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