Deck 29: Agency Formation and Termination

Question 1

A corporation must conduct all of its business affairs through agents.

Answer 1

True

Question 2

A principal who lacks contractual capacity can appoint an agent.

Answer 2

False

Question 3

When a principal hires another to kill someone,an agency is created.

Answer 3

False

Question 4

The principal has the duty to cooperate with the agent in the performance of his or her duties.

Question 5

Agency relationships are not necessary to the operation of a partnership.

Question 6

Generally,in agency situations,the principal and agent must both have contractual capacity.

Question 7

An agency by estoppel arises when a principal expressly creates the agency relationship with an agent.

Question 8

An express agency is one that happens when a principal and an agent expressly agree to enter into an agency agreement with each other.

Question 9

An agent who has negligently failed to perform as per the agency contract is liable only for breach of contract.

Question 10

In an express agency called a power of attorney,the principal is the attorney-in-fact.

Question 11

An attorney is an agent when he represents a client.

Question 12

A person who is not an employee who is employed by a principal to perform a certain task on his behalf is an independent contractor.

Question 13

A principal must compensate an agent at the completion of the agency or some other agreed upon time.

Question 14

A principal-agent relationship exists when an employer hires an employee to perform some form of physical service.

Question 15

Even if an employee cannot enter into contracts,a principal-agent relationship is formed by virtue of the employment relationship itself.

Question 16

An agency relationship is created by the mutual consent of a principal and an agent.

Question 17

An agency may be created even if a person misrepresents himself or herself as being another's agent when he or she really is not if the purported principal accepts the unauthorized act.

Question 18

Implied authority in an implied agency may be conferred by industry custom.

Question 19

An agent assumes the financial responsibility for all expenses within the scope of the agency.

Question 20

Agency is a fiduciary relationship.

Question 21

An agency agreement may exist for an infinite period of time.

Question 22

Any money or other benefit received by the agent in the course of the agency belongs to the agent.

Question 23

Which of the following is true about determining whether someone working for another is an independent contractor or an employee?

A) The classification of the person doing the work depends on that person's job title.
B) The classification of the person doing the work depends on whether the parties to the arrangement consider the person doing the work to be an employee or independent contractor.
C) The classification of the person doing the work depends on if the person is also an agent.
D) The classification of the person doing the work depends on a number of factors,with no single factor being any more important than the others.
E) The classification of the person doing the work depends on a number of factors,with the degree of control over that person's work by the person who is paying for the work being the most important factor.

Question 24

An agency may be terminated if the principal is declared bankrupt.

Question 25

Compared to an employee,an independent contractor is characterized by:

A) not being paid as much for the work performed
B) a lack of liability for her own actions
C) more freedom to do her work in the manner she determines
D) less ability to hire others to assist her

Question 26

An agency agreement may terminate after a certain event happens.

Question 27

Which of the following is true?

A) All employees are agents,and no independent contractors are agents.
B) All employees are agents,and some independent contractors are agents.
C) Some employees are agents,and some independent contractors are agents.
D) Some employees are agents,and no independent contractors are agents.
E) No employees are agents,and no independent contractors are agents.

Question 28

Which is true about agency agreements?

A) A minor may generally be a principal.
B) A minor may generally be an agent.
C) An agency agreement must have consideration on both the principal's and agent's side.
D) Agents must disclose their agency status to those with whom they are dealing.

Question 29

An agency is not terminated by the loss of a required qualification.

Question 30

An agent may continue to represent the principal even after the agency relationship is terminated.

Question 31

The general reference source for agency law is:

A) Article 4 of the Uniform Commercial Code
B) United States Supreme Court opinions
C) the Restatement (Second) of Agency
D) the Restatement (Second) of Contracts
E) state constitutions

Question 32

When an agency agreement terminates,direct notice of the termination must be given to all persons who dealt with the agent.

Question 33

An agency always requires:

A) both an agent and principal who are adults
B) a written contract
C) consideration on the part of both the principal and the agent
D) an identified underlying transaction
E) intent by both the principal and agent to be in the arrangement

Question 34

The primary function of an agent in a principal-agent relationship is to:

A) protect the principal from legal liability
B) conduct business on behalf of the principal
C) enter into contracts with the principal
D) operate as a partner with the principal
E) maintain the principal's status quo

Question 35

The termination of an agency by the agent is called the revocation of authority.

Question 36

Which of the following is generally true about a relationship where one party works for another?

A) A party can simultaneously be an employee and an independent contractor.
B) A party can simultaneously be an employee and an agent.
C) A party can simultaneously be an independent contractor and an agent.
D) Both B and C are true.
E) A,B,and C are true.

Question 37

When a principal terminates an agency contract,it is called a renunciation of authority.

Question 38

Assuming that any minor who is involved is old enough to understand the terms of a agency relationship,which of the following is generally true?

A) A minor can act as an agent on behalf of another minor.
B) An adult can act as an agent on behalf of a minor.
C) A minor can act as an agent on behalf of an adult.
D) An adult can act as an agent on behalf of a minor if the minor waives his right to disaffirm.
E) The principal can disaffirm all contracts that involve a minor as either principal or agent.

Question 39

An agency coupled with an interest is terminated by the death or incapacity of either the principal or the agent.

Question 40

Someone authorized to act on behalf of another is generally known as a(n):

A) agent
B) independent contractor
C) employee
D) surety

Question 41

What is the effect of an agent terminating a fixed-term agency prior to the expiration of the stated period of time?

A) The agency is terminated without further legal consequences.
B) The attempted termination of the agency is not effective.
C) The agency is terminated,but the agent might be liable for damages to the principal.
D) Any contracts previously formed by the agent can be disaffirmed by the third party.
E) The authority of the agent changes from express to apparent.

Question 42

An agency arrangement can be terminated by:

A) achievement of the agency's purpose
B) mutual agreement
C) occurrence of a specified event
D) both A and B
E) A,B,and C

Question 43

Where an employer makes use of a job title in an employment situation,which kind of authority can arise in the employee based on the job title?

A) apparent authority
B) authority by estoppel
C) inherent authority
D) express authority
E) implied authority

Question 44

An express agency arrangement can be formed with which types of agreements?

A) written only
B) oral only
C) oral or written
D) An agreement is not necessary to form an express agency.

Question 45

Implied authority can be best described as a situation where:

A) the principal and agent undertake actions in accordance with their earlier agreement that one act as agent for the other
B) the principal has made representations to a third party that someone is to act as her agent
C) the agent has made representations to a third party that he is acting as an agent for another
D) the conduct of two parties indicates that they are acting in a principal and agent capacity
E) both B and C

Question 46

When a principal terminates an agency arrangement,the principal's action is called:

A) revocation of authority
B) rejection of authority
C) renunciation of authority
D) reaffirmation of authority
E) reacquisition of authority

Question 47

Where the principal makes representations to a third party about the role that an agent is to play,which kind of authority can be created?

A) apparent authority
B) authority by estoppel
C) inherent authority
D) express authority
E) implied authority

Question 48

An agency arrangement based on the conduct of the two parties is what type of agency?

A) express
B) implied
C) inherent
D) apparent

Question 49

The death of which party or parties will cause an agency to terminate?

A) the principal only
B) the agent only
C) either the principal or the agent
D) neither the principal nor the agent

Question 50

An agent negotiates a contract with a third party,for which the agent did not have express authority.Which of the following is true?

A) The principal can never be held liable on the contract because the agent exceeded his authority.
B) The principal can be liable on the contract only if the agent had implied authority to enter into the contract.
C) The principal can be liable on the contract only if apparent authority was present.
D) Either implied or apparent authority might cause the principal to be liable on the contract.

Question 51

Incidental authority is a kind of:

A) express authority
B) implied authority
C) apparent authority
D) authority by ratification
E) authorization without authority

Question 52

When an agent terminates an agency arrangement,the agent's action is called:

A) revocation of authority
B) rejection of authority
C) renunciation of authority
D) reaffirmation of authority
E) reacquisition of authority

Question 53

An express written agency agreement that is often used to give an agent the power to sign legal documents on behalf of the principal is know as a(n):

A) exclusive agency contract
B) power of attorney
C) employer-employee relationship
D) employer-independent contractor relationship

Question 54

In the context of agency,ratification refers to:

A) reaffirming a contract to which one previously agreed
B) agreeing,after reaching majority,to be bound by a contract entered into as a minor
C) agreeing to be bound to a contract entered into by an agent that exceeded the agent's authority at the time the agent entered into it
D) getting the appropriate agency to agree to take steps to reduce an excessively large rodent population

Question 55

Apparent authority can be best described as a situation where:

A) he principal and agent undertake actions in accordance with their earlier agreement that one act as agent for the other
B) the principal has made representations to a third party that someone is to act as her agent
C) the agent has made representations to a third party that he is acting as an agent for another
D) the conduct of two parties indicates that they are acting in a principal and agent capacity
E) both B and C

Question 56

The bankruptcy of which party or parties will cause an agency to terminate?

A) the principal only
B) the agent only
C) either the principal or the agent
D) neither the principal nor the agent

Question 57

If the law changes such that the actions called for in an agency arrangement become illegal after the agency has been carried on legally for some period of time,what is the consequence?

A) The agency is terminated retroactively and the parties are left where they are.
B) The agency is terminated retroactively and the parties must each return any consideration received from the other.
C) The agency is terminated effective upon the change in law taking effect.
D) The agency is not terminated,but the principal and agent will each become liable for his or her own illegal actions.
E) The agency is not terminated,but the principal and agent will each become liable for the illegal actions of the other.

Question 58

Which of the following is not one of the common types of agent authority?

A) apparent
B) implied
C) actual
D) dependent
E) agency by ratification

Question 59

An express agency requires:

A) a written agreement between the principal and agent
B) an oral or written agreement between the principal and agent
C) no agreement if the conduct indicates an implied agreement
D) an ongoing arrangement for a reasonable period of time

Question 60

In an agency for a fixed term,such as 1 year,prior to the end of the stated period,the agent has:

A) the power,but not the right,to terminate the arrangement
B) the right,but not the power,to terminate the arrangement
C) both the power and the right to terminate the arrangement
D) neither the power nor the right to terminate the arrangement

Question 61

Why can apparent agency be created only by representations of the principal,but not the supposed agent?

Question 62

You have contracted orally with Patty to buy some real estate on her behalf.The only limitations are that she wants a vacant lot in a residential area for less than $100,000.If you find such a residential lot costing $85,000,what type of authority do you have to enter into this transaction on Patty's behalf?

A) express
B) apparent
C) implied
D) ratification

Question 63

Bob enlists the help of his son to buy a new car.On the way to test-drive several models,Bob tells his son,"I'm leaving this entire decision up to you except that you are not to spend over $20,000 on whatever car you decide on." At the Toyota dealer,Bob tells the salesperson,"I'm turning this whole decision over to my son,so deal with him even though it will be my car." Later,the son returns to the dealership and negotiates the purchase of a Toyota Camry for $21,500.What type of authority,if any,existed for the son to purchase this car?

A) apparent
B) implied
C) actual
D) dependent
E) No authority existed here.

Question 64

Which of the following would not terminate an agency by operation of law?

A) A real estate agent loses his license.
B) A principal hires another agent with similar duties.
C) The principal is declared bankrupt.
D) A lightning bolt kills the principal.

Question 65

Susan Marie works as a receptionist for a computer software company.Susan Marie works from 8 a.m.to 5 p.m.on Monday through Thursday,and from 8 a.m.to noon on Friday.Susan Marie is paid $15 per hour,and is told how to do her job and what she should be working on at any particular time.The software company and Susan Marie have executed an "independent contractor agreement" in which the terms of this arrangement are specified.Which of the following is true?

A) Susan Marie would be treated as an employee because she is paid for the work that she does.
B) Susan Marie would be treated as an employee because of the control exercised by the software company over her work and because of the manner in which she is paid.
C) Susan Marie would be treated as an independent contractor because of the terms of the express agreement with the software firm.
D) Susan Marie would be treated as an independent contractor because of the irregular working hours of working only part of the day on Fridays.

Question 66

A principal and agent enter into an agency agreement under which the agent has a fixed 90-day period to sell the principal's house.Which of the following will end the agency arrangement prior to the end of the 90-day period?

A) Notification by the principal that the arrangement is over.
B) Notification by the agent that the arrangement is over.
C) Notification by either the agent or the principal that the arrangement is over.
D) Neither the agent nor the principal can unilaterally end the arrangement prior to the expiration of the 90-day period.

Question 67

Ringo is a welder at a manufacturing facility.His main function at the organization is to perform welding related tasks.His job does not entail purchasing,and he rarely interacts with anyone outside of the organization.While at the grocery store,he runs into George,a salesman from a welding supply company.George tells Ringo that he will sell the company welding supplies at a significant discount if he can sign an exclusive contract immediately.Ringo thinks it looks like a good deal,so he signs his company up for the terrific bargain. Ringo tells his boss,Paul,about the deal.Paul is initially upset,but after review of the contract he decides to accept shipment of the supplies for the next few months.After a few months have passed,John,a salesman from a competing welding supply company offers an even better deal to Paul.Paul wants to get out of the contract with George.He's thinking of telling George that the initial contract wasn't valid because Ringo did not have authority to sign on behalf of the company.What is the most likely result?

A) The company will not be liable because Ringo had no authority by virtue of his position.
B) The company will not be liable because Ringo did not have authority to sign the contract,and ratification did not occur.
C) The company will be liable because Ringo is an authorized to bind the company by virtue of his position.
D) The company will be liable. Ringo is not authorized,but the actions of Paul constitute ratification.

Question 68

Pam and Alex enter into a contract for an agency agreement that states that Alex is Pam's agent to sell Pam's house.The term of the agency is from January 1 to April 1,2002.Which is true as of February 29,2002?

A) Neither Pam nor Alex has the power to end this agency.
B) Both Pam and Alex have the power to end this agency.
C) Pam has both the right and power to end this agency; Alex has neither.
D) Alex has both the right and power to end this agency; Pam has neither.

Question 69

The principal hires an agent to manage her boutique.After several months,the principal fires this agent.To avoid liability for any further acts done by this agent,the principal must give:

A) direct notice to all persons who knew of the agency
B) direct notice to those who dealt with the agent,and no notice to anyone else
C) direct notice to those who dealt with the agent,but only constructive notice to those who knew of the agency but did not deal with the agent
D) constructive notice to all persons who knew of the agency,and no notice to anyone else
E) No notice of the termination is required in order to avoid liability.

Question 70

A principal gives an agent express authority to "get his car running right." The authority that the agent has to enter into contracts for the purchase of auto parts is:

A) apparent authority
B) authority by estoppel
C) inherent authority
D) express authority
E) implied authority

Question 71

Ms.Principal and Mr.Agent sign an agency contract under which Agent will sell Principal's house for a fee of $10,000.Assume that the contract is valid in all respects and that on the third day of the contract period,Ms.Principal tells Mr.Agent that she has changed her mind and doesn't want him to sell the house.The next day Mr.Agent goes to Ms.Principal with a ready,willing,and able buyer.Ms.Principal:

A) must sell to the buyer because the agency is still in existence
B) cannot sell to the buyer because the agency is no longer in existence
C) can recover damages from Mr. Agent because the agency had ended
D) is not obligated to sell to the buyer because her renunciation had terminated the agency arrangement
E) may sell to the buyer even though the agency arrangement was no longer in existence

Question 72

What is the significance of an agency coupled with an interest?

A) Only apparent authority can exist.
B) The agency cannot be terminated unilaterally by the principal.
C) The agent must be compensated for the agent's efforts.
D) The agency cannot be terminated by agreement of the principal and agent.
E) Both B and D are true.

Question 73

Principal has entered into a 6-month contract during which Agent will sell Principal's products on a commission basis.Although Agent is complying with all terms of the agreement,during the third month Principal tells Agent she is no longer going to sell his products and will receive no further commissions if she does.Which of the following is true?

A) Agent continues to have a duty to sell because the 6 months are not yet over.
B) Principal has the power,but not the right,to terminate the agency.
C) Principal has the right,but not the power,to terminate the agency.
D) Principal has both the right and the power to terminate the agency.
E) Principal has neither the right nor the power to terminate the agency.

Question 74

John is hired at minimum wage in a fast-food restaurant.John works at the counter taking customer orders,accepting payment,and giving the orders to the customer.John must work in accordance with a detailed procedures manual.John is:

A) an independent contractor,but not an agent
B) an employee,but not an agent
C) an independent contractor as well as an agent
D) an employee as well as an agent

Question 75

Mickey went to eat at a local restaurant.He was unsatisfied with the meal,and decided to leave quickly without paying.Another patron noticed that Mickey left without paying,and followed Mickey's car onto the highway.The patron called a manager at the restaurant from a cell phone,providing information as to Mickey's location.The manager called 911 to relay the information to the police. The cars were driving at high- speed on the highway.Mickey lost control of his vehicle and suffered significant injuries after crashing into an embankment.The patron drove away from the scene without being identified.Mickey subsequently sued the restaurant,claiming that the patron was an agent of the establishment and therefore vicariously liable for the cause of the accident.Will the patron most likely be considered an agent of the restaurant?

A) Yes; the patron was acting on behalf of the restaurant and to further the purpose of the enterprise.
B) Yes; the patron was communicating with the restaurant manager and being directed by the establishment.
C) No; by the very nature of the definition,patrons are customers of a restaurant and may never act as agents.
D) No; the patron was merely relaying information to the manager,and these facts would not indicate that the manager was controlling the actions of the patron.

Question 76

Jack hires Frankie,who is 13 years old,to buy a computer on Jack's behalf.Which of the following is true?

A) This is a valid agency relationship even though Frankie is a minor,and Jack would be bound by authorized contracts entered into on Jack's behalf.
B) This is a valid agency relationship even though Frankie is a minor,but Jack would be able to disaffirm any contracts entered into on Jack's behalf.
C) This agency arrangement is not valid because the agent lacks contractual capacity.
D) If Frankie buys the computer on Jack's behalf,Frankie would not be entitled to payment under the terms of the agency arrangement because of his lack of capacity.

Question 77

Jeff hires Frank to work for his company.As part of his job duties,Frank must negotiate a contract with another an outside company.In this business relationship,what are the respective roles of the parties?

A) Jeff is the agent,Frank is the principal,and the outside company is a third-party.
B) Frank is the principal,Jeff is the agent,and the outside company is a third-party.
C) Jeff is the principal,Frank is the agent,and the outside company is a third-party.
D) The outside company is the principal,Jeff is the agent,and Frank is a third-party.

Question 78

An agency coupled with an interest typically arises in which situation?

A) The agent is compensated for the performance of the duties.
B) The principal would likely suffer a loss if the agent's duties are not properly performed.
C) The principal gives the agent authority to sell collateral owned by the principal in the event that the principal defaults on a loan payable to the agent.
D) The agent is hired to perform personal services on behalf of the principal.
E) All of the above are true.

Question 79

The principal hires an agent to manage his restaurant.As a result,the agent hires two people to serve as waitstaff.The hiring of the waitstaff is an example of what type of authority?

A) implied
B) express
C) apparent
D) ratified
E) no authority

Question 80

Bob,owner of a small business,goes to Sally to negotiate the purchase of some inventory.Bob has Paul with him,who he introduces to Sally as "Paul,my purchasing manager." A short while later,Bob says he must leave and says,"You two can conclude this deal." Paul signs a contract to buy 2,500 units of her product.Paul tells Bob,and Bob then says,"You know you weren't supposed to buy more than 1,000 units!" Assume that Bob,in fact,had instructed Paul,prior to meeting with Sally,not to buy more than 1,000 units.Can Sally hold Bob to the contract?

A) No,because Paul did not have authority to buy 2,500 units.
B) No,but she can hold him to a purchase of 1,000 units.
C) Yes,because there was implied authority for the transaction.
D) Yes,because there was apparent authority for the transaction.