Deck 17: Agency Relationships in Business

Question 1

Vicarious liability is direct liability.

Answer 1

False

Question 2

The relationship between a principal and an independent contractor cannot involve an agency relationship.

Answer 2

False

Question 3

Normally, employees who deal with third parties are not deemed to be agents.

Answer 3

False

Question 4

An agency relationship is enforceable even if it is created for an illegal purpose.

Question 5

For an agent's implied authority to be effective, a principal must confirm it in writing.

Question 6

An agency agreement can be created by an oral agreement.

Question 7

Agency relationships only exist between employers and employees.

Question 8

A principal does not have the right to control an agent's conduct in matters entrusted to the agent.

Question 9

Under the doctrine of respondeat superior, an agent is liable for any harm caused to a principal by a third party.

Question 10

If an agent has no authority but nevertheless contracts with a third party, the principal can be held liable on the contract even if the principal does not ratify the contract.

Question 11

Independent contractors have no control over the details of their work performance.

Question 12

Through a power of attorney, a principal may never permit an agent to do more than one specified act.

Question 13

An agency coupled with an interest is a relationship created for the benefit of the principal.

Question 14

An agency agreement can be implied by conduct.

Question 15

If a principal is undisclosed, the agent may be liable to the principal for a third party's nonperformance of a contract.

Question 16

The agent has the right to be compensated, and to be reimbursed and indemnified.

Question 17

A principal has a duty to cooperate with the agent and to assist the agent in performing his or he duties.

Question 18

Implied authority is authority declared in clear, direct, definite terms.

Question 19

An agent's duties to the principal arise from the agency relationship only if the identity of the principal is disclosed to a third party.

Question 20

An agent has a duty to keep and make available to the principal an account of all property and funds received and paid out on the principal's behalf.

Question 21

A person must have contractual capacity to enter into an agency contract as a principal.

Question 22

If a principal is disclosed, the agent may be liable to a third party for the principal's nonperformance of a contract.

Question 23

If a principal does not ratify an unauthorized contract, the principal is not bound.

Question 24

An agent has the implied authority to do what is reasonably necessary to carry out express authority.

Question 25

Under the law of agency, notice to the agent is notice to the principal.

Question 26

An agency can terminate once its purpose is achieved.

Question 27

A principal's ratification of an agent's unauthorized act must be express.

Question 28

A power of attorney can permit an agent to transact all business for a principal.

Question 29

A familiar example of an agent is a corporate officer.

Question 30

Limon, an agent for Mindwonder Games LLC, executes an unauthorized contract with NOW Marketing, Inc. The deal is highly advantageous to Mindwonder, and the company ratifies the contract. The contract is

A)valid.
B)vicarious.
C)void.
D)voidable.

Question 31

If a principal ratifies a contract without knowing all of the facts, the principal can rescind the contract.

Question 32

Agency relationships normally are consensual.

Question 33

Alexandra manages a Beans Bistro for Coffee Shops, Inc. To manage the business, Alexandra's authority can be inferred

A)from the position Alexandra occupies.
B)by a reasonable customer or supplier.
C)to contradict Alexandra's express authority.
D)under no circumstances.

Question 34

Vida is a purchasing agent for Wholesome Foods with the authority to buy grain up to a certain quantity. After the grain is bought, the agency relationship terminates

A)automatically.
B)following notice to all actual grain sellers.
C)following notice to all potential grain sellers.
D)following published notice in a local newspaper.

Question 35

An agency by estoppel arises when the principal's actions have created the appearance of an agency that does not in fact exist.

Question 36

Ronda holds herself out as possessing special accounting skills. As an agent, she must exercise the degree of skill or care expected of

A)a person having those skills.
B)an average, unskilled person.
C)a reasonable person.
D)the principal.

Question 37

Without authorization, Rolf contracts on behalf of Sari to have Tige paint the interior and exterior of Sari's house. Aware of all material facts involved, Sari ratifies the contract. Later, Sari tries to rescind the part of the contract relating to the exterior. This attempt will be

A)partly successful.
B)partly unsuccessful.
C)totally successful.
D)totally unsuccessful.

Question 38

Employment laws apply only to the employer-employee relationship.

Question 39

An agent is authorized to act on behalf and instead of a principal in doing business with third parties.

Question 40

An agent's deviation from the lawful, clearly stated instructions of the principal is a violation of the duty of obedience.

Question 41

Watercraft, Inc., employs Vladimir as a sales agent for a trial period. At the end of the period, Watercraft and Vladimir disagree on the amount of the commissions Vladimir is due for sales that he made. Watercraft, Inc. may demand

A)a constructive trust.
B)an accounting.
C)nothing.
D)specific performance.

Question 42

Orina hires Padget, a real estate broker, to sell her oceanfront house. The house is destroyed in a hurricane before being sold. Padget is

A)Orina's agent until Orina's insurer pays Padget's commission.
B)Orina's agent until the destroyed house is sold.
C)Orina's agent until the destroyed house is rebuilt and sold.
D)no longer Orina's agent.

Question 43

Refer to Fact Pattern 17-1. With respect to third parties, Nadya is Purified's

A)employee, agent, and independent contractor.
B)employee and agent.
C)employee but not agent.
D)independent contractor.

Question 44

Geoff serves in a representative capacity for Huck. To accomplish the objectives of this relationship, Geoff's authority can be implied

A)by contradiction.
B)by custom.
C)by lack of reason.
D)under no circumstances.Fact Pattern 17-1 Nadya and Owen work at Purified Water Company.Nadya is a sales representative who works with Purified's customers, including restaurants, grocery stores, and other businesses, as well as individual consumers.Purified closely supervises all of its sales reps, and dictates their schedules.Owen is an engineer who works in Purified's water treatment, but does not deal with third parties.

Question 45

Churchy hires Danielle, a real estate broker, to act as his agent to sell his land for $150,000. Oil is discovered beneath the land, causing its market value to increase considerably. The agency agreement is likely

A)continued with a proportionate increase in Danielle's sales commission.
B)continued until Danielle tells prospective buyers of the discovery.
C)terminated by act of the parties.
D)terminated by operation of law.

Question 46

Roberta introduces Steve to her friends as "my associate." Steve purports to act as Roberta's agent in several business transactions with those friends. If Roberta is liable for Steve's actions, it will be because their relationship is

A)an agency by agreement.
B)an agency by estoppel.
C)an agency by operation of law.
D)not an agency relationship.

Question 47

Kelvin is an agent for Lookout Mountain Accountants, Inc. On Lookout's behalf and at its request, Kelvin pays Nerdlinger for custom software designed for the management of Lookout's services. Kelvin's right to obtain the amount of those payments from Lookout arises under the principal's duty of

A)compensation.
B)cooperation.
C)indemnification.
D)reimbursement.

Question 48

Mirena serves in a representative capacity for Netanya. Orla is injured through Mirena's negligence. Netanya may be liable to Orla if Mirena's conduct occurred

A)due to a propensity Netanya was not and could not have been aware of.
B)during normal working hours.
C)in the course and scope of Mirena's employment.
D)outside the parties' employment relationship.

Question 49

Reynaldo is a delivery driver for Southeast Asian Noodle Company. Reynaldo follows detailed instructions of the company in carrying out his work. Reynaldo is

A)an employee.
B)an employer.
C)an independent contractor.
D)a principal.

Question 50

Baked Bread Company hires Connie to sell the company's products in a certain area. Baked Bread agrees to pay Connie a salary, plus commission, for a trial period. They also agree that Connie can sell using any methods and during any hours that seem appropriate. The key factor in whether Connie is Baked Bread's employee is​

A)the amount of Connie's salary.
B)the control Baked Bread has over the details of the work.
C)the length of the trial period.
D)the size of Connie's sales area.

Question 51

Spicy Hot Dog Vendors, Inc., grants its agent Teona an exclusive territory in which to sell Spicy Hot Dog products. Spicy Hot Dog cannot compete with Teona in that territory under the principal's duty of

A)compensation.
B)cooperation.
C)indemnification.
D)reimbursement.

Question 52

Jim agrees to act on Kit's behalf, subject to Kit's control, and Kit trusts Jim to so act. This describes a relationship between

A)a business and its competitors.
B)a government and its governed.
C)a parent and a child.
D)a principal and an agent.

Question 53

Emmett, an agent for Fridley, signs an agreement with Grover on Fridley's behalf but neglects to tell Fridley that the agreement requires the payment of a certain tax. The government prosecutes Fridley for failing to pay the tax. Fridley is

A)liable, because notice to Emmett is notice to Fridley.
B)liable, because notice to Grover is notice to Fridley.
C)not liable, because Emmett did not notify Fridley of the tax.
D)not liable, because Grover did not tell Fridley about the tax.

Question 54

Quince owns a used-car lot where Ray works as a salesperson. Quince tells Ray not to make any warranties for the cars. To make a sale to Sylvia, however, Ray adds a 50,000-mile warranty. Later, Sylvia sues Quince for breach of warranty. Quince's right to hold Ray liable for any damages arises from the following

A)avoidance.
B)cooperation.
C)the unauthorized act.
D)reimbursement.

Question 55

Jewelry & Coin Company hires Kelly Ann to buy gems and precious metals from various sources on its behalf. In this relationship, Jewelry & Coin is

A)an employee.
B)an independent contractor.
C)a principal.
D)an agent.

Question 56

Refer to Fact Pattern 17-1. With respect to third parties, Owen is Purified's​

A)employee, agent, and independent contractor.
B)employee and agent.
C)employee but not agent.
D)independent contractor.

Question 57

Miklos employs Nathalie to handle a list of financial transactions on Miklos's behalf. This power will terminate on

A)any transaction causing a loss to Miklos.
B)Miklos's death or incapacity.
C)Miklos's sixty-fifth birthday.
D)Nathalie's handling of one of each stipulated transaction.

Question 58

Dimitri, a certified public accountant and an investor, and Elinor, an insurance salesperson and a realtor, may create an agency relationship for

A)a business purpose only.
B)any legal purpose.
C)any legal or illegal purpose.
D)no purpose.Fact Pattern 17-1 Nadya and Owen work at Purified Water Company.Nadya is a sales representative who works with Purified's customers, including restaurants, grocery stores, and other businesses, as well as individual consumers.Purified closely supervises all of its sales reps, and dictates their schedules.Owen is an engineer who works in Purified's water treatment, but does not deal with third parties.

Question 59

Based on Nan's conduct, Odel reasonably believes that Poppy has the authority to act on Nan's behalf even though Poppy does not have the actual authority to do so. In this circumstance, Poppy has

A)apparent authority.
B)express authority.
C)implied authority.
D)no authority.

Question 60

John contracts with Kelly to buy a certain number of cattle for Kelly's Circle K ranch. John makes a deal with Lawson, the owner of a local herd, and makes a down payment. Kelly fails to pay the rest of the price. Lawson sues John for breach of contract. John's right to hold Kelly liable for any damages that he has to pay is the right of

A)compensation.
B)cooperation.
C)indemnification.
D)reimbursement.

Question 61

Picabo drives a truck as an employee for Quik Delivery, Inc. Picabo would most likely be considered acting outside the scope of her employment if she

A)crashed into a car at the airport while off duty.
B)hit a pedestrian in a parking lot during a "working" lunch.
C)ran over an attendant at Quik's gas station while refueling the truck.
D)smashed into a store-front while intoxicated on-duty.

Question 62

Mountain States Distribution Inc. hires Norris to work on Mountain States's shipping dock, accepting deliveries, dispatching trucks, and dealing with customers and other companies' drivers. With respect to Mountain States, Norris is most likely

A)an agent.
B)an independent contractor.
C)a principal.
D)an employer.

Question 63

Cory employs Dash Delivery Agency as an agent under a written agreement that describes the rights and duties of both parties. This is

A)apparent authority.
B)equal authority.
C)express authority.
D)implied authority.

Question 64

Emery is a corporate officer of Frakking Mining Corporation. With respect to binding Frakking Mining to contracts, Emery is

A)an agent and has the authority.
B)an employee and does not have the authority.
C)an independent contractor and does not have the authority.
D)not an agent, an employee, or an independent contractor but does have the authority.

Question 65

Refer to Fact Pattern 17-2. In most states, liability to Désean for nonperformance of the contract may be imposed on

A)none of the choices.
B)Berry and Cuisine Catering.
C)Berry only.
D)Cuisine Catering only.

Question 66

Bud approves on behalf of Cody-but without authorization-a contract with Dick to build a new silo. Cody does not ratify the contract. Later, Dick tries to enforce the deal against Cody. This attempt will be

A)partly successful.
B)partly unsuccessful.
C)totally successful.
D)totally unsuccessful.

Question 67

Refer to Fact Pattern 17-2. Cuisine Catering is

A)a disclosed principal.
B)an apparent agent.
C)an undisclosed principal.
D)a partially disclosed principal.

Question 68

Brenda, a salesperson at a Cabinets & Countertops store, tells D'Antoni, a customer, "Buy your cabinets here, and I'll install them for half of what the store would charge." D'Antoni buys the cabinets, which Brenda installs for half the store's price. Brenda keeps the money. Brenda has breached

A)no duty.
B)the agent's duty of loyalty.
C)the principal's duty of indemnification.
D)the agent's duty of obedience.Fact Pattern 17-2 Berry indicates that she is acting as an agent on behalf of an unidentified client-Cuisine Catering, LLC-when she enters into a contract with Désean.

Question 69

Yoshi contracts with Zach to buy a certain pub, Aficionado's, for Yoshi, who asks Zach not to reveal her identity. Zach makes a deal with Burcet, the owner of the pub, and makes a down payment. Yoshi fails to pay the rest of the price, and does not pay Zach for his services. Does Zach have any recourse against Yoshi? If so, on what basis and to what extent?

Question 70

Jerry agrees to act on Joyce's behalf, subject to her control, and Joyce trusts Jerry to so act. They set out the terms in a written document, which they both sign. This is

A)an agency by agreement.
B)an agency by estoppel.
C)an agency by operation of law.
D)not an agency relationship.

Question 71

Dakota Energy Company employs Evan to negotiate the purchase of mineral rights for future mining projects. Evan secretly buys some of the property and sells it to Dakota at a profit. Evan has breached

A)no duty.
B)the agent's duty of accounting.
C)the agent's duty of loyalty.
D)the principal's duty of compensation.

Question 72

Roman is the chief executive officer of Salty Snax Corporation. Roman's responsibilities include decisions on product development, marketing, and other significant business directions. Roman is subject to the approval and oversight of Salty Snax's board of directors. Teri is a Salty Snax manager whose duties include the firm's day-to-day hiring, firing, purchasing, and selling. Umberto is a Salty Snax salesperson, whose daily activities are controlled by Teri. Velma writes sales manuals and promotional materials for Salty Snax's products according to Roman's instructions and subject to Salty Snax's control, but has no dealings with the company's customers or suppliers. Warren writes copy on a contract-per-project basis and is not otherwise subject to Salty Snax's control. Who is a principal? Who is an agent? Who is an employee? Who is an independent contractor?