Chapter 14: Agency Law, Legal Environment of Business

False

A contract made by an agent on behalf of an undisclosed principal is never binding on a third party who did not know about the principal.

True

A major duty of principals to their agents is to indemnify them under most circumstances for liabilities incurred in completing the purpose of the agency.

True

A person appointed by an agent to help the agent for certain specific transactions is a special agent.

True

A principal is contractually liable to a third party if that party enters into a contract presented by an agent with apparent authority to act for the principal.

False

A principal may designate someone to do all acts that can be legally delegated to an agent. That agent is called a general agent.

True

A real estate agent who sells a house on commission is an agent, not an employee of the home owner.

False

A subagent is an agent of an agent, not an agent of the principal, so owes no duty to the principal, only to the agent.

True

Actual authority involves powers given by the principal to the agent.

True

Agency relationships may be based on an oral agreement.

False

Agency relationships must be evidenced by a written contract.

False

Agents rarely can change a principal's legal obligations.

False

All valid agency relationships are contracts.

True

An agency that is for the sale of land usually must be evidenced by a written contract.

True

An agent has a duty to notify his principal of all facts relevant to the purpose of the agency.

False

An agent is expected to perform responsibilities with the degree of care that is called ordinary care under the circumstances.

False

An agent may not legally bind a principal to contracts without the principal agreeing to each contract.

True

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

False

An express ratification takes place when the principal behaves as if she has the intention of ratifying an unauthorized agreement.

True

An express ratification takes place when the principal gives a clear signal to be bound by an action that would otherwise be unauthorized.

True

An implied ratification takes place when the principal behaves as if she has the intention of ratifying an unauthorized agreement.

False

An independent contractor is an agent and an employee of the person who hired her.

True

An independent contractor is not an employee of the person who hires her.

True

An independent contractor is usually not an agent of the principal who hired her, but can have that role too.

True

An undisclosed principal is a principal whose identity is unknown to the third party with whom the agent is involved.

False

Apparent authority arises when agent concludes that there is an appearance of authority from the principal to act on behalf of the principal in dealing with third parties.

True

Apparent authority arises when the principal creates an appearance of authority in an agent that leads a third party to conclude that the agent has authority to act for the principal.

False

Express or actual authority may only be created by written instruction or written contract.

False

Fiduciary duties apply to principals; agents have only non-fiduciary duties.

False

Gratuitous agents are appointed by other agents to undertake some work for the principal.

True

If Hilda volunteers to sell Heidi's horse for her, because Hilda knows lots of potential buyers, and Heidi agrees, Hilda is a gratuitous agent.

True

If a hurricane is coming and you spend $800 to buy supplies to protect your neighbor's house against storm damage, when they are gone and cannot be reached, you may have created an agency by operation of law.

True

If a principal behaves as if he intended to ratify an unauthorized agreement between his agent and a third party, a court will find that implied ratification has occurred.

True

If someone volunteers to act as a gratuitous agent, and performs a task, such as selling a car, for a principal, the legal consequences are the same as if the agent were paid.

False

In an agency relationship, the agent is a neutral party regarding contracts between the principal and third parties.

True

In an emergency, when someone acts on behalf of someone else in order to avoid a loss, the law may create an agency by operation of law.

True

In the case of an undisclosed principal, a third party is unaware of the identity of the principal as well as the existence of an agency relationship.

False

Legal obligations in an agency run from agent to principal, not principal to agent.

True

Power of attorney is based on a legal document.

True

Power of attorney is given to an agent called an attorney-in-fact.

False

Power of attorney may only be held by a licensed attorney.

False

Principals are presumed at common law to have no duties to their agents.

True

Principals are presumed to have a duty to cooperate with their agents.

True

Principals have an obligation to reimburse their agents for their normal business expenses related to the agency, unless otherwise agreed.

True

Principals may be bound by the unauthorized acts of agents if the agent appears to third parties to have the authority to act.

False

Principals only duty to agents is to compensate.

True

Ratification is an affirmation by the principal of an unauthorized agreement by a person acting as an agent with a third party.

True

The agency relationship is a key part to most business operations.

True

The death of a principal would affect the validity of contracts then made by the agent for the principal.

False

The legal document intended for the purpose of expressly establishing an agency is the attorney-in-fact.

True

The two general classifications of authority an agent can possess are actual authority and implied authority.

False

The two general classifications of authority an agent can possess are general authority and implied authority.

True

When a principal's conduct appears consistent with the existence of an agency relationship, an agency by estoppel may be created.

True

When an agent has the power to do whatever is reasonable and customary to carry out the agency purpose, the agent has implied authority.

True

When an agent is allowed to delegate duties to other agents, the other agents are subagents who assist the agent.

True

When an agent is authorized to execute all transactions connected with a business, the person is a general agent.

True

When an agent pays for the right to exercise authority for a business, there is an agency coupled with an interest.