Legal Foundations of Business Chapter 20
Assume that a car salesperson is employed to sell the principal's car. The principal tells the agent that the car was repaired after it was involved in a major accident. If the agent intentionally tells the buyer that the car was never involved in an accident, the agent has made an intentional misrepresentation. Which of the following statements is true?
Both the principal and the agent are liable for this misrepresentation.
Which of the following is NOT an important question to answer in determining whether an agent's conduct occurred within the scope of his or her employment?
Did the agent possess the required professional licensure(s)?
Which of the following is an accurate statement regarding the liability of a principal for an independent contractor's torts?
Generally, a principal is not liable for the torts of its independent contractors.
Suppose Qixia hires Harold, a lawyer and an independent contractor, to represent her in a court case. While driving to the courthouse to represent Qixia at trial, Harold negligently causes an automobile accident in which Mildred is severely injured. Which of the following is an accurate statement regarding the liability of Qixia and/or Harold for Mildred's injuries?
Harold is liable for Mildred's injuries, but Qixia is not liable.
Which of the following about independent contractors is true?
Labeling someone an independent contractor is only one factor in determining status
Rani decides to sell her house and hires Mark, a real estate broker, to list and sell the house for a price of $1 million. They agree that Mark will disclose the existence of the agency and the identity of the principal to interested third parties. Mark shows the house to Heather, a prospective buyer, and does not disclose to Heather that he is acting as an agent for Rani. Heather agrees to buy the house, and Mark signs the contract on behalf of Rani. Which of the following statements is true?
Rani, the principal, and Mark, the agent, both are liable.
Rani decides to sell her house and hires Mark, a real estate broker, to list and sell the house for a price of $1 million. They agree that Mark will disclose the existence of the agency and the identity of the principal to interested third parties. Mark shows the house to Heather, a prospective buyer, and discloses to Heather that he is acting as an agent for Rani. Heather agrees to buy the house, and Mark signs the contract on behalf of Rani. Which of the following statements is true?
Rani, the principal, is liable on the contract, but Mark, the agent, is not.
An agent who enters into a contract on behalf of another party impliedly warrants that he has the authority to do so. This is called the agent's implied warranty of _____.
authority
In a partially disclosed agency, who would be liable to the third party?
both the principal and the agent
In an undisclosed agency, who has liability to the third party?
both the principal and the agent
If an agent acts for two or more different principals in the same transaction, this is known as ________.
dual agency
When an agent runs personal errands while on the job, this is known as __________, which would release the principal from liability.
frolic and detour
Outsiders who are employed by principals to perform certain tasks on their behalf are called ________.
independent contractors
A principal is liable for an agent's ________.
intentional and innocent misrepresentations made within the scope of his or her authority
The term respondeat superior literally means "_____," and is based on the legal theory of vicarious liability, which is liability _____.
let the master answer; without fault
If an agent acquires confidential information during the course of the agency and uses it to his or her advantage, this is known as ________.
misuse of confidential information
A principal is liable under the doctrine of vicarious liability for intentional torts of agents and employees committed within the agent's scope of employment. The _________ tests are the two tests applied by courts to determine whether an agent's intentional torts were committed within the agent's scope of employment.
motivation and work-related
Under the standard for the __________________, an employerlong dashthe______________long dashis not liable if an employee, who is motivated by jealousy, injures someone during work hours on the premises who dated the employee's boyfriend. In this standard, the employee's personal motivation is important to the standard.
motivation test; principal
Agents owe a duty _______________ to the principal.
of loyalty
A principal, Nigel Jones, and an agent, Marcia McKee, agree that the agent will represent the principal to purchase a business and that the agent will disclose the existence of the agency and identity of the principal to third parties. The agent finds a suitable business and contracts to purchase the business on behalf of the principal, but the agent mistakenly signs the contract "Marcia McKee, agent." This is a(n) _____ agency that occurs because of _____.
partially disclosed; mistake
A real estate agent who is employed to purchase real estate for a principal cannot secretly sell his or her own property to the principal. This is because agents are generally prohibited from undisclosed _____ with the principal.
self-dealing
When an agent exceeds the scope of his or her authority, who is liable to the third party?
the agent only
Who is liable for the torts of an independent contractor?
the independent contractor only
Who is liable if an independent contractor enters into a contract without authority from the principal?
the independent contractor only
In a fully disclosed agency, who is liable to the third party?
the principal only
Who is liable for the injury caused by inherently dangerous activities that a principal assigns to an independent contractor?
the principal only
Who is liable if an independent contractor enters into a contract with authority from the principal?
the principal only
If an agent is offered a business opportunity that is meant for the principal and the agent takes advantage of it, this is known as ________.
usurping an opportunity
Suppose that an agent works for a principal that is in the business of real estate development. The principal is looking for vacant land to purchase to develop. A third party who owns and wants to sell his vacant land tells an agent of the principal of the availability of the land. The agent, without informing the principal, purchases the land for her own use. The agent is wrongfully _____ an opportunity, and thereby violating the agent's duty of _____.
usurping; loyalty
A principal is liable for an agent's actions _________________.
when the agent is negligent when acting within the scope of his or her authority
Which of the following is also NOT a critical factor in determining independent contractor status?
whether the worker is employed in an "employment-at-will" jurisdiction
Which of the following is NOT a critical factor in determining independent contractor status?
whether the employer's form of business ownership is sole proprietorship, partnership, traditional corporation (C-corp), Subchapter S corporation (S-corp), or limited liability company (LLC)
In determining the degree of control that the principal has over the party, the courts will look at all of the following EXCEPT?
work for a number of clients
Under the standard for the __________________, an employerlong dashthe ______________long dashcan be liable if an employee, who is motivated by jealousy, injures someone during work hours on the premises. Under this standard, the employee's motivation is immaterial for liability purposes.
work-related test; principal
