Deck 29: Relationship of Principal and Agent

Question 1

An agent must act solely in the interest of his principal in all acts that would affect the principal's business.

Answer 1

True

Question 2

The only employees who are agents of their employers are those authorized to contract on behalf of their employers.

Answer 2

False

Question 3

An agent will not be authorized to act for a principal unless he receives some consideration for the task.

Answer 3

False

Question 4

A fiduciary duty, arising out of a relationship of trust and confidence, is one of utmost loyalty and good faith.

Question 5

Jones, an agent of Rossi, is authorized to sell Rossi's ownership of wheat on the commodities market on Monday.On Monday, however, the market opens with the lowest prices for wheat in two decades.Jones must go ahead and sell Rossi's wheat on Monday.

Question 6

A minor cannot act as an agent.

Question 7

The agency relationship involves three basic elements: assent, control by the principal, and the agent's acting on behalf of the principal.

Question 8

The capacity to be a principal, and thus to act through an agent, depends on the capacity of the principal to do the act.

Question 9

Actual authority conferred upon an agent for a specified time does not continue after the specified time.

Question 10

A principal owes to any agent the same duties under tort law that the principal owes to all parties.

Question 11

An agency contract appointing the agent for a period of more than one year must be in writing.

Question 12

A principal may generally revoke the authority of an agent at any time.

Question 13

Because the authority given to an agent by a principal is strictly personal, the agent's death terminates the agency.

Question 14

The operation of agency involves only two persons: a principal and an agent.

Question 15

A gratuitous agent has a duty of loyalty but is not liable for any harm caused by his careless performance.

Question 16

Linton, as a sales agent for Nancy, may keep the money for the sales in his personal bank account until due to her as long as he keeps accurate records of the amounts he must separate out to pay to her.

Question 17

In some states, the authority of an agent to sell land must be in writing and signed by the principal.

Question 18

Anna employs Mark to purchase for her a suitable site for a roller rink.Mark owns a huge site himself and sells it to Anna at fair market value without disclosing to her that he is the owner of the land.Anna may not rescind the transaction, because Mark has not breached his fiduciary duty to his principal.

Question 19

Diane appoints Edward as her agent to sell goods in markets where the highest price can be obtained.Edward sells the goods in a market that is glutted and obtains a low price, even though he could have obtained a higher price in a nearby market by using more care in obtaining the available market information.Edward is liable to Diane for breach of the duty of diligence.

Question 20

If an agency is gratuitous, the principal ordinarily may revoke it without liability to the agent.

Question 21

An agent may make a secret profit from a transaction subject to the agency.

Question 22

If an agent receives a gift from a third person with whom he is dealing on behalf of the principal, he can keep it without notifying the principal.

Question 23

All independent contractors are agents, but not all agents are independent contractors.

Question 24

A plumber hired to redo the plumbing in a building is an independent contractor and an agent of the owner of the building.

Question 25

A gratuitous agency is not a true agency because it is not formed by contract.

Question 26

The appointment of an agent by a minor or an incompetent not under guardianship and any resulting contracts are voidable.

Question 27

Agency relationships are governed primarily by federal statute.

Question 28

The principal has the duty to provide the employee with reasonably safe conditions of employment and to warn the employee of any unreasonable risks involved in the employment.

Question 29

As a general rule, whatever business activity a person may accomplish personally, he may do through an agent.

Question 30

A person who engages an independent contractor to do a specific job has the right to control the details of the conduct and activities of the independent contractor as it applies to the specific job.

Question 31

The principal has a duty to indemnify the agent for losses incurred or suffered while acting as directed by the principal in a transaction which is not illegal or wrongful.

Question 32

An agency agreement must always be in writing.

Question 33

Whether an agency relationship has been created is determined by using a subjective test.

Question 34

The duty of obedience owed by an agent to a principal is not breached and will not result in liability to the principal by an agent's refusal to do an illegal or tortious act for the principal.

Question 35

Agency is a consensual relationship that the principal and agent may form by contract or agreement.

Question 36

The fiduciary duty of an agent has no bearing upon his ability to act on behalf of a competitor of his principal.

Question 37

The power of a gratuitous agent to affect the principal's relationship with third parties is the same as that of a paid agent.

Question 38

Agents and principals have mutual fiduciary duties to one another.

Question 39

All employees are agents, but not all agents are employees.

Question 40

If Elizabeth, agent for Wade, finds out one of Wade's customers has become insolvent, she has the duty to communicate this information to Wade.

Question 41

When the agency terminates, the agent's duty of confidentiality continues.

Question 42

Victor negligently led Gus to believe that Brenda had the authority to act on Victor's behalf.If Brenda had no authority but Gus reasonably and in good faith relied on Brenda's apparent authority:

A)Victor is liable to Gus for Gus's loss suffered because of his reliance.
B)Victor cannot be held liable to Gus because Brenda had no actual authority.
C)only Brenda can be held liable for any loss Gus suffered because of his reliance.
D)Gus must bear any loss because he did not determine the extent or existence of Brenda's authority.

Question 43

Which of the following is false with respect to a written agency agreement by an agent to act as the principal's exclusive agent for five years?

A)Such an agency is capable of being revoked.
B)If either party revokes the contract within five years, he will be liable for breach of contract.
C)The agent has the power to renounce the agreement.
D)This is an agency coupled with an interest.

Question 44

Which of the following is correct with regard to the capacity of an agent?

A)The incapacity of the agent disqualifies him from making a contract that is binding on his principal.
B)No mental capacity is necessary for an agent.
C)If an incompetent person who is not under guardianship appoints an agent, contracts made by that agent are voidable.
D)A corporation has no capacity to act as an agent.

Question 45

The agent may be subject to liability to her principal for breach of the duty of obedience if she:

A)entered into an authorized contract and the principal has changed her mind.
B)delegates her authority in any way and under any circumstances.
C)committed a tort for which the principal is now liable.
D)All of the above.

Question 46

Even when the outbreak of war places the principal and agent in the position of alien enemies, the authority of the agency is not terminated.

Question 47

Which of the following is NOT a major duty, which the agent owes to the principal?

A)Duty to obey instructions.
B)Duty to act in good faith and with loyalty.
C)Duty to indemnify.
D)Duty to exercise care.

Question 48

The negligence of an agent who is an employee in conducting the business of the principal exposes the principal to tort liability for injury and loss suffered by third persons.

Question 49

A __________ is a formal appointment of an agent.

A)fiduciary
B)revocation
C)power of attorney
D)rescission

Question 50

By the operation of law, the occurrence of certain events will automatically terminate an agency relationship.

Question 51

The result of an agent's functioning is exactly the same as if the principal had dealt directly with the third person.

Question 52

Since the agency relationship is created by agreement, the agency relationship may be terminated at any time by mutual agreement of the principal and the agent.

Question 53

Which of the following will terminate a power given as security?

A)The death of the creator.
B)Revocation of the power.
C)The incapacity of the creator.
D)None of the above.

Question 54

Agency is governed primarily by:

A)state common law.
B)the UCC.
C)federal statutes.
D)administrative law.

Question 55

An "electronic agent" is a true agent but is in electronic form.

Question 56

Agency law is basic to almost every other branch of business law.

Question 57

A gratuitous agent is not subject to the same duty of loyalty that is imposed upon a paid agent.

Question 58

A(n) __________ is a person in a position of trust and confidence who has a duty of utmost loyalty and good faith.

A)fiduciary
B)servant
C)independent contractor
D)principal

Question 59

A durable power of attorney is:

A)a written instrument that expresses the principal's intention that the agent's authority will become effective upon the principal's subsequent incapacity.
B)a written instrument that expresses the principal's intention that the agent's authority will not be affected by the principal's subsequent incapacity.
C)an irrevocable written or oral expression that an agent will have authority to make contracts for and on behalf of the principal.
D)Both (a) and (b).

Question 60

An agent has breached his fiduciary duty in which of the following situations?

A)All of the following choices are correct answers.
B)Where the agent makes a secret profit.
C)Where the agent uses information obtained in the course of the agency for his own benefit.
D)Where the agent competes with the principal.

Question 61

An agent may lose the right to compensation:

A)by breaching the agency contract willfully and deliberately.
B)if the specified result of the contract is not obtained.
C)if the duty of loyalty is breached.
D)All of the above
E)None of the above.

Question 62

All of the following except which one is a duty of an agent?

A)Account for money received on behalf of his principal.
B)Inform his principal of any information relevant to his agency.
C)Refrain from competing with his principal.
D)After the agency is terminated, refrain from using any information gained while an agent.

Question 63

Matt hires Joe's real estate agency to sell his property, telling Joe he has lost too much money playing the stock market to afford to keep it up.Then Matt wins the three million-dollar lottery! Joe reads this in the newspaper and that afternoon makes a contract with Sharon to sell the property.Is the contract valid?

A)No, the agency terminated because of the change in conditions.
B)No, the agent has no right to sell without consent.
C)Yes, Matt would have to notify Joe if he wanted to stop the sale.
D)Yes, Joe had apparent authority to sell.

Question 64

Which of the following would NOT be considered an agent?
a.A salesman who sells his employer's goods.
b.A manager who hires employees for the store owner.
c.A bus driver in relation to the riders.
d.A buyer who regularly buys merchandise for a store.

Question 65

A principal has no duty to compensate his or her agent if:

A)the agent breached the duty of obedience.
B)the agent breached the duty of loyalty.
C)it is a gratuitous agency.
D)All the above are correct.

Question 66

Carl loans Dan $1,500 for Dan's honeymoon.Dan gives Carl his ruby ring as security for the loan and after a year, tells Carl he may as well sell it to recoup the $1,500.When Dan's wife hears of this, she persuades Dan to call Carl and get back the ring.Can Carl sell it anyway?

A)Yes, because Carl has apparent authority.
B)Yes, because Carl has an express agency.
C)No, Carl's authority has been revoked.
D)Yes, because Dan cannot terminate this agency except by discharging the obligation.

Question 67

In the case of Del Pilar v.DHL Global Customer Solutions (USA), Inc., the court determined that:

A)Silver Ink was DHL's employee and, thus, DHL was liable under the doctrine of respondeat superior.
B)determining the nature of Silver Ink's relationship with DHL was a factual issue inappropriate for summary judgment.
C)Silver Ink was an independent contractor for whose conduct DHL was not liable.
D)the descriptive labels employed by the parties are controlling as to whether a person is an employee or an independent contractor.

Question 68

Steven is a manufacturer's representative for Incell Corporation.One day he receives a big-screen television as a gift from one of the clients he contacts on behalf of Incell.

A)Steven must account to Incell for the gift he has received.
B)The big-screen television belongs to Incell rather than to Steven.
C)If he keeps the TV without telling Incell, he will have breached his fiduciary duty.
D)All of the above are correct.

Question 69

An agent is not required to keep which of the following information confidential?

A)Unique business methods.
B)Customer lists.
C)Information that his or her principal is engaged in criminal activity.
D)Business plans.

Question 70

Arthur advances money to John so that John can purchase inventory for his business.In return and for security on the loan, John makes Arthur his agent.If John:

A)becomes incapacitated, Arthur's agency is terminated by operation of law.
B)dies, Arthur's agency is terminated by operation of law.
C)Both of the above.
D)Arthur's agency is irrevocable.

Question 71

If Carson, who is an agent for Peter, breaches his fiduciary duty to Peter, Carson:

A)is liable to Peter for breach of contract.
B)is liable to Peter in tort for any losses caused by the breach.
C)must make restitution for any profits or property received in breach of this duty.
D)All of the above are correct.

Question 72

Carolyn, a cashier at Tops Supermarkets, may cash checks for up to $20 over a purchase amount.A friend needs money for a dress so Carolyn cashes a check for $50 with no purchase.The check bounces.Carolyn is:

A)liable because she violated her duty of obedience.
B)liable because she breached her duty to inform.
C)not liable since she has apparent authority to take the check.
D)not liable unless she knew her friend did not have the money in the bank.

Question 73

The Electronic Signatures in Global and National Commerce Act validates:

A)contracts relating to transactions affecting interstate commerce formed by electronic agents as long as the action of the electronic agent is legally attributable to the person to be bound.
B)electronic signatures on codicils and testamentary trusts.
C)electronic signatures on divorces and other matters of family law.
D)electronic signatures on contracts governed by the UCC, other than sales and leases of goods.
E)All of the above.

Question 74

Bob owns a business delivering coffee and donuts within the downtown area of the city.Smith Co.calls him to deliver a large quantity of his products to their local office.While taking a coffee urn through the Smith Co.'s office, Bob drops it on Lester, scalding him.Who is liable?

A)Smith Co.and Bob are liable.
B)Bob alone is liable.
C)Lester has to absorb the cost himself since he assumed the risk by working at Smith Co.
D)Only Smith Co.is liable.

Question 75

Which of the following is not a breach of an agent's duty of obedience?

A)Entering into an unauthorized contract for which his or her principal is then liable.
B)Committing a tort for which the principal is now liable.
C)Improperly delegating her authority.
D)Not following a principal's instruction to misrepresent the quality of a competitor's goods to a potential customer.

Question 76

When is an agency relationship irrevocable?

A)It is never irrevocable.
B)When the agency is coupled with an interest of the agent in the subject matter.
C)When the principal violates his duties to the agent.
D)When the agent is a fiduciary.

Question 77

Mark, who is 16 years old, appoints Joe, age 21, as his agent to purchase a videotape recorder from VideoWorld.The transaction is:

A)void because Mark is a minor.
B)voidable by VideoWorld because Mark is a minor.
C)voidable by Mark because he is a minor.
D)not voidable because Joe is not a minor.

Question 78

The contractual duties owed by a principal to an agent are the duties of:

A)compensation.
B)reimbursement.
C)indemnification.
D)All of the above.
E)None of the above.

Question 79

The concept of conflict of interest as it relates to the law of agency includes which of the following?

A)An agent may take a position that conflicts with the principal only if the principal, with full knowledge of all the facts, consents.
B)An agent may not represent her principal in a transaction in which the agent has a personal interest.
C)An agent may not act on behalf of adverse parties to a transaction without both principals' approval of the dual agency.
D)All of the above.

Question 80

A gratuitous agent:

A)is a paid agent.
B)is subject to the same duty of loyalty as other agents.
C)has no duty of diligence.
D)need not be reimbursed for her expenses.