Chapter 14 True or Flase
A check-out clerk at the grocery store is typically in a master-servant relationship, not an agency relationship. a. True b. False
a
A general power of attorney is usually given to a universal agent. a. True b. False
a
A major duty of principals to their agents is to indemnify them under most circumstances for liabilities incurred in completing the purpose of the agency. a. True b. False
a
A person appointed by an agent to help the agent for certain specific transactions is a special agent. a. True b. False
a
An auctioneer who sells goods is likely an agent and independent contractor. a. True b. False
a
A contract made by an agent on behalf of an undisclosed principal is never binding on a third party who did not know about the principal. a. True b. False
b
A general power of attorney is usually given to a special agent. a. True b. False
b
Apparent authority arises when agent concludes that there is an appearance of authority from the principal to act on behalf of the principal in dealing with third parties. a. True b. False
b
Express or actual authority may only be created by written instruction or written contract. a. True b. False
b
Federal law states that employers are not liable for actions of employees based on their use of social media in the workplace. a. True b. False
b
Fiduciary duties apply to principals; agents have only non-fiduciary duties. a. True b. False
b
Geary was fired by his supervisor for revealing to higher management a serious problem with a company product. He sued for wrongful dismissal. You would expect the court to hold that Geary would be successful because he proved that if the product had gone to market it could have cost many lives. a. True b. False
b
Gratuitous agents are appointed by other agents to undertake some work for the principal. a. True b. False
b
If either the principal or agent dies, the agency relationship is suspended until replacements continue the agency's purpose. a. True b. False
b
The legal document intended for the purpose of expressly establishing an agency is the attorney-in-fact. a. True b. False
b
the two general classifications of authority an agent can possess are general authority and implied authority. a. True b. False
b
An undisclosed principal is a principal whose identity is unknown to the third party with whom the agent is involved. a. True b. False
a
When a principal's conduct appears consistent with the existence of an agency relationship, an agency by estoppel may be created. a. True b. False
a
When an agent has the power to do *whatever is reasonable* and customary to carry out the agency purpose, the agent has *implied* authority. a. True b. False
a
When an agent is allowed to delegate duties to other agents, the other agents are subagents who assist the agent. a. True b. False
a
When an agent is authorized to execute* all transactions connected with a business*, the person is a general agent. a. True b. False
a
A principal may designate someone to do all acts that can be legally delegated to an agent. That agent is called a general agent. a. True b. False
b
A principal may designate someone to execute all transactions connected with running a business. Such a person is known as a special agent. a. True b. False
b
A subagent is an agent of an agent, not an agent of the principal, so owes no duty to the principal, only to the agent. a. True b. False
b
Agency relationships must be evidenced by a written contract. a. True b. False
b
Agency relationships used to be common in decades past, but in recent years they have fallen out of favor. a. True b. False
b
An employer held responsible for the torts of an employee is said to have vicarious liability. a. True b. False
a
An express contract for certain terms of employment can restrict employment at-will. a. True b. False
a
An express ratification takes place when the principal gives a clear signal to be bound by an action that would otherwise be unauthorized. a. True b. False
a
An independent contractor is not an employee of the person who hires her. a. True b. False
a
An independent contractor is usually not an agent of the principal who hired her, but can have that role too. a. True b. False
a
A principal held responsible for the torts of an agent is said to have vicarious liability. a. True b. False
a
A principal is contractually liable to a third party if that party enters into a contract presented by an agent with apparent authority to act for the principal. a. True b. False
a
A principal may designate someone to do all acts that can be legally delegated to an agent. That agent is called a universal agent. a. True b. False
a
A principal's major reason for developing agency relationships is to expand business opportunities. a. True b. False
a
A real estate agent who sells a house on commission is an agent, not an employee of the home owner. a. True b. False
a
A company hired independent contractors to sell their products door-to-door. One sales rep, who had a criminal history, assaulted a customer, who sued the parent company. You would expect the court to hold the company liable for negligence. a. True b. False
a
A senior manager at a car dealership is likely both an agent and employee. a. True b. False
a
A stocker in a grocery store is an employee but not an agent for the store. a. True b. False
a
Actual authority involves powers given by the principal to the agent. a. True b. False
a
Agencies may be terminated by operation of law, without either party taking any action. a. True b. False
a
Agency relationships may be based on an oral agreement. a. True b. False
a
Agents have a duty of obedience to their principals, which means that if the agent ignores the principal's instructions, she violates her duty. a. True b. False
a
Agents have a fiduciary duty to their principals. a. True b. False
a
Agents have no obligation to engage in activity on behalf of principals that could lead to personal liability. a. True b. False
a
An *implied* ratification takes place when the principal *behaves* as if she has the intention of ratifying an unauthorized agreement. a. True b. False
a
An agency relationship may terminate by lapse of time. a. True b. False
a
An agency that is for the sale of land usually must be evidenced by a written contract. a. True b. False
a
An agency that is to last more than one year usually must be evidenced by a written contract. a. True b. False
a
An agent has a duty to notify his principal of all facts relevant to the purpose of the agency. a. True b. False
a
An agent's authority is the power to change the principal's legal obligations. a. True b. False
a
An employer could be liable for acts of an employee based on negligent hiring. a. True b. False
a
An employer could be liable for sexual harassment by an employee using social media improperly in the workplace. a. True b. False
a
An employer should be cautious about hiring persons with criminal backgrounds that mean they could pose a threat to others as the employer could be liable for unauthorized torts that occurred on the job. a. True b. False
a
Apparent authority arises when the principal creates an appearance of authority in an agent that leads a third party to conclude that the agent has authority to act for the principal. a. True b. False
a
Destruction of the subject matter of an agency ends an agency relationship. a. True b. False
a
Employers may wish to state that employee handbooks are not binding contracts. a. True b. False
a
Employment-at-will means that, unless a contract holds otherwise, employers are free to fire workers at any time for any reason and employees are free to quit their jobs at any time for any reason. a. True b. False
a
European nations generally have more detailed rules regarding employees than does the U.S. a. True b. False
a
Geary was fired by his supervisor for revealing to higher management a serious problem with a company product. He sued for wrongful dismissal. You would expect the court held that Geary's dismissal was proper under employment-at-will despite his good motives. a. True b. False
a
If Hilda volunteers to sell Heidi's horse for her, because Hilda knows lots of potential buyers, and Heidi agrees, Hilda is a gratuitous agent. a. True b. False
a
If a hurricane is coming and you spend $800 to buy supplies to protect your neighbor's house against storm damage, when they are gone and cannot be reached, you may have created an agency by operation of law. a. True b. False
a
If a principal behaves as if he intended to ratify an unauthorized agreement between his agent and a third party, a court will find that implied ratification has occurred. a. True b. False
a
If an American company sends an American employee to work in its office in France, the employee may be under French employment law. a. True b. False
a
If an agency relationship did not establish a rate of compensation for the duties of the agent, the principal must pay the "customary" rate for such services. a. True b. False
a
If an agent commits a tort outside the agent's scope of employment, the agent is liable to the third party for damages incurred. a. True b. False
a
If an agent is discovered to be representing conflicting interests, she has violated her duty of loyalty. a. True b. False
a
If someone volunteers to act as a gratuitous agent, and performs a task, such as selling a car, for a principal, the legal consequences are the same as if the agent were paid. a. True b. False
a
If you hire a builder to build a home, he is likely an independent contractor for you. a. True b. False
a
In an emergency, when someone acts on behalf of someone else in order to avoid a loss, the law may create an agency by operation of law. a. True b. False
a
In the case of an undisclosed principal, a third party is unaware of the identity of the principal as well as the existence of an agency relationship. a. True b. False
a
Power of attorney is based on a legal document. a. True b. False
a
Power of attorney is given to an agent called an attorney-in-fact. a. True b. False
a
Principals are presumed to have a duty to cooperate with their agents. a. True b. False
a
Principals have an obligation to reimburse their agents for their normal business expenses related to the agency, unless otherwise agreed. a. True b. False
a
Principals may be bound by the unauthorized acts of agents if the agent appears to third parties to have the authority to act. a. True b. False
a
Ratification is an affirmation by the principal of an unauthorized agreement by a person acting as an agent with a third party. a. True b. False
a
Some state courts hold that employment contracts contain implied covenants of good faith and fair dealing. a. True b. False
a
The agency relationship is a key part to most business operations. a. True b. False
a
The death of a principal would affect the validity of contracts then made by the agent for the principal. a. True b. False
a
The rule of law imposing vicarious liability on an innocent principal for the torts of an agent is respondeat superior. a. True b. False
a
The two general classifications of authority an agent can possess are actual authority and implied authority. a. True b. False
a
Traditionally, employees did not act as agents for their principals, but today employees may well also be agents. a. True b. False
a
When an agent pays for the right to exercise authority for a business, there is an agency coupled with an interest. a. True b. False
a
A company hired independent contractors to sell their products door-to-door. One sales rep, who had a criminal history, assaulted a customer, who sued the parent company. The company was not liable because the sales rep was an independent contractor. a. True b. False
b
Agents rarely can change a principal's legal obligations. a. True b. False
b
All employee handbooks are held to create binding contractual obligations on the part of employers who use them. a. True b. False
b
All valid agency relationships are contracts. a. True b. False
b
An agent is expected to perform responsibilities with the degree of care that is called ordinary care under the circumstances. a. True b. False
b
An agent makes a contract with a third party on behalf of the disclosed principal. The principal then breaches the contract. The third party may sue the agent to recover damages. a. True b. False
b
An agent may not legally bind a principal to contracts without the principal agreeing to each contract. a. True b. False
b
An express ratification takes place when the principal behaves as if she has the intention of ratifying an unauthorized agreement. a. True b. False
b
An independent contractor is an agent and an employee of the person who hired her. a. True b. False
b
If money is commingled (funds of agent mixed with funds of the principal), a violation of duty to account occurs only if the principal can show actual harm. a. True b. False
b
If the subject matter of an agency agreement is destroyed, the agency relationship continues until new subject matter is found. a. True b. False
b
In an agency relationship, the agent is a neutral party regarding contracts between the principal and third parties. a. True b. False
b
In her relations with her principal, an agent must meet the "ordinary standard of conduct" imposed on people engaged in business dealings. a. True b. False
b
Legal obligations in an agency run from agent to principal, not principal to agent. a. True b. False
b
One factor that courts may consider when trying to decide if an independent contract or employee relationship exists is whether or not the contractor has the right to direct or control the work of the employer. a. True b. False
b
Power of attorney may only be held by a licensed attorney. a. True b. False
b
Principals are liable for *all* torts committed by their agents. a. True b. False
b
Principals are presumed at common law to have no duties to their agents. a. True b. False
b
Principals only duty to agents is to compensate. a. True b. False
b
