Practice Test

The cost to business of substance abuse, in lower productivity and higher medical insurance costs, is estimated to be about:

$250 billion per year

About ____ of the working population are serious alcohol abusers

8%

In Zambelli Fireworks Manufacturing Co. v. Wood, where Zambelli sued Wood for violating the noncompete agreement in his contract, the appeals court held that:

Wood's specialized knowledge from working at Zambelli in addition to customer goodwill constituted legitimate business interests that Zambelli had a right to protect through a reasonable restrictive covenant

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

a general agent

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

a general power of attorney

Lisa works for Sally. Lisa's jobs include selling the folk-art Santa Claus statutes that Sally hand-makes, as well as purchasing the wood for the statutes. In this case Lisa is:

a servant and an agent

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

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

an agency relationship

A real estate agent is an example of

an agent

A UPS package sorter is an example of:

an employee

A senior manager at Don Reid Ford is an example of

an employee with agency powers

An auctioneer is an example of

an employee with agency powers

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

authority

The principal is possibly liable for the torts of the agent if the agent's tort was:

authorized by the principal or an unauthorized intentional tort was within the scope of the agent's employment

Many companies give employees handbooks that discuss company policy and procedures. Legally, handbooks:

can create binding contractual employment obligations

a unionized company:

cannot impose a drug-testing program unless approved by the union in collective bargaining

The principal may hold the third party to a contract, in an undisclosed principal situation, except when the:

contract, when a negotiable instrument, does not include the identity of the principal or existence of the agency relationship

When there is an undisclosed principal, the agent is:

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

Persons appointed by an agent delegated some authority are known as

subagents

Wrongful discharge is a:

tort

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

An agency coupled with an interest is created:

by an agent who has paid for the right to exercise authority with regard to a business

Suppose a car dealership hires people to sell cars to customers at the dealership. The people who are hired are most likely to be:

employees and agents

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

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

An _____ is one in which one party promises not to sue another in case of injury caused by a tort or some other event

exculpatory agreement

___ consists of oral or written instructions given by the principal to an agent

express authority

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

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

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

Attorneys, auctioneers, and other such persons who conduct business on behalf of the principal are examples of:

independent contractors who are also agents

a disclosed principal is a principal whose identity is:

known to third parties to contracts entered into with the agent

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

more than one year

In Guz v. Bechtel National the supreme court of California held that Guz, an employee who had been fired and sued for wrongful dismissal had:

no cause of action for breach of implied contract; his best hope was a violation of personal policies that constituted a contract

Which of the following are public-policy exceptions recognized by most states as limits to the employment-at-will doctrine allowing termination of employees?

performing a public duty (reporting for jury duty) and exercising a right (filing for workers' compensation)

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

power of attorney

Which of the four general factors which bear upon whether a master-servant relationship exists is determinative:

power of control

traditionally, the chief difference between an agent and a servant (employee) was that the:

servant was generally not employed to represent a principal in business dealings

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

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:

terminiated by operation of law

Implied ratification usually occurs when:

the agent accepts the benefits of the agreement

For an agency to be valid in most states:

the agent must be subject to the principal's control

When an agency is terminated

the agent's authority to act for the principal ends

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:

the duty to disclose the principal is on the agent and Yim did not disclose Hosung Enterprise, Inc. as the principal

Which of the following can determine the scope of authority given to an agent

the trade customs in business

when liability is imposed on the principal for the unauthorized torts of an agent, it is called:

vicarious liability

In Cove Management v. AFLAC, Galgano, an independent contractor who solicited insurance business for AFLAC, rented office space from Cove under AFLAC's name. 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

which of the following is part of the principal's duty to cooperate

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

In France v. Southern Equipment Co., where France, after falling off a roof, sued Southern Equipment Co. who had employed Quality Metal Roof, a company that contracted with France's employer, Royalty Builders, to build them a new metal roof for exposing him to the inherently dangerous job of roofing, the appeals court held that there are four general factors that bear upon whether a master-servant relationship exists. Which of the following is one of those factors:

-selection and engagement of the servant -payment of compensation -power of dismissal -power of control

Which of the following is a factor that courts consider during a vicarious liability case when determining whether an act was within the scope of employment:

-whether the act was of the same general nature as those authorized by the principal -whether the agent was authorized to be where he was at the time the act occurred -whether the agent was serving the principal's interests at the time of the act

Which of the following is an advantage to having the ability to use agents:

access to the expertise of agents and expanded business opportunities

Fiduciary Duties include:

accounting, notification, performance, loyalty, and reasonable care

agency by estoppel means:

actions by the principal lead a person to believe that the presumed agent has authority to act on the principal's behalf

___ is the authority given by the principal to the agent

actual authority

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

actual or apparent authority

If an employer and employee agree on employment of a certain time, or that job security will be provided, then there is likely:

an express contract

Employees may be required to sign, as a condition of employment, an agreement that they will not recruit fellow employees for another company if they leave for another place of employment. This is called:

anti-raiding covenant

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

Exceptions to the presumption of at will employment come from:

both courts and legislation

Subagents work for the agent and owe duties to:

both the agent and the principal

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:

both wardley and gritton owed bearden fiduciary duties and so both were liable

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

In Ballalatak v. All Iowa Agriculture Association, where Ballalatak contended that he was fired for inquiring into whether the company was fulfilling its workers' compensation obligation and the general manager claimed he was fired for insubordination, the Iowa state supreme court held that Ballalatak:

could not sue for wrongful discharge because Iowa law does not protect an employee who advocates internally for another employee's workers' compensation claims

A ____ is liable to a third party for a contract made by an agent who had actual authority to act on behalf of the principal

disclosed principal

Employee handbooks usually do which of the following?

discuss grounds for discipline and dismissal and communicate company policies and procedures

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 of care

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

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

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

An agency can be ended upon reasonable notice by:

either the agent or the principal

A ____ 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 to the unauthorized activities of an agent and accepts the benefits of an unauthorized agreement with a third party

In Guz v. Bechtel National, where Guz was fired after 22 years good service in a personnel cutback and sued for breach of implied contract and covenant of fair dealing, the California high court held that Guz:

had no suit against his employer

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

he is violating his duty of loyalty

Geary was an employee of U.S. Steel. His concerns about the safety of a new product were ignored by his superior. He went to higher management to let them know of the problem. The product was withdrawn from the market, but Geary was fired by his superior. Geary sued the company for wrongful dismissal. The Pennsylvania court held that Geary:

loses because of the employment at will doctrine

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

Employees may be required to sign, as a condition of employment, an agreement that they will not leave the company and go to work for themselves or a competitor firm in a position that could inflict competitive injury on the employer. This is called:

noncompete agreement

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

not responsible for the agent's 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 the law means of the doctrine of estoppel ratification written agreement

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

A ____ relationship is one in which an agent acts on behalf of or for the principal, with a degree of personal discretion

principal-agent

Putting a bold disclaimer at the front of the handbook that says it is not a contract and requiring employees to sign the disclaimer is an attempt by businesses to:

protect themselves from being found to create an implied contract

The whistle blower exception to at will employment is most likely to apply to:

public sector employees

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

ratifies the agency

an alleged principal becomes a real principal by:

ratifying the agreement

Employers may be liable for torts of employees that can be attributed to negligent hiring or supervision under the rule of law known as:

respondeat superior

The rule of law imposing vicarious liability upon an innocent principal is known as:

respondeat superior

If an agent or employee commits an unauthorized tort outside the scope of employment:

the agent or employee is liable to the third party for damages incurred and the principal or employer is not

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

the agent owes to the principal

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

the duty of obedience and performance

In Armstrong v. Food Lion, the Armstrongs were beaten by employees of a grocery store. They sued the store. The South Carolina high court held that the store was not liable because:

the employees were not acting within the scope of their employment or in furtherance of Food Lion's business when they attacked the Armstrongs

the independent contractor is distinguished by:

the extent of control the employer retains over work performance

Andrea has been working very hard for her employer, Bill. Two weeks before Andrea is due for a bonus payment, Bill fires her for no reason. Andrea could make a case that:

the implied covenant of good faith and fair dealings has been violated

actual authority gives the agent

the power and right to change the principal's legal status

Implied authority consists of:

the power to do whatever is reasonable and customary to carry out the agency purpose

To establish an agency relationship:

the principal and the agent must agree to form an agency

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

third parties

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

to account