Deck 30: Relationship With Third Parties

Question 1

Actual express authority depends on the third party having knowledge of the manifestations or statements made by the principal to the agent.

Answer 1

False

Question 2

Unless otherwise agreed, an agent making a contract for a partially disclosed principal is a party to the contract.

Answer 2

True

Question 3

A principal may be liable where his agent sells liquor to an underage person even though the principal did not authorize the act.

Answer 3

True

Question 4

Apparent authority is not actual authority.

Question 5

Apparent authority can arise where there is an undisclosed principal as well as where the principal is disclosed.

Question 6

Rena employs James, a real estate broker, to find a buyer for her home for a price of at least $125,000.James has the actual implied authority to contract for the sale of Rena's home.

Question 7

An agent has the power to contractually bind his principal whenever he has actual or apparent authority and acts within his authority.

Question 8

Ordinarily, an agent may delegate his duties to an equally qualified subagent.

Question 9

If an agent who has actual authority and receives reimbursement does not tell the third party that he is working in an agency capacity, the principal is still bound.

Question 10

Usually in cases where there is a known principal, the agent has liability for, and rights under, contracts made on behalf of a principal.

Question 11

Arthur is authorized under a written power of attorney to collect accounts for Peter.Peter dies, and there is no notice given to Tessa, who pays Arthur, as she has done in the past.If Arthur absconds with the money, Tessa will not have to pay again in a state which has adopted the Uniform Durable Power of Attorney Act.

Question 12

An agent for an unidentified principal is liable on the contract to the third party no matter whether the particular transaction is authorized or not.

Question 13

Sunset Properties, Inc.hires William to manage its 82-unit apartment complex.Nothing is said as to expenses.William purchases fuel to heat the apartments and arranges for a repairperson to do ordinary maintenance.William will be personally liable for these expenses, because he has no authority to incur them.

Question 14

Upon the termination of an agency, the agent's actual authority ceases.The Second and Third Restatements differ about when apparent authority ceases.

Question 15

Tom is the promoter of a new corporation that has not yet been incorporated.On behalf of the as yet unincorporated business, he enters into a three-year lease agreement for office space and personally signs the lease in his own name.The corporation is liable on the contract, because Tom is its agent.

Question 16

A subagent owes a fiduciary duty to both the agent and to the principal.

Question 17

Apparent authority may arise by an agent's showing a third party a document from the principal authorizing the agent to enter into such a transaction.

Question 18

The liability of an employer under the doctrine of respondeat superior is limited to wrongdoing by the employee in the course of his employment.

Question 19

A principal who authorizes his agent to commit a tortious act with respect to the property or person of another is not liable for the injury or loss sustained by that person.

Question 20

An agent is never personally liable for the torts he commits while in the scope of his employment.

Question 21

A principal is contractually bound to a third party if the agent acts without any authority but the principal ratifies the contract.

Question 22

The power of an agent is her ability to change the legal status of her principal.

Question 23

Actual notice requires a written, not oral, communication to the third party.

Question 24

Apparent authority arises out of words or conduct of a disclosed or unidentified principal manifested to third persons.

Question 25

Gerald, an agent, who makes a contract with Adele on behalf of Leon, an unidentified principal, may maintain in Gerald's own name a breach of contract action against Adele.

Question 26

Constructive notice of termination of an agency may not occur by mere publication in a newspaper.

Question 27

A person may ratify a prior unauthorized act and may later revoke the ratification.

Question 28

Implied authority may arise from customs or usages of the principal's business.

Question 29

Under the Second Restatement, the bankruptcy of the principal terminates, without notice, the power of an agent to affect the principal's property that passes to the bankruptcy trustee.

Question 30

Ratification may relate to acts that have exceeded the authority granted to an agent.

Question 31

The contractual liability of the principal may depend upon whether the principal is disclosed, unidentified, or undisclosed.

Question 32

Ann, in the presence of Betty, tells Thomas that Ann is Betty's agent.In reality, Ann has no authority.Betty hears the statement, but she says nothing.In reliance, Thomas ships goods to Betty on Ann's order.Betty is liable even though no actual authority existed.

Question 33

A principal's intention to permit the agent to delegate granted authority may only be gathered from the express authorization of the principal.

Question 34

In all cases death of a principal terminates all authority of an agent, including apparent authority, even though no notice is given to third parties.

Question 35

No apparent authority exists where the third party knows that the agent has no actual authority.

Question 36

An example of successful land purchases made by agents for an undisclosed principal took place in Florida for Walt Disney Productions.

Question 37

An employer may have criminal liability for the acts of his employee.

Question 38

Under the Third Restatement, if a principal becomes incapacitated, the agency relationship terminates and all authority, including apparent authority, automatically ceases.

Question 39

An agent who has either actual or apparent authority has the power to bind his principal.

Question 40

Actual authority consists of both express and implied authority.

Question 41

An agent is not normally liable on a contract he makes with a third party on behalf of a(n):

A)undisclosed principal.
B)disclosed principal.
C)unidentified principal.
D)All of the above are correct.

Question 42

The doctrine of __________ is the basis for an employer's liability for an unauthorized tort committed by his employee in the course of his employment.

A)indemnification
B)respondeat superior
C)apparent authority
D)direct liability

Question 43

If an agent tortiously injures a third party, the third party may not hold the principal personally liable.

Question 44

Which of the following is true regarding an agent who is acting for an undisclosed principal?

A)The agent will bind both himself and the principal on most contracts.
B)The third party will never be bound in a contract with the principal.
C)An undisclosed principal will bind only himself and not the agent.
D)Failure to disclose the name of the principal is a form of fraud.

Question 45

Richard writes a letter to Sarah authorizing her to sell his car and sends a copy of the letter to Timothy, a prospective purchaser.The next day, Richard sends a letter to Sarah revoking her authority, but he fails to notify Timothy.Sarah:

A)has actual authority to sell the car to Timothy.
B)has implied authority to sell the car to Timothy.
C)has apparent authority with respect to Timothy to sell the car.
D)is empowered under the doctrine of respondeat superior to negotiate the contract.

Question 46

To effect a ratification, the principal must manifest an intent to do so.

Question 47

An agent acts for a(n) __________ principal when the agent appears to be acting on her own behalf and the third person with whom she is dealing has no knowledge that she is an agent.

A)partially disclosed
B)undisclosed
C)unauthorized
D)disclosed

Question 48

A person who undertakes to make a contract on behalf of another person gives an implied warranty that he is in fact authorized to make the contract on behalf of the person he purports to represent.

Question 49

The doctrine of respondeat superior is most often applied in situations involving:

A)torts of the agent.
B)negligence of the principal.
C)contracts negotiated by the agent.
D)crimes committed by the agent.

Question 50

Under the Second Restatement, an agent representing an undisclosed principal is discharged from liability if the third party:

A)gets a judgment against the principal.
B)becomes aware of the principal.
C)gets a judgment against the agent.
D)He is never discharged from liability.

Question 51

To ratify a contract, the principal must have knowledge of all material facts and may ratify either the entire contract or the part that is advantageous to the principal.

Question 52

Which of the following is not correct regarding the relationship between an independent contractor and a principal?

A)The contractor is liable under respondeat superior.
B)The contractor generally contracts to perform services but is not controlled by the principal.
C)The right of control is the essential and often decisive factor in determining whether someone is an independent contractor or an employee.
D)Under some circumstances, a principal will be vicariously liable for torts committed by a carefully selected independent contractor.

Question 53

Gaines delivers a chair for Jasper Furniture and, before he goes back to the store, he goes 15 miles out of the way to visit a friend.On the way, he negligently runs a stop sign and hits Rick.Who can be held liable for the accident, and why?

A)Jasper Furniture under the doctrine of respondeat superior.
B)Gaines since his negligence caused the accident.
C)Gaines, but not Jasper Furniture, since Gaines had deviated from the purpose of his employment.
D)Both (a) and (b).
E)Both (b) and (c).

Question 54

If an agent, at his principal's direction, fixes prices with the principal's competitors:

A)only the agent is criminally liable.
B)only the principal is criminally liable.
C)both the principal and agent are criminally liable.
D)any liability would be civil only.

Question 55

Sam is George's agent.George decides to fire Sam.Mel is an old customer of George's and he has dealt on credit with Sam for over 20 years.Ellie is a prospective customer that Sam has spoken with on numerous occasions in his capacity as George's agent, and George was aware of the preliminary negotiations.Mel orders goods from Sam after Sam has been fired but Mel has no knowledge of the firing.Later, Sam takes an order from Ellie.Under the Second Restatement, if George does not give notice of the firing, George will:

A)be liable for the contract with Mel.
B)not be liable on the contract with Mel.
C)not be liable on the contract with Ellie.
D)Both (a) and (c).
E)Both (b) and (c).

Question 56

Which of the following is correct with regard to the doctrine of respondeat superior?

A)It is a form of liability without fault.
B)It holds an employer liable for the acts of both employees and independent contractors.
C)The liability of the principal under the doctrine is vicarious and depends upon proof of wrongdoing by the employee within the course of his employment.
D)Two of the above, (a) and (c), are correct.

Question 57

A subagent is an agent of both the principal and the agent.

Question 58

Pat bought a cotton sweater at Ivey's Fashion Store.Sue, the salesperson, told her the sweater was guaranteed not to shrink if washed in cold water by hand.Pat washes the sweater as directed, and it shrinks.Which of the following is correct?

A)Pat has no recourse against the store, because it was only the salesclerk who misrepresented the sweater.
B)Sue has apparent authority to make warranties such as the one that she made.Therefore, the store is bound.
C)If Sue is only a part-time employee, Ivey has no responsibility for misrepresentations she makes.
D)Salesclerks are usually independent contractors.Thus, there is no liability on the part of Ivey.

Question 59

Which of the following is true with regard to contractual relations between the principal and a third party?

A)There is no liability on the part of the principal if the agent acts with implied authority.
B)An undisclosed principal and the third party are contractually bound if the agent acts within her actual authority, unless the contract specifies otherwise.
C)A principal cannot be bound if the agent acts without any authority.
D)An unidentified principal is bound only if the agent acts within the scope of actual authority.

Question 60

Edward is hired to manage Fred's business.Which of the following is untrue regarding Edward's authority?

A)Edward has authority to sell a used cash register when he buys a new computerized checkout system for the store.
B)Edward has authority to send bills to customers and to accept payments on behalf of Fred.
C)Edward can hire employees, but he cannot fire them without Fred's consent.
D)Edward can enter into contracts with wholesalers for merchandise in the store.

Question 61

Which of the following is correct with regard to a contract entered into with a third person by an agent of an undisclosed principal?

A)The agent has no liability to the third person if the agent has acted within the scope of her authority.
B)The agent is personally liable upon the contract.
C)Under the Second Restatement, once the third person learns of the existence and identity of the principal, that third person may hold both the principal and the agent to the performance of the contract.
D)Under the Third Restatement, if the third party obtains a judgment against the principal, the agent is discharged from liability to that third party.

Question 62

An undisclosed principal may result in which of the following?

A)Liability of the agent for any contract made on behalf of such a principal.
B)The agent's being declared incompetent by a court of law.
C)A declaration order by the court for the principal to show a guarantee.
D)All of the above.

Question 63

Apparent authority:

A)depends on an agent's own statements about her authority.
B)depends on the principal's manifestations to the third party.
C)Both of the above.
D)confers on the agent or supposed agent the power to bind a disclosed, unidentified, or undisclosed principal.

Question 64

Respondeat superior:

A)imposes vicarious liability on the principal.
B)makes a principal liable for the acts of independent contractors.
C)makes a principal liable for the acts of employees committed within the scope of employment.
D)Both (a) and (c) are correct.

Question 65

Dan, an agent for Ramona, sees what he thinks is a good deal for Ramona.Without asking whether he has authority to negotiate the deal, Dan enters into a contract on Ramona's behalf.Ramona says later that she isn't interested.Is Ramona liable on the contract? Is Dan liable on the contract? Explain.

Question 66

Jack was fired by Pedro but decided to try to win back his job as agent by getting a big new contract.He approached Sharon, a new client, and made a pitch to sell Pedro's product.Sharon agreed to buy 100.Jack tells Pedro.What are the legal consequences?

A)Pedro has to hire Jack again and then make the deal.
B)Pedro would have to ratify the deal to get the benefit of the contract.
C)Pedro would have to negotiate the deal with Sharon himself.
D)Jack would forfeit his commission if Pedro took the contract.

Question 67

Discuss the requirements and effect of ratification of an agent's acts.

Question 68

Clara is planning to incorporate a new landscaping company, "Evergreen and Growin'." She has held herself out as an agent for Evergreen and has contracted to buy a truck, tools, fertilizer, and seed and also has entered into a lease on behalf of Evergreen for an office.When she fails to get the loan from the bank, she cannot start the business, so she cancels all the contracts.What are the consequences?

A)Clara can cancel all the contracts with no personal liability if she told them she was acting as an agent and expressly warranted that she would not be responsible.
B)Clara may be held personally liable on the contracts because she misrepresented to third parties that she had authority to make contracts on behalf of a non-existent corporation.
C)Since the company never existed, she gave no implied warranty.
D)Clara will be held liable for the contracts only if she ever gets the loan.

Question 69

An agent for a disclosed principal may agree to become liable on a contract between a principal and a third party in all but which of the following ways?

A)Making the contract in the agent's own name.
B)Co-making the contract with the principal.
C)Disclosing the principal's name and the agency relationship.
D)Guaranteeing that the principal will perform the contract between the third party and the principal.

Question 70

Unless otherwise agreed, authority to manage a business would include authority to do all but which one of the following?

A)Make repairs to the broken front door.
B)Hire employees to help run the shop.
C)Open a new branch office.
D)Receive money due to the business.

Question 71

Discuss whether the principal is liable in each of the following situations.
a.Patricia hires Andrew, an attorney, to negotiate a contract to purchase some property.She agrees to pay him $75 an hour for his services, and he agrees to use his own office and secretarial staff to negotiate and draft the agreement.One day, Andrew is driving his own automobile to a meeting with Edward to discuss the purchase of the land that he owns.Andrew drives too fast for conditions and has a minor traffic accident that results in $600 damage to the other vehicle.
b.Mel owns a retail store.He hires Sarah to work for him as a clerk in the home furnishings department.Mel instructs Sarah to make certain representations to customers regarding a microwave oven, which Sarah sells.Mel knows these misrepresentations are false, but Sarah does not.Henrietta buys a microwave in reliance on the misrepresentations.
c.ABC Inc.hires Keith as an outside salesman and instructs him to call on customers in a specified territory and to solicit orders for its products.One day Keith is driving the company car a little too fast for conditions on his way to call on a client.He accidentally drives the wrong way on a one-way street and has an accident with another vehicle that results in $6,000 in property damage and $30,000 in medical expenses.
d.The A & B Machine Company (ABMC) hires John as an outside salesman for its computers.It sets high sales quotas for him and instructs him to beat up salesmen from competing firms in order to keep them away from ABMC customers.In order to meet his monthly sales quota, John roughs up Ralph, who is a salesman for a competing firm and then tells Ralph to find his own customers and to stay away from John's territory.

Question 72

Ratification:

A)can only occur after the third person withdraws from the transaction and gives notice of such withdrawal.
B)cannot be effective against a corporation.
C)is equivalent to prior authority.
D)Both (a) and (b) are correct.

Question 73

Southern Furniture Co.hired Chuck to drive a company truck and deliver furniture.Chuck had a spotless driving record and did well on his driving test.Belinda ordered a chair from Southern Furniture Co.and arranged for its delivery on her lunch hour.Belinda was at home when Chuck delivered the chair.After delivering the chair, Chuck brutally raped Belinda, causing severe physical and psychological injuries.Chuck was convicted in the criminal courts.During the trial it was revealed that Chuck had been in a mental institution for the criminally insane for two years because he had brutally assaulted his mother and other women.He also had a lengthy criminal rap sheet involving theft crimes.Belinda sought compensation for her physical and psychological injuries from both Chuck and Southern Furniture Co.in civil court.Discuss the probable outcome of this case with regard to the issues of: (a) respondeat superior and (b) general tort liability of principals for the unauthorized acts of their agents.

Question 74

In the Parlato v.Equitable Life Assurance Society case, the appeals court held:

A)the "public notice rule" was binding under the facts of this case.
B)the principal had a duty to give notice to the third party in this case.
C)that the principal is responsible for torts its agent or former agent commits against unknown third parties because the principal has the ability to select agents.
D)under the circumstances of this case, the agent's apparent authority with regard to the third party terminated along with his actual authority when his employment by Equitable ended.

Question 75

The court in the Schoenberger v.Chicago Transit Authority case held that:

A)the actual authority of an agent may be founded on the acts or words of the agent.
B)implied authority is such authority as the principal knowingly permits the agent to assume.
C)actual authority is such authority as a reasonable, prudent person, exercising diligence and discretion, in view of the principal's conduct, would naturally suppose the agent to possess.
D)ZuChristian had neither actual nor apparent authority to make an offer of a specific salary or to make a promise of additional compensation.

Question 76

For a ratification to be effective, the principal:

A)must have knowledge of all material facts concerning the transaction.
B)must communicate her intent to ratify to the third party.
C)must have been in existence when the act was done.
D)Both (a) and (c) are correct.

Question 77

Under the Second Restatement, except in cases of death or incapacity, or where the performance of an authorized act becomes impossible, actual notice of termination of agency is required to the third party if she is one:

A)with whom the agent has dealt on credit.
B)to whom the agent has been specially accredited.
C)with whom the agent has begun to deal, as the principal should know.
D)All of the above.

Question 78

Saul is a sales representative for the Incman Corporation.Saul has a terrible driving record and has had his driver's license revoked, but nevertheless he continues to drive the company car for his job.One day he drives too fast for conditions, goes through a red light, and strikes a pedestrian.The accident happened despite the fact that Saul's supervisor at Incman had repeatedly reprimanded him and advised him to drive more cautiously.Incman:

A)has no liability, because they did not authorize Saul to drive carelessly.
B)has no liability, because Saul's actions were not a tort.
C)is liable even though it did not authorize Saul to drive carelessly, because it employed an improper person as its agent.
D)has no liability, because it has adequately supervised Saul as its agent.

Question 79

Jeff is acting as an agent for Tyler.Tyler's liability if Jeff makes an unauthorized tortious misrepresentation:

A)depends primarily on whether Jeff is an employee or independent contractor.
B)exists only if Jeff is an employee and was acting outside the scope of employment.
C)exists only if Jeff is an independent contractor and Tyler did not intend the misrepresentation.
D)exists regardless of whether Jeff is an employee or independent contractor and regardless of whether Tyler intended the result of Jeff's misrepresentation.

Question 80

Discuss the fundamental rules of contractual liability between a principal and the third party.