Ch 34: Liability to Third Parties & Termination

What type of agency relationship does not allow the principal to terminate it? a. An agency coupled with an interest b. An undisclosed agency c. A power of attorney d. A principal agency coupled with vicarious liability

a. An agency coupled with an interest

Which of the following results in termination of an agency by acts of the parties? a. An agency coupled with an interest b. Bankruptcy c. Changed circumstances d. Change in law

a. An agency coupled with an interest

What type of principal exists when a third party is unaware that the agent is acting on behalf of the principal? a. An undisclosed principal b. A classified principal c. A disclosed principal d. A conspicuous principal

a. An undisclosed principal

What type of principal is known to exist, but whose identity is not known by a third party who is entering into an agreement with an agent of the principal? a. An unidentified principal b. A principal by estoppel c. A ratified principal d. A disclosed principal

a. An unidentified principal

When can a principal revoke an agent's authority? a. At any time b. Only six months or more after the beginning of the agency relationship c. Only 30 days or more after an intentional tort committed by the agent against a third party d. Only on any yearly anniversary of the signing of the agency agreement

a. At any time

Which of the following is correct regarding an agency coupled with an interest? a. It is terminated when an event occurs that discharges the principal's obligation. b. It is a special kind of agency relationship created for the principal's benefit, not the agent's. c. It exempts the principal from taking any liability for any action of the agent. d. It allows the principal to terminate the relationship at any time.

a. It is terminated when an event occurs that discharges the principal's obligation.

Which of the following is correct regarding a durable power of attorney? a. It specifies that the agent's authority is intended to continue beyond the principal's incapacitation. b. It is also known as a special power of attorney. c. It specifies that the agent's authority ends on the principal's death or incapacitation. d. It is also known as a general power of attorney.

a. It specifies that the agent's authority is intended to continue beyond the principal's incapacitation.

What happens to an agency agreement when the agent declares bankruptcy? a. The agency agreement is terminated. b. The Secretary of State of the state in which the agency agreement was formed becomes the new agent for the principal. c. The trustee of the bankruptcy estate is the new agent. d. It becomes an agency coupled with an interest.

a. The agency agreement is terminated.

If an agent acts with no authority from a principal and enters into a contract with a third party, who is liable if there is a legal dispute regarding the agreement? a. The agent b. The agent's attorney c. The principal d. The incidental beneficiary

a. The agent

What happens when an agent acquires interests that conflict with the principal? a. The agreement is terminated. b. The agreement is ratified. c. The agent must pay the principal damages for profiting on the principal's interests. d. The principal automatically gains ownership rights to the agent's conflicting interests.

a. The agreement is terminated.

If an agent is acting within the scope of his or her authority on behalf of a disclosed principal, who will be liable for the actions of the agent? a. The principal b. The agent c. The third-party beneficiary d. The incidental beneficiary

a. The principal

If the principal fails to train or provide necessary resources that contribute to an agent committing a tort to a third party, who is liable? a. The principal b. The agent c. No one, since tort liability results only from an improper act, not from a failure to act d. The third party

a. The principal

An agent who exceeds his or her authority when the principal is disclosed or partially disclosed is liable for: ______. a. breach of implied warranty b. criminal wrongdoing c. breach of express warranty d. obstruction of justice

a. breach of implied warranty

An employer may be responsible for any tortious acts of the employee if the: ______. a. employer knew that the employee had a tendency to commit such acts b. employee and employer reside in the same state c. employment contract expressly excludes the employer from liability d. employee is an independent contractor

a. employer knew that the employee had a tendency to commit such acts

If a principal or agent becomes insane, the agency relationship is ordinarily finished. Some states have modified this law so that the agency contract still exists unless the affected person: ______. a. has been adjudicated insane b. also declares bankruptcy c. was genetically predisposed to insanity d. dies

a. has been adjudicated insane

The right to recover damages is referred to as the right of: ______. a. indemnification b. contribution c. recidivism d. reclamation

a. indemnification

If an agent has no authority to act on behalf of a principal but still enters into a contract with a third party, the principal is: ______. a. not bound to the contract unless the principal ratifies the agreement b. bound to the contract unless the principal fails to ratify the agreement c. not bound to the contract unless the principal is a partially disclosed principal d. bound to the contract if the principal is a disclosed principal

a. not bound to the contract unless the principal ratifies the agreement

An agency relationship can be terminated by a lapse ______ if the agreement specifies that the relationship will expire. a. of time b. in notification c. of purpose d. in resources

a. of time

Constructive notice occurs by: ______. a. publishing a notice in a circulating newspaper in the area where the agency agreement existed b. notifying the Secretary of State in the principal's state of residence c. written notification to the third party d. indemnifying the agent

a. publishing a notice in a circulating newspaper in the area where the agency agreement existed

In the same way the principal is responsible for the negligent acts of the employee under the doctrine of ______, the principal may also be liable for any intentional torts of the employee. a. respondeat superior b. unconscionability c. substantial performance d. res ipsa loquitur

a. respondeat superior

If an agent loses qualifications needed to perform duties for the principal, the agency relationship: ______. a. terminates b. nevertheless continues c. is suspended temporarily, pending restoration of the agent's qualifications d. is suspended temporarily, pending the court's appointment of a substitute agent with the necessary qualifications

a. terminates

If an unusual change in circumstances leads the agent to believe that the principal's instructions do not apply, the agency relationship: ______. a. terminates b. continues, but only pursuant to express approval by the Secretary of State in the state where the agency agreement was formed c. continues d. continues, but only pursuant to court order

a. terminates

What type of power of attorney allows the agent to conduct all business for the principal? a. A multinational power of attorney b. A general power of attorney c. A special power of attorney d. An agency by estoppel

b. A general power of attorney

Which of the following is not a relevant question in determining whether a wrongful act occurred within the scope of employment? a. Did the act occur within the time and space limits of employment? b. Did the employer earn a profit in the fiscal year immediately preceding the wrongful act? c. Did the employer authorize the employee's act? d. Was the act performed, at least in party, on behalf of the employer?

b. Did the employer earn a profit in the fiscal year immediately preceding the wrongful act?

Which of the following is correct regarding a special power of attorney? a. It specifies that the agent's authority is intended to continue beyond the principal's incapacitation. b. It grants the agent express authority over specifically outlined acts. c. It seldom terminates on the principal's death. d. It allows the agent to conduct all business for the principal.

b. It grants the agent express authority over specifically outlined acts.

Suppose that a United States principal has an agent in China authorized to conduct business dealings on the principal's behalf. If the U.S. goes to war with China, what effect will this have on the agency agreement? a. The agency agreement will continue, but only with the express permission of the U.S. government. b. The agency agreement will terminate. c. The agency agreement will continue, but only with the express permission of the Chinese government. d. The agency agreement will continue, but only with the express permission of the United Nations.

b. The agency agreement will terminate.

Select all that apply In certain situations, the agent is the only party liable for the contract even when the agent acts within his or her authority on behalf of an undisclosed principal. Identify these situations. a. The principal or agent knows a third party would enter into a contract with the principal if the principal's identity were disclosed but the agent does not disclose the identity anyway. b. The third party enters into a contract with the agent such that the agent's performance is required and the third party may reject the performance of the principal. c. The agent enters into a contract that is a nonnegotiable instrument. d. The contract expressly excludes the principal from the contract.

b. The third party enters into a contract with the agent such that the agent's performance is required and the third party may reject the performance of the principal. d. The contract expressly excludes the principal from the contract.

Which of the following is correct regarding the tort liability of a principal. a. A principal can never be held liable for an agent who commits a tort. b. The tort liability of a principal can be established either directly or indirectly. c. The tort liability of a principal can only be established indirectly. d. The tort liability of a principal can only be established directly.

b. The tort liability of a principal can be established either directly or indirectly.

If an agent has misrepresented himself or herself to a third party, how many legal options are available to the third party? a. None b. Two c. Three d. One

b. Two

What is the legal theory that a principal is liable for the actions of an agent who is working for him or her? a. Res ipsa loquitur b. Vicarious liability c. Assumption of the risk d. Substantial performance

b. Vicarious liability

In which of the following cases is the agent most likely to be personally liable to the third party? a. When the contract expressly excludes the agent from the contract b. When the agent exceeds his or her authority to act on behalf of the principal c. When the principal ratifies the agreement d. When the third party is aware that the agent does not represent the principal

b. When the agent exceeds his or her authority to act on behalf of the principal

Agency is a(n) ______ agreement between ______ parties. a. consensual; three b. consensual; two c. non-consensual; three d. non-consensual; two

b. consensual; two

When a third party is aware that an agent is making an agreement on behalf of a principal and also knows who the principal is, the principal is a ______. a. partially disclosed principal b. disclosed principal c. principal by estoppel d. ratified principal

b. disclosed principal

Indemnification involves the employer seeking remuneration from the: ______ for damages the employer has paid. a. employer's insurance company b. employee c. third party injured d. state where the employer is incorporated

b. employee

If the principal or the agent dies, the agency relationship: ______. a. is continued with a new agent b. is automatically terminated c. continues unchanged, with the estate of the deceased party assuming the responsibilities of the deceased d. is assumed by the state through the power of eminent domain

b. is automatically terminated

An agent's apparent authority continues until the principal: ______. a. contacts a court and notifies legal authorities that the agency relationship is over b. notifies third parties that the relationship has ended c. compensates the agent d. notifies the agent that the relationship has been terminated

b. notifies third parties that the relationship has ended

If Pang hires Jacquelyn to paint his house green and the city council soon thereafter passes a law making it illegal to paint houses green, the new law automatically ______ the agency agreement. a. ratifies b. terminates c. endorses d. renews

b. terminates

If an agent commits a tort against a customer, the customer often argues that: ______. a. the agent is liable because he or she is a party to the contract b. the principal is liable because he or she should have taken more care in hiring the agent c. the principal is liable because he or she interacts with the customer d. the agent is liable because the customer only communicated with the agent

b. the principal is liable because he or she should have taken more care in hiring the agent

If the third party is aware of the principal's existence but not his or her identity, the principal is classified as a(n) ______. a. ratified principal b. unidentified principal c. disclosed principal d. principal by estoppel

b. unidentified principal

The law holds a principal directly responsible for his or her own tortious conduct: ______. a. when the agent commits a tortious act outside the course and scope of the agency b. when the principal directs the agent to commit a tort, thereby authorizing the agent's unlawful behavior c. when the agent is an independent contractor d. unless the agency contract expressly excludes the principal's tort liability

b. when the principal directs the agent to commit a tort, thereby authorizing the agent's unlawful behavior

Courts often refer to an employee's substantial departure as a(n): ______. a. deviation from responsibility b. miscarriage of justice c. "frolic of his own" d. "jealous mistress"

c. "frolic of his own"

What type of principal is known by the third party when an agreement is made with an agent? a. An apparent principal b. A ratified principal c. A disclosed principal d. An attorney-in-fact

c. A disclosed principal

What type of power of attorney is meant to continue beyond the principal's incapacitation? a. A terminable power of attorney b. A multinational power of attorney c. A durable power of attorney d. A special power of attorney

c. A durable power of attorney

Which of the following types of notice directly informs a third party that an agency agreement has been terminated? a. Constructive b. Implied c. Actual d. Equitable

c. Actual

Which of the following is correct regarding a principal's liability for an agent's misrepresentation to a third party? a. It is based on whether the agent was acting in the scope of employment. b. Whether the principal authorized the agent's misrepresentation is irrelevant. c. It depends on whether the principal authorized the agent's misrepresentation. d. It is the same as tort liability.

c. It depends on whether the principal authorized the agent's misrepresentation.

Suppose that Noelle hires a real estate agent to sell her house. Before the house can be sold, the agent loses his real estate license. What happens to the agency relationship in this scenario? a. It continues until expiration of the time specified in the agency agreement. b. It continues, with the commission reduced to one-half of the original amount by statutory mandate. c. It terminates. d. It continues, with the commission reduced by one-third of the original amount by statutory mandate.

c. It terminates.

With an undisclosed principal, who is liable to a third party? a. The principal b. Neither the principal nor the agent c. The agent d. The incidental beneficiary

c. The agent

If an agent renounces the agency relationship, which of the following is correct? a. The agent is liable for the commission of a tort. b. The agent cannot be liable for breach of contract. c. The agent can be liable for breach of contract if the agency agreement stated a specific amount of time that the relationship is to exist. d. The agent is automatically liable for breach of contract.

c. The agent can be liable for breach of contract if the agency agreement stated a specific amount of time that the relationship is to exist.

Which of the following is correct if the purpose of an agency relationship has been fulfilled? a. The agency ends through application of equitable principles. b. The agent continues to have complete authority to act on the principal's behalf. c. The agent no longer has the authority to act on the principal's behalf. d. The agency ends by operation of law.

c. The agent no longer has the authority to act on the principal's behalf.

If an agent commits a crime without authorization from the principal, who is liable for the crime? a. Both the principal and the agent b. The principal only c. The agent only d. Neither the principal nor the agent

c. The agent only

Which of the following is correct if a principal and an agent decide they do not wish to continue in the agency relationship? a. They can cancel the agreement, but only if they receive the express, written consent of at least two incidental beneficiaries. b. They can cancel the agreement, but only if they request and receive the express consent of a civil district court judge. c. They can cancel the agreement and terminate the relationship. d. They can cancel the agreement, but only if they receive the express, written consent of at least two third-party beneficiaries.

c. They can cancel the agreement and terminate the relationship.

A third party injured through the negligence of an employee can sue: ______. a. the state in which the employer is incorporated b. only the employee c. either the employee or the employer d. only the employer, based on the employer's exclusive, vicarious liability for the wrongful actions of its employees

c. either the employee or the employer

The theory of respondeat superior does not apply to: ______. a. insurance companies b. the tortious actions of the principal's employees c. independent contractors d. the tortious actions of the principal's agents

c. independent contractors

The principal has vicarious liability in a principal-agent relationship because the: ______. a. principal was personally at fault b. agent is always considered an independent contractor c. principal negligently hired the agent d. principal is invariably expressly excluded from the contract

c. principal negligently hired the agent

Generally, if a principal or an agent has been adjudicated insane, the agency relationship is: ______. a. nevertheless enforceable b. ratified c. terminated d. actively monitored by the state

c. terminated

The doctrine of respondeat superior applies to which of the following relationship(s)? a. Neither the principal-agent relationship nor the employer-employee relationship b. The employer-employee relationship only c. The principal-agent relationship only d. Both the principal-agent relationship and the employer-employee relationship

d. Both the principal-agent relationship and the employer-employee relationship

Which of the following is false regarding the power of attorney? a. It grants an agent specific powers. b. It is a specific form of express authority. c. It is usually in writing. d. It is a general form of implied or apparent authority.

d. It is a general form of implied or apparent authority.

For an agency agreement to terminate through lapse of time, which of the following must occur? a. A third party must have been injured (either physically, economically, or both) by the agent. b. The principal must notify the Secretary of State of the termination in the state where the principal resides. c. The duration of the agency must be for at least six months. d. The agency agreement must specify that the agreement will expire at a designated time.

d. The agency agreement must specify that the agreement will expire at a designated time.

Marta is an attorney representing Lola in her suit against a pharmaceutical company. If the pharmaceutical company offers Marta a job and she accepts, what will happen to the agency agreement between Marta and Lola? a. The agency agreement will terminate and the state will become the new agent for Lola. b. The agency agreement will become an agency coupled with an interest. c. The agency agreement will be reaffirmed by Marta and Lola so as to reinforce their duties toward each other. d. The agency agreement will terminate because Marta has acquired an interest opposed to Lola's interests.

d. The agency agreement will terminate because Marta has acquired an interest opposed to Lola's interests.

If an agent makes a substantial departure from the course of employer's business and a legal incident occurs, who will be liable? a. The principal b. The state where the the principal resides c. No one, since all actions are irrelevant if they occurred outside the course and scope of employment d. The agent

d. The agent

Who is liable to a third party if an agent exceeds his or her authority to act on behalf of the principal? a. Neither the agent nor the principal b. Any incidental beneficiary c. The principal d. The agent

d. The agent

Suppose that while working on the outside of the building he is renovating, an independent contractor injures an innocent bystander when he inadvertently drops a pile of bricks. Who will be liable for the contractor's actions in this scenario? a. The insurance company of the bystander b. The state in which the independent contractor resides c. The owner of the building d. The independent contractor

d. The independent contractor

If an independent contractor engages in extremely hazardous activities at the direction of the principal, who will be liable if a third party is injured? a. The state in which the hazardous activities occurred b. The third party, based on automatic application of the assumption-of-the-risk doctrine c. The state in which the independent contractor principally conducts business d. The principal

d. The principal

If an agent has misrepresented herself to a third party, the injured third party can either ______ the contract with the principal and be compensated for any money lost, or ______ the contract and sue the principal to recover damages. a. affirm; modify b. revoke; cancel c. affirm; remediate d. cancel; affirm

d. cancel; affirm

A principal who ratifies an agent's tortious act, knowing that the agent acted illegally, is liable: ______. a. if the agent is an independent contractor b. unless the agency contract expressly excludes the principal's lability c. only if the principal provides proper tools to the agent concerning the necessity to employ competent goals d. even if the principal does not condone the agent's conduct

d. even if the principal does not condone the agent's conduct

A power of attorney is a specific form of ______ authority. a. equitable b. implied c. apparent d. express

d. express

An agent who acts within the scope of his or her authority on behalf of a disclosed principal is: ______. a. not liable, but only if the contract expressly excludes the agent from contractual liability b. personally liable for contractual nonperformance c. personally liable because he or she is a party to the transaction d. not liable for the acts of the principal

d. not liable for the acts of the principal

The only time a principal can be liable for the crime of an agent is when the: ______. a. agent authorized the criminal act b. principal terminated the agency after the crime was committed c. principal became aware of the crime after-the-fact d. principal authorized the criminal act

d. principal authorized the criminal act

An employer cannot escape liability for an independent contractor's tort if: ______. a. the contractor commits a tort for himself or herself and not for the principal b. the employer directs the contractor to engage in safe activities c. the contractor has worked intermittently with the employer for at least three years d. the employer directs the contractor to commit the tort

d. the employer directs the contractor to commit the tort

The principal is always liable in tort to someone who relied on the agent's misrepresentation if: ______. a. the agent misrepresented himself or herself outside the scope of employment without the authorization of the employer b. the principal was expressly excluded from the contract c. the agent is an independent contractor employed by the principal d. the principal authorized the agent to engage in an act and the agent misrepresented himself or herself intentionally or unintentionally

d. the principal authorized the agent to engage in an act and the agent misrepresented himself or herself intentionally or unintentionally

If a third party does not know that an agent is acting on behalf of a principal, the principal is a(n) ______ principal. a. ratified b. partially disclosed c. apparent d. undisclosed

d. undisclosed

If a principal is disclosed, an agent who exceeds her authority cannot be sued for breach of contract because he or she: ______. a. is liable instead for tortious interference of contract b. is liable instead based on the doctrine of respondeat superior c. is not liable for the principal's tortious conduct d. was never an intended party to the contract

d. was never an intended party to the contract

Due to the fiduciary nature of an agency relationship, an agent cannot terminate the agency by renouncing the authority given to him or her. true false

false Reason: An agency can terminate the agency relationship by renouncing the authority given to him or her.

If a specific event fundamental to the essential purpose of the agency relationship occurs, this results in termination of the agency relationship by operation of law. true false

false Reason: If a specific event fundamental to the essential purpose of the agency relationship occurs. this results in termination of the agency relationship by acts of the parties.

If the purpose of an agency relationship has been fulfilled, this results in termination of the agency relationship by operation of law. true false

false Reason: If the purpose of an agency relationship has been fulfilled, this results in termination of the agency relationship by acts of the parties.

Insolvency automatically results in termination of the agency relationship. true false

false Reason: Insolvency, the inability to pay debts or the condition in which liabilities outweigh assets, does not necessarily result in termination of the agency relationship.

An agent who commits a tort that injures a third party is personally liable for his or her actions only if the principal is an undisclosed principal. true false

false Reason: This is false. An agent who commits a tort that injures a third party is personally liable for his or her actions, regardless of both the classification and the liability of the principal.

Generally, since principals and agents cannot control one country's declaration of war against another country, war cannot terminate an agency agreement. true false

false Reason: War can terminate an agency agreement if the war makes it impossible to enforce the rights of the parties to the agency.

An agency relationship can be terminated on the occurrence of a specific event. true false

true An agency relationship can be terminated on the occurrence of a specific event.

Changed circumstances can result in termination of the agency relationship through operation of law. true false

true Reason: If an unusual change in circumstances leads the agent to believe that the principal's instructions do not apply, the agency relationship terminates by operation of law.

A principal can revoke an agent's authority without liability if the agent has breached the fiduciary duty to the principal. true false

true Reason: If the agency has breached the fiduciary duty to the principal, the principal can revoke the agent's authority without liability.

The Latin phrase respondeat superior means "let the superior speak." true false

true Reason: This is true. The doctrine of respondeat superior (a Latin phrase meaning "let the superior speak") applies in the context of the principal/employer-agent/employee relationship.