Deck 19: Relationship of Principal and Agent

Question 1

Diane appoints Edward as her agent to sell goods in markets where the highest price can be obtained. Edward 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 by using more care in obtaining the available market information. Edward is liable to Diane for breach of the duty of diligence.

Answer 1

True

Question 2

The maxim "Qui facit per alium, facit per se" accurately describes the relationship between an independent contractor and the one who hired him or her.

Answer 2

False

Question 3

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.

Answer 3

False

Question 4

The operation of agency involves at least three persons.

Question 5

An agent can never act for two principals.

Question 6

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

Question 7

An agency contract appointing the agent for a period of more than one year does not have to be in writing.

Question 8

In a partnership, each partner is an agent of the partnership.

Question 9

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

Question 10

An agent hired to buy gems for his principal can buy a diamond to give to his wife only if he asks his principal first;
otherwise, he has breached his fiduciary duty.

Question 11

Unless otherwise agreed, a power given as security may not be revoked.

Question 12

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

Question 13

The distinction between employee and independent contractor is irrelevant.

Question 14

In some states, the authority of an agent to sell land must be in writing and signed by the principal.

Question 15

Edward writes to Judy, who is in the business of purchasing goods for others, telling her to purchase certain goods and ship them to him. Before answering Edward's letter, Judy does as directed and charges the goods to Edward. Judy was not authorized to do this because an agency relationship did not yet exist between Edward and Judy.

Question 16

Mary employs Tony to purchase for her a suitable site for an office complex. Tony owns a suitable site himself and sells it to Mary for the fair market value without disclosing to her that he is the owner of the land. Tony has fulfilled his duties to Mary, because he sold the property for the fair market value, even if he failed to disclose his ownership of the property.

Question 17

A minor can act as an agent for an adult.

Question 18

An agent whose compensation depends on his accomplishing a specific result is entitled to the agreed compensation only if the result is achieved within a reasonable time if no time is stated.

Question 19

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

Question 20

An agent, acting within the scope of authority granted by the principal, may bind the principal to contracts, but may not negotiate terms of the contracts.

Question 21

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.

Question 22

The fiduciary duty of an agent has a bearing upon his ability to act on behalf of a competitor of his principal.

Question 23

Whether a person is an employee or an independent contractor makes a difference in whether the principal has obligations under certain federal and state statutes.

Question 24

Agency relationships are governed primarily by federal statute.

Question 25

An attorney retained to handle a particular transaction is an independent contractor and also an agent regarding that transaction.

Question 26

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.

Question 27

Agents and principals have mutual fiduciary duties to one another.

Question 28

A person who engages an independent contractor may control the method and manner used by the contractor to perform the job.

Question 29

Factors in determining whether a person acting for another is an employee or an independent contractor include the kind of occupation, the skill required, which party supplies the tools, and whether payment is by the job or by time worked.

Question 30

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

Question 31

An agent may be liable to his principal if he improperly delegates his authority.

Question 32

The appointment of an agent by a minor or an incompetent not under a guardianship and any resulting contracts are not voidable regardless of the agent's contractual capacity.

Question 33

The duty of obedience owed by an agent to a principal is not breached and will not result in liability to the principal if the agent refused to do an illegal or unethical act for the principal.

Question 34

An agency agreement does not have to always be in writing.

Question 35

According to the Restatement, whether an agency relationship has been created is determined by using a subjective test.

Question 36

Since the capacity to be a principal depends upon the capacity of the principal to do the act himself, a person cannot appoint an agent to act for him in the case that he subsequently loses mental capacity.

Question 37

"Electronic agents" are not considered agents despite their name.

Question 38

All employees are agents, but not all agents are employees.

Question 39

An agent who violates his fiduciary duty loses the right to compensation.

Question 40

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

Question 41

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

A) Entering into an unauthorized contract for which his or her principal is liable.
B) Refusing to follow the principal/employer's instruction to misrepresent the quality of a competitor's goods to a potential customer.
C) Improperly delegating her authority.
D) Committing a tort for which the principal is liable.

Question 42

Contractual duties of a principal to an agent include all but the duty to:

A) pay the agent for losses suffered while acting legally as directed by the principal.
B) account for financial benefits.
C) pay for authorized expenses incurred.
D) compensate the agent as specified in the contract.

Question 43

Jason may validly authorize Nathan to:

A) obtain title to Max's car by making materially false representations of an existing fact.
B) vote in his place since Jason is not feeling well on election day.
C) negotiate a contract for the sale of Jason's boat.
D) All of these.

Question 44

Trudy would breach the duty to inform if she failed to tell her principal:

A) a debtor of her principal has become insolvent.
B) property her principal authorized her to sell at $50,000 could be sold for $53,000.
C) a customer of her principal has become insolvent.
D) All of these.

Question 45

The Electronic Signatures in Global and National Commerce Act:

A) makes electronic records and signatures valid and enforceable across the United States for many types of transactions affecting interstate commerce.
B) excludes all transactions covered under the UCC.
C) was enacted by all the states after being promulgated as a uniform act.
D) defines an "electronic agent" as a true agent.

Question 46

Which of the following may terminate an agency agreement by operation of law?

A) Fulfillment of purpose
B) Mutual agreement of the parties
C) Bankruptcy of the principal
D) Renunciation by the agent

Question 47

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

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

Question 48

Amber, who is an agent for Peter, breaches her fiduciary duty to Peter. Amber:

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 49

_{43. The duty of requires the agent to act in the principal's affairs only as authorized by the principal and to obey all}
Reasonable instructions and directions given by the principal.

A) accounting
B) obedience
C) fiduciary
D) diligence

Question 50

An agent is not required to keep which of the following information confidential?

A) Unique business methods
B) Customer lists
C) Information that his or her principal is engaged in criminal activity
D) Business plans

Question 51

Which of the following is not a factor used to determine whether an agent is an employee or an independent contractor?

A) Whether the employer or the employee/independent contractor designates the person and the tasks to be accomplished
B) Whether the principal is or is not in business
C) Whether payment is by the job or by the time worked
D) Whether the work is part of the regular business of the principal

Question 52

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

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

Question 53

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

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

Question 54

A gratuitous agent:

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

Question 55

According to the Second Restatement, in which of the following situations would an agency be terminated by operation of law?

A) An outbreak of war places the principal and agent in the position of alien enemies.
B) The death of the individual principal, only upon the agent's notice of the death.
C) The agent gives notice to the principal that she is renouncing the authority given to her.
D) None of these.

Question 56

Which of the following is not an agent of the business?

A) An officer of a corporation
B) A person hired by a sole proprietor to make purchases of business supplies and materials
C) A member of a limited liability company
D) All of these are agents of the businesses.

Question 57

A(n)
B) indemnification
C) power of attorney
D) qui facit per alium

Question 58

Which of the following is correct with regard to the capacity of an agent?

A) The incapacity of the agent disqualifies him from making a contract that is binding on his principal.
B) Business associations do not have the capacity to act as agents.
C) If an incompetent person who is not under guardianship appoints an agent, contracts made by that agent are voidable.
D) Electronic agents, although not persons, are considered agents.

Question 59

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

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 60

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

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

Question 61

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. If the check bounces, Carolyn is:

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 62

Which of the following would NOT be considered an agent?

A) A salesman who sells his employer's goods
B) An independent contractor without authority to act on behalf of the person hiring her
C) A factory worker hired to operate a machine
D) A buyer who regularly buys merchandise for a store

Question 63

Identify at least six factors a court will consider in determining whether a person acting for another is an employee or an independent contractor.

Question 64

All of the following except which one is a duty of an agent?

A) Account for money received on behalf of the principal
B) Inform the principal of any information relevant to the agency
C) Refrain from competing with the principal
D) Refrain from using any information gained while an agent

Question 65

In circumstances under which a person is held liable as a principal even though no actual agency has been created, there is a(n):

A) agency by estoppel.
B) apparent agency.
C) ostensible agency.
D) All of these.

Question 66

An agency:

A) is a consensual relationship that the principal and agent may form by contract or agreement.
B) must be created with consideration.
C) requires a formal writing, called a power of attorney.
D) which is voidable because of the incapacity of an agent results in only voidable contracts with third parties.

Question 67

What is an independent contractor? Can an independent contractor also be an agent? Explain.

Question 68

Robert advances money to John so that John can purchase inventory for his business. In return and for security on the loan, John makes Robert his agent. If John:

A) becomes incapacitated, Robert's agency is terminated by operation of law.
B) files for bankruptcy, Robert's agency is terminated by operation of law.
C) dies, Robert's agency is terminated by operation of law.
D) Robert's agency is irrevocable.

Question 69

Mark, who is 16 years old, appoints Joe, age 21, as his agent to purchase a videotape recorder from VideoWorld. The transaction between Joe and VideoWorld is:

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

Question 70

Mark hires Joe's real estate agency to sell his estate, 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 estate. Is the contract valid?

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 71

When is an agency relationship irrevocable?

A) It is never irrevocable.
B) When the agency is coupled with an interest of the agent in the subject matter
C) When the principal violates his duties to the agent
D) When the agency is gratuitous

Question 72

Milton 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, Milton drops it on Lester, scalding him. Who is liable?

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

Question 73

An agency will terminate on the occurrence of all but which one of the following?

A) The goal of the agency is accomplished.
B) The agent decides to quit.
C) The subject matter of the agency is destroyed.
D) The principal leaves the country.

Question 74

Identify the following relationships and parties.
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 salesclerk 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.Invox Corporation hires Gary 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.

Question 75

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?

A) No, because Carl's agency has been revoked
B) No, because an unreasonable amount of time has elapsed
C) Yes, because Carl has apparent authority
D) Yes, because Dan cannot terminate this agency