Question 1

Which of the following is NOT a major duty, which the agent owes to the principal?

Accepted Answer

A)  Duty to obey instructions. 
B)  Duty to act in good faith and with loyalty. 
C)  Duty to indemnify. 
D)  Duty to exercise care. 
A)  Duty to obey instructions. 
B)  Duty to act in good faith and with loyalty. 
C)  Duty to indemnify. 
D)  Duty to exercise care. C

Question 2

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

Accepted Answer

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

Question 3

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

Accepted Answer

A) True 
 B)False  True

Question 4

A minor cannot act as an agent.

Accepted Answer

A) True 
 B)False

Question 5

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 6

A plumber hired to redo the plumbing in a building is an independent contractor and an agent of the owner of the building.

Accepted Answer

A) True 
 B)False

Question 7

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 8

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 9

An agent may lose the right to compensation:

Accepted Answer

A)  by breaching the agency contract willfully and deliberately. 
B)  if the specified result of the contract is not obtained. 
C)  if the duty of loyalty is breached. 
D)  All of these 
E)  None of these. 
A)  by breaching the agency contract willfully and deliberately. 
B)  if the specified result of the contract is not obtained. 
C)  if the duty of loyalty is breached. 
D)  All of these 
E)  None of these.

Question 10

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 11

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

Accepted Answer

A) True 
 B)False

Question 12

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

Question 13

The agent may be subject to liability to her principal for breach of the duty of obedience if she:

Accepted Answer

A)  entered into an authorized contract and the principal has changed her mind. 
B)  delegates her authority in any way and under any circumstances. 
C)  committed a tort for which the principal is now liable. 
D)  All of these. 
A)  entered into an authorized contract and the principal has changed her mind. 
B)  delegates her authority in any way and under any circumstances. 
C)  committed a tort for which the principal is now liable. 
D)  All of these.

Question 14

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

Question 15

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

Accepted Answer

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

Question 16

Carl loans Dan $1,500 for Dan's honeymoon. Dan gives Carl his ruby ring as security for the loan and after a year, tells Carl he may as well sell it to recoup the $1,500. When Dan's wife hears of this, she persuades Dan to call Carl and get back the ring. Can Carl sell it anyway?

Accepted Answer

A)  Yes, because Carl has apparent authority. 
B)  Yes, because Carl has an express agency. 
C)  No, Carl's authority has been revoked. 
D)  Yes, because Dan cannot terminate this agency except by discharging the obligation. 
A)  Yes, because Carl has apparent authority. 
B)  Yes, because Carl has an express agency. 
C)  No, Carl's authority has been revoked. 
D)  Yes, because Dan cannot terminate this agency except by discharging the obligation.

Question 17

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 18

The result of an agent's functioning is exactly the same as if the principal had dealt directly with the third person.

Accepted Answer

A) True 
 B)False

Question 19

Whether an agency relationship has been created is determined by using a subjective test.

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 28: Relationship of Principal and Agent

Which of the following is NOT a major duty, which the agent owes to the principal?

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

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

A minor cannot act as an agent.

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

A plumber hired to redo the plumbing in a building is an independent contractor and an agent of the owner of the building.

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

An agent may lose the right to compensation:

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

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:

The agent may be subject to liability to her principal for breach of the duty of obedience if she:

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:

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

Carl loans Dan $1,500 for Dan's honeymoon. Dan gives Carl his ruby ring as security for the loan and after a year, tells Carl he may as well sell it to recoup the $1,500. When Dan's wife hears of this, she persuades Dan to call Carl and get back the ring. Can Carl sell it anyway?

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.

The result of an agent's functioning is exactly the same as if the principal had dealt directly with the third person.

Whether an agency relationship has been created is determined by using a subjective test.

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.

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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