Question 1

Arthur is authorized to collect accounts for Peter.Peter dies, and there is no notice given to Theresa, who pays Arthur, as she has done in the past.Under the rules of the Third Restatement and the Uniform Durable Power of Attorney Act, if Arthur absconds with the money, Theresa will not have to pay again.

Accepted Answer

A) True 
 B)False  True

Question 2

Compare and contrast ratification and adoption of unauthorized contracts.

Accepted Answer

Both ratification and adoption are means of affirming prior unauthorized acts.Ratification binds the principal and the third party as if the purported agent had initially acted with actual authority.Once made, ratification is irrevocable.Ratification frees the agent from liability to the principal for acting without or beyond authority.The agent is also freed from liability to the third party for inducing the third party to enter the contract without the principal's authority.Adoption is the act of a corporation to affirm a preincorporation contract made on its behalf.The corporation, in addition to the promoter, becomes bound.Adoption differs from ratification because it is not retroactive and does not release the promoter from liability.The majority of states do not allow a corporation to ratify a promoter's contracts because the corporation did not exist when the contracts were made.

Question 3

Paul is a truck driver who owns his own truck and delivers loads to various companies for nine months out of the year.For the hard winter months, Paul goes to Key West to "put his feet in the sand." One evening while delivering a load for Emblem Helicopter Parts Co., Paul got into a "little scuffle" with a rowdy trucker who was giving Nell, a waitress at the DewDrop Inn Cafe, a hard time.Paul knocked out five of "Rowdy's" teeth.Rowdy is suing Paul and Emblem for his injuries.Discuss whether Rowdy will win against Emblem on the issue of: (a) respondeat superior and (b) unauthorized acts of agents.

Accepted Answer

(a) Respondeat superior -No.Paul is an independent contractor because he works for many companies and directs his own working time.(b) Unauthorized act of an agent.Paul is probably not an agent; however, if he were an agent, without any negligence evident on the part of Emblem in their hiring, supervising, controlling or training, then Rowdy would not win on this issue.

Question 4

Actual notice requires a written, not oral, communication to the third party.

Accepted Answer

A) True 
 B)False

Question 5

Under the Second Restatement, all third parties that were aware of the apparent authority of the agent must have actual and not constructive notice to terminate the agent's apparent authority.

Accepted Answer

A) True 
 B)False

Question 6

Sam is George's agent.George decides to fire Sam.Mel is an old customer of George's and he has dealt with Sam for over 20 years.Ellie is a prospective customer that Sam has spoken with on numerous occasions in his capacity as George's agent, and George was aware of the preliminary negotiations.Mel orders goods from Sam after Sam has been fired but Mel has no knowledge of the firing.Later, Sam takes an order from Ellie, who does not know of the firing.Using the rules of the Second Restatement, which of the following statements would apply to this scenario?

Accepted Answer

A)   George will be liable for the contract with Mel.
B)   George will not be liable on the contract with Mel.
C)   George will not be liable on the contract with Ellie.
D)   George will be liable for the contract with Mel but not liable on the contract with Ellie
E)   George will be not liable for either the contract with Mel or the contract with Ellie

Question 7

The contractual liability of the principal may depend upon whether the principal is disclosed, unidentified (partially disclosed), or undisclosed.

Accepted Answer

A) True 
 B)False

Question 8

Identify three ways an agent may agree to become liable on a contract between the principal and the third party.

Accepted Answer

The answer of Identify three ways an agent may agree...

Question 9

A subagent owes a fiduciary duty to both the agent and to the principal.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A)   An undisclosed principal and the third party are contractually bound if the agent acts within her actual authority, unless the contract specifies otherwise.
B)   An unidentified principal is bound only if the agent acts within the scope of actual authority.
C)   There is no liability on the part of the principal if the agent acts with implied authority.
D)   A principal cannot be bound if the agent acts without any authority.

Question 11

Under the rule of the Third Restatement, if a principal becomes incapacitated, the agency relationship terminates and all authority ceases.

Accepted Answer

A) True 
 B)False

Question 12

An undisclosed principal may result in which of the following?

Accepted Answer

A)   A declaration order by the court for the principal to show a guarantee.
B)   Liability of the agent for any contract made on behalf of such a principal.
C)   The agent's being declared incompetent by a court of law.
D)   All of these.

Question 13

Vista Properties, Inc.hires Lance to manage its 144-unit apartment complex.No provision for expenses is made in the contracts.If  Lance arranges for a repairperson to do ordinary maintenance,  he will be personally liable for these expenses, because he has no authority to incur them.

Accepted Answer

A) True 
 B)False

Question 14

Apparent authority may arise by an agent's showing a third party a document from the principal authorizing the agent to enter into such a transaction.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is correct with regard to the doctrine of respondeat superior ?

Accepted Answer

A)   It is a form of liability without fault.
B)   It ordinarily holds an employer liable for the acts of both employees and independent contractors.
C)   The liability of the principal under the doctrine is vicarious and depends upon proof of wrongdoing by the employee within the scope of employment.
D)   It is a form of liability without fault and t he liability of the principal under the doctrine is vicarious and depends upon proof of wrongdoing by the employee within the scope of employment.

Question 16

Frank, acting as a promoter for Garleen Co., a corporation not yet in existence, makes a contract with Towne Supplies.When Garleen Co.is formed, it may:

Accepted Answer

A)   in all states, ratify the contract, thereby releasing Frank from potential liability.
B)   adopt the contract, but Frank would not be released from potential liability on the contract.
C)   ratify all or part of Frank's contract.
D)   adopt the contract, thereby making it retroactive.

Question 17

Gerald, an agent, who makes a contract with Adele on behalf of Leon, an unidentified principal, may maintain in Gerald's own name a breach of contract action against Adele.

Accepted Answer

A) True 
 B)False

Question 18

Unless otherwise agreed, an agent making a contract with actual or apparent authority on behalf of an unidentified principal is a party to the contract.

Accepted Answer

A) True 
 B)False

Question 19

An agent for an unidentified principal is liable on the contract to the third party no matter whether the particular transaction is authorized or not.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

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

Exam 29: Relationship With Third Partiespart Vii: Business Associations

Compare and contrast ratification and adoption of unauthorized contracts.

Actual notice requires a written, not oral, communication to the third party.

Under the Second Restatement, all third parties that were aware of the apparent authority of the agent must have actual and not constructive notice to terminate the agent's apparent authority.

The contractual liability of the principal may depend upon whether the principal is disclosed, unidentified (partially disclosed), or undisclosed.

Identify three ways an agent may agree to become liable on a contract between the principal and the third party.

A subagent owes a fiduciary duty to both the agent and to the principal.

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

Under the rule of the Third Restatement, if a principal becomes incapacitated, the agency relationship terminates and all authority ceases.

An undisclosed principal may result in which of the following?

Vista Properties, Inc.hires Lance to manage its 144-unit apartment complex.No provision for expenses is made in the contracts.If Lance arranges for a repairperson to do ordinary maintenance, he will be personally liable for these expenses, because he has no authority to incur them.

Apparent authority may arise by an agent's showing a third party a document from the principal authorizing the agent to enter into such a transaction.

Which of the following is correct with regard to the doctrine of respondeat superior ?

Frank, acting as a promoter for Garleen Co., a corporation not yet in existence, makes a contract with Towne Supplies.When Garleen Co.is formed, it may:

Gerald, an agent, who makes a contract with Adele on behalf of Leon, an unidentified principal, may maintain in Gerald's own name a breach of contract action against Adele.

Unless otherwise agreed, an agent making a contract with actual or apparent authority on behalf of an unidentified principal is a party to the contract.

An agent for an unidentified principal is liable on the contract to the third party no matter whether the particular transaction is authorized or not.

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