Business Law Chapter 16

Eli and Marilyn ask Gracie to be the administrator of their will and the guardian of their children if they pass away before their children reach the age of majority. Gracie agrees. Fiduciary relationships such as this one a. involve a high degree of trust and confidence. b. are legal only between family members. c. typically exist only between employees in government agencies. d. allow the parties to legally avoid their obligations to one another.

A

Kris represents Josh in the sale of his house as his real estate agent. Kris is entitled to a. compensation. b. loyalty. c. full disclosure. d. confidentiality.

A

Napoleon owns Napoleon's Construction. He agrees to renovate Mrs. Cernan's bathroom. According to Internal Revenue Service (IRS) criteria, Napoleon is likely to be classified as a. an independent contractor. b. a disclosed principal. c. an employee. d. a partially disclosed principal.

A

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

A

Disclosed Principal

A principal whose identity is known by the third party at the time the contract is made by the agent

Partially Disclosed Principal

A principal whose identity is not know to the third party, but they know that the agent is is acting on behalf of a principal at the time the contract is made

Undisclosed Principal

A principal whose identity is not known by the third party, and the third party had no idea that the agent may be acting on behalf of a principal at the time of contract. The third party may hold either the agent or principal liable for damages

Agency by Operation of Law

An agency formed on the absence of a formal agreement; when the agent is unable to contact the principal

Power of Attorney

Authorization for one to act as another's attorney in special circumstances

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 alone is liable for Martina's injuries. b. both Jason and Miguel are liable for Martina's injuries. c. Martina cannot recover damages for her injuries in court because Miguel was acting as an agent. d. Miguel can seek an indemnification against Jason.

B

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. liable under the doctrine of apparent authority. b. not liable. c. liable only if the shop owner knew that Maureen was not Kramer's agent. d. fully liable under the doctrine of intelligent agents.

B

Sam goes out shopping, and using his wife Juanita's credit card, he buys $221.00 worth of groceries. Under agency law, Juanita will probably be deemed a. liable for the purchase, based on the doctrine of respondeat superior. b. liable for the purchase, based on the creation of an agency by operation of law. c. not liable for the purchase, based on Sam's duty of performance. d. not liable for the purchase, based on Sam's lack of a power of attorney.

B

Sarah has to move from the East Coast to the West Coast for her job. Elmo agrees to act as Sarah's agent to sell her New York condo. As her agent, Elmo owes Sarah all of the following duties except a. loyalty. b. payment. c. performance. d. notification.

B

Under the equal dignity rule: a. contracts creating agency relationships are voidable by agents. b. if a contract must be in writing to be executed, an agent's authority must also be in writing. c. if a contract between a principal and an agent lasts for longer than one year, it must be in writing.

B

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

C

Dara gives her agent, Marla, money to purchase a new commercial oven. Marla takes the money and deposits it into her personal checking account. Marla then accidentally spends some of Dara's money. Marla has violated his duty of a. loyalty. b. payment. c. accounting. d. cooperation.

C

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

Sarah asks Sergio to mow her law. 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. liable for Sarah's harms because Dan is an independent contractor. c. probably not liable for Sarah's injuries. d. not liable for Sarah's injuries because breached her duty of notification.

C

Whitney works at home making unique children's clothes. Liam buys Whitney's clothes to sell in his store. With respect to Whitney's legal relationship to Liam, she is probably a. an employee. b. a principal. c. an independent contractor. d. an agent by operation of law.

C

Principal Duties to Agent

Compensation, reimbursement, cooperation

Charlie tells Jamal that Marisol has agreed to allow him to sell her racing bicycle. Marisol is present at the time, hears the conversation, and says nothing. Jamal wants to buy a bicycle like Marisol's, so he agrees with Charlie to buy Marisol's bike. Marisol then refuses to sell the bicycle. Marisol claims that she is not bound by the agreement formed by Charlie and Jamal because Charlie is not her agent. Marisol is a. not bound by the contract because she did not have an agency agreement with Charlie. b. not bound by the contract because of a rescission. c. bound by the contract, under a theory of agency by operation of law. d. bound by the contract, under a theory of agency by estoppel.

D

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 independent contractor working for Gina. b. an agent for Woodward. c. an undisclosed principal. d. a partially disclosed principal.

D

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

D

(T/F) The principal-agent relationship is fiduciary and therefore not based on trust, but specific laws.

False

Equal Dignity Rule

If the principal's contract must be in writing, then so must the agent's

Agent Duties to Principal

Performance, notification, loyalty, accounting, obedience

Agency by Estoppel

Principal causes a third party to believe another person is their agent, and the third party acts on behalf of that belief

Respondeat Superior

When a principal is held liable for wrongful acts committed by agents while acting within the scope of employment

Apparent Authority

When the principal causes a third party to believe the agent has authority, even though they do not