Deck 11: Agency

Question 1

Authority based on what the third party reasonably believes the agent to possess is called ______ authority.

Answer 1

apparent

Question 2

Vince is a general contractor who hires Brad to install plumbing in a government building under construction. The morning that Brad is to begin work, Vince discovers that Brad has lost his plumbing license and is no longer eligible to do work on government buildings. When Brad shows up ready to work, Vince informs him that he can't use his services and sends him away. The agency relationship terminated due to operation of law.

Answer 2

True
Explanation: An agency will terminate due to operation of law should a circumstance occur preventing the agency from going forward. Here, the loss of a required license will terminate the agency because it would be illegal for Brad to act without a valid license.

Question 3

A revocation of the agency relationship requires that the principal and the agent agree to terminate the agency.

Answer 3

False
Explanation: Revocation of an agency relationship occurs when the principal expressly terminates the agency, and this may be done unilaterally.

Question 4

Sam is hired by a pest company to go into people's homes, and six months after he starts working, it is discovered that Sam had previously been arrested and found guilty of criminal assault. Failure to fire Sam or reassign him to a nonpublic-related position may give rise to a suit based on ________ should Sam attack a customer in the customer's home while in the course of employment.

Question 5

Agents who act on behalf of a principal without receiving any compensation are called ________ agents.

Question 6

An independent contractor is not considered an employee but is entitled to minimum wage and overtime protections.

Question 7

If an agent possesses important facts directly related to his agency relationship but withholds those facts from the principal, the agent has breached her duty of _____.

Question 8

An express termination of the agency relationship by the agent is called a renunciation.

Question 9

Clyde has been hired to deliver a truckload of hogs to a cross-state slaughterhouse. On the way there he stops to visit his girlfriend Samantha, who lives five minutes off his prescribed route. He spends five minutes with her. During those five minutes he is considered to be on a _____.

Question 10

To develop your understanding of agency law, you need to be aware of the legal requirements for creating an agency, the liability of a principal for an agent's conduct, and the remedies available to the parties.

Question 11

An agent is generally prohibited from using his or her own judgment as a substitute for the principal's judgment unless specifically authorized by the principal.

Question 12

The principal may be an individual or entity (such as a corporation), but the agent must be an individual.

Question 13

In an agency relationship, one party agrees to act as an agent for another party.

Question 14

Craig has been hired by Brian to negotiate a deal with Rudy. Brian instructs Craig that while he is in Rudy's office, should he be able to steal the Johnson file, he is to do so. If Craig has the opportunity to steal the file but fails to do so, he is in violation of his duty of obedience and obligation to follow his principal's instructions.

Question 15

The person from whom an agent has received instruction and authorization and to whose benefit the agent is expected to perform and make decisions pursuant to an agency relationship is called the __________.

Question 16

Liability involving one party's liability for another party's act is called ________ liability.

Question 17

One who agrees to act and is authorized to act on behalf of another, a principal, to legally bind the principal in particular business transactions with third parties pursuant to an agency relationship is the ___________.

Question 18

The centerpiece of a fiduciary relationship is the agent's duty to act with due care when performing the responsibilities of the agency.

Question 19

Acceptance of an agent's previously unauthorized act by a principal is called _____.

Question 20

Tom has been injured on the job, so Dick hires Harry to fill in for Tom. The agreement with Harry is that he will work until Tom is ready to return. When Tom is indeed ready to return, Dick's position is terminated by an express act defined as _____.

Question 21

The manager at an apartment complex has no prior criminal record but has just been arrested for possession of child pornography. If he is convicted but given probation and not jailed, the apartment complex may be liable if it does not fire him and he later harms a child on the premises.

Question 22

Whether someone is an agent or not depends on what is said in the agreement between the principal and the agent.

Question 23

A principal has the power to terminate an agency relationship whether or not the principal has the legal right to terminate that relationship.

Question 24

Jethro is having a sweet-16 birthday party for his daughter Kate in his backyard. To make the party special, he hires Tony to put on a fireworks display. He found Tony through a classified ad in the local newspaper. In the written contract, Jethro simply instructs Tony to begin the display at 8 p.m., make it last 16 minutes, and make it spectacular; no safety parameters are mentioned or discussed. During the finale, one of the rockets malfunctions and explodes amid the party guests, injuring eight people. Jethro has no liability because Tony was an independent contractor.

Question 25

An agent may work for two principals at the same time if the agent deals fairly with both.

Question 26

Actual authority is the authority that the third party may reasonably assume that the agent possesses.

Question 27

The Restatement (Third) of Agency has been adopted in about half of the states.

Question 28

If an agent suffers losses while acting for the principal, the principal has a duty to indemnify the agent for those losses.

Question 29

A principal has a duty to reimburse or indemnify the agent for payments made or expenses incurred event if incurred outside the agent's actual authority.

Question 30

Whether an agency is classified as disclosed, undisclosed, or partially disclosed, the principal has the duty to fully perform the contract obligations.

Question 31

One significant benefit of an employer's completing an IRS Form SS-8 is that even if the employer does, in fact, misclassify a worker, the proper completion of the form may evidence a good faith effort by the employer, reducing or even eliminating IRS penalties for misclassification.

Question 32

One of the principal's duties is to keep an accounting during the agency relationship.

Question 33

If an agent is acting within the scope of his or her employment and commits an intentional tort harming a third party, the principal may be liable for the injuries sustained.

Question 34

Gina has hired Frank, an attorney, to handle her divorce. If, during face-to-face negotiations, Frank strikes Gina's husband's attorney, Gina will be liable because Frank was her agent employee.

Question 35

Rob agrees to act as an agent for Diane in selling her car. Diane has a duty of loyalty to Rob.

Question 36

Courts apply a subjective standard when examining the existence of offer and acceptance by the parties when they created an agency relationship.

Question 37

In a fully disclosed agency situation, the agent is not contractually liable to the third party.

Question 38

The doctrine of negligent hiring applies to independent contractors only when the contractor is hired to do a hazardous or inherently dangerous job.

Question 39

Your professor is a partially disclosed agent representing your school.

Question 40

In an agency relationship the principal's control must be total and continuous over the agent.

Question 41

In California, courts determine independent contractor status by considering each of the following except:

A) whether the worker is engaged in a distinct occupation or business.
B) whether the work is usually done under the principal's direction or by a specialist without supervision.
C) the skill required.
D) what the parties agreed to.

Question 42

Angelina hires Brad to drive a truck to a depot 200 miles away. She specifies the route that he is to take and tells him to be sure to arrive by 5 p.m. On the way, Brad finds himself nodding off due to hunger. He checks the time and finds that he has plenty of time to make the 5 p.m. deadline, so he decides to stop at a diner that he is familiar with. The diner is three-quarters of a mile off the route that Angelina had specified. Brad does not call Angelina to ask for permission. On the way to the diner, Brad runs a red light and has a collision with Billy Bob. Billy Bob sues Angelina.

A) Angelina wins because Brad was on a detour, freeing her from liability.
B) Angelina wins because Brad was on a frolic, freeing her from liability.
C) Angelina loses because Brad was on a detour, so she is liable.
D) Angelina loses because Brad was on a frolic, so she is liable.

Question 43

Young has just fired Kathy, who was her agent. Young places an ad in the classified section of the local newspapers that states, "Kathy no longer works for or represents Young in any way." Young placed this ad to eliminate any possible liability resulting from:

A) actual authority.
B) apparent authority.
C) ratification.
D) respondeat superior.

Question 44

Which of the following is the true statement?

A) Ratification applies to previously unauthorized acts.
B) Actual authority must be expressly created and cannot be based on custom or past dealings.
C) Apparent authority is based on what the principal communicates to the agent and not to the third party.
D) Actual authority must always be expressed in writing.

Question 45

Respondeat superior makes a principal liable for:

A) acts of the agent based on implied authority.
B) unauthorized acts of the third party.
C) frolics and detours of the agent.
D) negligent acts of independent contractors.

Question 46

Agency law primarily exists on the:

A) state level.
B) federal level.
C) common law level.
D) constitutional level.

Question 47

Sanchez borrowed money from Fifth National Bank to buy a car. She defaulted on the loan. Fifth National hired Rex's Recovery Service to repossess the car for a set fee. Rex's was simply told to locate and seize the car. Rex's would be classified as:

A) an agent/employee.
B) a principal.
C) a gratuitous agent.
D) an independent contractor.

Question 48

A gratuitous agent:

A) has no duty of care owed to the principal.
B) breaches the duty of care when ordinarily negligent.
C) breaches the duty of care when grossly negligent.
D) is held to the same standard of care as any other type of agent except the independent contractor.

Question 49

Which of the following is a form of vicarious liability?

A) respondeat superior
B) disgorgement
C) repudiation
D) ratification

Question 50

In Hannington v. University of Pennsylvania, the court had to determine whether an attorney acted under apparent authority regarding the negotiation and signing of a settlement agreement. The court determined that:

A) attorneys are generally independent contractors and cannot possess apparent authority to bind a principal.
B) after six months of negotiations it is reasonable to believe that an attorney has apparent authority to finalize an agreement on behalf of the principal.
C) because the agency was disclosed and the principal's identity well known, the university could have easily verified the enforceability of the agreement with Hannington, so it is at fault for not doing so.
D) third parties may never enforce an agreement that the principal has not authorized and signed.

Question 51

Agency law generally exists on the state statutory level and is based on:

A) common law.
B) the Restatement (Second) of Agency.
C) tort law.
D) the federal regulation of agency.

Question 52

Robert is a wealthy businessman who wishes to purchase a particular property. Realizing that the price might become inflated if his name is made known, he asks Faye to negotiate the purchase of the property on his behalf. Faye is the general manager of Robert's east coast operations. Faye reports directly to Robert and is supervised in all respects. Faye is told to tell Philip, the property owner, that she represents someone, but she's told not to specify who she works for. The agency would be described as:

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

Question 53

The Happy Days Day Care is hiring a child care worker. On the employment application Happy Days specifically asks if the applicant has ever been arrested. Tina applies for a job at Happy Days and answers no to that question. She also answers no to the question that asks if there is any reason that she would not be qualified to work with children. Soon after Tina is hired, she severely shakes a baby to stop it from crying, causing the baby injuries. It is discovered at trial that Tina has been fired from numerous day cares for baby shaking and various other offenses. If the baby's parents sue Happy Days:

A) Happy Days is not liable because it made a good faith effort to screen applicants and because it specifically asked about past indiscretions.
B) Happy Days is liable because Tina was dealing not with the public but only with children.
C) Happy Days is liable for negligent hiring.
D) Happy Days is liable for negligent retention.

Question 54

Jack is a truck driver employee of Ace Trucking. While delivering his cargo, he sees that the truck assigned to him is low on gas. Jack pulls into a convenient station and puts $50 worth of gas into the truck, which will allow him to complete his assignment and return to the depot.

A) Ace is not required to reimburse Jack unless, prior to starting the delivery, he had been given the express actual authority to purchase gas on behalf of the principal.
B) Ace is not required to reimburse Jack unless he phoned in and asked for and was granted permission to purchase gas.
C) Ace will be required to reimburse Jack for the cost of the gas based on implied authority stemming from his express authority to drive the truck.
D) Ace will be required to reimburse Jack because apparent authority gives him the right to buy gas when it is apparent that it is needed.

Question 55

The nonagent employee relationship is sometimes referred to as the:

A) superior-inferior relationship.
B) supervisor-worker relationship.
C) director-directee relationship.
D) master-servant relationship.

Question 56

Mike worked for Frank's Pizza as a driver and was an agent. His duties consisted of making deliveries along a designated route. One day Mike decided to see his girlfriend, Jackie, who lived 50 miles off his pizza route. While driving to his girlfriend's, Mike injured a pedestrian, Chuck. The accident was caused by Mike's negligent driving. Chuck is now suing both Mike and Frank's for personal injuries. Under the circumstances:

A) Frank's is liable under the doctrine of respondeat superior.
B) Frank's is never liable for the negligent torts of its agents.
C) Chuck can recover damages from both Frank's and Mike.
D) Frank's is not liable because Mike was on a frolic of his own.

Question 57

Karl is a driver for Arnold's Appliance Store and delivers appliances to customers. One day, Karl negligently secures a washer and dryer in the back of his truck, and while he is driving, the washer falls out of the truck. Jan, driving behind the truck, sees the appliance flying at her and swerves into a telephone pole. Which of the following is correct?

A) Karl, but not Arnold's, is liable.
B) Both Karl and Arnold's are liable.
C) Arnold's, but not Karl, is liable.
D) No one is liable; it was an accident.

Question 58

In which of the following situations is the agent not liable should the principal breach the contract with the third party?

A) none (Agents are liable in all agency situations.)
B) partially disclosed agency
C) undisclosed agency
D) disclosed agency

Question 59

If an agent acts in a disloyal manner and realizes a personal profit from his or her acts, the court may order a return of the funds, which is called:

A) replenishment.
B) disgorgement.
C) restoration.
D) reinstatement.

Question 60

Joyce contracted with Mega Drug Corporation to buy vitamins on behalf of Howard, a personal trainer. Howard told Joyce to use her own name and not to disclose to Mega that she was working for Howard. If Joyce signs the contract in her own name only and Howard won't honor it:

A) Joyce can't be sued because she's only an agent.
B) Joyce is liable but may sue Howard based on indemnification.
C) Joyce is liable but may sue Howard based on failure of loyalty.
D) Howard has no liability to anyone, since his name was never disclosed.

Question 61

When hiring a new employee, or when continuing the current employment of an employee, how and why must an employer take specific steps to protect the public?

Question 62

In Edgewater Motels Inc., v.A. J. Gatzke and Walgreen Company, Gatzke, an employee agent of Walgreen, while filling out expense reports under the scope of his employment, accidentally started a fire due to careless smoking, severely damaging the Edgewater Motel. With regard to the smoking the court determined that:

A) defendant Walgreen has no liability because smoking had nothing to do with Gatzke's duties, so the fire was caused by an act outside the scope of his employment.
B) defendant Walgreen is liable only if it knew that Gatzke smoked and did not order him to stop or if it condoned or authorized smoking.
C) Edgewater wins because the smoking occurred as Gatzke was performing his job and the slight deviation for his personal comfort was reasonable and was not a severe departure from his duties.
D) Edgewater wins because Walgreen authorized Gatzke to rent the room and is therefore liable for any intentional or unintentional acts of its employee agent that result in harm to others.

Question 63

Generally, the agent's duty to keep an accounting means that the agent must:

A) keep records, receipts, and other documentation of costs or income for the principal.
B) be able to verify the exact number of hours the agent spends acting within the scope of employment.
C) prepare tax returns for the principal pertinent to the agent's financial activities.
D) be able to account for any and all of the principal's funds when they are commingled with the agent's or anyone else's funds.

Question 64

The IRS has developed a three-prong test to determine an agent's status. Which of the following is not a prong in this test?

A) whether the working relationship is written or oral
B) behavioral aspects of the agency
C) the type of working relationship between the principal and the agent
D) the financial arrangements between the principal and the agent

Question 65

Donald is an agent representing Xmart, a large department store chain. Xmart has sent him to deal with Fred in regard to purchasing Fred's land in order to erect a new store. When Donald first meets Fred, Fred calls Xmart to verify that Donald is in fact an agent authorized to deal on Xmart's behalf. Xmart sends Fred a written confirmation of Donald's authorization to act as its agent and states that a contract signed by Donald will be honored by Xmart. Donald and Fred meet every other day during the negotiations. While the negotiations are still ongoing, Donald is fired by Xmart because it doesn't feel that he is making sufficient progress. Why is it important for Xmart to communicate with Fred regarding Donald's firing?

Question 66

Explain the difference between a frolic and a detour and how they affect or do not affect the principal's liability.

Question 67

Explain the doctrine of respondeat superior and how it applies to a principal's liability.

Question 68

An agency relationship is terminated by expiration in all of the following situations except:

A) the time period ends.
B) an event occurs.
C) the purpose has been accomplished.
D) the principal dies.

Question 69

Mike calls Beth and asks her to referee a soccer game. Beth is not obligated to work the game. If she accepts the assignment and works the game, she is told the time of the game, she must wear an approved uniform, and she is paid a fee. Once on the pitch (field) she is in complete control. Beth is considered:

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

Question 70

Courts apply the ________ analysis to determine the classification of an agent.

A) consistency-over-form
B) fundamentals-over-style
C) substance-over-form
D) classification-over-mode

Question 71

What is meant by ratification, and what three options does a principal have when confronted by a situation involving ratification?

Question 72

Fundamentally, an agency transaction involves creation of agency, performance of obligations and duties, and:

A) express agreement.
B) entering of a contract.
C) termination of agency.
D) transaction of business.

Question 73

Name the five agent duties that comprise the agent's fiduciary responsibility to the principal.

Question 74

Explain the interrelationship of agency law and contract law as they relate to the principal and agent in an agency relationship.

Question 75

If a principal wants to keep her identity secret, she would use:

A) a disclosed agency.
B) a partially disclosed agency.
C) an undisclosed agency.
D) an independent agency.

Question 76

Which of the following is an example of terminating the agency relationship by express act?

A) The principal calls the agent and tells her to stop working.
B) The principal dies.
C) The principal files for bankruptcy.
D) The thing the agent was hired to work on is destroyed in a fire.

Question 77

Stella is an agent for Howard. It has come to Howard's attention that Stella has breached the duty of loyalty and has used information that Stella should have passed on to Howard for her own personal dealings. What remedies does Howard have if he chooses to end the agency relationship?

Question 78

Explain the three-prong test the IRS uses to determine an agent's status.

Question 79

With regard to negligent hiring, the courts would require the least amount of scrutiny regarding:

A) an office worker.
B) a teacher.
C) a tour guide.
D) a pizza delivery person.

Question 80

Why is it important for agents to accurately define their role when signing contracts on behalf of a principal?