Deck 13: The Agency Relationship

Question 1

Which of the following is a distinguishing characteristic of the law of agency?

A) It is derived largely from special statutes.
B) It is derived largely from tort and contract law.
C) It is derived largely from provincial legislation.
D) It is derived largely from contract law.

Answer 1

B

Question 2

The employment contract of a manager of a business expressly recites her authority.How do other components of her authority come into existence?

A) via the more tangible form of a detailed job description
B) by conducting a fact-specific inquiry of the position's job description
C) via the nature of the position and business management requirements
D) by the strict utterance of instructions to the manager

Answer 2

C

Question 3

What approach would a court most likely take to determine the type of authority an agent has?

A) an inherently flexible inquiry
B) a fact-specific inquiry
C) a broad informal inquiry
D) a narrow informal inquiry

Answer 3

B

Question 4

How will a power of attorney operate if it states that the occurrence of a specific event will make it operational?

A) as a variation of a general power of attorney
B) as a variation of an enduring power of attorney
C) as a variation of a springing power of attorney
D) as a variation of a specific power of attorney

Question 5

Cory,the owner of ABC Industries,jokingly introduced his executive assistant as the 'vice-president' of sales to a prospective client.Assuming the customer is unaware of the truth,what type of agency may Cory's action have created?

A) actual agency
B) agency of necessity
C) agency by ratification
D) agency by estoppel

Question 6

An agent has been given authority to act for the principal in relation to a directive that sets out conditions required for the removal of life-support systems.What form of authority has the agent been given?

A) a general power of attorney
B) a specific-care directive
C) a personal care power of attorney
D) a health care directive

Question 7

Tom's photographs will be exhibited for two weeks in Natural WildLife Gallery Inc.,commencing May 1.The gallery is authorized to sell any of Tom's works,as long as they adhere to the agreed price list.What is the nature of the relationship between these parties?

A) agency by commitment
B) employment agreement
C) agency by agreement
D) retainer agreement

Question 8

Bonita and Laraleigh want to create a relationship with insurance broker Lee Kim.How should they proceed if they want to use the most common method available to accomplish the desired outcome?

A) deposit
B) retainer
C) contract
D) letter of intent

Question 9

Which statement best describes the actual authority of an agent?

A) It must be created in writing.
B) It may be express or implied.
C) It cannot be easily customized.
D) It is always limited in time and scope.

Question 10

Hamish is the purchasing agent for an automobile parts chain and regularly goes on buying trips to find new products for the business.Which of the following is an example of a fiduciary duty owed by Hamish to his employer?

A) duty to avoid conflicts of interest
B) duty of personal performance
C) duty not to breach the agency contract
D) duty to ratify on behalf of the principal

Question 11

Which of the following employees is mostly likely an agent on behalf of their employer?

A) custodian
B) sales clerk
C) typist
D) maintenance worker

Question 12

Eve's best friend,Amrita,knew Eve wanted to buy a delivery van for her new business and when Amrita saw a great van that met all of Eve's specifications at an auction,she decided to bid on it without telling Eve.Can Eve ratify the contract entered into by Amrita?

A) No,because Amrita is not Eve's actual agent.
B) No,because Amrita was not Eve's employee.
C) Yes,provided Amrita was Eve's employee.
D) Yes,but only if Amrita identified Eve as her principal when she bought the van.

Question 13

Which of the following terms is synonymous with "apparent authority"?

A) actual authority
B) implied authority
C) ostensible authority
D) agency by estoppel

Question 14

Garnett Fashions Ltd.just terminated its long-term agency relationship with the Higa Agency,which it has retained for many years to negotiate purchase contracts with retail outlets for Garnett's manufactured goods.What advice would you give Garnett at this time?

A) that Higa has the onus to inform outsiders that it is no longer Garnett's agent
B) that Garnett has the onus to inform outsiders that Higa is no longer its agent
C) that outsiders have an obligation to prove whether or not there is an ongoing agency relationship between Garnett and Higa
D) that Higa can no longer bind Garnett to contracts

Question 15

Although Geraldine's job title at a local car dealership is "sales director," in reality,all car deals must be approved by the dealership's owner.One day,Geraldine exceeded her authority and approved a sales contract when the owner was away.Why might the contract be binding on the dealership?

A) because she was acting with apparent authority
B) because she was an agent of necessity
C) because she is an employee of the car dealership
D) because she had actual authority

Question 16

Jacqueline is a real estate agent and her clients are a young couple who are hoping to purchase their first home.Which of the following statements is true regarding Jacqueline's role as "real estate agent"?

A) She likely has the actual authority to make binding contracts on behalf of her clients.
B) She has implied and ostensible authority to make binding contracts on behalf of her clients.
C) She likely has no authority to make binding contracts of sale on behalf of her clients.
D) She now fulfills the role of purchasing agent for her clients.

Question 17

What do agency by estoppel and agency by ratification have in common?

A) The agent is an employee of the principal.
B) They are both forms of actual authority.
C) The agent has no actual authority to do what he does.
D) The principal has mislead the outsider.

Question 18

Why do agency relationships,in general,operate with few difficulties?

A) Agents simply represent principals in transactions with others.
B) Engaging external specialists is a cornerstone of business.
C) Businesspeople cannot operate their businesses alone.
D) Parties use agents instead of dealing face to face.

Question 19

What is a distinguishing characteristic of the implied authority of an agent?

A) It may be intuitively deduced by the agent's position.
B) It typically takes the form of an informal power of attorney.
C) It is customarily limited to a short time period.
D) It is inherently inflexible and narrowly defined.

Question 20

Sherif is the general manager of a clothing store.His authority to hire an electrician to repair a faulty light in the store would likely arise from which of the following?

A) personal care power
B) his implied authority
C) his fiduciary duty
D) his legal authority

Question 21

What would a court require evidence of in order to establish the existence of a fiduciary duty owed to a plaintiff?

A) the principal's influence and trust
B) the defendant's reliance,power,and influence
C) the agent's influence and reliance
D) the plaintiff's reliance,trust,and vulnerability

Question 22

Although he had no actual or implied authority to do so,while the owner of Acta Investments was away,her long-time executive assistant entered into a one-year lease contract with a photocopier company.As it turns out,the contract is very favourable to Acta.In which situation would Acta be unable to ratify the lease contract by its "agent"?

A) where the contract favours Acta
B) where the contract favours the "agent"
C) where Acta fails to act within a reasonable time
D) where the "agent" lacked actual authority

Question 23

Are principal's vicariously liable for torts committed by their agents?

A) Yes,if the agent is acting within the scope of the agent's authority.
B) No,unless the agent is also an employee of the principal.
C) Yes,provided an agency by estoppel exists.
D) No,unless the agent is acting for an undisclosed principal.

Question 24

Although he was not really an agent and had no authority to do so,Gordon thought his employer would be delighted when he purchased a truck "on behalf of" his employer.Although the price was very reasonable,his employer now refuses to ratify the contract.Which statement best describes the parties' liability under the contract?

A) Gordon and his employer are bound by the contract.
B) The employer is solely liable as an undisclosed principal.
C) The employer is solely liable under the doctrine of estoppel.
D) Gordon is bound by the contract.

Question 25

Marta sold Phillip's racing cycle to Bill while Phillip was away on business in Toronto.Phillip hadn't expected Marta to act in this way,but he happily accepted the $1500 cash and signed a receipt.In this instance,the agency relationship exemplifies which of the following?

A) implied authority
B) agency by estoppel
C) agency by ratification
D) actual authority

Question 26

Which of the following is considered,as a general rule,to be within the scope of an agent's fiduciary duties?

A) full disclosure of acceptance of each secret commission and profit
B) absolute prohibition against acting for two principals
C) sending a client's file for storage with an outside storage facility
D) personal interests supersede the interests of the principal

Question 27

Which of the following would a court require confirmation of in order to establish the validity of an agency relationship where circumstances involve agency by estoppel?

A) the adoption by the principal of a contract the agent lacked authority to enter at the time
B) circumstances that necessitated acting without authority from the principal
C) an agreement by the third party to be bound by commitments made to the agent
D) the principal's actions are readily viewed by outsiders as denoting an existing agency relationship

Question 28

Karim's agent,Monica,was instructed to negotiate a contract to buy a new delivery truck for Karim's courier business but not to disclose Karim's identity,other than to indicate she is acting for 'an undisclosed buyer'.Which statement best describes this situation?

A) Karim and Monica will both be bound by the contract.
B) Only Monica will be bound by the contract.
C) Only Karim will be bound by the contract.
D) Neither Karim or Monica will be bound by the contract.

Question 29

What are the duties required of an agent?

A) reimburse the principal for out-of-pocket expenses
B) pay the principal for services rendered
C) abide by the terms of the agency agreement
D) indemnify the principal for agency business losses

Question 30

Which of the following is a duty owed by a principal in an agency relationship?

A) reimburse the agent for out-of-pocket expenses
B) fiduciary duty to uphold the trust placed by the agent
C) retroactively acknowledge authority of agents
D) ratify all contracts within prescribed time limits

Question 31

A lawyer is researching the damages relating to his client's breach of a fiduciary duty that ought to be recoverable.What would the lawyer most likely have to consider?

A) damages arising from contract and the equities
B) contract,tort,and punitive remedies
C) damages arising from contract and tort remedies
D) contract,tort,and equitable remedies

Question 32

Which statement best exemplifies the liability of an agent who acts without authority and contracts with a third party?

A) The agent is liable to the principal for breach of warranty of authority.
B) The third party is liable to the principal for breach of warranty of authority.
C) The principal is liable to the agent for breach of agency by ratification.
D) The agent is liable to the third party for breach of warranty of authority.

Question 33

Kyrie negotiated a contract in good faith with a party whose introductory letter from his employer reasonably led her to believe he had the proper authority to do so.What would be the most likely outcome of any dispute challenging the existence of an agency relationship?

A) The law sides with the principal through ratification.
B) A court will determine the agent had actual authority.
C) The law sides with the customer through estoppel.
D) A court will determine the agent had apparent authority.

Question 34

Dora is an investment advisor who is also part owner of a new business.Without disclosing her ownership,Dora has recommended that clients purchase shares in her new business.Which of the following wrongs has Dora likely committed?

A) breach of duty of agency
B) breach of fiduciary duty
C) breach of authority
D) estoppel

Question 35

Jack sent a cover letter with his new purchasing agent,Kuan Huo,advising suppliers of Kuan's authority to transact purchases under $33 000.How would a court considering a dispute in which a plaintiff alleges Kuan had apparent authority to enter into a $42 000 purchase contract most likely resolve this dispute?

A) Deny the third party's claim based on the principal's stated limitation.
B) Deny the second-party claim because the agent's limited authority was reasonably known.
C) Deny a first-party claim on the grounds it ought to have known of the reasonable limitation.
D) Deny the outsider's claim based on the agent's unenduring authority.

Question 36

Which statement best describes fiduciary relationships?

A) All fiduciaries are agents.
B) All agents are fiduciaries.
C) All fiduciaries are employees.
D) All employees are fiduciaries.

Question 37

What would an insurance agent who fails to advise a client that a form of requested coverage is unavailable likely be found by a court to have committed?

A) breach of insurance standard
B) breach of fiduciary duty
C) breach of agency of insurance
D) breach of enduring contract

Question 38

What constrains a lawyer's ability to place herself in a position where her own interests conflict with the interests of the principal?

A) a profit rule
B) a trust rule
C) a constraint rule
D) a conflict rule

Question 39

From which of the following does a third party typically derive an agent's ostensible authority?

A) the conduct of the principal
B) reasonable inference of usual authority
C) an expression of the limitations of authority
D) inferring typical authority

Question 40

Connect Industries manufactures electrical components and conducts its sales through its agent who finds customers and enters into sales agreements on Connect's behalf.Which statement best describes the relationship between Connect Industries and its agent?

A) The agent must be an employee of Connect Industries.
B) The agent cannot secretly act for other electrical component manufacturers while working for Connect Industries.
C) The agent is in a fiduciary relationship with Connect Industry's customers.
D) Provided he is not an employee,the agent may perform similar duties with competing electrical component manufacturers.

Question 41

When an agent acts within the scope of the agent's authority,the principal is bound by the contract,whether the principal likes it or not.

Question 42

An agent who has been given permission to "download responsibility for performance" is required to personally perform the obligations arising from the agency relationship.

Question 43

A duty imposed on a person who has a special relationship of trust with another is legally known as a fiduciary duty.

Question 44

Amir was given verbal permission to buy a truck for his employer with a spending limit of $20 000.Amir's agreement to pay $21 000 for a truck will not be binding on his employer.

Question 45

Blanchett Lighting Supplies has terminated the employment of Drako,its long-time purchasing agent.What an advisable step for Blanchett to take after terminating this agency relationship?

A) Ensure the termination agreement is put into writing.
B) Ensure that third parties are notified.
C) Ensure an indemnity agreement is in place.
D) Ensure the agent is informed in writing of the termination.

Question 46

The application of which of the following is most likely to be created by the liability arising from agency principles with respect to employees and independent contractors?

A) the doctrine of vicarious liability
B) the common law principle of agency
C) the common law neighbour principle
D) the doctrine of primary liability

Question 47

If an agent is to issue promissory notes or sign cheques in the name of the principal,then the agency agreement should be in writing.

Question 48

Which of the following would a risk manager indicate as being a key point with respect to managing agency relationships?

A) Choosing to avoid conflicts of interests is an agent's duty.
B) Choose wisely,instruct carefully,and review regularly.
C) Fiduciary duties must be specified in the agency agreement.
D) Fiduciary duties are automatically owed to the principal.

Question 49

An agency relationship created when one party adopts a contract entered into on his behalf by another who acted without authority at the time is legally known as an agency by estoppel.

Question 50

It is possible to form an agency relationship by words or actions.

Question 51

It is always necessary to look at the essence of a relationship rather than merely relying on what the parties call themselves.

Question 52

When the agent has acted outside the scope of her authority in entering into the contract-that is,by exceeding the powers she has been given-the contract cannot bind the principal.

Question 53

The individual who permits another to act on his or her behalf is legally known as a principal.

Question 54

In both agency by estoppel and agency by ratification,the agent has no authority to do what he does.

Question 55

Partners in a partnership are agents and can bind the partnership to contracts.

Question 56

The law of agency is derived largely from tort and contract law.

Question 57

An agency relationship created when the principal acts such that third parties reasonably conclude that an agency relationship exists is legally described as an agency by ratification.

Question 58

A large land developer granted Kyrie authorization to act as agent on its behalf,as an undisclosed principal,for the purchase of three tracts of land.Kyrie believes that,as long as she remains within the scope of that authority,the developer will be liable on the contracts.Which of the following is noted as being a valid criticism of this rule of agency law?

A) The agent has no liability.
B) It's an area of unsettled law.
C) It's inconsistent with the general principles of contract law.
D) The terminology in this area is not consistently employed by the judiciary.

Question 59

Agency relationships generated difficult complications resulting from unethical practices,necessitating the legislation of numerous special statues to govern agent's duties and responsibilities.

Question 60

The onus is on outsiders to inquire as to the limits of an agent's authority.

Question 61

Identify each type of agency authority and describe what is required of the principal in each instance.

Question 62

An agent is bound by a fiduciary duty to avoid undisclosed,unauthorized conflicts of interest.

Question 63

Identify under what circumstances an agent may be personally liable on the contract entered into on behalf of the principal.

Question 64

Outline the ways in which a principal can be legally bound to a contract by application of the law of agency.

Question 65

A principal whose identity is unknown to a third party who has no knowledge that the agent is acting in an agency capacity is legally known as an undisclosed principal.

Question 66

A principal can ratify every contract that his "agent" enters.

Question 67

Explain why agency by estoppel forces a principal to be bound by an unauthorized contract.Contrast and briefly discuss this with respect to a principal's position under agency by ratification.

Question 68

Identify and briefly describe the implied power a general manager of a hockey team presumably would have.Contrast the hockey team general manager's implied power with that presumably given to a manager of a convenience store.

Question 69

Briefly discuss the importance of the agency relationship to business,including what it is,what it allows,how it is used,and the advantage derived from using it.

Question 70

Briefly outline how an agency agreement can come to an end.What steps should a principal take when concluding an agency relationship and why?

Question 71

Is fiduciary duty unique to the relationship between an agent and principal or does it also arise in other business relationships?

Question 72

An agent automatically owes a fiduciary duty to his principal.

Question 73

Identify the typical fiduciary duties of an agent.