Deck 10: Contract Law: Working With Agents

Question 1

To ratify an act is to:

A)approve or authorise the act retrospectively
B)denounce the act in strong terms.
C)authorise the act in advance either verbally, in writing, or by course of dealings.
D)give express or actual authority for the performance of the act prospectively.

Answer 1

A

Question 2

Which of the following is the least accurate.A mercantile agent is:

A)a person appointed to sell property on behalf of a client.
B)a factor who sells the principal's property in his own name.
C)a broker.
D)a factor who sells the principal's property in the client's name.

Answer 2

D

Question 3

Authority by necessity is the authority of an agent that:

A)arises when something has to be done in an emergency situation on behalf of a principal that is within the scope of an agent's pre-existing implied authority.
B)arises when someone, whether or not already an agent of the principal, needs to do something to protect the property of the principal.
C)exists regardless of whether or not good faith is present on the part of the agent.
D)is expressly or impliedly given by the principal to their agent in a situation in which the principal's property is under threat.

Answer 3

B

Question 4

An agent will have 'authority by estoppel' to bind the principal in circumstances in which the agent:

A)does not have actual authority but has apparent authority.
B)does not have actual or apparent authority but has behaved in good faith.
C)has not behaved in a manner that was unconscionable.
D)has implied authority.

Question 5

The nature and extent of the implied authority of a company director to act on behalf of the company:

A)Is usually expressly granted by the board of directors as a whole.
B)Is not affected by the position of the director on the board.
C)Tends to decrease with the seniority of the director's position.
D)Tends to increase with the seniority of the director's position.

Question 6

Which of the following is not a requirement for establishing that an agent has apparent authority?

A)The agent did not have actual authority.
B)The third party knew that the agent did not have actual authority.
C)The principal 'held out' the agent as having authority to act on their behalf.
D)The third party relied upon that holding out and assumed that the agent had actual authority.

Question 7

When a principal tells an agent not to enter into a contract or behave in a particular manner and the agent does so regardless, the principal will still be liable for the legal consequences of the agent's act provided that, among other things:

A)the principal has done something which has the effect of holding the agent out as having the necessary authority.
B)the third party has suffered detriment and damages are an inappropriate remedy.
C)the third party knew that the agent did not have actual authority but thought on reasonable grounds that the agent had apparent authority.
D)the principal ought to have foreseen that the agent would do the act or enter into the contract.

Question 8

Which of the following statements is not true of an enduring power of attorney?

A)It is sometimes called a living will.
B)It generally takes effect when and if the principal loses intellectual capacity.
C)It generally lapses when and if the principal loses intellectual capacity.
D)Like a general power of attorney it is a written grant of express actual authority.

Question 9

A mercantile agent is called a 'factor' if:

A)they are not in possession of the principal's property.
B)they are in possession of the principal's property.
C)they are an insurance broker.
D)they are a stockbroker.

Question 10

Freud Fallis, an organisational psychologist with the Australian Tax Department ('ATD'), has long been complaining to management about the drabness of the ATD's offices and its detrimental effect on staff morale.Weary of his persistence in championing unorthodox ideas, ATD's management decide that Freud's contract will not be renewed.After this decision is communicated to Freud, as a 'last hurrah' and without express authority, he moves ahead his plans to engage the producers of a 60-minute makeover television show to revamp the ATD's offices on a weekend.To Freud's surprise the ATD's management is not happy with the erotic sculptures, strobe lighting and psychedelic wallpaper the decorators use.Which of the following would mean that the ATD is not liable to pay the show's producers?

A)The producers of the show did not have actual or implied authority to transform the offices of the tax department.
B)It was not reasonable for the makeover show's producers to assume that Freud had authority to make such outlandish renovations, and at the time they were engaged, they did not believe that he had such authority.
C)Freud was not an independent contractor but was an employee of the ATD.
D)The ATD was not intending to renew Freud's contract and thus could not have authorised the renovations.

Question 11

Generally speaking, when will a person become expressly authorised to act as agent for a principal?

A)When the principal grants such authority verbally or in writing.
B)When the agent has an enduring power of attorney.
C)When the agent's actions can reasonably be seen to be within the scope of their job description.
D)When the principal becomes incapacitated and the agent has a general power of attorney.

Question 12

James Pierce is a Sydney pet shop owner who frequently orders litters of pedigree puppies from interstate.These are delivered by rail to a local station where James collects them.On one particular occasion, due to industrial action in Sydney, James cannot make it to the station to collect a litter.Jeff, the manager of the rail yard, sees the train arrive and, after a time, takes the liberty of arranging for the litter to be put into a nearby pet hotel for the weekend, fearing that they will not survive at the rail yard in the summer heat.James, upset at the high cost of the pet hotel, refuses to honour the contract Jeff has made with the hotel owners.Which of the following matters is not relevant in determining whether or not James must pay the hotel bill?

A)Whether Jeff could have contacted James at the time of the delivery to get express instructions.
B)Whether Jeff acted in good faith.
C)Whether Jeff effectively had possession and control of the pets.
D)Whether Jeff was authorised by his employer to take the puppies to the pet hotel.

Question 13

Del credere agents are generally paid a higher commission than other agents because:

A)They agree to indemnify the principal in the event of non-performance by the third party.
B)They have special skills and experience.
C)They agree to indemnify the principal in the event of negligence on their part.
D)They work in at the upper end of the stock market dealing with high volumes of premium stocks and shares.

Question 14

Solicitors are:

A)commonly but not necessarily agents of their clients.
B)always agents of their clients.
C)never agents of their clients.
D)universal agents of their clients.

Question 15

Which of the following statements is false?
A)An insurance broker is an independent intermediary between an insurance company and the insured.
B)An insurance broker usually acts for the insured.
C)An insurance agent is engaged by and represents the insurance company.
D)An insurance agent is engaged by and represents the insured person.
Feedback:

A) Learning objective 10.1: What is the relationship between a 'principal', an 'agent' and a 'third party'?
And the client.

Question 16

Which of the following is not true of ratification?

A)It may be express.
B)It may be implied.
C)It may take place before the act to be ratified has occurred.
D)A new company ('the principal') can ratify acts made by its founders ('the agents') before the company came into existence.

Question 17

In which of the following circumstances will an agent's act not generally be binding on the principal because the agent has no authority (leaving aside contexts in which the agent has apparent authority)?

A)When the agent was given verbal authority by the principal to do the act.
B)When the principal has ratified the act verbally.
C)When the act was something necessary or appropriate given the scope of the agent's actual authority although they had no express authority.
D)When the agent's authority was given verbally in circumstances in which legislation required the authority to be given in writing.

Question 18

Brokers are in the business of:

A)selling property that is not in their possession.
B)selling intellectual property.
C)selling stock, insurance, finance, cars and so on that they have purchased.
D)selling stock, insurance, finance, cars and so on that they own.

Question 19

A 'special agent', in a legal context, is best defined as someone who:

A)has limited authority to act on behalf of the principal.
B)has unrestricted authority to act on behalf of the principal.
C)has broad general authority to act on behalf of a principal.
D)drinks martinis, drives fast cars and defers to no authority.

Question 20

What is the relationship between the concepts of 'agent' and 'employee'?

A)All employees are agents.
B)All agents are a kind of employee.
C)Not all agents are employees but all employees are agents.
D)Not all agents are employees and not all employees are agents.

Question 21

If a third party learns that an agent was acting for an undisclosed principal, the third party has the right to:

A)enforce the contract against the principal and the agent jointly.
B)enforce the contract against the principal only.
C)enforce the contract against the agent only.
D)enforce the contract against either the principal or the agent but not both.

Question 22

An agent's right to remuneration is:

A)inherent.A right of payment is essential to establish a relationship of agency.
B)a term of the contract between principal and agent.
C)determined by law.
D)a right to a commission only.

Question 23

A real estate agent who learns that a property comparable to their client's property, in the same street, sold for a price well above that for which their client's property is listed on the market should:

A)pass this information on to their client.
B)suggest to their client that the asking price be increased.
C)advise their client not to sell their property.
D)disregard the information.

Question 24

The test for determining whether or not a gratuitous agent has breached their duty of care to the principal is:

A)a subjective test which entails consideration of what the agent thought was reasonable action in the circumstances.
B)a subjective test which entails consideration of the degree of care a professional of reasonable skill and competence would exercise.
C)an objective test which entails consideration of the degree of care that the agent ordinarily uses in attending to their own affairs.
D)an objective test which entails consideration of the degree of care a reasonable person would exercise.

Question 25

Generally speaking, agents are entitled to be indemnified by the principal:

A)for payments, expenses and liabilities specifically agreed upon either verbally or in writing.
B)for payments, expenses and liabilities contemplated by both parties at the time of entry into the agency agreement.
C)for all payments, expenses and liabilities covered by the terms of their agreement.
D)for all payments, expenses and liabilities incurred by the agent as a necessary result of carrying out the principal's instructions.

Question 26

The word remuneration is closest in meaning to the word:

A)payment.
B)gratitude.
C)indemnity.
D)damages.

Question 27

If an agent does an act that they were expressly instructed by the principal not to do, and the act is beyond the scope of their express or apparent authority, what will generally happen if the act is a tort that causes harm to a third party?

A)The principal will not be liable for the agent's actions and the third party will not be able to sue the principal in respect of the tort.
B)The principal will be entitled to terminate the agent's employment and have them prosecuted.
C)The principal will be liable for the agent's actions and can be sued for the tort.
D)The agent will be an independent contractor.

Question 28

If an agent is found to have received a secret commission from a third party, the principal is not entitled to:

A)recover the secret commission and report the matter to the relevant authorities.
B)refuse to pay any commission owed to the agent.
C)terminate the contract with the agent and the contract with the third party.
D)sue the agent in the tort of passing off.

Question 29

If the principal owes money to the agent and the agent holds some of the principal's property, the agent may:

A)sell the property or hold the property until the money is paid.
B)sell the property and recover the amount of money owed to them.
C)hold the property until the money is paid.
D)hold the property until the principal asks for it.

Question 30

A gratuitous agent is:

A)an agent who is not known to the principal.
B)an agent who is not paid by the principal.
C)required to exercise a higher standard of care than a professional agent.
D)an agent who is not an employee of the principal.

Question 31

An agent has a fiduciary duty to exercise their duties in a way that:

A)is not contrary to the interests of the principal.
B)is mutually advantageous.
C)puts the interests of the principal beyond all other considerations.
D)promotes the interests of the principal amongst third parties however possible.

Question 32

The receipt of a secret commission by an agent is not which of the following:

A)legitimate remuneration.
B)conduct that conflicts with the agent's fiduciary duty.
C)a crime.
D)payment made by a third party to an agent without the principal's permission or knowledge.

Question 33

An agent in Queensland who fails to carry out their job with due care and skill will not be liable in negligence if:

A)they are a professional and they acted in a manner that is widely accepted in Australia by peer professional opinion to be competent professional practice.
B)they have exercised the level of skill and competence that they and their peers would exercise in their own affairs.
C)they are not a professional.
D)they are a gratuitous agent and therefore owe a lesser standard of care to the principal.

Question 34

Which of the following circumstances is not an exception to the rule that an agent is not personally liable for liabilities incurred on behalf of the principal?

A)Where the doctrine of the undisclosed principle applies.
B)Where custom or usage establishes that the agent will be personally liable.
C)Where a tort has been committed by the agent.
D)Where there has been a breach of warranty of authority.

Question 35

If a principal's instructions are vague or ambiguous the agent:

A)will not be in breach of the duty to follow instructions if they have interpreted the instructions honestly.
B)has a duty to seek to clarify them before acting, or they will breach their duty to follow instructions.
C)is not obliged to follow the instructions.
D)has a lower standard of care to the principal in respect of the task that is related to the instructions.

Question 36

The agent's duty of confidentiality is a duty that prevents the agent from:

A)ever disclosing to others information about the affairs of the principal or using for their own benefit information about the principal.
B)disclosing damaging information about the affairs of the principal.
C)ever using information about the principal for their own benefit.
D)disclosing to others or using for their own benefit information about the principal's affairs without the principal's permission during the course of the agency.

Question 37

The agent has a duty to pass on to the principal:

A)any information they learn in the course of acting on behalf of the principal that a reasonable person would think to be of interest to the principal.
B)only information expressly requested by the principal.
C)only information required to be passed on to the principal by the legislation governing their relationship.
D)any information they learn in the course of acting on behalf of the principal.

Question 38

The indemnity a principal ordinarily owes to an agent extends to:

A)all payments made, expenses incurred and liabilities assumed as a necessary result of carrying out the instructions of the principal.
B)all of the agent's business expenses.
C)all of the expenses and liabilities of the agent however they arise.
D)all payments made and expenses and outlays incurred while the agent is carrying out the instructions of the principal, but not liabilities to third parties.

Question 39

An agent must keep the funds of the principal at all times:

A)separate from their own.
B)in a bank account.
C)in a jointly held account.
D)in a trust account.

Question 40

An agent who does something that they were not in fact authorised to do, but had apparent authority to do, will:

A)have breached the duty to follow the principal's instructions.
B)not be liable to the principal.
C)be liable to criminal prosecution.
D)be liable to the principal and to the third party, if either has suffered damage.

Question 41

A mercantile agent is an agent who:

A)is authorised to act on behalf of the principal in commercial matters.
B)sells the principal's property in the agent's own name.
C)is authorised to act on behalf of the principal in private matters.
D)sells the principal's property in the principal's name.

Question 42

A del credere agent:

A)agrees to indemnify the principal in the event of non-performance by the third party.
B)is usually not entitled to a commission.
C)agrees to indemnify the principal in the event of negligence.
D)is authorised to do anything on behalf of the principal that the principal can do.

Question 43

Authority by ratification exists if the principal:

A)authorises the agent's act retrospectively.
B)denounces the agent's act.
C)authorises the agent's act in advance.
D)authorises the agent's act in writing.

Question 44

If an agent is appointed to engage in illegal acts on behalf of the principal:

A)the agent's appointment can be terminated by principal or agent without notice.
B)the agent's appointment is automatically terminated.
C)any contract negotiated by the agent on behalf of the principal, while enforceable in a civil court, will attract criminal penalties.
D)the third party will not be bound to honour the contract with the principal but the agent's appointment will be valid.

Question 45

A is engaged as the personal assistant for P, a famous celebrity.A regularly hires luxury cars on behalf of P, for which P regularly pays.One weekend, without P's permission, A hires a Porsche in P's name for A's own personal use.Is P entitled to refuse to pay for the hiring of the Porsche?

A)Yes.A was not authorised to hire the car on P's behalf.
B)No.A had apparent authority and P is bound by A's order.
C)No.A had the express authority of P.
D)Yes.The supplier should have checked that A was authorised by P before hiring the car to A.

Question 46

An agent may have apparent authority to act on behalf of the principal:

A)even in the absence of actual authority.
B)even if the third party did not know they were an agent.
C)even in the absence of a 'holding out' by the principal.
D)even if the third party knew the agent had no authority.

Question 47

Once a relationship of agency has been brought to an end:

A)the agent may still have actual authority to act on behalf of the principal.
B)the principal may still be liable for acts of the agent that are committed whilst the agent is acting within the scope of their apparent authority.
C)the principal may still be liable for acts of the agent that are committed whilst the agent is acting within the scope of their implied authority.
D)the principal will be liable to third parties in respect of acts of their agent in any case in which they have not notified the third party in writing that the agent is no longer acting for them.

Question 48

A broker is:

A)an agent who is authorised to sell the principal's property without being in possession of the property.
B)an agent who is authorised to sell the principal's property while being in possession of the property.
C)a principal who is authorised to sell the agent's property without being in possession of the property.
D)a principal who is authorised to sell the agent's property while being in possession of the property.

Question 49

P enters into a contract with A according to which A is to deliver a crate of P's watermelons to a customer in another State by a certain date.The delivery is delayed by flooding, and rather than allow the watermelons to perish, A sells them to local buyers along the way.P sues A for compensation.Could A successfully argue that they had the authority to sell the watermelons on P's behalf?

A)Yes, because A had express authority to sell the watermelons.
B)No, because A did not have actual authority to sell the bananas.
C)No, because A should have tried to contact P to get instructions.
D)Yes, because A had authority by necessity to sell the watermelons.

Question 50

An enduring power of attorney:

A)is implied rather than express.
B)is, strictly speaking, not a form of agency.
C)continues even if the principal loses intellectual capacity.
D)is no longer permitted under current law.

Question 51

Which of the following is not a requirement for establishing a breach of warranty of authority on the part of an agent?

A)The agent claimed that they were making a contract on behalf of the principal.
B)The agent claimed that they were making a contract on their own behalf.
C)The agent did not in fact have authority to act on behalf of the principal.
D)The third party relied on the agent's representation and would not have entered into the contract but for the representation.

Question 52

Felicity Featherstone is appointed by Giovanni, the owner of the restaurant The Purple Palace ('TPP'), to arrange cleaning contractors to clean TPP.Before she has had a chance to take any step toward hiring cleaners, TPP is totally destroyed by flood.What is the effect, in law, of this event on the agency agreement between Felicity Featherstone and Giovanni?

A)That is something for Felicity and Giovanni to decide.
B)The agreement has been repudiated.
C)The agreement has been frustrated.
D)There has been a fundamental breach of the agreement

Question 53

Implied authority of a company director to act on behalf of the company:

A)does not exist.
B)is usually set out in the company constitution.
C)includes authority to hire employees.
D)tends to increase with the seniority of the director's position.

Question 54

A 'special agent' is an agent with:

A)limited authority to act on behalf of the principal.
B)unrestricted authority to act on behalf of the principal.
C)broad general authority to act on behalf of a principal.
D)no authority to act on behalf of the principal.

Question 55

The legal term 'principal' means:

A)an ideal or value.
B)the head of a school or organisation.
C)a person represented by an agent and legally responsible for that agent.
D)a person who is the employer of an agent and legally responsible for that agent.

Question 56

If an agent appointed under a power of attorney acts on behalf of a principal after the principal dies but before the agent has been informed of the death, power of attorney legislation in each state provides that:

A)the agent's act will not bind the principal's estate and any contracts entered into by the agent on the principal's behalf are void.
B)the agent will be personally liable for any contracts entered into.
C)the agent's actions will bind the estate of the principal.
D)any contracts entered into on behalf of the principal by the agent are voidable and may be terminated at the discretion of the executors of the principal's estate.

Question 57

Complete loss of intellectual/legal capacity on the part of the principal will:

A)give the principal the right to elect to terminate the agency agreement.
B)automatically terminate the agency unless the agent was appointed under the authority of a general power of attorney.
C)automatically terminate the agency unless the agent was appointed under the authority of an enduring power of attorney.
D)increasing the standard of care owed by the agent to the principal and broaden the scope of their duties.

Question 58

P, the manager of a DVD store, tells A, a sales person, not to sell a particular DVD because it has been set aside for another customer.A accidentally sells the DVD to T.Can P recover the DVD from T?

A)No, because A acted with apparent authority.
B)No, because damages would be an appropriate remedy.
C)Yes, because A acted without actual authority.
D)Yes, because A acted negligently.

Question 59

Where a third party contracts with an undisclosed principal via an agent, the principal will still be able to enforce the contract with the third party unless:

A)the agent did not have authority to act for the principal or the agent told the third party that they were acting on their own behalf.
B)the agent did not act in good faith.
C)the third party chooses not to proceed with the contract.
D)the terms of the contract are unfair to the third party.

Question 60

The legal term 'agent' means:

A)a person who is authorised to act on behalf of a principal.
B)a person who is employed by a principal.
C)a person with whom the principal has entered into a contract to do important work.
D)a person who is engaged by the principal as an independent contractor.

Question 61

An agent who acts without actual authority but with apparent authority is likely to be:

A)in breach of the duty to follow the principal's instructions.
B)in breach of the duty not to delegate.
C)prosecuted.
D)personally liable.

Question 62

A is authorised by P to negotiate a contract with T on P's behalf.A will be personally liable to T if they fail to:

A)tell T that they are acting for P.
B)tell T P's name.
C)show T their written authority to act on P's behalf.
D)show P their written authority to act on T's behalf.

Question 63

The receipt of a secret commission by an agent is:

A)legal.
B)normal.
C)equitable.
D)criminal.

Question 64

A 'gratuitous agent' is:

A)an agent paid at a higher rate than usual.
B)an agent who agrees to act without being paid by the principal.
C)an agent who is reimbursed but not indemnified.
D)an agent who has exercised a lien over the principal's property.

Question 65

An agent should keep any funds of the principal that they acquire:

A)separate from their own.
B)in a safe.
C)until they get paid.
D)in multiple currencies.

Question 66

Which of the following statements about employees and agents is correct?

A)All employees are agents.
B)Not all employees are agents but all agents are employees.
C)Not all agents are employees but all employees are agents.
D)Not all agents are employees and not all employees are agents.

Question 67

The agent must pass on to the principal:

A)all information they learn during the period they are acting as an agent that a reasonable person would think to be of interest to the principal.
B)all money acquired during the period they are acting as an agent.
C)all money paid by the third party including any commission payable by the principal to the agent.
D)all information they learn during the period they are acting as an agent.

Question 68

An agent will breach their duty to act personally if they:

A)delegate administrative aspects of the task to an employee.
B)arrange for another to carry out the task, even if the principal gives their permission.
C)keep to themselves information they learn that is of obvious interest to the principal.
D)appoint an agent to carry out the principal's instructions on behalf of the agent, without informing the principal.

Question 69

T makes a written offer to A to lease certain property to P, which A accepts on behalf of P.A did not have actual authority to accept the offer on behalf of P.T withdraws the offer.P then ratifies the A's acceptance.Does T have an agreement with P?

A)Yes.The ratification will operate retrospectively.
B)No.Ratification does not operate retrospectively.
C)Yes.At the time of acceptance A had actual authority.
D)No.At the time of acceptance A did not have implied authority.

Question 70

The relationship between a principal and agent is:

A)fiduciary.
B)non-contractual.
C)platonic.
D)equal.

Question 71

An agent is entitled to remuneration:

A)regardless of the principal's intentions.
B)if agreed by the principal and agent.
C)according to legislation.
D)as reimbursement for expenses incurred on behalf of the principal.

Question 72

Authority by necessity exists if:

A)something has to be done in an emergency situation on behalf of a principal that is within the scope of an agent's implied authority.
B)the agent lacks actual authority but needs to do something to protect the property of the principal.
C)there is no good faith on the part of the agent.
D)the agent is compelled to act on behalf of the principal in order to protect the interests or property of the agent.