Deck 32: Agency Formation and Duties

Question 1

Agency relationships do not permeate the business world.

Answer 1

False

Question 2

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

Answer 2

True

Question 3

Generally, the law assumes that the principal is aware of any information acquired by the agent that is relevant to the agency.

Answer 3

True

Question 4

An agency relationship created for a purpose that is contrary to public policy may still be enforceable.

Question 5

Ratification involves a question of intent, and intent can be expressed only by words.

Question 6

The agent has the right to be compensated, to be reimbursed and indemnified, and to have a safe working environment.

Question 7

Whether a worker is an employee or an independent contractor has no effect on the employer's liability for the worker's actions.

Question 8

An agent can represent two principals in the same transaction as long as neither of them knows about it.

Question 9

The term fiduciary is at the heart of agency law.

Question 10

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

Question 11

Any copyrighted work created by an employee within the scope of his or her employment at the request of the employer is a "work for hire."

Question 12

If a great degree of skill is required, this may indicate that a person is an employee hired for a specialized job and not an independent contractor.

Question 13

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

Question 14

An agency agreement can be implied by conduct.

Question 15

Employers can avoid certain tax liabilities by hiring independent contractors instead of employees.

Question 16

Anything that an agent obtains by virtue of the employment or agency relationship is his or hers to keep.

Question 17

A person must have contractual capacity to be an agent.

Question 18

Even during emergency situations, when the principal cannot be consulted, the agent may not deviate from the principal's instructions without violating the duty of obedience.

Question 19

If work is usually done under the employer's direction, this indicates independent-contractor status.

Question 20

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

Question 21

Global Games Corporation employs Hyacinth as an agent. Global Games gives her an exclusive territory in which to sell its products. Global Games cannot compete with her in that territory under the duty of

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

Question 22

California Produce Company hires Drew to work on California Produce's shipping dock, checking outgoing loads and dispatching the company's drivers. With respect to California Produce, Drew is most likely

A) an agent.
B) an independent contractor.
C) a principal.
D) a work for hire.

Question 23

Donato is Equipment Repair Service Company's chief executive officer. On Equipment Repair's behalf, Donato solicits business, hires and fires workers, and handles finances. Equipment Repair pays Donato varying amounts, depending on his "needs." Donato is most likely

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

Question 24

Lorena is appointed as an agent for Milled Grains, Inc. The agency agree?ment is silent as to the level of sales that Lorena is expected to achieve. She must

A) achieve nothing because the agreement says nothing on the issue.
B) attain the level that Lorena achieved with her previous employer.
C) maintain the level Milled Grains attained before Lorena became an agent.
D) use reasonable diligence and skill in selling.

Question 25

Insurance Sales Corporation hires Jeremy to act as its agent. Insurance Sales's right not to perform a contract entered into by Jeremy, if he breaches their agency agreement, is the right of

A) avoidance.
B) indemnification.
C) nullification.
D) termination.

Question 26

Fact Pattern 32-1B (Questions B4-B6 apply)
Margo works as an administrator and receptionist in Neon's Garage Door Store. Neon withholds federal taxes from Margo's pay, and controls the methods and details of the performance of her work. Margo is not au?thorized to modify the prices or other terms of a sale at the store. Omar installs Neon's Garage Door products at the buyers' locations.
Refer to Fact Pattern 32-1B. At the shop, Margo is

A) an independent contractor.
B) Neon's employee only.
C) Neon's employee and agent.
D) Neon's principal.

Question 27

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 28

Largo is an agent for MaryElise. MaryElise gives Largo clear instructions to enter into contracts on her behalf only on Mondays, Wednesdays, or Fridays. Largo enters into a contract on her behalf on Tuesday. Largo has breached

A) the duty of performance.
B) the duty of loyalty.
C) no duty.
D) the duty of obedience.

Question 29

Ingmar asks Jessie to contract with Jessie's high school classmates to babysit Ingmar's new baby. Jessie orally agrees to do so. This is

A) an agency by agreement.
B) an agency by estoppel.
C) an agency by ratification.
D) not an agency relationship.

Question 30

Bernard is an expert on exotic flowers. Custom Floral Arrangements, Inc., hires Bernard to order exotic flowers for its arrangements. Bernard does not examine the quality of the flowers he orders on behalf of Custom Floral. Bernard has breached

A) the duty of performance.
B) the duty of loyalty.
C) no duty.
D) the duty of notification.

Question 31

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 32

Investment Holdings Corporation hires Jerilyn, a business appraiser, to locate investment possibilities for Investment Holdings. Jerilyn learns of a salsa and hot sauce manufacturing company avail?able for a reasonable price, but neglects to tell Investment Holdings. Most likely, Jerilyn

A) breached the agent's fiduciary duties to the principal.
B) did nothing wrong.
C) failed to take advantage of a business opportunity.
D) assumed that the information was confidential.

Question 33

Bailey is an agent for Culinary Delites Company. In the course of Bailey's performance for Culinary Delites, she pays Drivers' Repair Service for certain vehicle maintenance and repair work. Bailey's right to obtain the amount of the payments from Culinary Delites arises under the principal's duty of

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

Question 34

Sybil agrees with Tyrone and other professional athletes to sign contracts with promoters and others on the athletes' behalf. Sybil is

A) an agent.
B) an employee.
C) an employer.
D) a principal.

Question 35

Fact Pattern 32-1B (Questions B4-B6 apply)
Margo works as an administrator and receptionist in Neon's Garage Door Store. Neon withholds federal taxes from Margo's pay, and controls the methods and details of the performance of her work. Margo is not au?thorized to modify the prices or other terms of a sale at the store. Omar installs Neon's Garage Door products at the buyers' locations.
Refer to Fact Pattern 32-1B. Neon hires Professional Janitorial Company to clean the store. Neon gives Professional Janitorial instructions as to what needs to be cleaned and when. Professional Janitorial is

A) an independent contractor.
B) Neon's employee only.
C) Neon's employee and agent.
D) Neon's principal.

Question 36

Fact Pattern 32-1B (Questions B4-B6 apply)
Margo works as an administrator and receptionist in Neon's Garage Door Store. Neon withholds federal taxes from Margo's pay, and controls the methods and details of the performance of her work. Margo is not au?thorized to modify the prices or other terms of a sale at the store. Omar installs Neon's Garage Door products at the buyers' locations.
Refer to Fact Pattern 32-1B. Neon authorizes Omar to sell garage door upgrades and accessories at the buyers' lo?cations at prices that Omar negotiates with those buyers. With respect to sales at those locations, Omar is

A) an independent contractor.
B) Neon's employee only.
C) Neon's employee and agent.
D) Neon's principal.

Question 37

Rosario is a chef and caterer who hires out on a per-project basis to companies with on-location work sites, as well as to hosts of banquets, corporate meetings, concerts, weddings, and other events. In this capacity, Rosario is

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

Question 38

Elaine owns the Fabric & Yarn store. Goldie is a salesperson in the store. When Goldie makes a sale to Heather, the sale is binding on

A) Elaine.
B) Goldie.
C) Fabric & Yarn only-and only if Elaine is present at the sale.
D) no one.

Question 39

Home Enterprises employs Itzak to buy property for a possible residential development. Itzak secretly buys some of the property and sells it to Home Enterprises at a profit. Itzak has breached

A) no duty.
B) the duty of accounting.
C) the duty of loyalty.
D) the duty of notification.

Question 40

Lucille is married to Marcus. Lucille buys food for their children's lunches and charges the cost to Marcus's account. This is

A) an agency by operation of law.
B) an agency by estoppel.
C) an agency by ratification.
D) not an agency relationship.

Question 41

Build-It Construction Company contracts with Classic Beverage Corporation to build Classic Beverage's corporate headquarters. Build-It Construction contracts with Dependable Tools & Materials Inc. for construction supplies but refuses to pick up the order. Meanwhile, Classic Beverage hires Elmo, a certified public accountant, to work in its cost-accounting division as an employee, with no authority to hire or supervise others. Elmo asks Fayette, an outside experienced accountant, to advise him on certain accounting procedures but fails to pay Fayette for the service. Classic Beverage also contracts with Gloria, a salesperson, to solicit orders for its products in a designated territory. Gloria obtains an order from Highpoint Concessions, Inc., which is assured the order will be filled soon. But Gloria does not follow through with the paperwork and fails to submit the order to Classic Beverage. Highpoint Concessions suffers a loss. Dependable Tools, Fayette, and Highpoint Concessions claim Classic Beverage is liable under agency law. Discuss fully whether an agency relationship was created by Classic Beverage with Build-It Construction, Elmo, or Gloria.

Question 42

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?