Chapter 32

The agent has the duty to act ______ for the benefit of the principal and not in the interest of the agent or a third party.

Solely

An agent will have emergency powers: a. to protect the principal's property and rights when the agent is unable to communicate with the principal. b. when the agent is on the phone. c. when the principal is on the phone.

a. to protect the principal's property and rights when the agent is unable to communicate with the principal.

Liability for contracts formed by an agent depends on how the principal is classified and on whether the actions of the agent were authorized or unauthorized. a. True b. False

a. True

The agency relationship is a fiduciary relationship based upon trust, and each party owes the other the duty to act with the utmost good faith. a. True b. False

a. True

The employer is charged with knowledge of any dangerous conditions discovered by an employee and pertinent to the employment situation. a. True b. False

a. True

The most common exception to the employment-at-will doctrine is made on the basis that the employer's reason for firing the employee violates a fundamental public policy of the jurisdiction. a. True b. False

a. True

To a large extent, statutory law has displaced common law doctrines that apply to employment relationships. a. True b. False

a. True

Today, standard agency principles also apply to e-agents. a. True b. False

a. True

We all have a social duty that requires us to manage our affairs so as to not injure another. This duty applies even when we act through an agent. a. True b. False

a. True

When an agent fails to perform his or her duties, for what may the agent be liable to the principal? Choose two. a. breach of contract b. misappropriation c. invasion of privacy d. administrative injunction e. tort liability

a. breach of contract e. tort liability

In which situations may the courts find an agency relationship in the absence of a formal agreement? Choose two. a. in family relationships b. in commercial transactions c. in emergency situations d. in creation of intellectual property

a. in family relationships c. in emergency situations

To give adequate notice of the termination of the agency relationship, the principal (select two): a. must directly contact all persons who may have interacted with the agent. b. must directly contact all persons the principal knows interacted with the agent. c. may give constructive notice, such as through publication in a newspaper, to all persons without contacting anyone directly. d. may give constructive notice, such as through publication in a newspaper, to any person who has not yet dealt with the agent but who may have heard about the agency relationship. e. need not reach out to any person either directly or through constructive notice.

a. must directly contact all persons who may have interacted with the agent. d. may give constructive notice, such as through publication in a newspaper, to any person who has not yet dealt with the agent but who may have heard about the agency relationship.

Ernest signs a listing agreement with Lisa to sell his house. Before Lisa finds a buyer, the house is destroyed by flooding. In this case, the agency agreement between Ernest and Lisa: a. terminates based on impossibility. b. terminates based on changed circumstances. c. terminates based on war. d. continues in full force and effect.

a. terminates based on impossibility.

The principal has several remedies available, including _____ for breach of fiduciary duties and ______ remedies if the agent engages in misrepresentation, negligence, deceit, libel, slander or trespass. Anything that the agent obtains by virtue of the agency relationship belongs to the ______ and will be considered held in ______ for the principal. If the agent breaches the agreement, the principal also has a right of ______. Finally, if the principal is sued for the agent's negligent conduct, the principal can sue the agent for ______.

-contractual -tort -principal -constructive trust -avoidance -indemnification

The equal dignity rule has several exceptions. For example, an executive officer of a corporation ______ can conduct _____ business transactions without written authority. Likewise, when an agent acts in the _____ of a principal, the rule does not apply. Finally, when the agent's signature is merely a ______ , the agent does not need written authority to sign.

-normally -ordinary -presence -formality

Ratification occurs when the principal accepts responsibility for the agent's ______ acts. For ratification to be valid, the agent must have acted on behalf of an _____ principal, that principal must know all of the material _____, must _____ the agent's act in its entirety, and must have the legal ______ to ratify the transaction both at the time the agent engages in the act and at the time the principal ratifies it. The principal's ratification must occur before the third party ______ from the transaction, and the principal must _____ the same formalities when ratifying the act as would have been required to authorize it initially.

-unauthorized -identified -facts -affirm -authorization -withdraws -observe

Notary public

A public official authorized to attest to the authenticity of signatures.,

Agency

A relationship between two parties in which one party, the agent, agrees to represent or act for the other, the principal.,

Power of attorney

A written document authorizing another to act as one's agent. This may be special, permitting the agent to do specified acts only, or general, permitting the agent to transact all business for the principal.

A court can apply the doctrine of __________ when a principal has given a third party reason to believe that an agent has authority to act.

Agency by estoppel

With respect to their employers, employees who deal with third parties are generally deemed to be _____

Agents

If the two parties in the agency agreement disagree about how much the principal owes the agent, the agent may suspend performance and demand __________

An accounting

When a third party reasonably believes a person has authority to act on another's behalf, even if that person does not have such authority, the situation is known as ____________

Apparent authority

Fiduciary

As a noun, a person having a duty created by his or her undertaking to act primarily for another's benefit in matters connected with the undertaking. As an adjective, a relationship founded on trust and confidence.,

Implied authority

Authority that is created not by an explicit oral or written agreement but by implication. In agency law, implied authority of the agent can be conferred by custom, inferred from the position the agent occupies, or implied by virtue of being reasonably necessary to carry out express authority.,

Apparent authority

Authority that is only apparent, not real. In agency law, a person may be deemed to have had the power to act as an agent for another party if the other party's manifestations to a third party led the third party to believe that an agency existed when, in fact, it did not.,

If an agent commits a crime, the employer-principal is not liable unless the principal participated in the crime by _________ .

Conspiracy

Independent

Contractor One who works for, and receives payment from, an employer but whose working conditions and methods are not controlled by the employer. An independent contractor is not an employee but may be an agent.

What can OSHA compliance officers do with respect to facilities of establishments covered by the act? ____________

Enter and inspect the facilities

Agency by ________ is created when the _______ causes a third party to reasonably believe that an agency relationship exists.

Estoppel, principal

When the principal grants an agent an exclusive territory, we say that the principal has created a(n) _______ .

Exclusive agency

Equal dignity rule

In most states, a rule stating that authority given to an agent must be in writing if the contract to be made on behalf of the principal is also required to be in writing.,

The federal government began to regulate wages and working hours of employees _______

In the 1930's

Whether a worker is an employee or an independent contractor can affect the employer's __________ for workers' actions. If the Internal Revenue Service decides that an employee is misclassified as an independent contractor, the employer will be __________ for paying Social Security, withholding, and unemployment taxes.

Liability, responsible

Federal rules concerning worker safety are enforced by ______

OSHA

Express authority

Power given by one party to another in clear and definite terms to act on that person's behalf.,

Either party has the ______ to terminate the agency agreement, but they may not have the _______ to do so without legal consequence.

Power, right

The degree of skill or care required of an agent is usually that expected of a(n) __________ person under similar circumstances.

Reasonable

An agent's actions must be strictly for the benefit of the principal and must not result in any ________ profit for the agent.

Secret

Ratification

The act of accepting and giving legal force to an obligation that previously was not enforceable.

An employer may be held liable for the wrongful discharge of an employee if the discharge violated: _____________

The common law or statutory law

Which of the following laws does NOT relate to the regulation of wages and working hours? ___________

The national recovery act

An agent's implied authority can be inferred by ______________

The position the agent occupies

_____________ is required to inform any third parties who know of the existence of an agency that the agency has been terminated.

The principal

Any copyrighted work created by an employee within the scope of her or his employment at the request of the employer is called a ________

Work for hire

An agent's authority to act for a principal: a. may be actual or apparent. b. must always be in writing. c. can be expressed only.

a. may be actual or apparent.

A principal who authorizes an agent to commit a tort may be liable to persons or property injured because the act is considered to be the principal's. a. True b. False

a. True

Agency law is similar to contract law in that both an agency and a contract may be terminated by the parties or by operation of law. a. True b. False

a. True

Agency relationships are normally consensual, coming about through voluntary consent and agreement between the parties. a. True b. False

a. True

Francis drives a delivery truck for Weston Industries. In the middle of his delivery route, Francis stops to have a two-hour lunch with friends twenty miles away. While in the restaurant, Francis spills some water and another person falls on it. That person sues Weston Industries. To determine liability, a court would likely decide that Francis was acting: a. outside the scope of employment. b. within the scope of employment. c. in misrepresentation of Weston Industries. d. as a negligent agent.

a. outside the scope of employment.

A gratuitous agent may be held liable for breach of contract. a. True b. False

b. False

An agency coupled with an interest is created solely for the principal's benefit. a. True b. False

b. False

If an agent has authority to sign a contract on behalf of a disclosed principal, the third party may hold either the principal or the agent responsible to perform. a. True b. False

b. False

If the third party knows at the time the contract is made that the agent does not have authority, the principal nonetheless remains liable. a. True b. False

b. False

Which of the following is NOT a duty the agent owes the principal? a. performance b. superior competence c. notification d. loyalty e. obedience f. accounting

b. superior competence

Which of the following is NOT one of the four ways in which an agency relationship can arise? a. agency by agreement b. agency by ratification c. agency by federal law d. agency by estoppel e. agency by operation of law

c. agency by federal law

An agency coupled with an interest involves a situation in which the agent has: a. the ability to tell the principal what to do. b. no legal right or interest in the property that is the subject of the agency. c. some legal right or interest in the property that is the subject of the agency.

c. some legal right or interest in the property that is the subject of the agency.

Which of the following is NOT a duty the principal owes the agent? a. compensation b. reimbursement and identification c. substantial ownership in the business d. cooperation e. safe working conditions

c. substantial ownership in the business

Which of the following is not a classification of a principal? a. disclosed b. partially disclosed c. undisclosed d. materially disclosed

d. materially disclosed

If an agent is on a ________ , the principal will be liable, but if the agent is on a ________ , the principal will not be liable.

detour, frolic

A principal is always responsible for an agent's _______ made within the scope of the agent's authority.

misrepresentations

The Fair Labor Standards Act (FLSA) does NOT: ____________________

restrict the power of federal courts issuing injunctions against unions

Courts will determine independent contractor status by asking several questions. These include the following: How much ______ does the employer exercise over the details of the work? Is the worker engaged in a(n) _______ or business distinct from that of the employer? Is the work usually done under the employer's direction or by a(n) _______ without supervision? Does the employer _______ the tools at the place of work? For how long is the person ______? What is the method of ______, by time period or at the completion of the job? What degree of ______ is required of the worker?

-control -occupation -specialist -supply -employed -payment -skills

If an agent has no authority but nevertheless contracts with a third party, the principal cannot be held liable on the contract. a. True b. False

a. True

In an agency relationship involving two parties, the agent agrees to represent or act for the principal. a. True b. False

a. True

Agency relationships can exist outside an employer-employee relationship, and thus agency law has a broader reach than does employment law. a. True b. False

a. True

Apparent authority usually comes into existence through a principal's pattern of conduct over time. a. True b. False

a. True

Generally, the liability of the principal will depend on whether the agent was authorized to form a contract. a. True b. False

a. True

When a person who is not an agent makes a contract on behalf of a principal, the principal cannot benefit from the contract. a. True b. False

b. False

When an agency is terminated all of the agent's authority is terminated as well. a. True b. False

b. False

When the principal-agent relationship is not contractual, the agent may receive an order for specific performance from the court to ensure that the agency relationship may continue. a. True b. False

b. False

Maureen knows that her friend Kramer collects duck memorabilia. One day, she spots a carved wooden duck she is sure he will love. She tells the shop owner that Kramer will pay her for the duck as soon as he sees it, and she takes the duck with her to show it to Kramer. Kramer is: a. fully liable under the doctrine of intelligent agents. b. not liable. c. liable under the doctrine of apparent authority. d. liable only if the shop owner knew that Maureen was not Kramer's agent.

b. not liable.

Sarah asks Sergio to mow her lawn. Sergio, who is overloaded with work, contracts with Dan to do the work for him as an independent contractor. As Dan is mowing, Sarah walks out of her house and the lawnmower throws a rock and hits Sarah, causing serious injuries. In this situation, Sergio is: a. liable for Sarah's harms because he has a responsibility to control the actions of his employees. b. probably not liable for Sarah's injuries. c. not liable for Sarah's injuries because she breached her duty of notification. d. liable for Sarah's harms because Dan is an independent contractor.

b. probably not liable for Sarah's injuries.

When the principal does not ratify an unauthorized contract resulting in an unaccepted offer, the third party can: a. successfully sue the principal. b. revoke the offer at any time without liability. c. complain to the Securities and Exchange Commission.

b. revoke the offer at any time without liability.

An ordinary power of attorney ends when: a. the person giving the power turns sixty-five years old. b. the person giving the power dies or becomes incapacitated. c. the person giving the power dies, and his or her heirs inherit it.

b. the person giving the power dies or becomes incapacitated.

Selena signs a power of attorney appointing Kim, for the sole purpose of signing paperwork on her behalf that relates to the sale of her house. The power of attorney will automatically terminate based on: a. termination by either Selena or Kim. b. the purpose being achieved. c. a lapse of time. d. mutual agreement between Selena and Kim.

b. the purpose being achieved.

Who can become a principal and who can become an agent? a. Any person can become a principal, but an agent has to have the capacity to contract. b. Any person can become a principal and any person can become an agent. c. A person must have contractual capacity to be a principal, but any person can become an agent.

c. A person must have contractual capacity to be a principal, but any person can become an agent.

Gina buys a piece of pottery from Woodward for her principal, Kelvin. If Woodward knows that Gina is buying the pottery on behalf of someone other than herself but does not know the identity of that person, Kelvin is: a. an agent for Woodward. b. an independent contractor working for Gina. c. a partially disclosed principal. d. an undisclosed principal.

c. a partially disclosed principal.

In agency law, ratification occurs when: a. there is no agency relationship, but the words and actions of the principal lead a third party to assume that an agency exists. b. fiduciary obligations are owed by an agent to a principal. c. a principal, by words or by actions, affirms a contract made by a person who in fact is not an agent. d. the obligation of an agent who acted outside the scope of his or her authority is rejected.

c. a principal, by words or by actions, affirms a contract made by a person who in fact is not an agent.

Dean is not Paul's agent, but Paul tells Charlie that Dean has always been a good friend and can "handle any of my business affairs." If Dean were to later enter into a contract with Charlie on Paul's behalf, Dean would be acting under an: a. express authority. b. implied authority. c. apparent authority. d. obvious authority.

c. apparent authority.

Jason instructs his agent Miguel to obtain a piece of artwork from Martina by threatening to beat her if she refuses to sell the artwork. Miguel follows Jason's instruction and beats Martina when she refuses to sell the item. In this situation: a. Miguel can seek an indemnification against Jason. b. Martina cannot recover damages for her injuries in court because Miguel was acting as an agent. c. both Jason and Miguel are liable for Martina's injuries. d. Miguel alone is liable for Martina's injuries.

c. both Jason and Miguel are liable for Martina's injuries.

A familiar example of an agent is a: a. janitorial employee who does not deal with third parties. b. gardener hired to maintain the grounds at a large industrial complex. c. corporate officer who serves in a representative capacity for the owners of the corporation

c. corporate officer who serves in a representative capacity for the owners of the corporation

Samantha borrows $10,000 from John to start her business. She gives John her stock in AT&T, authorizing him to sell it if she defaults on her loan. If she later attempts to terminate his authority to sell the stock, she will not be successful because she gave John an agency: a. by power of attorney. b. for a specific occurrence. c. coupled with an interest. d. by express authority.

c. coupled with an interest.

Selma, an elderly widow, gives her young neighbor Steven written power of attorney. This means that Steven now: a. is an undisclosed principal. b. is a disclosed principal. c. has express authority to act as Selma's agent. d. has implied authority, but not express authority, to act as Selma's agent.

c. has express authority to act as Selma's agent.

Yakov hires Melina to be his Vice President for Marketing. The job description is pretty broad but does not include the ability to hire or terminate lower level employees in the Marketing division. If Melina has this power, it is based on her: a. obvious authority. b. apparent authority. c. implied authority. d. express authority.

c. implied authority.

Donald is a new financial analyst for a large stock-brokerage company. On the way to work, Donald collides with Yolanda, injuring her. Donald would normally be considered to be acting: a. as a borrowed servant. b. as a principal for the firm. c. outside the scope of employment. d. within the scope of employment.

c. outside the scope of employment.

A principal may be liable for the tortious conduct of an agent based on the principal's own actions, including all of the following EXCEPT: a. establishing improper rules that result in the agent's committing a tort. b. authorizing the use of improper materials or tools. c. providing explicit accurate written instructions to the agent. d. giving improper instructions.

c. providing explicit accurate written instructions to the agent.

Patricia hires Albert to sell Patricia's expensive sports car. Albert agrees on a sale with Zeke, who wants to purchase the car for its powerful engine and well-kept condition. Albert does not disclose Patricia's identity to Zeke. Albert also does not disclose the fact that Albert is an agent for someone else. Zeke tenders the purchase price to Albert, but Patricia refuses to deliver the car as agreed. In this situation: a. Patricia is not bound to perform because Albert did not act within the scope of his authority. b. Patricia is not bound to perform because Patricia's identity was not disclosed. c. Patricia is not bound to perform because the agency relationship was not disclosed. d. Patricia is bound to perform.

d. Patricia is bound to perform.

Lizzie works for Gary in his dance supply shop and is authorized to sell inventory but not to order new merchandise. Rena, a sales representative for a new line of dance wear, comes into the store and Lizzie places an order with her. When Gary learns the details of Lizzie's purchase he wants to ratify the contract. The one condition that is NOT necessary for ratification is: a. Gary must affirm Lizzie's order in its entirety. b. Rena and Gary must have legal capacity to engage in the transaction. c. Gary must know all the material facts about the transaction. d. Rena must withdraw from the transaction before Gary ratifies it.

d. Rena must withdraw from the transaction before Gary ratifies it.

A principal will be liable for the intentional torts of an employee-agent in all of the following situations, except: a. if the tort is within the scope of the employment. b. if the principal knew or should have known that the agent had a propensity to commit the tort. c. if the principal knowingly allowed the agent to engage in conduct that was dangerous to others. d. if the agent committed the intentional tort while on a frolic.

d. if the agent committed the intentional tort while on a frolic.

Kim hires Michelle to go to the art gallery and purchase a specific painting for him. The painting costs $1,500. Because this is the purchase and sale of goods for more than $500, the contract for the painting must be in writing. In order to have a legal purchase of the painting, Kim: a. must not have Michelle hired as his agent. b. may have Michelle sign on his behalf based on their verbal agency agreement. c. must have Michelle bring the contract to him for his original signature. d. may have Michelle sign on his behalf if the agency agreement is in writing.

d. may have Michelle sign on his behalf if the agency agreement is in writing.

Which of the following is NOT a valid reason for a termination of an agency by operation of law? a. death or insanity b. impossibility c. changed circumstances d. prior engagement e. bankruptcy f. war

d. prior engagement