BUL3310 UNIT 7 QUIZ QUESTIONS
Alan is the general manger of a restaurant. Although not mentioned in his employment contract, as part of carrying out his management duties he has the authority to buy supplies, hire employees, put ads on the radio, engage a cleaning service, pay bills, etc. These duties are expressions of his _____________authority.
Actual implied
Another term for ostensible authority is _______________ authority.
Apparent
Patty Principal fired Al Agent because Al had been careless in his record keeping and had comingled personal and business funds. Unless Patty notifies the third parties who dealt with Al that he is no longer her agent, Al will continue to have __________authority and Patty will be bound by his actions.
Apparent
A person who is given power of attorney is called an______________.
Attorney in fact
Carla was the agent for Newco, a New York company that wanted to relocate its corporate offices to New Jersey. Carla was given the authority to purchase 600 acres of New Jersey farmland, but was not allowed to tell the sellers that she represented Newco. She was only allowed to say that she represented an out- of- state corporation. After the contracts were signed, Newco's board decided not to relocate and wants to rescind the contacts. Which of the following statements is true about the liability of the parties?
Carla is personally liable on the contracts, but Newco must indemnify her because she was acting within the scope of her authority. Newco is liable to the sellers on these contracts because Carla was acting within the scope of her employment. (Both b and c are true)
In determining the rights and duties of the parties to an agency relationship, the courts look to
Case law
Which legal rule will not impose punitive damages on a master for the torts of his servants unless the master himself took some part in the wrongful action?
Complicity rule
Jill hired Ace Paving Company to pave her driveway. Ace's driver, Tom, carelessly dropped a load of hot tar on the lawn and prized rose bushes of Jill's neighbor, Dan. From whom can Dan seek damages?
Dan can only sue Ace and Tom in joint and several liability.
A principal whose identity is known to a third party is an _____________principal.
Disclosed
Athlete Superstar hired Angie Agent to negotiate a contract for him with a major cereal company. Photos of Athlete Superstar, in various action poses, are to be prominently displayed on every box of GoodForYou cereal for one year. In these circumstances, Athlete Superstar is a (n) ____________principal.
Disclosed
In order to ratify an agent's contract, the principal must have been __________at the time the contract was formed.
Disclosed
The only principal who can ratify a contract is an _____________ principal.
Disclosed
Rhonda Realtor was hired to find Client an undeveloped lot that met the following requirements: the lot must be in the mountains, on a pristine lake, consist of at least 10 acres, and be available for no more than $500,000. Rhonda found a property that met all these requirements for only $425,000. Enchanted, she bought the property for herself. She did not tell Client about her find and is still diligently seeking another property that meets Client's needs. Which, if any, agency duties has Rhonda violated?
Duty of loyalty Duty to inform Duty to obey instructions (All of the above)
An agent's actual authority may be
Express Implied (Both a and b)
Whether or not a principal has, through his actions, ratified a contract is a question of _________to be decided by the _________.
Fact. jury
Whether or not a servant was acting in the scope of his employment when he injured a third party is a question of __________ to be decided by the ______.
Fact. jury
Mike is a sole proprietor who buys, sells and repairs kilns and other equipment used in pottery making. He has an arrangement with K&M, a large equipment maker, to sell K&M's kilns in both his own name and in K&M's name and to receive payments from customers. Mike's relationship with K&M is that of a ________________.
Factor
A principal always has the right to terminate an agency.
False
A principal may terminate the agency of a disloyal agent only if the principal suffered a financial loss because of the agent's disloyalty.
False
Agency agreements must always be in writing.
False
An agent operating under a written power of attorney is called an attorney-at-law.
False
An agent whose agency appointment has terminated has implied authority to continue to conduct the principal's business until third parties are notified of the termination.
False
An employer is responsible for the torts committed by an employee while the employee is on a frolic, but not for those torts committed while the employee is on a detour.
False
An employer may have liability for the negligent hiring of a servant, but not for the negligent hiring of an independent contractor.
False
Apparent authority is created when a third party reasonably believes, based on the agent's conduct, that an unauthorized agent has the authority to act for the principal.
False
Assume that you hire an independent contractor to transport hazardous chemicals for your company. If he negligently causes damages to a third part while carrying out the job, you will not be liable because of his status as an independent contractor.
False
It is the duty of an agent to notify third parties when his agency is terminated.
False
Officers of corporations have unlimited actual authority to sell the real property and intangible assets of the corporation.
False
The doctrine of respondeat superior does not apply when the employees are highly trained professionals, such as doctors and airline pilots.
False
The legal test to determine whether someone is a general agent or a special agent is whether or not the agent is paid for his services.
False
The standard the agent must meet in carrying out the work of the principal is "extraordinary care and diligence."
False
Undisclosed principals have no liability to third parties for contracts negotiated by their agents.
False
When ratifying a contract, a principal may select which provisions of the contract to accept and which to reject.
False
Whether or not a principal has ratified a contract is a question of law to be decided by the judge at trial.
False
In some states, a parent-owner is liable for any damages caused by a family member operating the vehicle. This is the __________ doctrine.
Family car
In some states, a parent-owner is liable for any damages caused by a family member operating the vehicle. This is the __________doctrine.
Family car
The Principal and Agent have an ________________relationship with each other.
Fiduciary
A master will not be liable for the torts committed by a servant if the servant was on a ______when the tort was committed.
Frolic
When a servant completely abandons the master's work to pursue his own interests, the servant is on a ___________.
Frolic
Jim was called to active duty in the military. Knowing that he would be out of the country for a year or more, he gave his sister Peg authority to pay bills in his name, access his bank accounts, buy and sell stock in his brokerage accounts, and incur expenses to maintain his house and car and boat. Peg is Jim's______________.
General agent
Matt is employed as the manager of Local Steak House, with wide-ranging responsibilities for all aspects of the business. In this position, Matt is an________
General agent
Ann Agent was hired by Buyer to locate a piece of property suitable for building an office complex. Ann and her cousin jointly owned a piece of property that suited Buyer's needs. Without telling Buyer of her ownership interest, Ann negotiated the purchase on Buyer's behalf. The price for the property was its fair market value. What options are available to Buyer when he learns that Ann was the seller?
He may rescind the contract because Ann violated her duty of loyalty.
An agent is not entitled to indemnification when
His own negligence caused the damage for which he is being held responsible He was acting outside the scope of his authority (Both a and b)
Implied authority is also known as ____________authority.
Incidental
A principal is obligated to pay any judgments against an agent who incurred liability to a third party while carrying out the principal's orders. This duty to hold the agent "harmless" is the duty to___________.
Indemnify
Bill hired Acme Paving to pave his driveway. Acme is Bill's __________________.
Independent contractor
Tucker hired SoClean, a house washing service, to power wash his house and deck. SoClean's status of that of a (n) ________________________.
Independent contractor
A proprietor will be liable for damages caused by an independent contractor if the work the independent contractor was hired to do was
Inherently dangerous to the community. Illegal A duty that the proprietor could not delegate (All of the above)
An employee who commits a tort while acting in the scope of his or her employment
Is entitled to be indemnified by the principal if the tort was committed by following the principal's instructions. Has joint and several liability with the principal to the injured party. (Both b and c)
Neda, an attorney, has engaged in the following representations this past year. Which one is least likely to violate her duty of loyalty to her clients?
Neda represented a local restaurant, which she patronizes frequently, in an employment discrimination suit.
Raines Realty, a property management firm, hired Al Agent to manage an office complex. One of Al's duties was to collect the rents. Raines fired Al for negligence, but did not notify the tenants before the next rent payment was due. Al collected the rents as usual and left town with the money. Are the tenants required to pay that month's rent again to Raines?
No, because Al still had apparent authority to collect the rents until Raines told the tenants otherwise.
Apparent authority is also known as _____________authority.
Ostensible
When a third party knows that an agent is acting on behalf of a principal, but dies not know the identity of the principal, the principal is________________.
Partially disclosed
Jim was called to active duty in the military. Knowing that he would be out of the country for a year or more, he gave his sister Peg authority to pay bills in his name, access his bank accounts, buy and sell stock in his brokerage accounts, and incur expenses to maintain his house and car and boat. Because Peg is not compensated for the activities she is performing on her brother's behalf, she owes him
Peg owes Jim all the duties of an agent to a principal.
In an agency relationship, the principal always has the ____________to end the relationship; and the agent always has the _________________to end the relationship.
Power-----------------Power
The legal doctrine that holds the master liable for the torts committed by a servant while acting within the scope of this employment is
Respondeat superior
The well-established legal principal that employers are liable for the torts committed by employees while acting within the scope of their employment is _____________________.
Respondeat superior
A person who is employed to perform services for another and who is under the other's control and subject to the other's direction is a(n) _____________.
Servant/employee
Conan, an outstanding college pitcher, hired Masters to represent him in negotiations with a major league team. Masters may only negotiate a contract for Conan; he has no authority to make investments or purchase property on Conan's behalf. Masters would be classified as a (n) __________.
Special agent
Jim was called to active duty in the military. Knowing that he would be out of the country for a year or more, he gave his sister Peg authority to pay bills in his name, access his bank accounts, buy and sell stock in his brokerage accounts, and incur expenses to maintain his house and car and boat. Jim will be out of the country when a piece of land he sold goes to settlement. He wants to give Peg the authority to convey the deed and sign any necessary settlement papers in his name. To do this he should give Peg _______________.
Special power of attorney
Ruth had a contract to sell a vacation home she owned in North Carolina. Rather than make the trip from Oregon for the closing, she gave her brother Ian, who lived in North Carolina, the authority to represent her at the closing and to sign all the necessary papers. The notarized document that confers this authority on Ian is a (n) __________________; and Ian is a (n) _____________.
Special power of attorney--------Attorney in fact
The primacy source of law governing the relationship between the principal and the agent is
State common law case law
Ted was hired under a one year contract to manage Sue's sub shop. Eight months into the contract, Sue fired Ted in order to hire a new manager who had just graduated with a degree in marketing and had a lot of ideas for increasing sales. Ted had not breached the contract in any way. Which statement best describes Sue's rights in these circumstances?
Sue had the power, but not the right, to terminate Ted's contract.
What is the status of an agency agreement when a principal files for Chapter 7 bankruptcy?
The agency terminates by operation of law when the court grants the order for relief.
Sue hired Harry to sell her prized racing filly, YouGoGirl. Harry's commission was to be 20% of the selling price. Before a buyer could be found, YouGoGirl died of an equine virus. What is the status of the agency agreement between Sue and Harry?
The agency terminates by operation of law.
Pat hired Mike, a dealer in livestock, to sell his herd of cattle. Mike was to receive a 20 commission on the sale. Before a buyer could be found, the herd had to be destroyed because of an outbreak of mad cow disease. Which statement best describes the status of the agency agreement?
The agency was terminated by operation of law
What happens if an agent acts outside the scope of his or her authority when negotiating a contract?
The agent loses the right to reimbursement The agent loses the right to indemnification The agent becomes personally liable on the contract to the third party (All of the above)
In which of the following situations would an undisclosed principal be liable to the third party on a contract?
The agent was acting within the scope of his or her authority. The principal retained the benefits of the contract. The contract negotiated by the agent was not for the agent's personal services. (The principal is liable in all of the situations above)
Which of the following would not terminate an agency by operation of law?
The death of the principal The death of the agent The destruction of the goods that the agent was hired to sell All of the above terminate an agency by operation of law.
Sam is retiring and selling his business to Ed, an employee. They want Larry Lawyer to draw up a sales contract that protects both Sam's interests as the seller and Ed's interests as the buyer. If Larry agrees to this dual agency, which agency duty would he most risk violating?
The duty of loyalty
Which of the following is not a duty of the principal to the agent?
The duty to obey instructions
The major distinction between a servant and an independent contractor is that
The employer has the right to tell a servant how to do the job, while an independent contractor has exclusive control over the manner in which the job is done.
A principal will not have a duty to reimburse an agent if
The expenses were the result of the agent's negligence
An agent has a duty to obey the principal's instructions unless
The instructions require the agent to perform duties that are not in the agency agreement. The instructions are to perform an illegal act. (Both a and b)
Which of the following events would not terminate an agency by operation of law?
The principal breaches his or her duty to reimburse the agent.
A person who breaches a duty that is neither a contractual duty nor a crime commits a ____________.
Tort
A master can not normally avoid liability for damages caused by a servant even if he can show that the servant misunderstood his instructions.
True
A minor may act as an agent for an adult principal.
True
A person who enters into a contract with an independent contractor is called a proprietor.
True
A plaintiff who sues the employer and the employee in joint and several liability is limited to only one recovery.
True
A principal has the duty to notify third parties when an agency terminates.
True
A principal may ratify a contract by accepting the benefits of the contract.
True
A principal whose identity is known to a third party is a disclosed principal.
True
A proprietor will be liable for the torts of an independent contractor if the duties that the contractor is hired to perform are inherently dangerous to the public.
True
A third party must use reasonable care and diligence to make sure that an agent is acting within the scope of his or her employment.
True
Agents are personally liable to third parties on contracts when the principal was undisclosed.
True
Agents of undisclosed principals are entitled to be indemnified if held personally liable on contracts that were within the scope of their authority.
True
An agency will terminate by operation of law if the principal files for Chapter 7 bankruptcy.
True
An agent is a fiduciary of the principal.
True
An agent who comingles the principal's funds with his or her own violates the duty to account.
True
An agent who is wrongfully terminated may sue the principal for damages.
True
An agent who represents both the buyer and the seller in the purchase of a business is acting as a dual agent.
True
An agent will not be indemnified for injuries caused to third parties if the agent's negligence caused the injury.
True
An agent's duty to protect confidential information continues even after the agency relationship ends.
True
An agent's knowledge is imputed to the principal.
True
If a principal wishes to ratify a contract that an agent was not authorized to negotiate, he must do so before the third party withdraws from the contract.
True
If an agent gets a monthly advance against future commissions, the advances are treated as a minimum salary and need not be returned if the commissions on sales are not earned.
True
If the principal dies, the agency agreement terminates by operation of law.
True
In a multiple listing agreement, real estate is listed with several brokers who divide the commission on the sale.
True
Masters and servants have only joint liability for torts committed by the servant in the course of his employment.
True
Normally a master is not liable for torts committed by a servant while traveling from his home to the workplace.
True
Respondeat superior is a firm of vicarious liability.
True
The general manager of a business will have the implied actual authority to perform duties that are not expressly authorized in the employment agreement.
True
The principal is a fiduciary of the agent.
True
The secret formula for a soft drink is an example of a trade secret.
True
To ratify a contract, the principal must have been disclosed at the time the contract was formed
True
Under the family-car doctrine, any family member becomes an agent of the parent-owner while the family member is using the car.
True
When a principal files for Chapter 7 bankruptcy, all agency appointments end when the court grants an order of relief.
True
If a third party does not know that he is dealing with an agent and believes that the agent is acting on his own behalf and will perform on the contract, the principal in this situation is ______________.
Undisclosed
The general legal doctrine that holds one person responsible for the torts committed by another because of the relationship they have to each other is _______________
Vicarious liability
Which legal principal always imposes punitive damages on a master if the wrongful conduct of the servant justifies punitive damages ?
Vicarious liability rule
The general legal principal under which an innocent person can be held liable for the wrongdoing of another is
Vicarious liability.
Which of the following is not a factor in determining if a servant was acting within the scope of his employment?
Was the servant disobeying the instructions of the master when the tort was committed?
The last semester of his senior year, Marc had an unpaid internship in the sales department of a local TV station. When Marc left, he took a copy of the station's client list with him, reasoning that it would prove useful in the future when he graduated and got a permanent job at some other company in sales. Has Marc violated any agency duties?
Yes, Marc violated a duty to protect confidential information
Parker is a dealer in Oriental antiques and rugs. A sign in his store recommends that customers bring in their rugs to him for cleaning and repair. In fact, Parker does none of the cleaning or repair work himself. He sends the rugs to Local Cleaners, for whom he works as an agent making a 20 commission. Due to a mishap at Local's plant, the rug belonging to Parker's customer was damaged. Is Parker liable to the customer for the damage?
Yes, Parker is liable because he is the agent of an undisclosed principal.
Jim was called to active duty in the military. Knowing that he would be out of the country for a year or more, he gave his sister Peg authority to pay bills in his name, access his bank accounts, buy and sell stock in his brokerage accounts, and incur expenses to maintain his house and car and boat. Jim received several dividend checks from his stock broker while he was gone. Peg deposited the checks in her own bank account because her funds were low. Several weeks later she made out a personal check for the amount of the dividends and deposited it into Jim's account. Has Peg breached any agency duties?
Yes, she breached her duty to account.
Tim is the delivery person for a small local bakery. Tim often accepts payments from the bakery's customers when making his deliveries. Tim puts the payments that made by check in an envelope. He uses the cash payments to pay for his daily personal expenses. At the end of each week, he makes out a check to the bakery for the amount that he took in as cash payments. Has Tim breached any of his fiduciary duties as an agent?
Yes, the duty to account
An agent incurs personal liability on a contract with a third party when
he acts outside the scope of his authority in negotiating the contract he is an agent for an undisclosed principal he is an agent for a partially disclosed principal (all of the above would impose personal liability on the agent)
In which of the following situations would an employee avoid liability for torts committed while carrying out his employment obligations?
A corporate officer acting on behalf of the corporation A servant following the instructions of his master An agent carrying out the orders of his principal (None of the above: everyone has personal liability for the torts he commits)
Pat hired Mike to manage his deli, but the agency agreement did not state how much Mike is to be paid. In this situation,
A court will read in a reasonable salary based on comparable positions in the business community.
Apparent authority can only be created by the actions of
A disclosed principal
Which of the following is not an example of a trade secret?
A list of customers that was published in an ad in a trade journal
