BUL Unit 7

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

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

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

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

Alan is the general manger of a restaurant. Although not mentioned in his employment contract, as part of carrying out his management duties he has the authority to buy supplies, hire employees, put ads on the radio, engage a cleaning service, pay bills, etc. These duties are expressions of his _____________authority. Actual express Actual implied Actual apparent Constructive implied

Actual Implied

Which of the following is not an element of ratification? The principal was fully disclosed at the time the contract was formed. The principal is aware of all of the terms of the agreement The third party has not withdrawn from the contract All of the above are requirements for ratification

All of the above are requirements for ratification

An agent is not entitled to indemnification when >His own negligence caused the damage for which he is being held responsible >He was acting outside the scope of his authority >He committed a tort while following the instructions of the principal >Both a and b

Both a and b

An employee who commits a tort while acting in the scope of his or her employment >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. >Has joint and several liability with the principal to the injured party. >Both b and c

Both b and c

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 because Tom was clearly acting within the scope of his employment. >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 and Tom in joint and several liability.

Bill hired Acme Paving to pave his driveway. Acme is Bill's __________________. Broker Independent contractor Factor Special agent

Independent contractor

Neda, an attorney, has engaged in the following representations this past year. Which one is least likely to violate her duty of loyalty to her clients? Neda represented both the buyer and the seller in the purchase of a business. Neda represented both spouses in their property settlement following the divorce. Neda represented a local restaurant, which she patronizes frequently, in an employment discrimination suit. Neda created a limited partnership with three limited partners; she was one of the limited partners.

Neda represented a local restaurant, which she patronizes frequently, in an employment discrimination suit.

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 third parties have a duty to verify that agents are acting within the scope of their authority. Yes, because a payment to Al stopped being a payment to Raines when Al's actual authority to accept payments ended. 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.

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

In which of the following situations would an employee avoid liability for torts committed while carrying out his employment obligations? A corporate officer acting on behalf of the corporation A servant following the instructions of his master An agent carrying out the orders of his principal None of the above: everyone has personal liability for the torts he commits.

None of the above: everyone has personal liability for the torts he commits

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, what does she owe him?

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

The legal doctrine that holds the master liable for the torts committed by a servant while acting within the scope of this employment is Quid pro quo Respondeat superior Caveat emptor Alter ego liability

Respondeat superior

Barb hired Roofing Company to re-roof her garage. Bill, one of Roofing Company's employees, carelessly let a pallet of tiles fall from the roof onto the car of Barb's next door neighbor. Who is liable to the neighbor for these damages? Barb alone is liable because she hired Roofing Company to do the job. Roofing Company alone is liable under the doctrine of respondeat superior. Bill alone is liable because he committed the tort. Roofing Company and Bill are liable in joint and several liability

Roofing Company and Bill are liable in joint and several 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 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 _______________. Special power of attorney General power of attorney Factors letters of appointment 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) _____________. General power of attorney-------------------Attorney in fact Special power of attorney--------------------Attorney at law Special power of attorney--------------------Attorney in fact General power of attorney-------------------Attorney at law

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

Ted was hired under a one year contract to manage Sue's sub shop. Eight months into the contract, Sue fired Ted in order to hire a new manager who had just graduated with a degree in marketing and had a lot of ideas for increasing sales. Ted had not breached the contract in any way. Which statement best describes Sue's rights in these circumstances? >Sue had both the right and the power to terminate Ted's contract. >Sue had neither the right nor the power to terminate Ted's contract. >Sue had the power, but not the right, to terminate Ted's contract. >Sue had the right, but not the power, to terminate Ted's cont

Sue had the power, but not the right, to terminate Ted's contract.

What is the status of an agency agreement when a principal files for Chapter 7 bankruptcy? 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 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

Sue hired Harry to sell her prized racing filly, YouGoGirl. Harry's commission was to be 20% of the selling price. Before a buyer could be found, YouGoGirl died of an equine virus. What is the status of the agency agreement between Sue and Harry? The agency terminates by operation of law. The agency continues unless the principal, Sue, takes a unilateral action to end it. The agency continues unless the agent, Harry, takes a unilateral action to end it. The agency continues unless is it terminated by the mutual agreement of Sue and Harry.

The agency terminates by operation of law.

Pat hired Mike, a dealer in livestock, to sell his herd of cattle. Mike was to receive a 20 commission on the sale. Before a buyer could be found, the herd had to be destroyed because of an outbreak of mad cow disease. Which statement best describes the status of the agency agreement? The agency will continue under the same terms when Pat acquires a new herd. The agency was terminated by operation of law The agency was terminated by a unilateral action The agency was terminated by mutual agreement

The agency was terminated by operation of law

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

The duty to obey instructions

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. >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. >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.

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

The expenses were the result of the agent's negligence

Which of the following events would not terminate an agency by operation of law? The principal breaches his or her duty to reimburse the agent. The agent dies. The principal dies. The purpose of the agency becomes illegal.

The principal breaches his or her duty to reimburse the agent.

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

The principal is liable in all of the situations above

Which of the following statements is false about a principal's ratification of an authorized contract? >The principal must have been either disclosed or partially disclosed at the time the contract was formed. >The principal may not change any of the provisions of the contract. >The principal must be aware of all material facts surrounding the negotiations and formation of the contract. >The third party must not have withdrawn from the contract

The principal must have been either disclosed or partially disclosed at the time the contract was formed.

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

Vicarious liability rule

Which of the following is not a factor in determining if a servant was acting within the scope of his employment? Was the servant carrying on the master's business when the tort was committed? Was the servant disobeying the instructions of the master when the tort was committed? Was the instrumentality of the injury furnished by the master? Did the master authorize the servant to use the instrumentality of the injury?

Was the servant disobeying the instructions of the master when the tort was committed?

The last semester of his senior year, Marc had an unpaid internship in the sales department of a local TV station. When Marc left, he took a copy of the station's client list with him, reasoning that it would prove useful in the future when he graduated and got a permanent job at some other company in sales. Has Marc violated any agency duties? No, it was an unpaid position so he had no agency duties. No, Marc's duties to the TV station ended when his agency relationship ended. Yes, Marc violated a duty to protect confidential information Yes, Marc violated a duty not to be negligent

Yes, Marc violated a duty to protect confidential information

Parker is a dealer in Oriental antiques and rugs. A sign in his store recommends that customers bring in their rugs to him for cleaning and repair. In fact, Parker does none of the cleaning or repair work himself. He sends the rugs to Local Cleaners, for whom he works as an agent making a 20 commission. Due to a mishap at Local's plant, the rug belonging to Parker's customer was damaged. Is Parker liable to the customer for the damage? No, Parker is Local's agent and has no fiduciary duties to third parties. No, Parker has no liability because he was acting within the scope of this authority as Local's agent. No, Parker has no liability because agents are not responsible for the torts of the principal. Yes, Parker is liable because he is the agent of an undisclosed principal.

Yes, Parker is liable because he is the agent of an undisclosed principal.

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? >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.

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 not to be negligent Yes, the duty to account Yes, the duty of loyalty No, so long as he keeps careful accounts and gives the bakery all that it is due.

Yes, the duty to account

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

a disclosed principal

A proprietor will be liable for damages caused by an independent contractor if the work the independent contractor was hired to do was Inherently dangerous to the community. Illegal A duty that the proprietor could not delegate All of the above

all of the above

An agent incurs personal liability on a contract with a third party when >he acts outside the scope of his authority in negotiating the contract >he is an agent for an undisclosed principal >he is an agent for a partially disclosed principal >all of the above would impose personal liability on the agent .

all of the above

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, if any, agency duties has Rhonda violated? Duty of loyalty Duty to inform Duty to obey instructions All of the above

all of the above

Which of the following would not terminate an agency by operation of law? The death of the principal The death of the agent The destruction of the goods that the agent was hired to sell All of the above terminate an agency by operation of law.

all of the above would terminate

What happens if an agent acts outside the scope of his or her authority when negotiating a contract? The agent loses the right to reimbursement The agent loses the right to indemnification The agent becomes personally liable on the contract to the third party All of the above

all the above

Another term for ostensible authority is _______________authority. Apparent Incidental Express Constructive

apparent

Patty Principal fired Al Agent because Al had been careless in his record keeping and had comingled personal and business funds. Unless Patty notifies the third parties who dealt with Al that he is no longer her agent, Al will continue to have __________authority and Patty will be bound by his actions. Apparent Implied Incidental Actual

apparent

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

attorney in fact

An agent has a duty to obey the principal's instructions unless The instructions require the agent to perform duties that are not in the agency agreement. The instructions are to perform an illegal act. The instructions are not in the principal's best interest. Both a and b

both a and b

An agent's actual authority may be Express Implied Ostensible Both a and b

both a and b

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. Carla is personally liable on the contracts, but Newco must indemnify her because she was acting within the scope of her authority. Newco is liable to the sellers on these contracts because Carla was acting within the scope of her employment. Both b and c are true.

both b and c are true

In determining the rights and duties of the parties to an agency relationship, the courts look to Case law The Uniform Commercial Code The National Labor Relations Act Federal common law

case law

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 Durham rule Complicity rule Transferred liability rule

complicity rule

A principal whose identity is known to a third party is an _____________principal. Disclosed Undisclosed Partially disclosed Transparent

disclosed

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. Disclosed Partially undisclosed Undisclosed special

disclosed

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

disclosed

Whether or not a servant was acting in the scope of his employment when he injured a third party is a question of __________ to be decided by the ______. Fact.judge Law.judge Fact.jury Law.jury

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 factor is an agent with the special limited authority of procuring a customer so that the principal can affect a sale or exchange of property.

false

A principal always has the right to terminate an agency.

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.

false

A store manager is an example of a special agent.

false

Agency agreements must always be in writing.

false

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

false

An agent whose agency appointment has terminated has implied authority to continue to conduct the principal's business until third parties are notified of the termination.

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.

false

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

false

Apparent authority is created when a third party reasonably believes, based on the agent's conduct, that an unauthorized agent has the authority to act for the principal.

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.

false

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

false

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

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.

false

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

false

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

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.

false

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

false

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

false

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

false

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

false

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

family car

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

fiduciary

A master will not be liable for the torts committed by a servant if the servant was on a ______when the tort was committed. Lark Errand Frolic Detour

frolic

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

frolic

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. Peg is Jim's______________. Independent contractor Broker General agent Special agent

general agent

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 Broker Factor

general agent

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

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___________. Reimburse Indemnify Compensate Account

indemnify

Tucker hired SoClean, a house washing service, to power wash his house and deck. SoClean's status of that of a (n) ________________________. Factor Special agent Independent contractor Proprietor

independent contractor

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

ostensible

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________________. Disclosed Undisclosed Partially disclosed Transparent

partially disclosed

In an agency relationship, the principal always has the ____________to end the relationship; and the agent always has the _________________to end the relationship. Right-------------------Right Power-----------------Power Right-------------------Power Power-----------------Right

power-----------power

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. Indemnifies Reforms Ratifies Restores

ratifies

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) _____________. Independent contractor Agent Servant/employee Factor

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

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

state common law (case law)

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 not to be negligent The duty to account Dual agencies pose no particular problems in carrying out agency duties.

the duty of loyalty

A person who breaches a duty that is neither a contractual duty nor a crime commits a ____________. Tort Misdemeanor Malum in se Malum prohibitum

tort

A master can not normally avoid liability for damages caused by a servant even if he can show that the servant misunderstood his instructions.

true

A minor may act as an agent for an adult principal.

true

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

true

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

true

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

true

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

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

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

Agents of undisclosed principals are entitled to be indemnified if held personally liable on contracts that were within the scope of their authority.

true

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

true

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

true

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

true

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

true

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

true

An agent's duty to protect confidential information continues even after the agency relationship ends

true

An agent's knowledge is imputed to the principal.

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

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

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

true

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

true

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

true

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

true

Respondeat superior is a firm of vicarious liability.

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

The principal is a fiduciary of the agent.

true

The secret formula for a soft drink is an example of a trade secret.

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

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

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 Partially disclosed Transparent

undisclosed

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

vicarious liability