Law 17

11) In Montreal, Mike represents six different Canadian business firms in the sale and servicing of their products. Mike is a. an independent agent. b. a plural employee. c. a company representative. d. a contingency agent. e. a sales and servicing broker

A

15) Zelda is a Hollywood movie star wanting to buy recreational property. She describes her specifications to Craig and asks him to make an offer to purchase if he finds a suitable property. She asks him not to divulge her identity. Craig finds an ideal property and makes a written offer in his own name to purchase the property for $500 000.00. The vendor signs an acceptance. Zelda suffers a financial setback and refuses to go through with the contract. Whom can the vendor sue? a. Craig only b. Zelda or Craig c. Zelda only d. Zelda and Craig e. neither Zelda nor Craig

A

22) An agent will be liable for breach of warranty of authority if a. the agent misrepresents the scope of the agent's authority, and the principal is not bound to the contract with the third party. b. the agent accepts commissions from both principal and third party without full disclosure. c. there is a clause in the contract between principal and third party that makes it clear that the principal is not bound until the principal approves the contract. d. the agent does not make it clear to the third party that the agent is acting in a representative capacity. e. the agent breaches the terms and conditions of the agent's contract with the principal.

A

10) Albert is friends with Robert, the president of A. Co. When Albert hears about a lucrative deal with Y Co. that would benefit A Co., he immediately enters into a contract with Y Co., telling Y Co. that he is A Co.'s agent. When Albert tells Robert what he has done, Robert telephones Y. Co. and confirms the contract. In this case, as between A Co. and Y Co., a. there is no contract because Albert is an independent contractor. b. there is a contract because Robert ratified it on behalf of A Co. c. there is no contract because Albert had no authority to enter into it for A Co. d. there is a contract because Y Co. ratified it. e. Y Co. is estopped from arguing that there is no contract.

B

17) Jack previously transferred a piece of waterfront property next to his home to his daughter Alana. One day a real estate agent knocked on his door and asked whether the property was for sale. Jack told the agent that it was for sale "for the right price". The agent told Jack he had a customer who might be interested in buying it. Jack immediately signed a listing agreement with the agent giving him the authority to sell the property on his behalf. He failed to disclose the fact that he was not the actual owner. Shortly thereafter the agent returned with an offer. Jack countered the offer and the agent returned a short time later to advise that there was a binding deal. Jack subsequently told Alana that he had sold the property on her behalf and made a substantial profit. She told her father that she "did not want to sell" and that she was planning on building a home on the property in the near future. Jack immediately contacted the real estate agent and informed him that he was not the actual owner and that his daughter did not want to sell. In these circumstances, the purchaser's best remedy is a. an action seeking an order confirming the adoption by Alana of the contract made by Jack. b. an action against Jack for damages for breach of warranty of authority. c. an action against Alana alone for breach of contract. d. an action against Jack alone for "holding out". e. an action against Jack seeking injunctive relief.

B

29) A franchisor, Garden Delicious Inc, has 73 franchised outlets across Canada using the theme "healthy eating." Its Surrey, B.C., franchisee, Tom Cain, has been adding bagels to the regular "authorized" menu. Garden Delicious Inc. has asked Tom on several occasions to stop, but he has refused, saying that the contract does not specifically prohibit adding items to the menu. Legally speaking, will the franchisor be able to stop this practice? a. Yes, he will, since the franchisor has the money and legal clout to force compliance. b. Yes, he will, because there is an implied term that the franchisee is to protect the goodwill and trademarks and trade secrets of the franchisor. c. Yes, he will, since this practice will decrease the profits for all franchisees. d. No, he won't, since Tom is an independent businessperson, he can manage his business as he sees fit—within the law. e. No, he won't, since this practice will set a healthy precedent among the other franchisees.

B

8) Where a person who is really acting as agent for another does not tell this to a third party and enters into a contract with the third party, the third party a. can only sue the agent, whether or not the principal is disclosed. b. must decide whether to sue the agent or the principal. c. can argue a mistake rendering the contract voidable at the third party's option. d. can only sue the undisclosed principal, but not the agent. e. must attempt to limit its losses by rescinding the contract.

B

9) John, while acting as Henry's sales agent, negligently drives his car into the wall of Alice's house. In this situation a. Alice can only sue Henry, because he is John's principal. b. Alice can sue both John, who is primarily negligent, and Henry, who is vicariously liable for John's acts or omissions. c. Alice is estopped from suing Henry, who had no control over John. d. Alice can only sue John, because he was negligent. e. all of the above

B

14) James was an ordinary salesman for Bulldog Electric Ltd., but his business card read "Territory Manager." He had no authority to sell his company's products for a reduced price, yet he told a potential customer, "I'll give you a 10 percent reduction if you place an order today." Legally speaking, will the customer be able to get the reduced price should he sign the contract? a. Yes, he will, because the contract is already in existence. b. No, he won't, since there had been no past dealings. c. Yes, he will, because James had apparent authority. d. Yes, he will, since trade practice would establish the terms of sale. e. No, he won't, because James did not have actual authority.

C

18) If my son takes a luxury cruise without my permission and has the company send me the bill and I pay, I create the impression that I will always pay for this type of conduct. If I fail to inform the company that I will not pay again, this refers to the idea of a. false authorization. b. agent inducement. c. estoppel. d. mutual reliance. e. all of the above

C

23) David, the owner of BayView Reality Inc., decided to buy one of his own firm's listings for investment purposes. The principal (owner of the property) refused to pay any commissions or reduce the price on this transaction. Can this impasse be legally resolved? a. Yes, it can; all we need is an "arms-length" transaction with third party involvement. b. No, it cannot, since the agent has placed his own interest in conflict with that of the principal, therefore such a contract is illegal and void. c. Yes, it can; they both simply need to negotiate between them a satisfactory deal. d. No, it cannot, because David would lose his realtor's license if he completed this transaction. e. Yes, it can, since the real estate arbitration board would issue a ruling.

C

6) Happy Burgers is a successful fast food restaurant. Having decided to expand its operation, Happy Burgers decides to approach independent business people with the intention of licensing its operation to them, finding them a location for a Happy Burgers restaurant, setting up the restaurant, and training them in its operation. In return, they will pay Happy Burgers a royalty fee based on a percentage of their gross sales. This arrangement is an example of a. an agreement of purchase and sale. b. a license agreement. c. a franchise agreement. d. an agency agreement. e. a royalties agreement.

C

7) X Co. in Montreal retains Y as its purchasing agent to purchase goods from all over the world. If Y, having purchased goods in England, enters into an agreement with a shipping company to ship the goods to Montreal, a. Y will be in breach of the agency agreement because entering his agency agreement with X Co. is specific. b. Y will not be in breach of his agency agreement with X Co. because X Co. has ratified the shipping contract. c. Y will not be in breach of his agency agreement with X Co. because he has implied authority to enter into shipping agreements. d. Y will be in breach of the agency agreement with X Co. because he has no authority to enter into shipping agreements. e. none of the above

C

13) Charlie owns a small parcel of land in Toronto. He wants his sister, who lives within a short distance of the land, to sell the parcel for him. In order for his sister to be able to sign all the real estate documents, Charlie needs to authorize a. a lawyer to act as principal during the closing. b. a broker to bring the parties together. c. a sales agent to carry out his instructions. d. power of attorney for his sister. e. a local real estate agent to make out the papers.

D

16) Jonathan is a used car enthusiast. He enters into an agency agreement with Andrea. She owns a used car lot. The agency agreement limits Jonathan's authority to purchase used vehicles for under $25,000 and to ship them by flat bed trailer to Andrea's lot. When passing through Toronto one Saturday morning, Jonathan stops at the auto auction and sees a 1985 Jaguar that he wanted to bid on for Andrea. He was successful and purchased the vehicle for $24,000. However, he had no flat bed trailer and as such decided to drive the vehicle to Andrea's lot in London. He immediately arranged for automobile insurance on her behalf but without her authority. Near Kitchener he was involved in an automobile accident which resulted in the jaguar being a total write-off. No one was injured. He contacted Andrea and informed her of the situation. She immediately contacted the insurance company to ratify the insurance contract. In these circumstances a. Given that there was no personal injury, the insurance contract can be ratified. b. So long as the initial call made by agent was prior to the accident, the insurance contract can be ratified. c. Because Jonathan had the apparent authority to enter into the insurance contract, it is binding on Andrea. d. Andrea was unable to ratify the contract because at the time she attempted to do so the accident had already occurred.

D

19) Joe is appointed to sell a yacht on explicit instructions from the owner. Joe is acting with a. apparent authority. b. unilateral authority. c. promissory reliance. d. actual authority. e. mutual dependence.

D

21) For "selling-off-price-list," Vera was terminated from her position as sales rep for the Crouger Co. Two months after the termination, Vera is still sending in orders from her former customers. This raises the issue of a. whether Vera was really terminated or not. b. whether notification was given to customers. c. whether the company is estopped from accepting liability. d. whether there is "holding out" by Crouger Co. e. who gets the commissions.

D

24) Barney explains to Mrs. Adams that the contract is an option on her land, that he is an agent, and that the principal wants to remain undisclosed at the present time. If Mrs. Adams signs the option agreement, can it be enforced against her even though the principal is not named and the agent fails to sign? a. No, it cannot, because an agent always lacks the authority to bind an undisclosed principal. b. No, it cannot; since this agreement is for interest in land, it must have all the essential terms of a written contract. c. Yes, it can, because the agent clearly identified himself. d. Yes, it can, since only the charged party needs to sign the agreement. e. No, it cannot, since the names of both parties are needed on a written contract.

D

12) A entered into an agency agreement with agent B. B entered into a contract under seal with third party C. A was not named in the contract, but B described herself as "agent." Which one of the following statements is best applied to these facts? a. C can sue A and B on the contract. b. B can sue C or be sued by C on the contract. c. A can sue C and B on the contract. d. A and C can sue B on the contract. e. A may sue C or be sued by C on the contract.

E

20) Ingrid was the purchasing agent for Fashion Boutique Inc. She was authorized to place orders up to $10 000 but would have to get the owner's approval for anything larger. On January 17, she placed an order for $13 672 without getting approval. Will the vendor be able to enforce this contract? a. No, he won't, since this size of order would be expected in the trade. b. Yes, he will, because the customer was clearly informed of the limitation. c. Yes, he will, since it is within actual authority. d. No, he won't, because they did not check to see if Ingrid had approval. e. Yes, he will, since they had no reason to believe that Ingrid did not have the authority.

E

25) If an agent is liable for fraudulent misrepresentation in making a contract, the third party may rescind the contract. And if the agent was acting within his apparent authority, the third party may sue the principal as well as the agent for a. conspiracy to defraud. b. warranty of authority. c. breach of contract. d. agency negligence. e. tort of deceit.

E

26) Gene Stone told the Harders that he was an agent for the Trouplow Corp. and was raising money for a local expansion program. He then proceeded to sell them fifteen $1000 12 percent bonds. In truth, the Trouplow Corp. had never heard of Gene Stone, but they did have 12 percent bonds available for local residents to buy. To recover the $15 000 paid, the Harders should sue a. both agent and principal on the breach of contract. b. the Trouplow Corp. on the tort of deceit. c. Gene Stone for rescission of contract. d. for criminal prosecution of Gene Stone. e. Gene Stone for breach of warranty of authority.

E

27) None of the contracts between the six independent manufacturer's agents and the ABC Company speak as to how the contracts can be terminated. All six agents have been doing a splendid job for several years in selling ABC's products. However, last week, ABC's board of directors decided to turn the selling function over to the company's own employees. This is to be completed within the next 30 days. Can the company's agency contracts with the independent agents be legally terminated, and if so, how? a. Yes, they can be terminated by failing to renew the contracts upon expiration. b. Yes, they can be terminated by declaring the company's sales project to be at an end. c. No, they cannot be terminated without a breach and the resulting severance damages. d. Yes, they can be terminated, since a reasonable time has passed for each agency contract. e. Yes, they can be terminated by simply having the principal give notice that it wishes the relationship to come to an end; no other explanation is required.

E

28) A franchise agreement most likely gives the franchisee the right to a. locate and design their own business premises. b. demand direct financial assistance from the franchisor. c. use their own accounting, inventory control, and purchasing systems. d. franchisee protection legislation. e. trademarks, trade names, and logos belonging to the franchisor.

E

3) X Co. owns land all over downtown Toronto. From time to time, X Co. has used John Jones as its agent to sell land that it owns. X Co. hires John and tells him it wants to sell a downtown property located on Front Street. It instructs John to list the property for $1 million, but that it will take $900 000.00. John has a friend, Mary, who is interested in buying the Front Street property, but rather than listing it at $1 million, he simply tells Mary "For $900 000.00 it's yours," and she agrees. John, having effected the sale, now wants to be paid his commission by X Co. In this situation, a. John has apparent or ostensible authority to sell the land. b. John has breached his fiduciary duty owed to X Co. c. X Co. can refuse to pay John his commission. d. there is an agreement of purchase and sale between X Co. and Mary for the Front Street property. e. all of the above

E

30) The major difference between the franchisee-franchisor relationship and the agent-principal relationship is that only a. the franchisee relationship permits a business to expand rapidly. b. principals employ the assistance of others in order to reach out to a wider public. c. franchisors give authorization for entering into contracts. d. agents market the principal's products. e. franchisees contract with members of the public on their own behalf, not as agent for the franchisor.

E

4) Until yesterday, when X Co. fired Henry, Henry was employed as a purchasing representative, and over the time, he worked for X Co., Henry compiled an extensive list of X Co.'s customers. Henry, who is extremely angry over being fired, decides to get back at X Co., so he contacts X Co.'s largest supplier and on behalf of X Co. enters into a contract for the purchase by X Co. of 1 million dollars worth of goods that X Co. really has no need for. In this situation, a. there is a contract between the supplier and X Co. b. not having notified its customers, X Co. is estopped from arguing that there is no contract. c. X Co. had a duty to notify its suppliers that Henry had been fired. d. not having notified its customers, X Co. held out Henry as having the authority to make the contract. e. all of the above

E

5) Edward is the president of Jones and Sons Ltd., Wholesalers (J&S). He recently hired George Cummings as his national marketing and advertising manager. Yesterday, Edward took George to a convention where, after a few drinks, he introduced George to the president of Sears as his national sales manager. The next day, after his hangover had subsided, Edward called the president of Sears and told him the truth about George. A couple of days later, George entered into a contract with Sears under which J&S sold 2 million dollars worth of furniture to Sears. J&S now refuses to honour the contract. If Sears sues J&S on the contract, a. Sears will lose because the contract is unconscionable. b. Sears will lose, but will have a quantum meruit claim. c. Sears will win because Edward held out George as the national sales manager of J&S. d. Sears will lose because final acceptance of the contract had to come from J&S. e. Sears will lose because its president knew that George was only the national marketing and advertising manager of J&S.

E

1) The president of A Co. introduces B to a third party as his vice-president of marketing and sales. In reality, however, A Co.'s president makes it clear to B that he is only the vice-president of marketing and has no authority to make sales. If B now enters into a contract for the sale of A Co.'s goods to the third party, as between A Co. and the third party, a. there is no contract because B does not have express authority over sales. b. there is a contract because B had apparent or ostensible authority to enter into it. c. there is no contract because B can only deal with matters of marketing. d. there is no contract because it was not ratified by A Co. e. none of the above

b

2) A Co. develops land. From time to time, it has used B, an independent contractor, as its agent to help it buy land. In fact, A Co. even lets B keep an office in its head offices, and on occasion C, a third party, has seen B's office when he has had meetings at A Co. If B enters into an agreement of purchase and sale on behalf of A Co. to purchase C's land, a. there will be no agreement because B does not have the necessary authority. b. there will be no agreement because A Co. did not ratify the contract. c. there will be an agreement because B had express authority to enter into it. d. there will be an agreement between A Co. and C because A Co. is estopped from arguing that B did not have the authority to enter into it. e. none of the above

d