Deck 23: Agency Relationships in Business

Question 1

A familiar example of an agent is the owner of a corporation.

Answer 1

False

Question 2

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

Answer 2

False

Question 3

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

Answer 3

True

Question 4

Agency relationships normally are consensual.

Question 5

Employment laws apply only to the employer-employee relationship.

Question 6

An agency agreement can be implied by conduct.

Question 7

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

Question 8

A person must have contractual capacity to be an agent.

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

Through agents, a principal can conduct only one business operation at a time.

Question 14

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

Question 15

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 16

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

Question 17

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

Question 18

An agency relationship created for an illegal purpose is enforceable.

Question 19

An agency agreement can be created by an oral agreement.

Question 20

Agency relationships only exist between employers and employees.

Question 21

Fact Pattern 23-1​
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 plant.
Refer to Fact Pattern 23-1. 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 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

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

Question 24

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

Question 25

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 26

Reynaldo is a delivery driver for Southeast Asian Noodle Company. Reynaldo does exactly what the company tells him. Reynaldo is

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

Question 27

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

Question 28

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

Question 29

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

Question 30

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

A)the amount of Ike’s salary.
B)the control HomeBaked Bread has over the details of the work.
C)the length of the trial period.
D)the size of Ike’s sales area.

Question 31

Fact Pattern 23-1​
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 plant.
Refer to Fact Pattern 23-1. 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 32

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

Question 33

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

Question 34

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

Question 35

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

Question 36

If an agent has no authority but nevertheless contracts with a third party, the principal can be held liable on the contract.

Question 37

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

Question 38

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

Question 39

Vicarious liability is direct liability.

Question 40

An agency can terminate once its purpose is achieved.

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. Vladimir may demand​

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

Question 42

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.

Question 43

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 44

Rondi 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 45

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

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

Question 46

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 he has to pay is the right of​

A) ​avoidance.
B) ​cooperation.
C) ​indemnification.
D) ​reimbursement.

Question 47

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.

Question 48

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 49

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 50

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 51

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 52

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

A) ​a legal business purpose only.
B) ​any legal purpose.
C) ​any legal or illegal purpose.
D) ​no purpose.

Question 53

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 54

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 55

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 56

Emery is a corporate officer of Frakking Mining Corporation. Emery serves in a representative capacity for Frakking's owners. 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 57

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

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

Question 58

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 59

Jim agrees to act on Joyce's behalf, subject to her control, and Joyce trusts Jim 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 60

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 61

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 62

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 63

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

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

Question 64

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 65

Fact Pattern 23-2​
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.
Refer to Fact Pattern 23-2. 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

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?​

Question 67

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 68

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 69

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 70

Fact Pattern 23-2​
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.
Refer to Fact Pattern 23-2. Cuisine Catering is​

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

Question 71

Without authorization, Rolf contracts on behalf of Sari to have Tige paint the interior and exterior of Sari's house. 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 72

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.