BUL Exam 3

Which legal rule will not impose punitive damages on a master for the torts of his servants unless the master himself took some part in the wrongful action? Vicarious liability rule Transferred liability rule Complicity rule Durham rule

Complicity rule

An employee who commits a tort while acting in the scope of his or her employment Is entitled to be indemnified by the principal if the tort was committed by following the principal's instructions. Is not entitled to be indemnified by the principal if the tort was commited while in the workplace. Has no liability to injured party because of the doctrine of Res Ipsa Loquitor. Has no liability to the injured third party because of the doctrine of respondeat superior.

Is entitled to be indemnified by the principal if the tort was committed by following the principal's instructions.

Apparent authority is also known as _____________authority. Ostensible Constructive Incidental Express

Ostensible

Which of the following is not a duty of the principal to the agent? The duty to compensate The duty to obey instructions The duty to reimburse The duty to indemnify

The duty to obey instructions

A principal will not have a duty to reimburse an agent if The principal is disclosed The expenses are for food or travel The principal is undisclosed The expenses were the result of the agent's negligence

The expenses were the result of the agent's negligence

Respondeat superior is a firm of vicarious liability. True False

True

The principal is a fiduciary of the agent. True False

True

If an agency agreement does not state how much an agent is to be paid The agency agreement is voidable by the agent, but not by the principal The agency agreement is void The agent is assumed to be a gratuitous agent A court will read in a reasonable amount based on the customary rate in the business community.

A court will read in a reasonable amount based on the customary rate in the business community.

Pat hired Mike to manage his deli, but the agency agreement did not state how much Mike is to be paid. In this situation, The agreement is voidable by Mike. A court will read in a reasonable salary based on comparable positions in the business community. The agreement is voidable by Pat. Mike is a gratuitous agent until a salary is negotiated.

A court will read in a reasonable salary based on comparable positions in the business community.

Tom telephoned Mike's Boat Marina and Yacht Club about purchasing a boat. The person on the telephone told Tom to contact George, the Harbor Master at the Yacht Club, when he arrived if he wanted to view the boats for sale. George's duties at the club included renting slips, pumping fuel, keeping the grass and grounds cleaned, and hauling boats in and out of the water. Upon arriving at the marina, Tom and George inspected the first boat that was for sale without incident. They then proceeded to the second boat for sale docked at the Marina, the "Lovie Dovie." When they reached the "Lovie Dovie," they discovered the interior cabin of the boat was locked. George told Tom he would break into the boat to allow them to inspect the internal cabin, to which Tom protested. George, who lived in a vessel docked in the slip next to the "Lovie Dovie," assured Tom it was okay to break into the boat because "they don't have a problem with us doing this." After entering and inspecting the inside cabin, George removed the hatch cover so Tom could inspect the bottom of the boat. Tom then accidentally stepped into the hole where the hatch cover was located and sustained physical injury after falling through the opening. Tom filed a negligence action against Mike's Marina and Yacht Club. How would a court rule? A court would find that no reasonably prudent person would believe George had the authority to break into the "Lovie Dovie," irrespective of George's statements to the contrary, which are irrelevant for purposes of the apparaent authority inquiry. A court would rule that Mike's Marina and Yacht Club would be estopped from denying George's apparent authority. The court would find that a reasonably prudent person would believe George had the authority to break into "Lovie Dovie," especially after his statements that "they don't have a problem with us doing this", his statements would be considered relevant for the purposes of the apparent authority inquiry. A court would rule that Mike's Marina and Yacht Club would not be liable for apparent authority because breaking into boats was not in George's written employment agreement.

A court would find that no reasonably prudent person would believe George had the authority to break into the "Lovie Dovie," irrespective of George's statements to the contrary, which are irrelevant for purposes of the apparaent authority inquiry.

Apparent authority can only be created by the actions of The agent himself A partially disclosed principal A disclosed principal An undisclosed principal

A disclosed principal

Which of the following is not an example of a trade secret? A list of customers that was published in an ad in a trade journal The responses of a focus group to a company's product that have been gathered and analyzed. The formula for a compound used in a manufacturing process A business's marketing plans for the next five years

A list of customers that was published in an ad in a trade journal

A person who is given power of attorney is called an______________. Factor Attorney in fact General agent Attorney at law

Attorney in fact

Carla was the agent for Newco, a New York company that wanted to relocate its corporate offices to New Jersey. Carla was given the authority to purchase 600 acres of New Jersey farmland, but was not allowed to tell the sellers that she represented Newco. She was only allowed to say that she represented an out- of- state corporation. After the contracts were signed, Newco's board decided not to relocate and wants to rescind the contacts. Which of the following statements is true about the liability of the parties? Carla has no personal liability on the contracts because she was acting within the scope of her authority. Newco is not liable to the sellers on these contracts because Carla it is an out-of-state corporation. Carla is not personally liable on the contracts because she disclosed that it was an out-of-state corporation. Carla is personally liable on the contracts, but Newco must indemnify her because she was acting within the scope of her authority.

Carla is personally liable on the contracts, but Newco must indemnify her because she was acting within the scope of her authority.

Jill hired Ace Paving Company to pave her driveway. Ace's driver, Tom, carelessly dropped a load of hot tar on the lawn and prized rose bushes of Jill's neighbor, Dan. From whom can Dan seek damages? Dan can only sue Jill because she hired an independent contractor to carry out an unreasonably dangerous activity. Dan can only sue Ace and Tom in joint and several liability. Dan can sue Jill and Ace and Tom in joint and several liability. Dan can only sue Ace because Tom was clearly acting within the scope of his employment.

Dan can only sue Ace and Tom in joint and several liability.

Athlete Superstar hired Angie Agent to negotiate a contract for him with a major cereal company. Photos of Athlete Superstar, in various action poses, are to be prominently displayed on every box of GoodForYou cereal for one year. In these circumstances, Athlete Superstar is a (n) ____________principal. Partially undisclosed Special Disclosed Undisclosed

Disclosed

In order to ratify an agent's contract, the principal must have been __________at the time the contract was formed. Disclosed Undisclosed Either disclosed or partially disclosed Partially disclosed

Disclosed

The only principal who can ratify a contract is an _____________ principal. Undisclosed Partially disclosed Both a and c can ratify a contract. Disclosed

Disclosed

Rhonda Realtor was hired to find Client an undeveloped lot that met the following requirements: the lot must be in the mountains, on a pristine lake, consist of at least 10 acres, and be available for no more than $500,000. Rhonda found a property that met all these requirements for only $425,000. Enchanted, she bought the property for herself. She did not tell Client about her find and is still diligently seeking another property that meets Client's needs. Which of the following duties did Rhonda NOT violate? Duty of prescription Duty of loyalty Duty to obey instructions Duty to inform

Duty of prescription

An agent's actual authority may be Express or Implied Ostensible only Ostensible, Express, or Implied Express only

Express or Implied

Whether or not a principal has, through his actions, ratified a contract is a question of _________to be decided by the _________. Fact.judge Fact.jury Law.jury Law.judge

Fact.jury

Mike is a sole proprietor who buys, sells and repairs kilns and other equipment used in pottery making. He has an arrangement with K&M, a large equipment maker, to sell K&M's kilns in both his own name and in K&M's name and to receive payments from customers. Mike's relationship with K&M is that of a ________________. Independent contractor Special agent Broker Factor

Factor

A multiple listing agreement lists real property with several brokers, but only the selling broker earns a commission on the sale. True False

False

A principal may terminate the agency of a disloyal agent only if the principal suffered a financial loss because of the agent's disloyalty. True False

False

A store manager is an example of a special agent. True False

False

Agency agreements must always be in writing. True False

False

An agent operating under a written power of attorney is called an attorney-at-law. True False

False

An employer is responsible for the torts committed by an employee while the employee is on a frolic, but not for those torts committed while the employee is on a detour. True False

False

An employer may have liability for the negligent hiring of a servant, but not for the negligent hiring of an independent contractor. True False

False

Assume that you hire an independent contractor to transport hazardous chemicals for your company. If he negligently causes damages to a third part while carrying out the job, you will not be liable because of his status as an independent contractor. True False

False

Employers have greater liability for employee torts in states that have adopted the complicity rule than in those states that follow vicarious liability. True False

False

In contracts negotiated by an agent acting within the scope of his authority for a disclosed principal, the agent, the principal and the third party are equally liable on the contract. True False

False

It is the duty of an agent to notify third parties when his agency is terminated. True False

False

Officers of corporations have unlimited actual authority to sell the real property and intangible assets of the corporation. True False

False

The legal test to determine whether someone is a general agent or a special agent is whether or not the agent is paid for his services. True False

False

The standard the agent must meet in carrying out the work of the principal is "extraordinary care and diligence." True False

False

Undisclosed principals have no liability to third parties for contracts negotiated by their agents. True False

False

When ratifying a contract, a principal may select which provisions of the contract to accept and which to reject. True False

False

Whether or not a principal has ratified a contract is a question of law to be decided by the judge at trial. True False

False

In some states, a parent-owner is liable for any damages caused by a family member operating the vehicle. This is the __________doctrine. Family negligence In loco parentis Family car Durham

Family car

The Principal and Agent have an ________________relationship with each other. Arms length equitable Statutory Fiduciary

Fiduciary

The Principal and Agent have an ________________relationship with each other. equitable Statutory Arms length Fiduciary

Fiduciary

When a servant completely abandons the master's work to pursue his own interests, the servant is on a ___________. Frolic Detour Outing Trespass

Frolic

Matt is employed as the manager of Local Steak House, with wide-ranging responsibilities for all aspects of the business. In this position, Matt is an________ General agent Special agent Factor Broker

General agent

Ann Agent was hired by Buyer to locate a piece of property suitable for building an office complex. Ann and her cousin jointly owned a piece of property that suited Buyer's needs. Without telling Buyer of her ownership interest, Ann negotiated the purchase on Buyer's behalf. The price for the property was its fair market value. What options are available to Buyer when he learns that Ann was the seller? He may rescind the contract because Ann violated her duty of loyalty. He must go through with the contract, but does not have to pay Ann her commission. He must go through with the contract because her cousin's participation made this an arm's length deal. He must go through with the contract because the price was objectively fair.

He may rescind the contract because Ann violated her duty of loyalty.

Implied authority is also known as ____________authority. Apparent Constructive Ostensible Incidental

Incidental

A principal is obligated to pay any judgments against an agent who incurred liability to a third party while carrying out the principal's orders. This duty to hold the agent "harmless" is the duty to___________. Account Indemnify Reimburse Compensate

Indemnify

Mary, a retail appliance dealer, instructs Susan to repossess a TV set from Tom, who had purchased it on an installment contract. Mary informs Susan that Tom is in arrears on his payments. Actually, Mary had made a bookkeeping error, and Tom is current in his payments. Despite Tom's protests, Susan repossesses the TV set pursuant to Mary's instructions. Susan has committed the torts of trespass and wrongful conversion. What are Susan's options if Tom elects to bring an action for tort damages against her? Susan's actions were illegal and she will not be able to demand that Mary indemnify her against Tom's tort damages. Susan can demand that Mary indemnify her and satisfy Tom's tort claims. Susan can simply give back the TV which will negate Tom's claims of tort damages. Tom will not be able to collect tort damages from Susan because she was working for Mary.

Mary indemnify her against Tom's tort damages.

Raines Realty, a property management firm, hired Al Agent to manage an office complex. One of Al's duties was to collect the rents. Raines fired Al for negligence, but did not notify the tenants before the next rent payment was due. Al collected the rents as usual and left town with the money. Are the tenants required to pay that month's rent again to Raines? Yes, because a payment to Al stopped being a payment to Raines when Al's actual authority to accept payments ended. Yes, because third parties have a duty to verify that agents are acting within the scope of their authority. No, because Al still had apparent authority to collect the rents until Raines told the tenants otherwise. No, because Al still had implied authority to collect the rents until Raines told the tenants otherwise.

No, because Al still had apparent authority to collect the rents until Raines told the tenants otherwise.

When a third party knows that an agent is acting on behalf of a principal, but dies not know the identity of the principal, the principal is________________. Transparent Partially disclosed Undisclosed Disclosed

Partially disclosed

Allan, an agent, is working on behalf of Paul (the principal) to sell Paul's office building. Allan is also the agent for Bob who is interested in buying Paul's building. Allan does not tell Paul or Bob that he represents the other person. Allan acted for the best interests of Paul and the contract was as favorable as could be obtained anywhere. After Paul signs the contract to sell the property to Bob, he finds out that Allan also represented Bob. What remedies may Paul seek? Paul may sue Allan for breaching his scrivenor's duty. Paul may charge Allan with the commission of a felony. Paul may sue Allan and Bob for fraud. Paul may refuse to pay Allan his commission.

Paul may refuse to pay Allan his commission.

Jim was called to active duty in the military. Knowing that he would be out of the country for a year or more, he gave his sister Peg authority to pay bills in his name, access his bank accounts, buy and sell stock in his brokerage accounts, and incur expenses to maintain his house and car and boat. Because Peg is not compensated for the activities she is performing on her brother's behalf, she owes him Only the duties of loyalty and information. Only the duties of loyalty, information and the duty to account Only the duty of loyalty. Peg owes Jim all the duties of an agent to a principal.

Peg owes Jim all the duties of an agent to a principal.

When a principal decides to adopt and be bound on a contract that his agent did not have the authority to form, the principal _______________ the contract. Ratifies Indemnifies Restores Reforms

Ratifies

The well-established legal principal that employers are liable for the torts committed by employees while acting within the scope of their employment is _____________________. The rule of ultra vires The rule of transferred intent Respondeat superior The rule of corporate complicity.

Respondeat superior

A person who is employed to perform services for another and who is under the other's control and subject to the other's direction is a(n) _____________. Factor Agent Independent contractor Servant/employee

Servant/employee

Conan, an outstanding college pitcher, hired Masters to represent him in negotiations with a major league team. Masters may only negotiate a contract for Conan; he has no authority to make investments or purchase property on Conan's behalf. Masters would be classified as a (n) __________. Factor Broker Special agent General agent

Special agent

Jim was called to active duty in the military. Knowing that he would be out of the country for a year or more, he gave his sister Peg authority to pay bills in his name, access his bank accounts, buy and sell stock in his brokerage accounts, and incur expenses to maintain his house and car and boat. Jim will be out of the country when a piece of land he sold goes to settlement. He wants to give Peg the authority to convey the deed and sign any necessary settlement papers in his name. To do this he should give Peg _______________. Factors letters of appointment Special power of attorney General power of attorney Broker Authority

Special power of attorney

Ruth had a contract to sell a vacation home she owned in North Carolina. Rather than make the trip from Oregon for the closing, she gave her brother Ian, who lived in North Carolina, the authority to represent her at the closing and to sign all the necessary papers. The notarized document that confers this authority on Ian is a (n) __________________; and Ian is a (n) _____________. Special power of attorney--------------------Attorney in fact General power of attorney-------------------Attorney in fact Special power of attorney--------------------Attorney at law General power of attorney-------------------Attorney at law

Special power of attorney--------------------Attorney in fact

The primacy source of law governing the relationship between the principal and the agent is Federal statutes The Uniform Commercial Code State common law case law Federal common law

State common law case law

Bakery company is held liable for damages to an injured child who was struck by a companydelivery truck as the result of the employee-driver's negligence. After the Bakery pays the total damages to the injured party. The Bakery company may do which of the following? The Bakery may take the money out of the employees wages for up to one year. The Bakery may take the money out of the employees wages not to exceed $1,000 per month or 20%, whichever is less. The Bakery may sue the employee for breach of the duty not to be negligent. The Bakery may sue the employee for breach of the duty to obey instructions.

The Bakery may sue the employee for breach of the duty not to be negligent.

What is the status of an agency agreement when a principal files for Chapter 7 bankruptcy? The agency terminates by operation of law 90 days after the trustee takes over the debtor's assets. The agency terminates by operation of law when the court grants the order for relief. The agency terminates by operation of law 30 days after the trustee takes over the debtor's assets. The agency terminates by operation of law 60 days after the trustee takes over the debtor's assets.

The agency terminates by operation of law when the court grants the order for relief.

All of the following will happen if an agent acts outside the scope of his or her authority when negotiating a contract except? The agent loses the right to indemnification The agent becomes personally liable on the contract to the third party The agent loses the right to waiver The agent loses the right to reimbursement

The agent loses the right to waiver

Sam is retiring and selling his business to Ed, an employee. They want Larry Lawyer to draw up a sales contract that protects both Sam's interests as the seller and Ed's interests as the buyer. If Larry agrees to this dual agency, which agency duty would he most risk violating? Dual agencies pose no particular problems in carrying out agency duties. The duty not to be negligent The duty of loyalty The duty to account

The duty of loyalty

Sam is retiring and selling his business to Ed, an employee. They want Larry Lawyer to draw up a sales contract that protects both Sam's interests as the seller and Ed's interests as the buyer. If Larry agrees to this dual agency, which agency duty would he most risk violating? The duty of loyalty The duty to account Dual agencies pose no particular problems in carrying out agency duties. The duty not to be negligent

The duty of loyalty

The major distinction between a servant and an independent contractor is that An independent contractor is required to be licensed. An independent contractor is required to be bonded and to carry insurance. Independent contractors are hired under individual contracts, while servants must be hired under collective bargaining agreements. The employer has the right to tell a servant how to do the job, while an independent contractor has exclusive control over the manner in which the job is done.

The employer has the right to tell a servant how to do the job, while an independent contractor has exclusive control over the manner in which the job is done.

An agent must obey the principal's instructions in which of the following situations: The instructions require the agent to perform duties that are not in the agency agreement. The instructions would cause the agent to commit a felony. The instructions are to perform an illegal act. The instructions are not in the principal's best interest.

The instructions are not in the principal's best interest.

Which of the following would NOT terminate an agency by operation of law? The death of the principal The merger of the subagency and the goods The death of the agent The destruction of the goods that the agent was hired to sell

The merger of the subagency and the goods

In which of the following situations would an undisclosed principal be liable to the third party on a contract? The principal retained the benefits of the contract. The principal is liable in all of the situations above. The contract negotiated by the agent was not for the agent's personal services. The agent was acting within the scope of his or her authority.

The principal is liable in all of the situations above.

A master can normally avoid liability for damages caused by a servant if he can show that the servant misunderstood his instructions. True False

True

A person who enters into a contract with an independent contractor is called a proprietor. True False

True

A principal has the duty to notify third parties when an agency terminates. True False

True

A principal may ratify a contract by accepting the benefits of the contract. True False

True

A principal whose identity is known to a third party is a disclosed principal. True False

True

A proprietor will be liable for the torts of an independent contractor if the duties that the contractor is hired to perform are inherently dangerous to the public. True False

True

A third party must use reasonable care and diligence to make sure that an agent is acting within the scope of his or her employment. True False

True

Agents are personally liable to third parties on contracts when the principal was undisclosed. True False

True

An agency will terminate by operation of law if the principal files for Chapter 7 bankruptcy. True False

True

An agent is a fiduciary of the principal. True False

True

An agent who comingles the principal's funds with his or her own violates the duty to account. True False

True

An agent who is wrongfully terminated may sue the principal for damages. True False

True

An agent who represents both the buyer and the seller in the purchase of a business is acting as a dual agent. True False

True

An agent will not be indemnified for injuries caused to third parties if the agent's negligence caused the injury. True False

True

An agent's knowledge is imputed to the principal. True False

True

If a principal ratifies the unauthorized act of an agent, he releases the agent from any liability for the unauthorized act. True False

True

If a principal wishes to ratify a contract that an agent was not authorized to negotiate, he must do so before the third party withdraws from the contract. True False

True

If an agent gets a monthly advance against future commissions, the advances are treated as a minimum salary and need not be returned if the commissions on sales are not earned. True False

True

If the agent dies, the agency agreement terminates by operation of law. True False

True

If the principal dies, the agency agreement terminates by operation of law. True False

True

In a multiple listing agreement, real estate is listed with several brokers who divide the commission on the sale. True False

True

Masters and servants have only joint liability for torts committed by the servant in the course of his employment. True False

True

Normally a master is not liable for torts committed by a servant while traveling from his home to the workplace. True False

True

The general manager of a business will have the implied actual authority to perform duties that are not expressly authorized in the employment agreement. True False

True

Under the family-car doctrine, any family member becomes an agent of the parent-owner while the family member is using the car. True False

True

When a principal files for Chapter 7 bankruptcy, all agency appointments end when the court grants an order of relief. True False

True

If a third party does not know that he is dealing with an agent and believes that the agent is acting on his own behalf and will perform on the contract, the principal in this situation is ______________. Disclosed Undisclosed Transparent Partially disclosed

Undisclosed

The general legal doctrine that holds one person responsible for the torts committed by another because of the relationship they have to each other is _______________ Transferred liability Respondeat superior Primary liability Vicarious liability

Vicarious liability

Which legal principal always imposes punitive damages on a master if the wrongful conduct of the servant justifies punitive damages ? Complicity rule Durham rule Vicarious liability rule Transferred liability rule

Vicarious liability rule

The general legal principal under which an innocent person can be held liable for the wrongdoing of another is The rule of transferred intent Vicarious liability. The rule of corporate complicity The rule of ultra vires

Vicarious liability.

Jim was called to active duty in the military. Knowing that he would be out of the country for a year or more, he gave his sister Peg authority to pay bills in his name, access his bank accounts, buy and sell stock in his brokerage accounts, and incur expenses to maintain his house and car and boat. Jim received several dividend checks from his stock broker while he was gone. Peg deposited the checks in her own bank account because her funds were low. Several weeks later she made out a personal check for the amount of the dividends and deposited it into Jim's account. Has Peg breached any agency duties? Yes, she breached her duty to account. No, this is a gratuitous agency and her only duty is the duty of loyalty. No, her action made no difference because Jim ended up with the amount due him. No, there was no intent to convert Jim's money.

Yes, she breached her duty to account.

Tim is the delivery person for a small local bakery. Tim often accepts payments from the bakery's customers when making his deliveries. Tim puts the payments that made by check in an envelope. He uses the cash payments to pay for his daily personal expenses. At the end of each week, he makes out a check to the bakery for the amount that he took in as cash payments. Has Tim breached any of his fiduciary duties as an agent? Yes, the duty to account No, so long as he keeps careful accounts and gives the bakery all that it is due. Yes, the duty not to be negligent Yes, the duty of loyalty

Yes, the duty to account