Question 1

Regarding the termination of an agency,the Third Restatement:

Accepted Answer

A)   distinguishes between terminations based on death of a principal and terminations based on incapacity of the principal.
B)   applies the same rule to all causes of termination;it applies a reasonableness standard.
C)   applies the same rule to all causes of termination;it applies the actual notice standard.
D)   applies the same rule as under the Second Restatement;a principal's death automatically ends the agent's apparent authority. B

Question 2

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

Accepted Answer

A) True 
 B)False  True

Question 3

Even though an agent exceeds his express authority,the principal may still be bound.

Accepted Answer

A) True 
 B)False  True

Question 4

An agent acts for a(n)____ principal when she 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.

Accepted Answer

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

Question 5

The Second Restatement provides that the death of a principal terminates all authority of an agent,including apparent authority,even though no notice is given to third parties.

Accepted Answer

A) True 
 B)False

Question 6

A principal may be held liable for the torts of an independent contractor:

Accepted Answer

A)   whenever the contractor is performing work or rendering services for the principal.
B)   if the principal fails to supervise the contractor.
C)   if the contractor negligently performs an inherently dangerous activity.
D)   All of these.

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Martinez makes a contract with Bowers on behalf of a disclosed principal.If Bowers breaches the contract,ordinarily Martinez has no right of action against Bowers.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Apparent authority may arise in all but which of the following ways?

Accepted Answer

A)   The acts are customary of an agent in similar positions in an organization.
B)   The principal has acquiesced to prior similar transactions between the agent and the third party.
C)   The agent shows the third party a power of attorney from the principal authorizing the agent to enter such a transaction.
D)   An agent tells the third person she has the authority to transact such business on behalf of the principal.

Question 11

Spoken or written words the principal communicates to the agent create:

Accepted Answer

A)   actual,express authority.
B)   actual,implied authority.
C)   apparent authority.
D)   incidental authority.

Question 12

The purpose of an agency relationship is to:

Accepted Answer

A)   allow the principal to extend his business activities by authorizing agents to enter into contracts with third persons on the principal's behalf.
B)   encourage business growth by protecting employers from liability for torts or criminal activity.
C)   allow a principal to contract through agents in ways he would not be able to contract on his own,such as creating valid contracts in situations where the principal could only create voidable contracts on his own.
D)   eliminate the distinction between employees and independent contractors.

Question 13

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

Accepted Answer

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 14

Under the Third Restatement,an agent who represents an undisclosed principal is discharged from liability if:

Accepted Answer

A)   the third party's judgment against the principal is satisfied.
B)   the third party becomes aware of the principal.
C)   after learning the identity of the principal,the third party gets a judgment against the principal.
D)   The agent is never discharged from liability.

Question 15

Susan 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?

Accepted Answer

A)   Susan 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)   Susan 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)   Susan will be held liable for the contracts only if she ever gets the loan.

Question 16

There can be apparent authority where a third party knows the agent has no actual authority.

Accepted Answer

A) True 
 B)False

Question 17

The principal may ratify either the entire contract or certain parts of it.

Accepted Answer

A) True 
 B)False

Question 18

A person who purports to act as agent for a principal whom both the agent and the third party know to be wholly incompetent is personally liable on a contract entered into with a third person on behalf of such a principal.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A)   undisclosed
B)   disclosed
C)   partially disclosed
D)   All of these are correct.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 20: Relationship With Third Parties

Regarding the termination of an agency,the Third Restatement:

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

Even though an agent exceeds his express authority,the principal may still be bound.

An agent acts for a(n) ____ principal when she 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.

The Second Restatement provides that the death of a principal terminates all authority of an agent,including apparent authority,even though no notice is given to third parties.

A principal may be held liable for the torts of an independent contractor:

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

Martinez makes a contract with Bowers on behalf of a disclosed principal.If Bowers breaches the contract,ordinarily Martinez has no right of action against Bowers.

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

Apparent authority may arise in all but which of the following ways?

Spoken or written words the principal communicates to the agent create:

The purpose of an agency relationship is to:

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

Under the Third Restatement,an agent who represents an undisclosed principal is discharged from liability if:

There can be apparent authority where a third party knows the agent has no actual authority.

The principal may ratify either the entire contract or certain parts of it.

A person who purports to act as agent for a principal whom both the agent and the third party know to be wholly incompetent is personally liable on a contract entered into with a third person on behalf of such a principal.

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

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