Deck 13: The Agency Relationship

Question 1

Which of the following is a distinguishing characteristic of the law of agency?

A) It is derived largely from special statutes.
B) It is derived largely from tort and contract law.
C) It is derived largely from provincial legislation.
D) It is derived largely from contract law.

Answer 1

B

Question 2

How will a power of attorney operate if it states that the occurrence of a specific event will make it operational?

A) as a variation of a general power of attorney
B) as a variation of an enduring power of attorney
C) as a variation of a springing power of attorney
D) as a variation of a specific power of attorney

Answer 2

B

Question 3

What approach would a court most likely take to determine the type of authority an agent has?

A) an inherently flexible inquiry
B) a fact-specific inquiry
C) a broad informal inquiry
D) a narrow informal inquiry

Answer 3

B

Question 4

Why do agency relationships, in general, operate with few difficulties?

A) Agents simply represent principals in transactions with others.
B) Engaging external specialists is a cornerstone of business.
C) Businesspeople cannot operate their businesses alone.
D) Parties use agents instead of dealing face to face.

Question 5

Which of the following is an example of the type of duty that an agent might be engaged to carry out on behalf of a principal?

A) conduct market research
B) enter into sales contracts with clients on behalf of the principal
C) deliver orders to clients of the principal
D) conduct customer satisfaction surveys for the principal

Question 6

Which of the following is a distinguishing characteristic of the implied authority of an agent?

A) It may be intuitively deduced by the agent's position.
B) It typically takes the form of an informal power of attorney.
C) It is customarily limited to a short time period.
D) It is inherently inflexible and narrowly defined.

Question 7

William and Leah are both registered real estate agents. If Ray becomes a mercantile agent, how will all three of these individuals share a commonality?

A) Statutory regulations apply to their conduct.
B) The need to regulate these relationships necessitated the law of agency.
C) The inherent conflicts in these relationships necessitated the law of agency.
D) The law of agency regulates their conduct.

Question 8

The employment contract of a manager of a business expressly recites her authority. How do other components of her authority come into existence?

A) via the more tangible form of a detailed job description
B) by conducting a fact-specific inquiry of the position's job description
C) via the nature of the position and business management requirements
D) by the strict utterance of instructions to the manager

Question 9

Nabella is selling her house. She has asked a lawyer with Sheps & Shaps LLP to handle the legal aspects of the transaction. Which of the following will strongly support the creation of an agency relationship between Nabella and the lawyer?

A) the regulation of lawyer conduct
B) the up-front payment of a retainer
C) an agreement on a hourly rate
D) the legal authority of a lawyer

Question 10

Jacqueline has been given authority over her elderly mother's bank accounts and property. What type of formal authority has Jacqueline been given?

A) a general power of attorney
B) a bank form of power of attorney
C) a personal care power of attorney
D) a specific power of attorney

Question 11

Bonita and Laraleigh want to create a relationship with insurance broker Lee Kim. How should they proceed if they want to use the most common method available to accomplish the desired outcome?

A) deposit
B) retainer
C) contract
D) letter of intent

Question 12

What is the term for an outside party with whom an agent conducts business on behalf of a principal?

A) subcontractor
B) agent
C) plaintiff
D) third party

Question 13

Which of the following is synonymous with the term "ostensible authority" with respect to the law of agency?

A) implicated authority
B) actual authority
C) expressed authority
D) apparent authority

Question 14

An agent has been given authority to act for the principal in relation to a directive that sets out conditions required for the removal of life-support systems. What form of authority has the agent been given?

A) a general power of attorney
B) a specific-care directive
C) a personal care power of attorney
D) a health care directive

Question 15

Which of the following is a valid criticism of granting authority through a power of attorney?

A) the obvious potential for abuse presented by an attorney's unlimited power
B) the confusion that arises over which particular form applies
C) the obvious potential for the donor to accuse the attorney of wrongdoing
D) the confusion that arises over who may witness a donor's signature

Question 16

In what way are an agent's actual authority and an agent's apparent authority similar?

A) Both must be expressed in writing.
B) Both bind the principal.
C) Both restrict an agent to a single purpose.
D) Both are defined by statute.

Question 17

Tom's photographs will be exhibited for two weeks in Natural WildLife Gallery Inc., commencing May 1. The gallery is authorized to sell any of Tom's works, as long as they adhere to the agreed price list. What is the nature of the relationship between these parties?

A) agency by commitment
B) employment agreement
C) agency by agreement
D) retainer agreement

Question 18

Which of the following requires formal recognition with respect to an actionable claim arising from an alleged agency relationship?

A) a wide array of transactions
B) the cornerstone of a business
C) a delegation of authority
D) the commonality of occurrence

Question 19

In what way are agency relationships distinct from most other legal relationships?

A) all authority must be formalized
B) agent authority must be express
C) mutual consideration is not required
D) agent authority may be express or implied

Question 20

Which of the following would most strongly support a determination of the existence of a contract between a principal and a third party?

A) whether the principal actually likes the deal
B) the extent to which the agent is remunerated
C) the extent of the agent's actual authority
D) the timing of the agent's acceptance of a retainer

Question 21

Which of the following would a court require confirmation of in order to establish the validity of an agency relationship where circumstances involve agency by estoppel?

A) the adoption by the principal of a contract the agent lacked authority to enter at the time
B) circumstances that necessitated acting without authority from the principal
C) an agreement by the third party to be bound by commitments made to the agent
D) the principal's actions are readily viewed by outsiders as denoting an existing agency relationship

Question 22

A lawyer is researching the damages relating to his client's breach of a fiduciary duty that ought to be recoverable. Which of the following would the lawyer most likely have to consider?

A) damages arising from contract and the equities
B) contract, tort, and punitive remedies
C) damages arising from contract and tort remedies
D) contract, tort, and equitable remedies

Question 23

What would an insurance agent who fails to advise a client that a form of requested coverage is unavailable likely be found by a court to have committed?

A) breach of insurance standard
B) breach of fiduciary duty
C) breach of agency of insurance
D) breach of enduring contract

Question 24

Which of the following is a common characteristic of agency by estoppel and agency by ratification?

A) the law typically favours the principal
B) the reasonable conclusion of existence of agency
C) the adoption of a contract after the fact
D) the lack of the agent's authority to act

Question 25

Geoff regularly calls his investment broker to discuss current market conditions. Occasionally, Geoff requires his agent to carry out his instructions involving maturing bonds and trades of shares. How will a court view the relationship of agency that exists between Geoff and his broker?

A) as a relationship that reposes itself in vulnerability
B) as a relationship that reposes itself in reliance
C) as a fiduciary relationship.
D) as a non-fiduciary relationship

Question 26

Kyrie negotiated a contract in good faith with a party whose introductory letter from his employer reasonably led her to believe he had the proper authority to do so. What would be the most likely outcome of any dispute challenging the existence of an agency relationship?

A) The law sides with the principal through ratification.
B) A court will determine the agent had actual authority.
C) The law sides with the customer through estoppel.
D) A court will determine the agent had apparent authority.

Question 27

Which of the following is particularly relevant and therefore will most strongly support a plaintiff whose funds have been misappropriated by an investment advisor?

A) the doctrine of apparent authority
B) the doctrine of implied authority
C) the doctrine of actual authority
D) the doctrine of enduring authority

Question 28

From which of the following does a third party typically derive an agent's ostensible authority?

A) the conduct of the principal
B) reasonable inference of usual authority
C) an expression of the limitations of authority
D) inferring typical authority

Question 29

What distinguishes agency by ratification from agency by estoppel?

A) Under agency by ratification, the principal is not bound unless she chooses to be.
B) Under agency by estoppel, the principal is not bound unless she chooses to be.
C) Under agency by estoppel, the principal can sue the third party for breach of contract.
D) Under agency by ratification, the principal can sue a third party for breach of contract.

Question 30

In law, which of the following is synonymous with an agent's duty to show utmost good faith to the principal?

A) the ethics rule
B) the trust rule
C) the conflict rule
D) the profit rule

Question 31

Which of the following is considered, as a general rule, to be within the scope of an agent's fiduciary duties?

A) full disclosure of acceptance of each secret commission and profit
B) absolute prohibition against acting for two principals
C) sending a client's file for storage with an outside storage facility
D) personal interests supersede the interests of the principal

Question 32

Marta sold Phillip's racing cycle to Bill while Phillip was away on business in Toronto. Phillip hadn't expected Marta to act in this way, but he happily accepted the $1500 cash and signed a receipt. In this instance, the agency relationship exemplifies which of the following?

A) implied authority
B) agency by estoppel
C) agency by ratification
D) actual authority

Question 33

Which of the following would a court require evidence of in order to establish the existence of a fiduciary duty owed to a plaintiff?

A) the principal's influence and trust
B) the defendant's reliance, power, and influence
C) the agent's influence and reliance
D) the plaintiff's reliance, trust, and vulnerability

Question 34

Jack sent a cover letter with his new purchasing agent, Kuan Huo, advising suppliers of Kuan's authority to transact purchases under $33 000. How would a court considering a dispute in which a plaintiff alleges Kuan had apparent authority to enter into a $42 000 purchase contract most likely resolve this dispute?

A) Deny the third party's claim based on the principal's stated limitation.
B) Deny the second-party claim because the agent's limited authority was reasonably known.
C) Deny a first-party claim on the grounds it ought to have known of the reasonable limitation.
D) Deny the outsider's claim based on the agent's unenduring authority.

Question 35

What are the duties required of an agent?

A) reimburse the principal for out-of-pocket expenses
B) pay the principal for services rendered
C) abide by the terms of the agency agreement
D) indemnify the principal for agency business losses

Question 36

In which way are a reduction of an agent's authority and the severance of an agent's authority similar?

A) The same general principles will apply.
B) Both require representation by authority.
C) Both are governed by agency of estoppel.
D) Both require ratification by the principal.

Question 37

What constrains a lawyer's ability to place herself in a position where her own interests conflict with the interests of the principal?

A) a profit rule
B) a trust rule
C) a constraint rule
D) a conflict rule

Question 38

Which of the following is a duty owed by a principal in an agency relationship?

A) reimburse the agent for out-of-pocket expenses
B) fiduciary duty to uphold the trust placed by the agent
C) retroactively acknowledge authority of agents
D) ratify all contracts within prescribed time limits

Question 39

Which of the following is most important for agents to comprehend with respect to equitable remedies?

A) when a fiduciary relationship exists with the full scope of the duties
B) the whole range of equitable remedies that are available
C) that business relationships can be easily categorized as fiduciary
D) the remedies that are available when the agent lacks "clean hands"

Question 40

Which of the following exemplifies the liability of an agent who acts without authority and contracts with a third party?

A) The agent is liable to the principal for breach of warranty of authority.
B) The third party is liable to the principal for breach of warranty of authority.
C) The principal is liable to the agent for breach of agency by ratification.
D) The agent is liable to the third party for breach of warranty of authority.

Question 41

Agency relationships generated difficult complications resulting from unethical practices, necessitating the legislation of numerous special statues to govern agent's duties and responsibilities.

Question 42

An agency relationship created when the principal acts such that third parties reasonably conclude that an agency relationship exists is legally described as an agency by ratification.

Question 43

There must be three key relationships at play in any given agency situation.

Question 44

Which of the following would a risk manager indicate as being a key point with respect to managing agency relationships?

A) Choosing to avoid conflicts of interests is an agent's duty.
B) Choose wisely, instruct carefully, and review regularly.
C) Fiduciary duties must be specified in the agency agreement.
D) Fiduciary duties are automatically owed to the principal.

Question 45

Actual authority is a relationship that exists when one party represents another party in the formation of legal relations.

Question 46

The rules governing the relationship where one party acts as agent on behalf of a principal are known as the law of agency.

Question 47

A large land developer granted Kyrie authorization to act as agent on its behalf, as an undisclosed principal, for the purchase of three tracts of land. Kyrie believes that, as long as she remains within the scope of that authority, the developer will be liable on the contracts. Which of the following is noted as being a valid criticism of this rule of agency law?

A) The agent has no liability.
B) It's an area of unsettled law.
C) It's inconsistent with the general principles of contract law.
D) The terminology in this area is not consistently employed by the judiciary.

Question 48

An agent who has been given permission to "download responsibility for performance" is required to personally perform the obligations arising from the agency relationship.

Question 49

An insider is a party with whom the agent does business on behalf of the principal.

Question 50

Agency relationships are typical in the business context owing to a reliance on engaging external experts and specialists to act on a party's behalf in various transactions.

Question 51

A fiduciary owes a duty of good faith toward another because of their relationship.

Question 52

Express authority is a narrowly interpreted legal term describing the oral communication of authority to any agent.

Question 53

An agency relationship created when one party adopts a contract entered into on his behalf by another who acted without authority at the time is legally known as an agency by estoppel.

Question 54

The individual who permits another to act on his or her behalf is legally known as a principal.

Question 55

The application of which of the following is most likely to be created by the liability arising from agency principles with respect to employees and independent contractors?

A) the doctrine of vicarious liability
B) the common law principle of agency
C) the common law neighbour principle
D) the doctrine of primary liability

Question 56

"Agency" describes the power an agent derives from either express or implied agreement.

Question 57

A duty imposed on a person who has a special relationship of trust with another is legally known as a fiduciary duty.

Question 58

An agent that has been given actual authority has the legal capacity to bind the principal to contractual relations with outsiders.

Question 59

Which of the following is an advisable step for a principal to take after terminating an agency relationship?

A) Ensure the termination agreement is put into writing.
B) Ensure that third parties are notified.
C) Ensure an indemnity agreement is in place.
D) Ensure the agent is informed in writing of the termination.

Question 60

A springing power of attorney is a form of power of attorney that springs into life when an event specified in the power of attorney has taken place.

Question 61

Identify and briefly describe how an employed clerk typist may be transformed into the business's agent.

Question 62

Briefly describe the types of duties owed by an agent to his principal and indicate which of those duties would be considered to be the most important. Contrast the agent's duties with those owed to the agent by his principal.

Question 63

Identify each type of agency authority and describe what is required of the principal in each instance.

Question 64

Identify the circumstances under which a principal would be permitted, by law, to ratify a contract.

Question 65

Identify how a fiduciary duty arises, who is it owed to, and any requirements with regard to specifically state the duty. Provide a brief explanation of what the fiduciary duty is with regard to conflict of interest and how that obligation may be overcome. Provide an example of a conflict of interest situation.

Question 66

A principal whose identity is unknown to a third party who has no knowledge that the agent is acting in an agency capacity is legally known as an undisclosed principal.

Question 67

Identify and briefly describe the implied power a general manager of a hockey team presumably would have. Contrast the hockey team general manager's implied power with that presumably given to a manager of a convenience store.

Question 68

Identify and briefly describe the ways in which the nature of the authority given to an agent is inherently flexible and easily customized.

Question 69

Explain why agency by estoppel forces a principal to be bound by an unauthorized contract. Contrast and briefly discuss this with respect to a principal's position under agency by ratification.

Question 70

A representation of authority given by a person who purports to be an agent is legally known as a disclosed warranty.

Question 71

Identify and briefly describe the typical forms of power of attorney. Provide an example of each form of power of attorney you have identified.

Question 72

An agent automatically owes a fiduciary duty to his principal.

Question 73

An agent is bound by a fiduciary duty to avoid undisclosed, unauthorized conflicts of interest.

Question 74

Briefly discuss the importance of the agency relationship to business, including what it is, what it allows, how it is used, and the advantage derived from using it.