Question 1

The appointment of an agent by a minor or an incompetent not under guardianship and any resulting contracts are voidable.

Accepted Answer

A) True 
 B)False

Question 2

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 3

An agent must act solely in the interest of his principal in all acts that would affect the principal's business.

Accepted Answer

A) True 
 B)False

Question 4

A principal has no duty to compensate his or her agent if:

Accepted Answer

A)  it is a gratuitous agency. 
B)  the agent breached the duty of loyalty. 
C)  the agent breached the duty of obedience. 
D)  All these are correct. 
A)  it is a gratuitous agency. 
B)  the agent breached the duty of loyalty. 
C)  the agent breached the duty of obedience. 
D)  All these are correct.

Question 5

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

Accepted Answer

A)  will only affect their business if they hire independent contractors. 
B)  will only affect their business if they hire employees. 
C)  has no significance for their business. 
D)  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. 
A)  will only affect their business if they hire independent contractors. 
B)  will only affect their business if they hire employees. 
C)  has no significance for their business. 
D)  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.

Question 6

A(n) __________ is a person in a position of trust and confidence who has a duty of utmost loyalty and good faith.

Accepted Answer

A)  principal 
B)  independent contractor 
C)  fiduciary 
D)  servant 
A)  principal 
B)  independent contractor 
C)  fiduciary 
D)  servant

Question 7

Margie appoints Bryant as her agent to sell goods for the best price he can get.Bryant sells the goods in a market that is glutted and obtains a low price, even though he could have obtained a higher price in a nearby market, with a little more effort.Bryant is liable to Margie for breach of the duty of diligence.

Accepted Answer

A) True 
 B)False

Question 8

A principal may generally revoke the authority of an agent at any time.

Accepted Answer

A) True 
 B)False

Question 9

The capacity to act through an agent, depends on the capacity of the agent to do the act.

Accepted Answer

A) True 
 B)False

Question 10

Carson, who is an agent for Peter, breaches his fiduciary duty to Peter.Carson:

Accepted Answer

A)  is liable to Peter in tort for any losses caused by the breach. 
B)  is liable to Peter for breach of contract. 
C)  must make restitution for any profits or property received in breach of this duty. 
D)  All of these are correct. 
A)  is liable to Peter in tort for any losses caused by the breach. 
B)  is liable to Peter for breach of contract. 
C)  must make restitution for any profits or property received in breach of this duty. 
D)  All of these are correct.

Question 11

Agency relationships are governed primarily by federal statute.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following will terminate an agency coupled with an interest?

Accepted Answer

A)  The death of the principal. 
B)  The bankruptcy of the principal. 
C)  The incapacity of the principal. 
D)  None of these will terminate such an agency. 
A)  The death of the principal. 
B)  The bankruptcy of the principal. 
C)  The incapacity of the principal. 
D)  None of these will terminate such an agency.

Question 13

The fiduciary duty of an agent has no bearing upon his ability to act on behalf of a competitor of his principal.

Accepted Answer

A) True 
 B)False

Question 14

The principal has the duty to provide the employee with reasonably safe conditions of employment and to warn the employee of any unreasonable risks involved in the employment.

Accepted Answer

A) True 
 B)False

Question 15

A gratuitous agency is not a true agency because it is not formed by contract.

Accepted Answer

A) True 
 B)False

Question 16

Identify the following parties and relationships.
a.Patricia hires Andrew, an attorney, to negotiate a contract to purchase some property.She agrees to pay him $75 an hour for his services, and he agrees to use his own office and secretarial staff to negotiate and draft the agreement.
b.Mel owns a retail store.He hires Sarah to work for him as a clerk in the home furnishings department.
c.Carl is the general contractor for the construction of a large office complex.Carl hires Ed's Electric Company to do all of the wiring for the building.
d.Incellmed Corporation hires Bob as an outside salesman and instructs him to call on customers in a specified territory and to solicit orders for their products.
e.Marlin, who is the owner of Marlin's Department Store, hires Melissa as the general manager of his new branch in the Hillridge Mall.

Accepted Answer

a.Patricia is a principal, and Andrew is

Question 17

Lewis employs Donna under a one-year contract to sell Lewis's line of leather wallets and checkbook covers.If without Donna's knowledge, Lewis dies:

Accepted Answer

A)  under the Second Restatement, Donna's actual authority will not terminate until she has notice of Lewis's death. 
B)  under the Second Restatement, Donna's actual authority will not terminate until the end of the one-year contractual term. 
C)  under both the Second and Third Restatements, Donna's actual authority will terminate upon Lewis's death, whether she has notice or not. 
D)  under the Third Restatement, Donna's actual authority will not terminate until she receives notice of Lewis's death. 
E)  under both the Second and Third Restatements, Donna's actual authority will terminate at either the end of her one-year contractual term or when she receives notice of Lewis's death, whichever occurs first. 
A)  under the Second Restatement, Donna's actual authority will not terminate until she has notice of Lewis's death. 
B)  under the Second Restatement, Donna's actual authority will not terminate until the end of the one-year contractual term. 
C)  under both the Second and Third Restatements, Donna's actual authority will terminate upon Lewis's death, whether she has notice or not. 
D)  under the Third Restatement, Donna's actual authority will not terminate until she receives notice of Lewis's death. 
E)  under both the Second and Third Restatements, Donna's actual authority will terminate at either the end of her one-year contractual term or when she receives notice of Lewis's death, whichever occurs first.

Question 18

All independent contractors are agents, but not all agents are independent contractors.

Accepted Answer

A) True 
 B)False

Question 19

Victor negligently led Gus to believe that Brenda had the authority to act on Victor's behalf.If Brenda had no authority but Gus reasonably and in good faith relied on Brenda's apparent authority:

Accepted Answer

A)  Gus must bear any loss because he did not determine the extent or existence of Brenda'a authority. 
B)  only Brenda can be held liable for any loss Gus suffered because of his reliance. 
C)  Victor cannot be held liable to Gus because Brenda had no actual authority. 
D)  Victor can be liable to Gus for Gus's loss suffered because of his reliance. 
A)  Gus must bear any loss because he did not determine the extent or existence of Brenda'a authority. 
B)  only Brenda can be held liable for any loss Gus suffered because of his reliance. 
C)  Victor cannot be held liable to Gus because Brenda had no actual authority. 
D)  Victor can be liable to Gus for Gus's loss suffered because of his reliance.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 28: Relationship of Principal and Agent

The appointment of an agent by a minor or an incompetent not under guardianship and any resulting contracts are voidable.

An agent must act solely in the interest of his principal in all acts that would affect the principal's business.

A principal has no duty to compensate his or her agent if:

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

A(n) __________ is a person in a position of trust and confidence who has a duty of utmost loyalty and good faith.

A principal may generally revoke the authority of an agent at any time.

The capacity to act through an agent, depends on the capacity of the agent to do the act.

Carson, who is an agent for Peter, breaches his fiduciary duty to Peter.Carson:

Agency relationships are governed primarily by federal statute.

Which of the following will terminate an agency coupled with an interest?

The fiduciary duty of an agent has no bearing upon his ability to act on behalf of a competitor of his principal.

The principal has the duty to provide the employee with reasonably safe conditions of employment and to warn the employee of any unreasonable risks involved in the employment.

A gratuitous agency is not a true agency because it is not formed by contract.

Lewis employs Donna under a one-year contract to sell Lewis's line of leather wallets and checkbook covers.If without Donna's knowledge, Lewis dies:

All independent contractors are agents, but not all agents are independent contractors.

Victor negligently led Gus to believe that Brenda had the authority to act on Victor's behalf.If Brenda had no authority but Gus reasonably and in good faith relied on Brenda's apparent authority:

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

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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