Chapter 20 Reading Questions

An agent has the authority to buy antiques on behalf of his or her principal. The principal dies without the knowledge of the agent, and the agent continues to purchase items on behalf of the principal. Which of the following is an accurate statement regarding whether the transactions after the principal's death are binding on the principal's estate?

Such transactions are not binding on the principal's estate.

Which of the following is required for agency by ratification?

The principal must accept the agent's unauthorized act.

Which of the following is not a type of business relationship to which agency laws are relevant?

The principal-steward relationship

Which of the following is not recognized by courts as a factor when making decisions about an agency relationship's liability to third parties?

The relative bargaining power of the principal and the agent

Which of the following is one of a third party's options when an agent misrepresents himself or herself to the third party?

The third party can affirm the contract and sue the principal to recover damages.

Which of the following is not the principal's duty to the agent?

To be loyal to the agent

The principal's duties to the agent include all but which of the following?

To obey the agent

Which of the following is not an agent's duty to a principal?

To ratify the principal

True or false: The Department of Labor, National Labor Relations Board, and Equal Employment Opportunity Commission have each created joint employer doctrines for firms that depend on third-party contractors that no longer safeguard these businesses from employment-related liability issues arising from third-party contractors.

True

Which of the following is not identified by courts as a factor when making decisions about an agency relationship's liability to third parties?

Whether the agent was compensated based on industry standards

Express authority of an agent is often referred to as the agent's ______ authority.

actual

An agency relationship terminates if either the principal or agent becomes insane. Some states have modified this law so that unless the person has been ______ insane, the agency contract still exists.

adjudicated

Various ways to end an agency relationship include all but which of the following?

Creation of a subrogation interest

Which of the following is an incorrect statement regarding whether a principal can be held liable if an agent misrepresents himself or herself to a third party?

Misrepresentation liability depends on whether the agent was acting in the scope of employment.

The avenues for creating agency include a form of authority that attaches to that type of agency. Which of the following is not one of these avenues?

Quasi-agency

Which of the following is not a way to terminate an agency relationship?

Strict equity liability

When a principal is classified as a ______ principal, a third party is aware that an agent is making an agreement on behalf of the principal.

disclosed

An agency relationship is formed ______.

either by an informal oral agreement or by a formal written contract

An agent's _______ authority is derived from an agent's express authority and consists of what is reasonably necessary for carrying out the agent's grant of express authority.

implied

A(n) ______ is a person who is hired to perform a task for another but who is not the other's employee.

independent contractor

If either the principal or the agent dies, the agency relationship ______.

is automatically terminated

If an independent contractor engages in extremely hazardous activities, such as blasting operations, for his or her principal, the principal ______.

is responsible for any damages caused by the independent contractor

The doctrine of respondeat superior is used in the context of the ______ relationship.

principal-agent

Agency is generally defined as a relationship between a(n) ______ and a(n) ______.

principal; agent

Agency by ______ is an agency relationship that arises when an individual misrepresents himself or herself as an agent for another party and that party accepts the unauthorized act.

ratification

When a new law is passed subsequent to the formation of an agency agreement that makes the commission of the agency agreement illegal, the agency agreement is ______.

terminated

If an unusual change in circumstances leads the agent to reasonably believe that the principal's instructions do not apply, the agency relationship ______.

terminates

If the principal or the agent becomes insane, the agency relationship ______.

terminates

In the context of contractual liability to third parties for unauthorized acts of an agent on behalf of a principal, if a third party believed that the agent has authority, ______.

the agent is liable but the principal is not

Agency by implied authority is based on ______.

the conduct of the parties involved

In the context of contractual liability to third parties for authorized acts of an agent, if a principal is disclosed, ______.

the principal is liable but the agent is not

The ______ relationship is the most basic type of agency relationship.

principal-agent

______ agency exists when a third party reasonably believes, on the basis of a principal's actions, that an agency relationship exists between the principal and another individual.

Apparent

Tyler hires Ryan to apply stucco to the walls of her house. After Ryan was hired, the city council passes a law making it illegal to use stucco as an exterior surface of a house. The new law ______.

automatically terminates the agency agreement

In the context of contractual liability to third parties for unauthorized acts of an agent on behalf of a principal, if a third party believes the agent is mistaken about his or her authority, ______.

neither the principal nor the agent is liable

When an employer hires an employee to enter into contracts on behalf of the employer, a ______ relationship typically exists.

principal-agent

Smith contracts someone to act as her agent to sell a painting she found in her great-aunt's attic. Smith authorizes the agent to sell the painting for $1,000. In the course of showing the painting to several buyers, the agent learns the painting is a Van Gogh original that is worth much more than $1,000. Which of the following is an accurate statement regarding the agency?

The agent should infer that the principal does not want the original agency to continue.

Apparent agency is an agency relationship created by operation of ______ when one party, by his or her actions, causes a third party to believe someone is his or her agent when that person actually has no authority.

law

In the context of tort liability and agency relationships, which of the following is an incorrect statement?

If an agent commits a tort that injures a third party, his or her principal cannot be held liable for the agent's actions.

In the context of tort liability and agency relationships, which of the following is an accurate statement?

If an employee tortiously injures a third party and the employer controls the employee's behavior, the employer can be held liable for the tort.

In the context of contractual liability to third parties for authorized acts of an agent, if a principal is undisclosed, ______.

both the principal and the agent are liable

Whenever an employer hires an employee to perform some sort of physical service, the parties have created an ______ relationship.

employer-employee

______ is generally defined as a relationship between a principal and an agent.

Agency

Which of the following is an accurate statement regarding whether a principal can be held liable for the torts of an independent contractor?

An individual who hires an independent contractor cannot be liable for the contractor's tortious actions under the doctrine of respondeat superior.

Which of the following is an incorrect statement about an employer-employee relationship?

An employee is also known as an independent contractor.

Which of the following is true of an independent contractor?

An independent contractor is not an employee.

Which of the following is not considered an agent's right or remedy against a principal?

A right to demand ratification

Which of the following is not an agent's right or remedy against the principal?

A right to indemnification

Proposed changes to the _____ intend to increase the minimum salary required for overtime exemption for administrative and professional employees in the United States from $23,660 a year to $47,476.

Fair Labor Standards Act

Which of the following is an accurate statement about the effect of lapse of time on agency relationships?

If an agency agreement specifies that the agency exists for a certain time, the relationship ends when the amount of time expires.

Which of the following is not a way in which an agency relationship can be terminated by the acts of the parties involved?

Judgment notwithstanding the verdict Declaratory judgment

An agency coupled with an interest is an agency relationship that is created for the benefit of ______.

agents

Expressed agency is also known as agency by ______.

agreement

Agency relationships are ______ relationships.

consensual

A(n) ______ trust is an equitable trust imposed on a person who wrongfully obtains or holds legal right to property he or she should not possess.

constructive

When a principal enacts a(n) ______ trust, the court rules that the agent is merely holding the property or goods in trust for the principal, granting the principal legal right or possession.

constructive

Apparent agency is also known as agency by ______.

estoppel

In an ______ agency relationship, the agent has express authority.

expressed

The most common type of agency is ______.

expressed agency

Given that an agent is the one who benefits, an agency coupled with an interest is also known as "power given as ______."

security

When a principal is classified as a ______ principal, a third party knows the identity of the principal.

disclosed

______ authority is the authority of an agent that arises by inference from the words and actions of the principal.

Implied

In the context of agency, identify a true statement about the relationship between express authority and implied authority.

Implied authority cannot conflict with any express authority.

______ is a Latin phrase meaning "let the superior speak."

Respondeat superior

The avenues for creating agency include a form of authority that attaches to that type of agency. Which of the following is not part of these avenues?

Symbolic agency

Which of the following is not one of the three types of business relationships to which agency laws are relevant?

The principal-third-party beneficiary relationship

When an agent agrees to act on behalf of a principal, the agent is a(n) ______, a person in a position of trust and confidence and, as such, owes certain duties to the principal.

fiduciary

If a third party reasonably believes on the basis of a principal's actions that an agent has authority to represent the principal, the principal must uphold any agreements made with the agent, who has ______ authority.

apparent