Deck 32: A: Agency Formation and Duties

Question 1

An agent is required to notify the principal of all matters concerning the subject matter of the agency.

Answer 1

True

Question 2

An agency relationship created for a purpose that is illegal is unenforceable.

Answer 2

True

Question 3

An agent has the right to perform agency duties without interference by the principal.

Answer 3

True

Question 4

An agent's actions must be strictly for the benefit of the principal.

Question 5

All agency relationships are based on contract.

Question 6

Anything that an agent obtains by virtue of the agency relationship belongs to the principal.

Question 7

Considerable control over the details of work indicates agent status.

Question 8

A person must have contractual capacity to be a principal.

Question 9

Agency relationships do not exist between employers and employees.

Question 10

A worker engaged in an occupation or business distinct from that of an employer points to independent-contractor status.

Question 11

Through agents,a principal can conduct multiple business operations simultaneously.

Question 12

Any copyrighted work created by an employee,whether or not an employer requested it,is a "work for hire."

Question 13

An agent has a duty to follow all clearly stated instructions of the principal,lawful or not.

Question 14

Agency by operation of law may not occur in emergency situations.

Question 15

Work done by a specialist without supervision indicates employee status.

Question 16

Only through its agents can a corporation function and enter into contracts.

Question 17

An agreement to form an agency relationship must be in writing.

Question 18

Employment laws apply only to the employer-employee relationship.

Question 19

An independent contractor may not act in the capacity of an agent.

Question 20

A principal owes an agent a duty of obedience.

Question 21

Macro Corporation and National Purchasing Company may create an agency agreement

A)by conduct,in writing,or orally.
B)by conduct or orally only.
C)in writing only.
D)under no circumstances.

Question 22

Fact Pattern 32-1B
Liz and Molly work as clerks in Nia's Dress Shop.Nia withholds federal taxes from their pay,and controls the methods and details of the performance of their work.Liz and Molly are not au?thorized to modify the prices or other terms of a sale at the shop.
Refer to Fact Pattern 32-1B.At the shop,Liz and Molly are

A)independent contractors.
B)Nia's employees only.
C)Nia's employees and agents.
D)Nia's principals.

Question 23

Jay holds himself out as possessing special accounting skills.As an agent,he 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 24

National Computer Corporation (NCC)employs Cynthia as an agent.NCC gives her an exclusive territory in which to sell NCC products.NCC cannot compete with her in that territory under the duty of

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

Question 25

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

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

Question 26

Fact Pattern 32-1B
Liz and Molly work as clerks in Nia's Dress Shop.Nia withholds federal taxes from their pay,and controls the methods and details of the performance of their work.Liz and Molly are not au?thorized to modify the prices or other terms of a sale at the shop.
Refer to Fact Pattern 32-1B.Nia authorizes Liz to sell clothes at remote lo?cations at prices that Liz negotiates in those locations.With respect to sales at those locations,Liz is

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

Question 27

Espresso Roast Company hires Forrest to work on Espresso's shipping dock,checking outgoing loads and dispatching Espresso's drivers.With respect to Forrest,Espresso is most likely

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

Question 28

Elle is an agent for Fine Cosmetics,Inc.Elle owes Fine Cosmetics the duty of

A)avoidance.
B)compensation.
C)indemnification.
D)performance.

Question 29

Regional Investment Corporation (RIC)hires Sam,a real estate agent,to locate investment properties for RIC.Sam learns of a warehouse avail?able for $100,000,but neglects to tell RIC.Most likely,Sam

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 30

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

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

Question 31

Ester is a lighting technician who hires out on a per-project basis to film and television production companies,as well as theatres and other venues that stage dramatic and musical performances.In this capacity,Ester is

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

Question 32

Prospective Enterprises (PE)employs Quinn to buy property for a possible com?mercial development.Quinn secretly buys some of the property and sells it to PE at a profit.Quinn has breached

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

Question 33

Mona is an agent for Nationwide Restaurant Corporation (NRC).In act?ing as an agent,Mona follows all of NRC's clearly stated instructions.This responsibility arises under

A)no agent's duty.
B)the agent's duty of loyalty.
C)the agent's duty of notification.
D)the agent's duty of obedience.

Question 34

KupaJava hires Lola to manage one of KupaJava's seven drive-through coffee stands.KupaJava agrees to pay Lola a salary,plus commission.KupaJava stipulates the standards that should be observed,the goals that should be attained,and the methods that should be used.Lola is most likely KupaJava's

A)employee.
B)independent contractor.
C)principal.
D)work for hire.

Question 35

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

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

Question 36

Fact Pattern 32-1B
Liz and Molly work as clerks in Nia's Dress Shop.Nia withholds federal taxes from their pay,and controls the methods and details of the performance of their work.Liz and Molly are not au?thorized to modify the prices or other terms of a sale at the shop.
Refer to Fact Pattern 32-1B.Nia hires O'Reilly's Carpet Company to clean the carpets of her shop.Nia gives O'Reilly's instructions as to what needs to be cleaned and when.O'Reilly's is

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

Question 37

Dizzy is not Edwina's agent but enters into a contract with Frida on Edwina's behalf.Edwina later contacts Frida to approve the contract.This is

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

Question 38

Carol agrees with Dede and other performers to sign contracts with promoters and others on the per?formers' behalf.Carol is

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

Question 39

Jody is an agent for Kwik Credit Company (KCC).In the course of Jody's performance for KCC,Jody pays Leo for certain auto maintenance and repair services.Jody's right to obtain the amount of those payments from KCC arises under the principal's duty of

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

Question 40

Jim agrees to act on Kit's behalf,subject to Kit's control,and Kit trusts Jim to so act.This describes a relationship between

A)a business and its competitors.
B)a government and its governed.
C)a parent and a child.
D)a principal and an agent.

Question 41

Principal Resources Corporation contracts with Quality Construction to build an addition to Principal's corporate office building.Quality contracts with Rite Supply Company for materials for the addition but refuses to pick up the materials.Meanwhile,Principal hires Skye,a certified public accountant,to work in its cost-accounting division as an employee,with no authority to hire or supervise others.Skye asks Theo,an outside experienced accountant,to advise her on certain accounting procedures but fails to pay Theo for the service.Principal also contracts with Uma,a salesperson,to solicit orders for its products in a designated territory.Uma obtains an order from Verity Industries,Inc. ,which is assured the order will be filled soon.But Uma does not follow through with the paperwork and fails to submit the order to Principal.Verity suffers a loss.Rite Supply,Theo,and Verity Industries claim Principal is liable under agency law.Discuss fully whether an agency relationship was created by Principal with Quality Construction,Skye,or Uma.

Question 42

Herschel contracts with Ivy to buy a certain coffee shop,Java Jive,for Ivy,who asks Herschel not to reveal her identity.Herschel makes a deal with Kendal,the owner of the restaurant,and makes a down payment.Ivy fails to pay the rest of the price,and does not pay Herschel for his services.Does Herschel have any recourse against Ivy? If so,on what basis and to what extent?