Deck 24: Liability of Principals and Agents to Third Parties

Question 1

Ratification does not give the principal full benefit of the contract.

Answer 1

False

Question 2

When an agent commits a tort or crime while working for the principal,the agent is personally liable for the consequences of his actions,unless he is acting at the direction of the principal.

Answer 2

False

Question 3

When the agent colludes with a third party to withhold knowledge or money from the principal,the principal will be liable.

Answer 3

False

Question 4

Agents may not delegate to employees acts that involve no judgment or discretion.

Question 5

An agent's exercise of apparent authority,in the absence of actual authority,is in violation of the agent's duty to the principal.

Question 6

A sales manager for a corporation would probably have authority to hire sales agents for the corporation and such agents can also act as subagents.

Question 7

An agent possesses implied authority when:

A)the principal has ratified past actions,leading third persons to believe authority exists.
B)the principal gives greater authority to special agents than general agents.
C)the agent is required to safeguard the property interests of the principal due to an emergency.
D)the agent's powers are specifically described by the principal.

Question 8

Many courts allow a third party to rescind a contract when the person has relied on a misrepresentation by the agent even though the contract contains an exculpatory clause.

Question 9

An agent who commits a criminal act under instruction from her principal is guilty of that crime.

Question 10

An attorney-in-fact:

A)is the label given to an agent whose authority is in writing.
B)is the label given to an agent whose authority is implied.
C)is the label given to an agent whose authority is apparent.
D)is the label given to an agent who has the authority to ratify.

Question 11

When the principal is undisclosed,the third party who deals with the agent believes the agent is acting personally and accordingly expects the agent to be a party to the contract.

Question 12

The test of an agent's implied authority is:

A)the justifiable belief of the agent.
B)the specific language the principal used in granting the authority.
C)to determine whether the authority is also apparent.
D)the technical label given to an agent.

Question 13

If the agent exceeds his or her authority,liability results-unless the principal ratifies the act or the third party has knowledge of the unauthorization.

Question 14

A person may have apparent authority even though she has never been appointed an agent by the principal.

Question 15

Express authority:

A)is created when the principal specifically describes the extent of the agent's powers.
B)arises from the principal's failure to inform third persons that the relationship is not what it appears to be.
C)occurs with respect to an act of an agent who has exceeded the authority given.
D)is created by the conduct of the principal that causes a third person reasonably to believe that another has the authority to act for the principal.

Question 16

Between the agent and the principal,it is the principal who is ultimately liable for the acts of the subagent.

Question 17

Ratification must be expressed and may not be implied from the actions of the agent.

Question 18

The test of an agent's express authority is:

A)the justifiable belief of the agent.
B)the specific language the principal used in granting the authority.
C)the technical label given to an agent.
D)the surrounding circumstances such as the words and conduct of the parties.

Question 19

An agent does not possess the implied authority to do whatever is reasonably necessary to accomplish the objectives of the agency.

Question 20

Generally,notice to the agent is notice to the principal if it relates to the business of the agency.

Question 21

Jane appointed Tom as her agent and gave him express authority to retain subagents to do some or all of Tom's work.Tom retained Mike as a subagent.Based on these facts,which of the following statements is true?

A)Only Jane is bound to a third party by Mike's actions.
B)Neither Jane nor Tom is bound to a third party by Mike's actions as subagent.
C)Between Jane and Tom,it is Tom who is ultimately liable for Mike's actions as subagent.
D)Mike is solely bound to third parties for his actions as subagent.

Question 22

Apparent authority may exist:

A)only if actual authority has been conferred.
B)if a principal has unintentionally permitted third persons to believe a person is her agent.
C)if the principal specifically describes the extent of the agent's powers in writing or orally and makes him/her a special agent.
D)when the conduct of the principal causes a third person reasonably to believe that another has the authority to act for the principal.

Question 23

An agent can limit the liability for the acts of a subagent to the principal by using:

A)express authority
B)ministerial actions
C)implied authority
D)exculpatory clause

Question 24

General agents:

A)have a limited range of implied authority than special agents.
B)are authorized by the principal to do a specific act.
C)are agents who do not possess the authority to contract on behalf of its principal.
D)act for the principal in a number of transactions over a period of time.

Question 25

A large and well-known corporation wants to acquire a plot of ground for a new plant.To avoid the extra cost,purchases the land through several agents,each purporting to be buying personally.In such cases,the corporation is a(n)______.

A)undisclosed principal
B)disclosed principal
C)partially disclosed principal
D)subagent

Question 26

Which of the following statements is true for a principal's liability for notice and payments to the agent?

A)The agent is not bound to inform the principal of knowledge the agent gains in the course of his or her responsibilities.
B)Payment to the agent of a debt owed to the principal discharges the debt if the agent has authority to receive such payments.
C)An agent who makes over-the-counter sales is viewed as having express authority to collect for the goods.
D)The principal is bound by the information that is passed on by the agent if it relates to the scope of the agent's responsibilities and authority.

Question 27

Jen is a buyer for Autumn's Iowa health food store.While Jen is in California buying tofu,she finds a solar car for sale for just $3,000.Jen contracts to buy the car for Autumn,who has been looking for a solar car for the past three years.Autumn instructs the seller of the car to ship it.Under these circumstances:

A)Autumn has ratified the contract.
B)Autumn is not liable on the contract.
C)Jen is liable on the contract.
D)Jen has ratified the contract.

Question 28

Ratification may be inferred by a court:

A)from the fact that the principal accepted the benefits of an unauthorized contract.
B)from the agent's failure to repudiate an unauthorized contract after becoming aware of it.
C)from the third party's extent of knowledge about the contract.
D)from the principal's failure to give express authority to the agent.

Question 29

A principal's intent to ratify a contract:

A)needs to be expressed explicitly.
B)may not be implied by his acts or failure to act.
C)may be inferred by a court from the fact that the principal accepted the benefits of an unauthorized contract.
D)may be inferred from the principal's repudiation of an unauthorized contract after becoming aware of it.

Question 30

For ratification to be effective:

A)the principal cannot be disclosed to the third person.
B)the agent or purported agent must have acted on behalf of the principal.
C)the principal must have had capacity to do the act only at the time of ratification.
D)it is necessary that the principal fully understand the legal significance of all material facts.

Question 31

When Nancy's aunt left for her annual Christmas vacation,she left Nancy in charge of her coffee shop.During this time,there was a devastating snow storm which damaged the roof of the café.Under such circumstances,Nancy can make necessary repairs if she cannot reach her aunt for further instructions because:

A)she has apparent authority.
B)she has power of attorney.
C)she has express authority.
D)she has inherent agency power.

Question 32

An agent will be relieved from liability for representations in excess of the agent's authority if:

A)the agency is partially disclosed.
B)the third party knows that the agent is acting in excess of his authority.
C)the entity has a legal existence.
D)the act was undertaken with a good intent.

Question 33

The principal is bound by representations:

A)that are reasonably necessary for the agent to make in order to accomplish the purpose of the agency since they would be apparently authorized.
B)that the agent is expressly authorized to make.
C)even if the third person knows that the agent has exceeded his actual authority.
D)that are not customary in the kind of business being transacted by the agent.

Question 34

Where an agent has taken an unauthorized action:

A)the principal may not ratify the action even if it would be beneficial to the principal to do so.
B)the principal is free to ratify the beneficial part of the unauthorized action and deny any burdensome part of it.
C)any ratification by the principal must be for the entire action,not merely the beneficial part.
D)the principal may ratify the action only if the principal is a corporation.

Question 35

A person who is induced to enter a contract by the misrepresentation of an agent has the same remedies as if he had contracted with any person who made a _____.

A)misrepresentation
B)duress
C)undue influence
D)fraud

Question 36

Liability is imposed on an agent who has exceeded his authority on the basis of an:

A)implied warranty of authority.
B)actual warranty of authority.
C)inherent warranty of authority.
D)apparent warranty of authority.

Question 37

Which of the following statements is true for a nonexistent or incompetent principal?

A)If the third person is unaware of the lack of capacity of the principal,the agent is protected.
B)A minor is considered a nonexistent principal.
C)The law imposes an apparent warranty by the agent that the principal has the capacity to be bound.
D)A person judged insane is not considered to be nonexistent.

Question 38

Which of the following is true for ratification?

A)It releases the principal from liability to the third person.
B)It gives the agent the same right to compensation that he would have had if there had been prior authorization.
C)It requires that the principal to have full understanding of the legal significance of all material facts.
D)It is inferred by a court from the fact that the agent accepted the benefits of an unauthorized contract.

Question 39

Which of the following statements is true about apparent authority?

A)Only a general agent can have apparent authority.
B)Only a special agent can have apparent authority.
C)If the agent justifiably believed he had authority,his authority would be apparent.
D)If a third party justifiably believed the agent had authority,the agent's authority would be apparent.

Question 40

Ratification releases:

A)the principal from liability.
B)the agent from liability.
C)the third party from liability for acts of the principal.
D)the principal and the third party from liability.

Question 41

Explain the concept of apparent authority.

Question 42

After Bart and Veronica were involved in an automobile accident,Bart retained Rhonda as an attorney to negotiate an out-of-court settlement.After a lengthy discussion with Veronica's insurance company,Rhonda settled the case for $5,000.However,Bart personally rejected the $5,000 offer.Veronica filed suit to enforce the settlement,claiming that Rhonda was authorized to accept the settlement on behalf of Bart.Discuss Rhonda's express,implied and apparent authority.

Question 43

Which of the following statements is true for the principle of respondeat superior?

A)When an agent commits a tort or crime while working for the principal,the agent is always personally liable for the consequences of his actions.
B)A principal's liability under respondeat superior often is called direct liability.
C)If the agent was acting within the scope of the agency when the tort occurred,he is liable for his own actions.
D)This theory of liability makes the principal responsible without regard to whether the principal was actually at fault.

Question 44

Jacobsen contracted with Orr to purchase some of Orr's property.Jacobsen informed Orr that he (Jacobsen)was purchasing the property on behalf of another person,but Jacobsen did not reveal to Orr the name of the person for whom Jacobsen was making the purchase.The agency here is:

A)disclosed.
B)undisclosed.
C)partially disclosed.
D)illegal.

Question 45

A person who commits a crime under instructions from her principal:

A)is relieved from liability if committed within the scope of employment.
B)is guilty of the crime because the agent's duty to society overrides the duty to follow the direction of the principal.
C)is guilty of the crime because newly revised criminal codes will almost always impose liability on the third party.
D)is relieved from liability if the crime is committed to accomplish the objectives of the agency.

Question 46

When the principal is negligent in the hiring and/or supervision of the agent,the principal may be liable under:

A)direct liability.
B)apparent agency.
C)joint liability.
D)vicarious liability.

Question 47

Wheelz retained Doug,an attorney,to repossess several utility trailers,giving him the authority to take whatever steps were necessary to recover the trailers.Doug hired Randy RepoMan to locate the equipment.After orally reporting to Doug that he had found the trailers in Iowa,Doug instructed RepoMan to have them towed to Nebraska.RepoMan hired Ted's Towing to carry out the request.Ted's stored the trailers on its lot in Omaha,Nebraska,and RepoMan notified Doug of this fact.When Ted's was not paid,it sued Wheelz for its towing and storage services,arguing that RepoMan was a subagent capable of binding Wheelz to the towing and storage contract.Discuss.

Question 48

Ralph and Ann engaged Sue,a realtor,to sell their variety store.Sue represented to buyer Mike that "this was a typical general store," selling gas,oil,hardware,beer,and groceries.She reported that the store had an annual gross income of over $1 million.Sue failed to inform Mike that one-third of the store's profit was attributable to an accompanying lawn and garden equipment distributorship that Ralph and Ann were not including in the sale.When Mike visited the business,Sue directed him away from the garage area where the lawn and garden equipment was stored.Throughout all of these negotiations,Ralph and Ann were unaware of Sue's misrepresentations.After purchasing the store,Mike learned of the importance of the equipment sales from Ralph and Ann.Are Ralph and Ann liable for Sue's misrepresentation? If yes,what can they do to avoid liability?

Question 49

A principal's liability under respondeat superior often is called:

A)direct liability.
B)vicarious liability.
C)contributory liability.
D)enterprise liability.

Question 50

Briefly describe the doctrine of respondeat superior.