Deck 19: Secured Transactions and Bankruptcy

Question 1

An agency relationship can be created only for a lawful purpose.

Answer 1

True
Explanation: An agency relationship can be created only for a lawful purpose in the same way that a contract cannot have an illegal purpose.

Question 2

When a third party is aware that an agent who exceeds his or her authority does not represent the principal, the law does not hold the agent liable for an agreement in cases in which the agent exceeds his or her authority to act on behalf of the principal.

Answer 2

True
Explanation: When a third party is aware that the agent who exceeds his authority does not represent the principal, the law does not hold the agent liable for the agreement.

Question 3

Agents who go beyond their authority when the principal is disclosed or partially disclosed are liable for breach of contract, not breach of implied warranty.

Answer 3

False
Explanation: Agents who go beyond their authority when the principal is disclosed or partially disclosed are liable for a breach of implied warranty, not for a breach of contract.

Question 4

The principal may terminate an agency coupled with an interest.

Question 5

An agent's implied authority is derived from an agent's apparent authority and consists of what is reasonably necessary for carrying out the agent's grant of express authority.

Question 6

Singapore outlawed the use of electronic contracts.

Question 7

Because an agent with express authority has specific goals he or she is to achieve, the agent is also granted the use of other means, beyond the express agreement, reasonably necessary to achieve the desired goal.

Question 8

Agency law is primarily federal law.

Question 9

Which of the following is false regarding law in Iran?

A) The principal must indemnify the agent for expenses or losses incurred not due to the agent's fault, if the agent was acting within the scope of his authority.
B) The duty of loyalty is recognized.
C) An agent is considered a trustee.
D) The principal must compensate the agent for his services if the agent was acting within the scope of his authority.
E) A breach of trust is considered a civil offense, not a criminal offense.

Question 10

The equal dignity rule requires that all agency agreements be in writing.

Question 11

While an agent owes duties to a principal, the principal owes no duties to an agent.

Question 12

Bankruptcy of either the principal or agent always terminates the agency relationship.

Question 13

A gratuitous agent is one who acts without consideration.

Question 14

Agents may have contract remedies available against principals, but not tort remedies.

Question 15

In order to properly provide notice of the termination of an agency relationship, actual notice of agency termination must be given to third parties who have had business interactions with the agent.

Question 16

All employees are agents of their employers, and all agents are employees.

Question 17

A durable power of attorney is legally binding after the principal becomes incapacitated.

Question 18

If an agent breaches duties owed to the principal, the principal can sue the agent; and the principal may be entitled to a variety of contract and tort remedies beyond those stated in the contract between the principal and agent.

Question 19

Actual notice of agency termination may never by given orally.

Question 20

An individual who lacks contractual capacity may hire an agent to make contracts on his or her behalf.

Question 21

A ______________ is a written document, created by a principal, expressing his or her wishes for an agent's authority not to be affected by the principal's subsequent incapacity.

A) General purpose power of attorney
B) Living power of attorney
C) Notarized power of attorney
D) Durable power of attorney
E) Lasting power of attorney

Question 22

Which of the following was the result on appeal in Reading Radio, Inc. v. Fink, the case in the text in which it was alleged that before leaving his job, an employee breached his fiduciary duty of loyalty by actions including diverting employees to a new employer and by failing to enforce covenants-not-to-compete?

A) That the employee breached his fiduciary duty of loyalty.
B) That the employee breached his fiduciary duty of loyalty only if it could be established that the employee personally profited from his actions.
C) That the employee breached his fiduciary duty of loyalty only if it could be established that the new employer profited from the employee's actions.
D) That the employee did not breach his fiduciary duty of loyalty.
E) That no fiduciary duty of loyalty exists to be breached.

Question 23

Which of the following is another name for apparent agency?

A) Simplified agency
B) Equitable agency
C) Agency by law
D) Agency by estoppel
E) Approved agency

Question 24

Which of the following is a form of authority upon which an agency relationship may be based?

A) Expressed agency
B) Implied agency
C) Apparent agency
D) Ratification
E) All of these

Question 25

Which of the following are types of business relationships to which agency laws are relevant?

A) Principal-agent
B) Employer-employee
C) Employer-independent contractor
D) Principal-agent, employer-employee, and employer-independent contractor
E) Principal-agent and employer-employee, but not employer-independent contractor

Question 26

If a principal agrees to hire no other agent for a period of time or until a particular job is done, the principal and agent have entered into a[n] ______________ agency contract.

A) Limited
B) Specific
C) Exact
D) Identified
E) Exclusive

Question 27

Which of the following is false regarding the agency relationship?

A) It is a consensual relationship.
B) It may be formed by formal written contracts.
C) It may usually be formed by informal oral agreements.
D) It exists when the principal takes action to ask another individual to act on behalf of the principal.
E) People must be trained in the field involved in order to qualify as agents.

Question 28

Which of the following is a document that gives an agent authority to sign legal documents on behalf of the principal?

A) Order of authority
B) Power of order
C) Legal empowerment
D) Power of attorney
E) Respondeat superior

Question 29

Which of the following types of agency occurs when a principal leads a third party to believe another individual serves as his or her agent; but, the principal has actually made no agreement with the so-called agent?

A) Expressed agency
B) Implied agency
C) Apparent agency
D) Ratification
E) Endorsement

Question 30

Which of the following is generally defined as a relationship between a principal and an agent?

A) Agency
B) Principality
C) Combination
D) Employment
E) Authorization

Question 31

Which of the following is false regarding the employer-employee relationship?

A) The employee is subject to the control of the employer.
B) Generally, all employees are considered to be agents of the employer.
C) Employees who are not legally authorized to enter into contracts binding their employer are considered agents.
D) Employees not legally authorized to interact with third parties are considered agents.
E) Independent contractors fall under the employer-employee relationship.

Question 32

Which of the following is a person who has a duty to act primarily for another person's benefit?

A) Principal
B) Employer
C) Fiduciary
D) Trustor
E) Benefitor

Question 33

In a[n] _____ relationship, the agent is authorized to act for and on behalf of the principal, who hires the agent to represent him or her.

A) Authority
B) Principality
C) Agency
D) Decreed
E) Conferred

Question 34

Under which of the following does a principal give an agent broad authority to sign legal documents on behalf of the principal as opposed to authority for only a specific purpose?

A) A general power of attorney
B) A specific power of attorney
C) A localized power of attorney
D) A broad power of attorney
E) A recognized power or attorney

Question 35

Which of the following is the most common form of agency?

A) Expressed agency
B) Implied agency
C) Apparent agency
D) Ratification
E) Endorsement

Question 36

Whenever an employer hires an employee to perform some sort of physical service, the parties have created a[n] ______________ relationship.

A) Employer-agent relationship
B) Employer-employee relationship
C) Employer-independent contractor relationship
D) Avowed relationship
E) Acknowledged relationship

Question 37

Which of the following was the result on appeal in Iglesia Cristiana La Casa Del Senor, Inc., Etc. v. L.M., the case in the text involving the issue of whether a church was liable based on the principle of respondeat superior for a sexual assault allegedly committed by a church pastor?

A) That the church was liable to the plaintiff based upon principles of respondeat superior.
B) That the church was liable based on principles of respondeat superior only if it could be proven that the pastor sexually assaulted more than one person.
C) That the church was liable based on respondeat superior only if it could be proven that the church had knowledge of at least one sexual assault prior to the plaintiff's but failed to remove the pastor from church assignments.
D) That the church was not liable based upon principles of respondeat superior.
E) That the church was not liable based upon principles of respondeat superior only because the pastor was immediately fired when his actions came to light.

Question 38

Which of the following typically exists when an employer hires an employee to enter into contracts on behalf of the employer?

A) Principal-agent relationship
B) Employer-agent relationship
C) Employer-independent contractor relationship
D) Avowed relationship
E) Acknowledged relationship

Question 39

Under which of the following does a principal give authority to an agent only for the specific areas or purposes listed in the agency agreement?

A) A general power of attorney
B) A specific power of attorney
C) A localized power of attorney
D) A broad power of attorney
E) A recognized power or attorney

Question 40

When parties form an agency relationship by making a written or oral agreement, the agency is known as a[n] _______________.

A) Expressed agency
B) Implied agency
C) Apparent agency
D) Ratification
E) Endorsement

Question 41

Which of the following is a term for persons who are not employees but who are hired by employers to perform certain tasks?

A) Employee agents
B) Independent contractors
C) Independent agents
D) Principle agents
E) Task-specific agents

Question 42

A ______________ trust is an equitable trust imposed on one who wrongfully obtains or holds legal right to property he or she should not possess.

A) Resolute
B) Actual
C) Constructive
D) Defined
E) Absolute

Question 43

In most situations how many principals may an agent represent in any one agreement?

A) One
B) Two
C) Three
D) Four
E) Any number

Question 44

An agent cannot represent both the principal and a third party in an agreement because there could be a ______________.

A) Consortium
B) Disagreement
C) Conflict of interest
D) Delineation of interest
E) Absolution

Question 45

In noncontractual relationships which of the following may the agent seek in order to force the principal to perform the contract?

A) Specific performance
B) Specific recoupment
C) Adequate performance
D) Reformation
E) None of these

Question 46

Which of the following is the term used to describe the duty an agent has to follow the lawful instruction and direction of the principal?

A) Duty of action
B) Duty of contract
C) Express duty of action
D) Duty of performance
E) Duty of obedience

Question 47

Which of the following is the term used to identify the duty of an agent to perform specified duties with reasonable skill and care?

A) Duty of action
B) Duty of contract
C) Express duty of action
D) Duty of performance
E) Duty of obedience

Question 48

The question of whether a worker is an employee or an independent contractor has important implications in which of the following areas?

A) Workers' compensation
B) Workplace safety
C) Unemployment statutes
D) Workers' compensation, workplace safety, and unemployment statutes
E) Workers' compensation and workplace safety, but not unemployment statutes

Question 49

Which of the following is the term used to describe the duty an agent has to perform responsibilities of the principal as specified in the agency agreement?

A) Duty of action
B) Duty of contract
C) Express duty of action
D) Duty of performance
E) Duty of obedience

Question 50

When a contract exists and a principal agrees to certain conditions, but fails to perform, which of the following may the agent seek in order to force the principal to perform the contract as stipulated?

A) Specific performance
B) Specific recoupment
C) Adequate performance
D) Reformation
E) None of these

Question 51

Which of the following is false regarding a principal's duties to an agent?

A) An agent can sue the principal if the principal does not fulfill duties owed to the agent.
B) In a successful suit against a principal, an agent is entitled to contract remedies but not tort remedies.
C) If the principal has failed to meet duties owed to the agent, the agent can refuse to act on behalf of the principal until the failure is remedied.
D) The principal has a duty to compensate an agent for services provided unless the parties have agreed that the agent will act gratuitously.
E) The principal has a duty of reimbursement and indemnification to the agent for authorized expenditures.

Question 52

Which of the following is true regarding the liability in tort of employers for the actions of employees and independent contractors?

A) Employers are generally liable in tort for the actions of their employees, while they are generally not liable for the actions of independent contractors.
B) Employers are generally liable in tort for the actions of independent contractors, while they are generally not liable for the actions of employees.
C) Employers are not generally liable in tort for the actions of independent contractors or for the actions of employees.
D) Employers are generally liable in tort for the actions of independent contractors and also for the actions of employees.
E) Employers are generally liable in tort for the actions of independent contractors and the actions of employees, but only if the employer has agreed to be liable in a written contract with the employee or independent contractor.

Question 53

Which of the following refers to the right of a principal to sue an agent to recover any amount assessed against the principal for a breach of contract caused by the agent's negligence?

A) Reformation
B) Indemnification
C) Reimbursement
D) Contribution
E) Recoupment

Question 54

Which of the following is a term for a person who contracts with another to do something for him but who is not controlled by the other nor subject to the other's right to control with respect to his physical conduct in the performance of the undertaking?

A) An employee
B) An independent contractor
C) An authorized contractor
D) A task-specific contractor
E) A partial contractor

Question 55

Which of the following is true regarding the status of an agent as a fiduciary?

A) Although the principal is a fiduciary, an agent is not a fiduciary.
B) An agent is only a fiduciary if the principal and agent agreed by written contract that the agent would be a fiduciary.
C) An agent is only a fiduciary if the principal and agent agreed by written or oral contract that the agent would be a fiduciary.
D) An agent is only a fiduciary to the principal if a transaction in excess of $10,000 is involved.
E) An agent is a fiduciary to the principal.

Question 56

Which of the following may an agent demand if the agent believes that he or she is not being properly compensated?

A) Specific performance
B) Accounting performance
C) An accounting
D) A contractual documentation
E) A contractual audit

Question 57

Which of the following is true if there is no agreement between a principal and an agent regarding the amount for which the principal will compensate the agent?

A) It will be assumed that the agent agreed to work for free on a gratuitous basis.
B) The agent will be allowed to set the price which will be enforced unless it is unconscionable.
C) The principal will be allowed to set the price which will be enforced unless it is unconscionable.
D) The court will appoint a magistrate to set the price.
E) Compensation will be calculated according to the customary fee in the situation.

Question 58

To which of the following is the employer-employee relationship subject?

A) Workers' compensation
B) Workplace safety
C) Employment discrimination
D) Unemployment statutes
E) All of these

Question 59

To which of the following is the employer-independent contractor relationship not subject?

A) Workers' compensation
B) Workplace safety
C) Employment discrimination
D) Unemployment statutes
E) All of these

Question 60

Which of the following is a term used to describe the duty of an agent to communicate any information to the principal that the agent thinks could be important to the principal?

A) Duty of notification
B) Duty of information
C) Requirement of conveyance
D) Constructive notification
E) Constructive information

Question 61

Which of the following is true if an agent has no actual or apparent authority to act on behalf of a principal, but the agent still enters into a contract with a third party?

A) The principal is bound only if the principal is a disclosed principal.
B) The principal is bound only if the principal is an unidentified principal.
C) The principal is bound only if the principal is a partially disclosed principal.
D) The principal is bound only if the principal is a disclosed principal or a partially disclosed principal.
E) The principal is not bound unless the principal ratifies the contract.

Question 62

In an express agency relationship, the agent has ______________ authority.

A) Express
B) Implied
C) Apparent
D) Inherent
E) Acknowledged

Question 63

Which of the following is the term for the rule enforced by most states that when express authority is granted for an agent to enter into a contract legally required to be in writing, the grant of authority also must be in writing?

A) The equal dignity rule
B) The required writing rule
C) The statute of frauds rule
D) The matching rule
E) None of these because there is no such rule

Question 64

Which of the following is true regarding agent liability when a third party gets a judgment against a previously undisclosed principal?

A) The agent is freed from liability to the third party.
B) The agent remains liable to the third party.
C) The agent is freed from liability to the third party unless the principal refuses to pay.
D) The agent is freed from liability to the third party unless the principal files for bankruptcy.
E) The agent is freed from liability to the third party unless a contract for personal service was involved.

Question 65

The doctrine of ______________ is used in the context of the principal/employer-agent/employee relationship.

A) Superior respondeat
B) Respondeat superior
C) Stare decisis
D) Res superior
E) Supre superior

Question 66

Which of the following is true under the UCC regarding liability of a principal to an agent if the agent enters into a contract that is a negotiable instrument?

A) The principal is liable to the same extent as if no negotiable instrument were involved because the negotiable instrument has no effect on the principal's liability.
B) The principal cannot be held liable unless the principal's name is on the instrument.
C) The principal cannot be held liable unless the agent's signature indicates that it was made in a representative capacity.
D) The principal cannot be held liable unless the principal's name is on the instrument or the agent's signature indicates that it was made in a representative capacity.
E) The principal cannot be held liable unless the principal's name is on the instrument or the agent's signature indicates that it was made in a representative capacity, or the agent has been adjudicated insolvent.

Question 67

Which of the following is true regarding liability of a principal to an agent based on a contract an agent makes with a third party that expressly excludes the principal from the contract?

A) The principal is liable to the agent because it is unconscionable to exclude a principal from a contract.
B) The principal is liable to the agent only if the principal is an unidentified principal.
C) The principal is liable to the agent only if the principal is a partially disclosed principal.
D) The principal is liable to the agent unless the principal gave the agent authority in writing to make the agreement with the third party.
E) The principal is not liable to the agent.

Question 68

Which of the following holds the principal-employer liable for any harm caused by the agent-employee during the time that the agent-employee is working for the principal?

A) Vicarious liability
B) Responsible liability
C) Comparative liability
D) Contributory liability
E) Applied liability

Question 69

Upon which of the following is the equal dignity rule based?

A) The statute of writings
B) The statute of frauds
C) The documentation rule
D) The enforcement rule
E) The common rule

Question 70

Which of the following is true regarding the right of a third party to reject the performance of the principal?

A) The third party may reject the performance of the principal at any time.
B) The third party may never reject the performance of the principal.
C) The third party may reject the performance of the principal if the third party entered into a contract with the agent such that the performance of the agent is required.
D) The third party may reject the performance of the principal if the third party entered into a contract with the agent such that the performance of the agent is required or the third party can establish that the third party had been involved in past litigation with the principal.
E) The third party may reject the performance of the principal if the third party entered into a contract with the agent such that the performance of the agent is required; the third party can establish that the third party had been involved in past litigation with the principal; or the principal owes money to the third party.

Question 71

Which of the following types of agency exists when a third party reasonably believes, on the basis of a principal's actions, that an agency relationship exists between the principal and another individual?

A) Express
B) Implied
C) Acknowledged
D) Perceived
E) Apparent

Question 72

When a principal is classified as a[n] ______________ principal, a third party is aware that an agent is making an agreement on behalf of a principal and the third party also knows the identity of the principal.

A) Acknowledged
B) Permitted
C) Disclosed
D) Revealed
E) Uncovered

Question 73

What does the Latin phrase respondeat superior mean?

A) Let the superior speak
B) Let the agent speak
C) Let the employee speak
D) Let all speak
E) Let all be responsible

Question 74

Which of the following is true regarding an agent's liability when the agent commits a tort while acting as an agent for a principal?

A) The agent is personally liable only if the agent was on a mission for an unidentified principal.
B) The agent is personally liable only if the agent was on a mission for an unidentified principal or a partially disclosed principal.
C) The agent is liable regardless of the classification of the principal or the liability of the principal.
D) The agent is not liable if the principal is liable.
E) The agent is not liable unless the principal is insolvent.

Question 75

An agent's implied authority is derived from an agent's ____________ authority.

A) Express
B) Apparent
C) Perceived
D) Acknowledged
E) Temporary

Question 76

Which of the following is true in situations in which a principal was undisclosed and the third party comes to know of the undisclosed principal's identity, but proceeds to get a judgment against the agent?

A) The principal is liable to the third party anyway.
B) The principal is liable to the third party only if the agent does not pay.
C) The principal is liable to the third party only if the agent files for bankruptcy.
D) The principal is released from liability to the third party.
E) The principal is released from liability unless a contract for personal service was involved.

Question 77

Which of the following are factors considered by courts in determining whether an act committed by an employee occurred within the course and scope of employment?

A) Whether the employer authorized the employee's act.
B) Whether the employer provided the tools by which the act occurred.
C) Whether the employer knew that the act would involve the commission of a serious crime.
D) Whether the employer authorized the employee's act, whether the employer provided the tools by which the act occurred, and also whether the employer knew that the act would involve the commission of a serious crime.
E) Whether the employer authorized the employee's act and whether the employer provided the tools by which the act occurred, but not whether the employer knew that the act would involve the commission of a serious crime.

Question 78

Express authority is often referred to as ______________ authority.

A) Absolute
B) Inherent
C) Actual
D) Noticed
E) Approved

Question 79

Which of the following is true regarding liability of an agent acting within his or her authority on a contract involving an undisclosed principal?

A) The law will likely hold the agent liable for the agreement.
B) The law will hold the agent liable for the agreement unless the contract the agent had with the principal expressly provided that the agent would not be held liable in such cases.
C) The law will hold the agent liable for the agreement unless the contract the agent had with the principal impliedly or expressly provided that the agent would not be held liable in such cases.
D) The law will hold the agent liable for the agreement unless a contract for under $1,000 is involved in which case only the principal would be held liable.
E) The law would not hold the agent liable on the agreement.

Question 80

In which types of agency relationships is the agency relationship inferred from the conduct of the parties?

A) Express agency
B) Agency by estoppel
C) Implied agency
D) Both agency by estoppel and implied agency
E) None of these