Legal Foundations of Business Chapter 20

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Assume that a car salesperson is employed to sell the​ principal's car. The principal tells the agent that the car was repaired after it was involved in a major accident. If the agent intentionally tells the buyer that the car was never involved in an​ accident, the agent has made an intentional misrepresentation. Which of the following statements is​ true?

Both the principal and the agent are liable for this misrepresentation.

Which of the following is NOT an important question to answer in determining whether an​ agent's conduct occurred within the scope of his or her​ employment?

Did the agent possess the required professional​ licensure(s)?

Which of the following is an accurate statement regarding the liability of a principal for an independent​ contractor's torts?

Generally, a principal is not liable for the torts of its independent contractors.

Suppose Qixia hires​ Harold, a lawyer and an independent​ contractor, to represent her in a court case. While driving to the courthouse to represent Qixia at​ trial, Harold negligently causes an automobile accident in which Mildred is severely injured. Which of the following is an accurate statement regarding the liability of Qixia​ and/or Harold for​ Mildred's injuries?

Harold is liable for​ Mildred's injuries, but Qixia is not liable.

Which of the following about independent contractors is​ true?

Labeling someone an independent contractor is only one factor in determining status

Rani decides to sell her house and hires​ Mark, a real estate​ broker, to list and sell the house for a price of​ $1 million. They agree that Mark will disclose the existence of the agency and the identity of the principal to interested third parties. Mark shows the house to​ Heather, a prospective​ buyer, and does not disclose to Heather that he is acting as an agent for Rani. Heather agrees to buy the​ house, and Mark signs the contract on behalf of Rani. Which of the following statements is​ true?

Rani, the​ principal, and​ Mark, the​ agent, both are liable.

Rani decides to sell her house and hires​ Mark, a real estate​ broker, to list and sell the house for a price of​ $1 million. They agree that Mark will disclose the existence of the agency and the identity of the principal to interested third parties. Mark shows the house to​ Heather, a prospective​ buyer, and discloses to Heather that he is acting as an agent for Rani. Heather agrees to buy the​ house, and Mark signs the contract on behalf of Rani. Which of the following statements is​ true?

Rani, the​ principal, is liable on the​ contract, but​ Mark, the​ agent, is not.

An agent who enters into a contract on behalf of another party impliedly warrants that he has the authority to do so. This is called the​ agent's implied warranty of​ _____.

authority

In a partially disclosed​ agency, who would be liable to the third​ party?

both the principal and the agent

In an undisclosed​ agency, who has liability to the third​ party?

both the principal and the agent

If an agent acts for two or more different principals in the same​ transaction, this is known as​ ________.

dual agency

When an agent runs personal errands while on the​ job, this is known as​ __________, which would release the principal from liability.

frolic and detour

Outsiders who are employed by principals to perform certain tasks on their behalf are called​ ________.

independent contractors

A principal is liable for an​ agent's ________.

intentional and innocent misrepresentations made within the scope of his or her authority

The term respondeat superior literally means​ "_____," and is based on the legal theory of vicarious​ liability, which is liability​ _____.

let the master​ answer; without fault

If an agent acquires confidential information during the course of the agency and uses it to his or her​ advantage, this is known as​ ________.

misuse of confidential information

A principal is liable under the doctrine of vicarious liability for intentional torts of agents and employees committed within the​ agent's scope of employment. The​ _________ tests are the two tests applied by courts to determine whether an​ agent's intentional torts were committed within the​ agent's scope of employment.

motivation and​ work-related

Under the standard for the​ __________________, an employerlong dash​the______________long dashis not liable if an​ employee, who is motivated by​ jealousy, injures someone during work hours on the premises who dated the​ employee's boyfriend. In this​ standard, the​ employee's personal motivation is important to the standard.

motivation​ test; principal

Agents owe a duty​ _______________ to the principal.

of loyalty

A​ principal, Nigel​ Jones, and an​ agent, Marcia​ McKee, agree that the agent will represent the principal to purchase a business and that the agent will disclose the existence of the agency and identity of the principal to third parties. The agent finds a suitable business and contracts to purchase the business on behalf of the​ principal, but the agent mistakenly signs the contract​ "Marcia McKee,​ agent." This is​ a(n) _____ agency that occurs because of​ _____.

partially​ disclosed; mistake

A real estate agent who is employed to purchase real estate for a principal cannot secretly sell his or her own property to the principal. This is because agents are generally prohibited from undisclosed​ _____ with the principal.

self-dealing

When an agent exceeds the scope of his or her​ authority, who is liable to the third​ party?

the agent only

Who is liable for the torts of an independent​ contractor?

the independent contractor only

Who is liable if an independent contractor enters into a contract without authority from the​ principal?

the independent contractor only

In a fully disclosed​ agency, who is liable to the third​ party?

the principal only

Who is liable for the injury caused by inherently dangerous activities that a principal assigns to an independent​ contractor?

the principal only

Who is liable if an independent contractor enters into a contract with authority from the​ principal?

the principal only

If an agent is offered a business opportunity that is meant for the principal and the agent takes advantage of​ it, this is known as​ ________.

usurping an opportunity

Suppose that an agent works for a principal that is in the business of real estate development. The principal is looking for vacant land to purchase to develop. A third party who owns and wants to sell his vacant land tells an agent of the principal of the availability of the land. The​ agent, without informing the​ principal, purchases the land for her own use. The agent is wrongfully​ _____ an​ opportunity, and thereby violating the​ agent's duty of​ _____.

usurping; loyalty

A principal is liable for an​ agent's actions​ _________________.

when the agent is negligent when acting within the scope of his or her authority

Which of the following is also NOT a critical factor in determining independent contractor​ status?

whether the worker is employed in an​ "employment-at-will" jurisdiction

Which of the following is NOT a critical factor in determining independent contractor​ status?

whether the​ employer's form of business ownership is sole​ proprietorship, partnership, traditional corporation​ (C-corp), Subchapter S corporation​ (S-corp), or limited liability company​ (LLC)

In determining the degree of control that the principal has over the​ party, the courts will look at all of the following​ EXCEPT?

work for a number of clients

Under the standard for the​ __________________, an employerlong dashthe ​______________long dashcan be liable if an​ employee, who is motivated by​ jealousy, injures someone during work hours on the premises. Under this​ standard, the​ employee's motivation is immaterial for liability purposes.

work-related test; principal


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