Law Test Ch 14

advantages to having the ability to use agents

-access to the expertise of agents -expanded business opportunity

Categories of agents

-gratuitous -special -general -universal

duty owed by the agent to the principal, fiduciary

-loyalty -reasonable care -accounting -notification

Which of the following would lead to termination by operation of law for an agency:

-principal dies -agent dies -subject matter of agency is destroyed

To establish an agency relationship:

1. the procedure in state statutes must be followed 2. there must be a written contract between the parties 3. the principal must file an agency charter with the appropriate state agency

A person authorized to execute all regular transactions connected with a business is called a:

General

A manager who runs all aspects of a hotel is most likely what kind of agent:

General agent

A legal document that establishes some agency relationships is known as:

Power of attorney

You hire an agent to sell your house for you. Typically, such an agent receives a fee only if they actually sell the house. This person is most likely:

a special agent

A principal has a _____the agent for reasonable expenses incurred in carrying out the duties of the agency.

duty to reimburse

If an agent competes with his principal without the principal's consent:

he is violating his duty of loyalty

When a principal accepts the consequences of the activities of a person who had previously not been the principal's agent, the principal:

ratifies the agency

An alleged principal becomes a real principal by:

ratifying the agreement

Persons appointed by an agent delegated some authority are known as:

sub-agents

For an agency to be valid in most states:

the agent must be subject to the principal's control

The law of agency places its primary emphasis on the duties:

the agent owes to the principal

Which of the following would not be a factor in determining a ratification:

the third party wishes for the principal to be a party to a contract

When Galgano defaulted on payments, Cove sued AFLAC contending that Galgano was its agent when he rented the office, so AFLAC was liable. The appeals court held that AFLAC:

was not obligated to the lease because Galgano did not have *apparent authority* to sign a lease that would bind AFLAC

An agency through operation of law is established:

when an emergency exists and the agents actions are in the public interest

Express authority consists of the agent's:

written or oral instructions from principal to agent

You post a notice at school that you will sell your laptop computer for $600. A buyer comes by your room to look at it while you are gone and your roommate sells it for $500, thinking you would be happy with that price, which you did not authorize.

you can accept the deal by express or implied ratification

part of the principal's duty to cooperate

-provide a safe working environment -warning the agent of any unreasonable risk associated with the agency -not furnishing goods of inferior quality to the agent

Which of the following determines the scope of authority given to an agent:

-statements of the principal -principals conduct -trade customs in business

how to end an agency

-unilateral notice by agent or principal -mutual consent -lapse of agreed-upon time

In Bearden v. Wardley Corp., where Bearden sued Wardley because one of its agents, Gritton, bought a house from her and then cheated her on the transaction, the court held that:

Gritton and Wardley violated their fiduciary obligations to Bearden, so both are liable

Juan and Marie enter into an oral agreement that Marie will sell Juan's crusty herb garlic bread to gourmet food stores in the area. This works until Juan gets sick and no longer makes his bread. Marie is furious that Juan is unable to supply her with the popular bread and sues him for lost profits. A court is likely to rule:

Maries authority to act as agent for Juan lapsed and the agency relationship is terminated

Many states require agencies that will exist for ____ to be established in writing.

More than one year

In Yim v. J's Fashion Accessories, Inc., where J's Fashion sued Yim for failing to pay for goods he bought under the name Ho Tae and Yim denied liability on the grounds that he had been acting as an agent for Hosung Enterprise, Inc which also did business under the name Ho Tae, the courts held that:

Yim was liable because he never disclosed Hosung Enterprise, Inc. as the principal

To carry out their duties, universal agents are typically granted:

a general power of attorney

An agent is trying to sell a house for $100,000 for her principal. The principal will sell the house for as little as $80,000, but wants to get as much as possible. The agent tells her cousin to offer $81,000. The agent's actions are:

a violation of the duty of loyalty

Lois was the agent of Lester, who owned a store in Walton, Iowa. While Lester was away on vacation, the Mississippi River reached record flood. As an agent, Lois only had permission to engage in sales at the store and purchase certain items. Faced with the prospect of losing all goods, Lois shipped Lester's inventory to a storage facility 200 miles away, out of the path of the flood waters. This incurred costs, but saved the inventory. Lois acted in:

accordance with her duty of reasonable care

The authority given by the principal to an agent, conferring on the agent the power and right to change the principal's legal status is referred to as:

actual authority

___is the authority given by the principal to the agent.

actual authority

The agent's ability to transact business on behalf of and for the principal depends on whether the agent possesses:

actual or apparent authority

____is when an agency is created because the actions of the principal may lead one to reasonably believe that the presumed agent has the authority to act for the principal.

agency by estoppel

An employment of an agent for the purpose of representation in establishing relations between a principal and third parties is known as

agency relationship

When an agent pays for the right to have authority for a business, a(n) _____ is created.

agency with coupled with an interest

Subagents work for the agent and owe duties to:

agent and principal

The duties of a principal to an agent do not include:

allowing the agent "significant discretion"

X hires Y to buy some property on X's behalf and X makes an oral agreement that Y will work for X's company as the company's general manager and X and Y enter into a written agreement that Y will work for X as the general manager of X's company created a

an agency relationship

When you go on vacation you give your neighbor authority to pick up your mail and watch for burglars for you. You tell the neighbor not to go into the house or let anyone else in. A fire on the hills threatens your house. The neighbor goes in to carry out valuables before the house burns. This action is:

an agency through operation of law

A key element of an agency relationship is:

an agents ability to transact business for the pricipal

Barbara, a purchasing agent for UTA, was fired for good reason. Being angry about her dismissal, she calls one of UTA's suppliers and orders 1,000 purple widgets UTA does not need. If UTA, the principal, is held liable for this transaction, it is because Barbara had:

apparent authority

When a *principal* creates an impression of authority in an agent that leads a third party to conclude that the agent has authority to act for the principal, the agent is said to have:

apparent authority

An agent's _____is the power to change the principal's legal obligations.

authority

Express ratification creating an agency by the principal occurs when the principal:

by action shows a clear intent to be bound by unauthorized acts of the agent

Cook instructs Chan, her agent, to buy a van for her business. Chan contracts for a van with a third party, who knows that Chan is an agent. If Cook does not like the van and refuses to pay for it, the seller may sue:

cook because Chan has actual authority to make a contract on behalf of her principal

___is one whose identity is known by the third party at the time a contract is entered into with an agent.

disclosed principal

Scott is an agent for Lee and his duties require him to fly to Chicago from Cleveland. Scott gets up late and misses his flight to Chicago so he has to buy a second plane ticket. As principal, Lee:

does not have a duty to reimburse Scott for the second plane ticket because it was Scott's fault he had to buy it

Because of the _____an agent may not represent another party whose interests are in conflict with those of the principal.

duty of loyalty

An agent has a ____the funds and property of his principal that have been entrusted to him or have come into his possession

duty to account for

In Bearden v. Wardley Corp., where Gritton's real estate agent cheated her in a deal, the court held that Wardley, Gritton's employer, violated its ____to Bearden:

duty to care

If an agency agreement did not specify how much an agent would be paid for his work, the principal has a ____the "customary" amount.

duty to compensate

The principal has a _____ with her agent by performing responsibilities defined in the agreement forming the agency

duty to cooperate

Insuring an agent against losses suffered during the course of authorized transactions is part of the principal's:

duty to indemnify

The principal is under a ___ for damages to cover the agent's losses (such as from litigation) suffered while undertaking authorized transactions for the principal.

duty to indemnify

A(n) ___ is a principal's clear signal to be bound to the otherwise unauthorized agreement.

express ratification

Implied ratification of an agency occurs when the principal:

fails to object the unauthorized activities of an agent and accepts the benefits of an unauthorized agreement with a third party

An agent is a(n)___ of the principal, which means that the agent occupies a position of trust, honesty, and confidence for the principal.

fiduciary

If a payment amount is not specified in the agency agreement, a principal's duty to compensate means that the principal must pay the agent:

for the reasonable value of the services provided

A person who volunteers with no expectation of being paid for her services is a(n):

gratuitous agent

Bill is an attorney in Ohio. Marla hires Bill to create a trust for her children. Bill has not been keeping up with developments in trust law, and so creates an inefficient trust. Under recent Ohio law, he could have created a much more beneficial trust. In this case, Bill:

has violated a duty if reasonable care

Lyle is Thelma's agent. Thelma has made it clear to Lyle that she does not want him to sign the contracts that he negotiates; she retains that power. If, despite Thelma's instructions, Lyle negotiates and signs a contract with Tom committing Thelma to spend thousands of dollars, what will the consequences of Lyle's actions be?

if tom was justified in presuming Lyle had authority to sign the contract, thelma will be responsible

The power of an agent to do whatever is reasonable and customary to carry out the agency purpose is given by:

implied authority

____ takes place when the principal behaves as if he has the intent of ratifying an unauthorized agreement.

implied ratification

The principal's duty to reimburse does not cover expenses:

incurred due to the agent's misconduct or negligence

The principal's duty to indemnify the agent means the principal must:

insure the agent against losses suffered during the course of authorized transactions

Power of attorney:

is a document that creates an agency

Suppose a hurricane is going to hit South Florida; there are two days to prepare for it and the owner of a house is on a raft trip in Brazil and cannot be reached. The next door neighbors spend $800 on plywood and other materials to protect the house from the hurricane. Legally, this expenditure is likely to be:

is the responsibility of the homeowner, there is agency by operation of law

When there is an undisclosed principal, the agent is

liable to the third party for the principal's nonperformance of the contract

The buyer for an electronics store is bribed by a supplier to order more of the brand sold by the supplier. This action violates which of the agent's duties?

loyalty

Ratification of an agreement that is required by law to be in writing:

must be in writing

Terry hires an agent, Janet, to sell a piece of property for no less than $50,000 with Janet to receive a 6% commission upon sale. Which of the following is Janet legally permitted to do without Terry's consent? a. Janet can sell the property to her brother for $50,000

none

If an agent claims to have authority but in fact has none, the principal is:

not responsible for the agents dealings with third parties who have no reason to think the agent has authority

For an agent to be a fiduciary means to:

occupy a position of trust, honesty, and confidence with respect to the principal

An agency may be established by:

operation of law or by oral agreement of the parties or by written agreement of the parties

The scope of an agent's authority is determined from the:

oral or written expressions of the principal or the principal's conduct or the customs in the business for which the agent is employed

An agency is created when an agent agrees to act for, or in place of, the:

principal

Through an agency relationship, the agent becomes a representative of the:

principal

In an agency the principal:

provides the agent with authority

When problems developed and the company, presuming Clark worked for ITC, sued ITC. The court would be likely to hold that ITC:

ratified clark's actions and so became liable for his actions

duty of loyalty

requires an agent to place the principal's interests before the agent's personal interests or those of any third party

In most states, which agencies must be in writing:

sale of land

Many states require agencies for _____to be established in writing.

sale of land

An agent with authority to represent the principal only for a specific transaction, usually for a limited time is a(n):

special agent

Adam enters into an oral agreement with Tushar that Tushar will sell Adam's house for him. A week later, the house burns down. Adam and Tushar's agency is now:

terminated by operation of law

An agency ends without any action by the principal or the agent through:

termination by operation of law

When an agency is terminated:

the agent's authority to act for the principal ends

An agent must perform instructions provided by the principal. If the agent fails to do so, he violates:

the duty of obedience and performance

The duty of an agent to perform responsibilities with the degree of care that a reasonable person would exercise under the circumstances is:

the duty of reasonable care

To ratify an agreement a principal must know:

the important facts of the agreement

Actual authority give the agent:

the power and right to change the principals legal staus

A principal's ratification is:

the principals acceptance of responsibility for an agents activities

An agency relationship normally involves the use of an agent to represent a principal in dealing with which of the following:

third party

An agent must be able to show where money or property comes from and goes to because of his duty:

to account

The duty of an agent not to mix personal funds with the funds of the principal is the duty:

to account

The duty of an agent to keep his principal informed of all facts relevant to the agency purpose is called the duty:

to inform

an _____ is one whose identity is unknown by the third party at the time when a contract is entered into with an agent

undisclosed principal

Someone designated to do all acts that can be legally granted to an agent is called a(n):

universal agent

Agreement of the parties, ratification of the agent's activities by the principal, application of the doctrine of estoppel and operation of law are all:

ways that an agency may be established