Question 1

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 2

Charles states he has authority to contract for Wyatt and that he will be personally liable if he does not in fact have the authority to bind Wyatt.Identify the name and effect of Charles's statement.If Charles enters the contract without making such a statement, is there a way the same effect could result?

Accepted Answer

The answer of Charles states he has authority to contract...

Question 3

An employer may not be held liable if her employee sells liquor to an underage person if this criminal act was unauthorized by the employer.

Accepted Answer

A) True 
 B)False

Question 4

Ratification and adoption of contracts have the same effect; they are both retroactive and both release the purported agent.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Which of the following is true regarding an agent who is acting for an undisclosed principal?

Accepted Answer

A) The agent with actual authority will bind both himself and the principal on most contracts. 
B) The third party will never be bound in a contract with the principal. 
C) An undisclosed principal will bind only himself and not the agent. 
D) Failure to disclose the name of the principal is a form of fraud.

Question 7

In general, an undisclosed principal and the third party to a contract are contractually bound if the agent acts within the scope of his actual authority in making the contract.

Accepted Answer

A) True 
 B)False

Question 8

The purpose of an agency relationship is to allow principals to extend their business activities.

Accepted Answer

A) True 
 B)False

Question 9

Discuss apparent authority and some common ways in which it might arise.

Accepted Answer

The answer of Discuss apparent authority and some common ways...

Question 10

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 11

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

Accepted Answer

A) True 
 B)False

Question 12

Respondeat superior:

Accepted Answer

A) imposes vicarious liability on the agent. 
B) makes a principal liable for the acts of independent contractors. 
C) imposes vicarious liability on the principal for employees' acts committed within the scope of employment. 
D) makes the agent responsible for his own acts

Question 13

Which of the following is true with regard to contractual relations between the principal and a third party?

Accepted Answer

A) There is no liability on the part of the principal if the agent acts with implied authority. 
B) An undisclosed principal and the third party are contractually bound if the agent acts within her actual authority, unless the contract specifies otherwise. 
C) Under the Second Restatement, no principal is bound if the agent acts without any authority. 
D) A partially disclosed principal is bound only if the agent acts within the scope of actual authority.

Question 14

A principal is contractually bound to a third party if the agent acts without any authority but the principal ratifies the contract.

Accepted Answer

A) True 
 B)False

Question 15

Under the Second Restatement, which of the following is correct with regard to a contract entered into with a third person by an agent of an undisclosed principal?

Accepted Answer

A) The agent has no liability to the third person if the agent has acted within the scope of her authority. 
B) The agent is personally liable upon the contract unless the third person discovers the existence and identity of the principal and elects to hold the principal to the contract. 
C) Once the third person learns of the existence and identity of the principal, that third person may hold both the principal and the agent to the performance of the contract. 
D) If the third party obtains a judgment against the principal, the agent may still have liability to that third party.

Question 16

Arthur, who works for Peter, sees what he thinks is a good deal for Peter.Without asking whether he has authority to negotiate the deal, Arthur enters into a contract on Peter's behalf.Peter says later that he isn't interested.Is Peter liable on the contract? Is Arthur liable on the contract? Explain.

Accepted Answer

The answer of Arthur, who works for Peter, sees what...

Question 17

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 18

The Second and Third Restatements are the same regarding when an agent's apparent authority ceases.

Accepted Answer

A) True 
 B)False

Question 19

If an agent exceeds his actual and apparent authority, the principal is not bound, which makes the agent a party to the contract.

Accepted Answer

A) True 
 B)False

Question 20

Sunset Properties, Inc.hires William to manage its 48-unit apartment complex.Nothing is said as to expenses.
William purchases fuel to heat the apartments and arranges for a repairman to do ordinary maintenance.William will be personally liable for these expenses, because he has no authority to incur them.

Accepted Answer

A) True 
 B)False

Exam 20: Relationship With Third Parties

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

An employer may not be held liable if her employee sells liquor to an underage person if this criminal act was unauthorized by the employer.

Ratification and adoption of contracts have the same effect; they are both retroactive and both release the purported agent.

Which of the following is true regarding an agent who is acting for an undisclosed principal?

In general, an undisclosed principal and the third party to a contract are contractually bound if the agent acts within the scope of his actual authority in making the contract.

The purpose of an agency relationship is to allow principals to extend their business activities.

Discuss apparent authority and some common ways in which it might arise.

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

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

Respondeat superior:

Which of the following is true with regard to contractual relations between the principal and a third party?

A principal is contractually bound to a third party if the agent acts without any authority but the principal ratifies the contract.

Under the Second Restatement, which of the following is correct with regard to a contract entered into with a third person by an agent of an undisclosed principal?

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.

The Second and Third Restatements are the same regarding when an agent's apparent authority ceases.

If an agent exceeds his actual and apparent authority, the principal is not bound, which makes the agent a party to the contract.