Deck 17: Agency Law

Question 1

As a general rule, an agent is liable on contracts entered into on behalf of a fully disclosed principal.

Answer 1

False

Question 2

An agent may not engage in inappropriate behavior that reflects badly on the principal. This rule applies to conduct

A)during working hours.
B)during off-duty time.
C)during both working hours and off-duty time.
D)only by public officials.

Answer 2

C

Question 3

In its most basic terms, a fiduciary relationship is one of

A)trust.
B)control.
C)competition.
D)disclosure.

Answer 3

A

Question 4

The principle of liability stating that an employer is liable for a physical tort committed by an employee acting within the scope of employment and a nonphysical tort of an employee acting with authority is called

A)the equal dignities rule.
B)respondeat superior.
C)fiduciary control.
D)apparent authority.

Question 5

How is consent established in an agency relationship?

A)The principal must ask the agent to do something and the agent must agree.
B)The principal gives consideration to the agent.
C)The principal and agent must have a written, notarized agreement.
D)All of these are correct.

Question 6

Jolene hired Lacy to find a buyer for her house. Adam was interested in buying the house. If both Jolene and Adam agree, Lacy, a real estate agent, may represent both parties.

Question 7

Rob agrees to act as an agent for Diane in selling her car. Diane has a duty of loyalty to Rob.

Question 8

You cannot be held liable for the actions of your agents if the agents are violating your instructions.

Question 9

An agency agreement terminates if the activity involved becomes illegal.

Question 10

An agent is always liable for his or her own torts committed within the scope of the agency relationship.

Question 11

An agent must obey all instructions of the principal.

Question 12

Unless they make an agreement in advance about the term of the agreement, either party to an agency relationship has the power to terminate it at any time.

Question 13

If apparent authority is present, the principal is liable for even the unauthorized acts of the agent.

Question 14

Becky asks her friend Maggie to walk her dog for her, and Maggie agrees. While out walking, the dog gets away from Maggie and runs into Mr. Edwards' garden, digging up some expensive plants. Which statement best characterizes this situation?

A)Becky is liable for the damages to Mr. Edwards' garden, because she exercised control over her agent, Maggie.
B)Maggie is liable for the damages to Mr. Edwards' garden, because she was walking the dog at the time of the damage.
C)Neither Becky nor Maggie is liable for the damages to Mr. Edwards' garden because no agency relationship existed between Becky and Maggie.
D)Both Becky and Maggie are equally liable for the damages to Mr. Edwards' garden--the dog belongs to Becky, but Maggie was walking him at the time of the damage.

Question 15

Kaiya is a sales representative of TriColor. Kaiya owes a fiduciary duty to TriColor.

Question 16

Erica's supervisor told her to arrange for a conference room at the Kelly Inn. Erica has express authority to contract for the room.

Question 17

John hired Tim to sell his house. Which statement is correct?

A)John is Tim's principal.
B)Tim, but not John, can terminate the agency relationship.
C)John, but not Tim, can terminate the agency relationship.
D)Tim is John's principal.

Question 18

Mohammad was an employee in the new product development department of Estay Inc. Mohammad was directly involved in the development of a new product that Estay intended to launch in 6 months. Estay took great care to keep information concerning the new product a secret. Ceries, Inc., a competitor of Estay, persuaded Mohammad to leave Estay to direct Ceries' marketing department. Which statement is correct?

A)Mohammad can share with Ceries the confidential information he knows about Estay's new product because he was directly involved in its development.
B)Mohammad can share with Ceries the confidential information he knows about Estay's new product because his agency relationship with Estay is terminated.
C)Mohammad cannot share with Ceries the confidential information he knows about Estay's new product because of the equal dignities rule.
D)Mohammad cannot share with Ceries the confidential information he knows about Estay's new product because he has a duty not to disclose confidential information he acquired during the agency.

Question 19

If Denise is hired to work as a cashier, she has the implied authority to do acts reasonably necessary to carry out her job.

Question 20

What is the best definition of a fiduciary relationship?

A)The principal pays the agent to act on his or her behalf.
B)The principal grants an agent permission to act, either by words or conduct.
C)A principal is liable for certain torts committed by an agent.
D)The trustee must act in the best interests of the beneficiary.

Question 21

Grant is a delivery person for Watkins Furniture. One day, after delivering a chair to Nadine's house, he stopped at a fast food restaurant to get a sandwich at the drive-through window. As he was leaving the parking lot, he accidentally hit the rear of Blanche's car. Discuss the possible liability of Watkins for Grant's accident. Would there be any difference in the potential liability of Watkins if Grant had the accident after driving 30 miles away to visit a friend?

Question 22

Luther (principal)and Marcia (agent)have an agency relationship. Under which circumstances will the relationship end "at will."

A)Luther and Marcia agree their agency relationship will last two years. At the end of that time, the agency relationship is terminated.
B)Luther and Marcia made no agreement in advance about the term of the agreement. One afternoon, Marcia is tragically killed in an automobile accident.
C)Luther and Marcia agree their agency relationship will last two years. One year into the relationship, they meet for lunch and decide the relationship isn't working and both agree to end it.
D)Luther and Marcia made no agreement in advance about the term of the agreement. One day, Luther calls Marcia and tells her he no longer wishes her to be his agent.

Question 23

Mrs. O'Leary hired Jenna to sell her house in Michigan. She executed a power of attorney in favor of Jenna authorizing her to do "anything and everything associated with the sale of real estate, acting as a prudent person." On May 30, Jenna finalized a deal with Brandon for the purchase of the house. Brandon and Jenna signed the real estate contract that day. Jenna learned the next day that Mrs. O'Leary had died May 29.

A)The contract is void since the agency terminated May 29.
B)The contract is valid since the agency's purpose was achieved before Jenna was notified of Mrs. O'Leary's death.
C)The contract is voidable at the option of Mrs. O'Leary's estate.
D)The contract is voidable at the option of Brandon.

Question 24

Chance is a traveling marketing representative for a publishing company. He is an independent contractor and was hired without negligence. One afternoon while driving to a meeting, Chance negligently runs a stop sign and causes an accident. Judy is injured. Judy can

A)hold both Chance and his company liable for her injury.
B)hold the company but not Chance liable.
C)hold Chance but not the company liable.
D)not hold Chance or his company liable for her injury.

Question 25

Betsy's elderly father gave her written authority to sell the family house. Her father lived in Arizona, and she lived in Minnesota. After about two months she found a buyer for the house and signed an acceptance of the offer on March 21. Later that same day, she learned her father had died the day before (March 20). Other members of the family did not want the family house sold and claimed that the acceptance Betsy signed was void. The buyer of the house claims Betsy had the legal authority to sell the house and that the contract is binding. Who is right?

Question 26

Janelle has an art collection that she wants to sell. She calls Amber and tells her to sell the art collection for her at an upcoming auction. Amber agrees. This is an example of

A)apparent authority.
B)respondeat superior.
C)intermediary agency.
D)express authority.

Question 27

Alex worked for years for MegaCorp. During his employment with MegaCorp, he learned a great deal of confidential information and knew that if this information got into the hands of competitors or the general public, MegaCorp could suffer great business losses. Alex claims that he was wrongfully fired by MegaCorp, and accordingly, he believes he has no obligation to MegaCorp to keep any information he acquired with them as confidential. MegaCorp claims that Alex is under a continuing duty to keep confidential information secret, even though he is no longer with the company. Who is right? Why?

Question 28

Circus Pizza contracted with Art to run its birthday parties. Art's responsibilities included supervising the children and organizing the games. Circus did not investigate Art's background, which included a history of assaulting children. Art assaulted a 7-year-old girl in the restaurant's kitchen during a birthday party. Circus Pizza

A)cannot be liable for the damages because Art committed an unforeseeable intentional tort.
B)cannot be held liable for the damages because Art's conduct was not in the scope of employment.
C)may be held liable on the basis of negligent hiring.
D)may be held liable only if Circus actually knew of Art's background.

Question 29

Pamela hired Lena to sell her business. Lena

A)can buy the business as long as the price is fair.
B)can buy the business as long as she qualifies for financing.
C)can buy the business only with Pamela's permission.
D)cannot buy the business under any circumstances.

Question 30

Which of the following is a duty of a principal to an agent?

A)duty of loyalty
B)duty to indemnify for reasonable expenses
C)duty to provide information
D)All of these are correct.

Question 31

Tom, the production manager at Esday, was told by his supervisor to hire Elton, a 15-year-old boy, to operate an industrial machine. Hiring the 15 year old violates the child labor laws. What should Tom do in this situation?

A)Tom should hire Elton; he has a duty to obey Esday's instructions.
B)Tom should hire Elton; he has a duty of care to ensure that the government does not discover that Elton is 15 years old.
C)Tom should not hire Elton; he has a duty of care and he would not be caring for Elton.
D)Tom should not hire Elton; he has a duty to obey Esday's instructions only if they are legal and ethical.

Question 32

When a principal is unidentified

A)the agent and principal will be jointly and severally liable on the contract.
B)the agent and principal will be only jointly liable on the contract.
C)only the principal can be liable.
D)only the agent is liable.

Question 33

A principal is bound by contracts that an agent enters into with authority. Discuss the various types of contractual authority an agent may have.

Question 34

In the case of an undisclosed principal, a third party

A)can only recover from the principal.
B)can only recover from the agent.
C)cannot recover at all.
D)can recover from either the agent or the principal.

Question 35

Andrew has been hired to do some work for Rossi Enterprises. What factors would a court consider in determining if Andrew is an employee or an independent contractor? Why does the designation matter?