Module 3: Ch. 33, 34,35
With an undisclosed principal, who is liable to a third party?
The agent
Which of the following is correct if the purpose of an agency relationship has been fulfilled?
The agent no longer has the authority to act on the principal's behalf.
Which of the following is false regarding the franchise agreement?
The franchisor can establish the price at which the franchisee sells the goods.
Suppose that while working on the outside of the building he is renovating, an independent contractor injures an innocent bystander when he inadvertently drops a pile of bricks. Who will be liable for the contractor's actions in this scenario?
The independent contractor
Cleveland and Archie operate an antique store, owned as a partnership between the two. Cleveland disappeared. A few days later, Archie learned that Cleveland embezzled $90,000 of government grant money that was given in pandemic relief for their store during the Covid-19 crises. Is Archie responsible for the $90,000?
Yes, because Archie and Cleveland are partners.
Which of the following types of notice directly informs a third party that an agency agreement has been terminated?
actual
Powers of Blank______ can be given for business and health care purposes.
attorney
Which of the following is not a way an agency relationship will terminate by acts of the parties?
Change in circumstances
Which of the following is false regarding European Union (EU) law and termination of the agency relationship?
Released agents in the EU do not receive compensation if they have brought the principal new customers from whom the principal continues to profit.
What is the correct term for the investor-owners of a corporation?
Shareholders
Corporate shareholders have Blank______ liability for corporate debts.
limited
The Blank______ liability company is an unincorporated form of business organization that combines the most advantageous features of partnerships and corporations.
limited
The Blank______ combines the tax advantages and management flexibility of a partnership with the limited liability of a corporation.
limited liability company
Whenever a duty is imposed on the principal, a(n) Blank______ right exists for the agent.
corresponding
In an agency by estoppel, the important factor is whether the principal acts to: Blank______.
create the impression that the agent has the authority to act on behalf of the principal
If a limited partner dies, the limited partnership is usually dissolved.
false
John hired Michelle to negotiate a very important contract on his behalf. Michelle would be considered a(n) ________blank.
fiduciary
Powers of attorney are often given for: Blank______.
health care and business purposes
Jean wants to file a discrimination case against her employer, and she retains Daryl as her employment law attorney. Daryl agrees that she has a case and assures her he will file the case for her. If Daryl fails to file the action on time, Daryl will fail in his duty of: Blank______.
performance
The only time a principal can be liable for the crime of an agent is when the: Blank______.
principal authorized the criminal act
The principal has vicarious liability in a principal-agent relationship because the: Blank______.
principal negligently hired the agent
Which of the following is not a recognized component of an agency relationship?
subrogation
If an agent acts with no authority from a principal and enters into a contract with a third party, who is liable if there is a legal dispute regarding the agreement?
the agent
If an agent makes a substantial departure from the course of employer's business and a legal incident occurs, who will be liable?
the agent
Who is liable to a third party if an agent exceeds his or her authority to act on behalf of the principal?
the agent
Tom hired Taylor to rake his leaves. When Taylor finished, Tom thanked him and shook his hand. Since nothing was said between the two parties about payment, agency theory indicates that Tom owes Taylor: Blank______.
the customary fee for Taylor's work
An employer cannot escape liability for an independent contractor's tort if: Blank______.
the employer directs the contractor to commit the tort
Which of the following forms of business organizations is an agreement between at least one general partner and at least one limited partner?
the limited partnership
In an agency relationship, the agent is authorized to act for and on behalf of: Blank______.
the principal
The principal is always liable in tort to someone who relied on the agent's misrepresentation if: Blank______.
the principal authorized the agent to engage in an act and the agent misrepresented himself or herself intentionally or unintentionally
If an agent commits a tort against a customer, the customer often argues that: Blank______.
the principal is liable because he or she should have taken more care in hiring the agent
Courts often refer to an employee's substantial departure as a(n): Blank______.
"frolic of his own"
The right to recover damages is referred to as the right of: Blank______.
indemnification
A principal has the duty of reimbursement and: Blank______.
indemnification of the agent
The Restatement of Agency defines a person who contracts with another to do something for him, but is not controlled by him nor subject to the other's right to control with respect to his physical conduct in the performance of the undertaking, as a(n): Blank______.
independent contractor
The theory of respondeat superior does not apply to: Blank______.
independent contractors
If the principal or the agent dies, the agency relationship: Blank______.
is automatically terminated
Simon hired Becky as his agent. Becky's responsibilities included making real estate contracts on behalf of Simon. Which of the following is correct regarding the agency agreement between Simon and Becky?
it must be in writing
A Blank______ is a relationship between two or more persons or corporations created for a specific business undertaking.
joint venture
The Blank______ is a relationship between two or more persons or corporations that is created for a specific business undertaking.
joint venture
A syndicate is usually considered a type of Blank______; this, they are almost always governed by Blank______ law.
joint venture; partnership
In a principal-agent relationship, the duty of loyalty requires that the agent: Blank______.
keep confidential any information about the principal
If an agent is acting within his or her authority regarding a contract that involves an undisclosed principal, the agent is ________blank.
liable for the contract
A(n) Blank______ partnership is an agreement between at least one general partner and at least one limited partner.
limited
The duty that requires the agent to to keep all information about the principal confidential both during the agency relationship and after is known as the duty of: Blank______.
loyalty
In a Blank______, the franchisor provides the franchisee with the formula or necessary ingredient to manufacture a product.
manufacturing arrangement
When an agent is given the power of attorney, the agreement: Blank______.
must be in writing
If an agent has no authority to act on behalf of a principal but still enters into a contract with a third party, the principal is: Blank______.
not bound to the contract unless the principal ratifies the agreement
An agent who acts within the scope of his or her authority on behalf of a disclosed principal is: Blank______.
not liable for the acts of the principal
An agent's apparent authority continues until the principal: Blank______.
notifies third parties that the relationship has ended
The principal's duty Blank______ means to assist the agent in the performance of his or her duties.
of cooperation
An agency relationship can be terminated by a lapse Blank______ if the agreement specifies that the relationship will expire.
of time
The major disadvantage of partnerships is that: Blank______.
partners are personally liable for the firm's debts
The duty that requires an agent to perform his or her duties as required by the agency agreement is known as the duty of: Blank______.
performance
In an agency coupled with an interest, the agency relationship is also called ________blank.
power given as security
In an agency relationship, the person who hires the agent is known as the: ______.
principal
When an employer hires an employee to enter into contracts on its behalf, this is known as a(n) Blank______ relationship.
principal-aent
Which of the following are types of business agency relationships? (Check all that apply.)
principal-agent, employer-independent contractor, employer-employee
Agency law is primarily Blank______ law.
state
Agency law is primarily governed by ________blank.
state law
A corporation must be created according to: Blank______.
state law only
Corporate income is: Blank______.
subject to double taxation
Generally, if a principal or an agent has been adjudicated insane, the agency relationship is: Blank______.
terminated
If Pang hires Jacquelyn to paint his house green and the city council soon thereafter passes a law making it illegal to paint houses green, the new law automatically Blank______ the agency agreement.
terminates
If an agent loses qualifications needed to perform duties for the principal, the agency relationship: Blank______.
terminates
If an unusual change in circumstances leads the agent to believe that the principal's instructions do not apply, the agency relationship: Blank______.
terminates
If a new law is passed that makes an agency relationship illegal, what happens to the agreement?
the agency agreement is terminated
Suppose that a United States principal has an agent in China authorized to conduct business dealings on the principal's behalf. If the U.S. goes to war with China, what effect will this have on the agency agreement?
the agency agreement will terminate
If an agent commits a crime without authorization from the principal, who is liable for the crime?
the agent only
What happens when an agent acquires interests that conflict with the principal?
the agreement is terminated
Which of the following is a specialized form of business organization?
the business trust
Which of the following specialized forms of business organizations is defined as an organization formed by individuals who pool resources to gain a market advantage?
the cooperative
Generally, an employer is liable for which of the following?
the tort of its employees
Raj informs his insurance agent that he wishes to purchase a comprehensive insurance policy for his house and all of the contents. The agent forgot to process the insurance. The following week, Raj's home caught on fire and suffered extensive damage. Raj could bring a claim against the agent for failure to honor his duty: Blank______.
to perform
ACME Construction Company hired Janelle as a clerical worker. Janelle began to cough and have headaches during work hours, and it was discovered that her symptoms were caused by various toxic substances that were present at the company's facility. ACME Construction Company has breached its duty: Blank______.
to provide safe working conditions
Suppose an agent negotiates a contract on behalf of a principal. The contract is breached through the agent's negligence, and the principal is then sued by the third party. The principal can sue the agent: Blank______.
to recover the amount assessed to the third party
A principal can revoke an agent's authority without liability if the agent has breached the fiduciary duty to the principal.
true
If a third party does not know that an agent is acting on behalf of a principal, the principal is a(n) Blank______ principal.
undisclosed
If the third party is aware of the principal's existence but not his or her identity, the principal is classified as a(n) Blank______.
unidentified principal
In the United Arab Emirates (UAE) under both Commercial Transaction Law and UAE Civil Code, ________blank are entitled to seek compensation in the event of termination.
unregistered agents
Agency agreements usually do not need to be in writing unless the agent: Blank______.
will enter into a contract that the statute of frauds requires to be in writing
What type of power of attorney is meant to continue beyond the principal's incapacitation?
A durable power of attorney
Which of the following is correct regarding powers of attorney?
A durable power of attorney specifies that the agent's authority is intended to continue beyond the principal's incapacitation.
What type of power of attorney allows the agent to conduct all business for the principal?
A general power of attorney
If an agent fails in his or her duties to the principal, that failure provides the basis for which of the following?
A tort or contract action against the agent
An agent who commits a tort that injures a third party is personally liable for his or her actions only if the principal is an undisclosed principal.
False
What type of principal is known to exist, but whose identity is not known by a third party who is entering into an agreement with an agent of the principal?
An unidentified principal
Which of the following is not an advantage of operating a business as a sole proprietorship?
Articles of organization promote managerial efficiency
Which of the following statements is true about taxes in a limited partnership?
Both limited partners and general partners pay taxes on their share of the profit.
Which are the following remedies are potentially available when a principal violates agency agreement?
Both tort and contract remedies
The Civil Code of ________blank defines a legal person as "an organization which possesses civil legal capacity for civil acts and which, according to the law, independently enjoys civil rights and assumes civil obligations."
China
Which of the following is not a relevant question in determining whether a wrongful act occurred within the scope of employment?
Did the employer earn a profit in the fiscal year immediately preceding the wrongful act?
Which of the following is the term used to describe the duty and responsibilities of the agent as specified in the agency agreement?
Duty of performance
Which of the following is correct regarding a limited liability partnership (LLP)?
Each partner in an LLP is responsible for his or her own negligence and the negligence of those that he or she supervises.
Which of the following is not a type of independent contractor?
Elementary school teacher
Which of the following is correct regarding whether Greg has any right of recovery against Simone for his injured foot?
Greg has a right of recovery against Simone.
Which of the following is false regarding revocation of the authority of an agent and renunciation by an agent?
If an agent has breached a fiduciary duty to the principal, the principal can revoke the agent's authority, but the agent may be entitled to damages.
Which of the following results in termination of an agency relationship by operation of law?
Impossibility
Which of the following is false regarding a limited liability partnership (LLP)?
In most states, the LLP is considered a separate legal entity.
Which country is partially influenced by classical Islamic law and suggests that under respondeat superior those who cause harm should repair it?
Iraq
In non-contractual relationships, in order to force the principal to perform the contract, the agent may seek which of the following?
Recover for services rendered
Identify the ways in which the agency relationship can be terminated by the acts of the parties involved. (Check all that apply.)
Revocation of authority Fulfillment of purpose Lapse in time
PJ is starting a new gaming adventure by himself. Which of the following organizational formats would he want to form, if ease of formation was his primary objective?
Sole proprietorship
Which federal agency is particularly interested in determining whether workers are employees or independent contractors?
The IRS
What happens to an agency relationship following the death of the agent?
The agency relationship is terminated.
The Blank______ governs voluntary associations between two or more people who co-own a business for profit in most states in the absence of an express agreement.
Uniform Partnership Act
What is the legal theory that a principal is liable for the actions of an agent who is working for him or her?
Vicarious liability
Which of the following is not a factor considered by courts in determining whether an act committed by an employee occurred within the course and scope of employment?
Whether the employee had worked for the employer for a substantial period of time
Which of the following is correct regarding an agent's rights and remedies against a principal?
While agency relationships are intended to benefit the principal, agents are not without rights and remedies.
Gabriel sent Arthur on a trip to San Diego to purchase some antique furniture that Gabriel planned to resell. Arthur paid for his own airline ticket, lodging, and meals. Is Gabriel required to reimburse Arthur for his trip expenses?
Yes, because Arthur is Gabriel's agent and as such, he is entitled to reimbursement.
Ritten is employed full-time as a widget sales person for Widgets Incorporated Ritten receives commissions for all his sales. When he receives his pay check he is sure that Widgets Incorporated has shorted him a portion of his commission. Ritten could ask for ________blank.
an accounting
When can a principal revoke an agent's authority?
at any time
When a third party is aware that an agent is making an agreement on behalf of a principal and also knows who the principal is, the principal is a Blank______.
disclosed principal
In a Blank______, the franchisor manufactures a product and licenses a dealer to sell it in an exclusive territory.
distributorship
A principal's obligation to pay an agent for his or her services is called the
duty to compensate
A third party injured through the negligence of an employee can sue: Blank______.
either the empoyee or employer
Indemnification involves the employer seeking remuneration from the: Blank______ for damages the employer has paid.
employee
Which of the following are agents of an employer?
employees
A(n) ________blank relationship has formed when the employer has the right to control the conduct of employees.
employer-employee
If an independent contractor is engaged in ________blank activities for the principal, the principal will be responsible for any damages by the independent contractor.
extremely hazardous
Insolvency automatically results in termination of the agency relationship.
false
Under the duty of obedience, the agent must follow the lawful or unlawful instruction and direction of the principal.
false
An agency relationship is a(n) Blank______ relationship.
fiduciary
Agency through Blank______ authority cannot conflict with any Blank______ authority that has been given.
implied; express
Which of the following is correct regarding a power of attorney?
It is a specific form of express authority, usually in writing, granting an agent specific powers.
Which of the following is correct regarding a durable power of attorney?
It specifies that the agent's authority is intended to continue beyond the principal's incapacitation.
Which of the following is not an advantage of operating a business as a partnership?
Limited liability of partners
Does the president of Kool Science have the authority to sign a contract with a supplier on behalf of Language Fun for the language-science kits?
No, because he is not an agent of Language Fun.
What is the rationale behind vicarious liability?
The employer benefits from the work of the employee; therefore, the employer should also be responsible for any harm the employee causes.
Which specialized form of business organization exists because of an arrangement between the owner of a trade name or trademark and the person who sells goods or services under the trade name or trademark?
The franchise
Which statement is true regarding S corporations?
They may be formed under state law.
Bert was Myra's real estate agent. Bert purchased a piece of property for Myra, but when it came time to turn over the property, Bert retained the property. In this scenario, Myra: Blank______.
can put a constructive trust on the property
If the employer has the right to substantially control the worker's day-to-day operations, the worker is generally considered a(n): Blank______.
employee
An agency relationship that is formed through the conduct of the parties is known as an agency by Blank______ authority.
implied
Suppose that Noelle hires a real estate agent to sell her house. Before the house can be sold, the agent loses his real estate license. What happens to the agency relationship in this scenario?
it terminates
A(n) Blank______ company is a partnership agreement in which company members hold transferable shares, while all the goods of the company are held in the names of the partners.
joint stock
A ________blank is a partnership agreement in which company members hold transferable share while all the goods of the company are in the names of the partners.
joint stock company
A limited liability company (LLC) is formed by filing articles of Blank______ in the state in which its members want to establish their LLC.
organization
A sports company has hired a very famous athlete to endorse a line of sports products. The relationship between the sports company and the athlete is: Blank______.
principal-agent
An agent cannot represent both the principal and a third party because: Blank______.
there could be a conflict of interest
An employer can gain ownership of the work of an independent contractor only by an agreement between both parties that a specific work is a work for hire.
true
Changed circumstances can result in termination of the agency relationship through operation of law.
true
Cooperatives may be incorporated or unincorporated.
true
The law typically assumes that the principal is aware of all information revealed to the agent, regardless of whether the agent shares it with the principal.
true
If a principal is disclosed, an agent who exceeds her authority cannot be sued for breach of contract because he or she: Blank______.
was never an intended party to the contract
The law typically assumes that a principal is aware of all of the information that: Blank______.
was revealed to the agent
The Latin phrase respondeat superior means "let the superior speak."
true
Which of the following results in termination of an agency by acts of the parties?
An agency coupled with an interest
Which of the following is correct regarding an S corporation?
It is a corporation under federal tax law but is taxed like a partnership as long as it follows certain regulations.
Which of the following is false regarding the power of attorney?
It is a general form of implied or apparent authority.
A(n) Blank______ is a person who has a duty to act primarily for another person's benefit.
fiduciary
A(n) Blank______ agent is one who acts without consideration.
gratuitous
Agency law is especially important for: Blank______.
United States firms doing business globally
What is Wendy's best cause of action?
Wendy should sue Rob for breach of implied warranty.
Which of the following is not typically addressed in a franchise agreement?
Whether the agreement constitutes a general partnership or a limited partnership
Which of the following is an advantage of a franchise for the franchisor?
The franchisor takes a low risk in starting the franchise.
Which of the following is correct if a principal and an agent decide they do not wish to continue in the agency relationship?
They can cancel the agreement and terminate the relationship.
A principal must authorize the power of attorney while he or she is: Blank______.
competent
Michael and Sheridan have determined that they would be great business minds. They decide to start a new business together where they will join forces to open a business that offers health and nutrition classes along with personalized training workouts. This would be a(n) ________blank.
joint venture
If the franchisee does not meet the requirements in the franchise agreement, the franchisor can terminate it, but must give sufficient Blank______.
notice
A principal owes specific duties to: Blank______.
the agent
What type of liability does a principal have when it authorizes an agent to engage in an act and the agent intentionally or unintentionally falsifies his or her role?
Misrepresentation
Wilson wants to have an office in Florida, Arizona and one in New Mexico where most snowbirds go for the winter. Nadine tells Wilson that, if they form an LLC, they only need to file paperwork in one of those states. Is she correct?
No, LLCs usually need to register in every state in which they intend to operate.Correct
Cheryl is 16 years old. Can she hire Jerry, a 20-year-old, as an agent to make contracts on her behalf?
No, because Cheryl is a minor and thus cannot hire an agent.
Which of the following is a disadvantage of operating a business as a sole proprietorship?
Personal liability for business debts
An employer may be responsible for any tortious acts of the employee if the: Blank______.
employer knew that the employee had a tendency to commit such acts
An agency by agreement is also known as an: Blank______.
expressed agency
A limited partnership and a limited liability partnership refer to the same type of business organization.
false
The law assumes that the principal is aware only of information actually provided to the principal by the agent.
false
A person who has the duty to act primarily for the benefit of another person is known as a(n)
fiduciary or agent
Which of the following is correct regarding whether Jason is liable to Sakura for the cost of the book if Sakura pays Gwen the purchase price?
Jason is liable to Sakura for the cost of the book.
All employees are agents of their employers, and all agents are employees.
false
An individual who lacks contractual capacity may hire an agent to make contracts on his or her behalf.
false
Due to the fiduciary nature of an agency relationship, an agent cannot terminate the agency by renouncing the authority given to him or her.
false
Employers are generally liable in tort for the actions of their employees and independent contractors.
false
If an agent has no authority to act on behalf of a principal, but the agent still enters a contract with a third party, the principal is not bound unless ________blank.
the principal ratifies the agreement
If a contract exists and the principal agrees to certain conditions but fails to perform them, the agent may seek court assistance in forcing the principal to: Blank______.
perform the contract as specified
Which form of business organization is a legal entity formed by selling shares of stock to investors?
The corporation
If there is no agreement between a principal and an agent regarding the amount for which the principal will compensate the agent, which of the following statements is true?
Compensation will be calculated according to the customary fee in the situation.
For an agency agreement to terminate through lapse of time, which of the following must occur?
The agency agreement must specify that the agreement will expire at a designated time.
Marta is an attorney representing Lola in her suit against a pharmaceutical company. If the pharmaceutical company offers Marta a job and she accepts, what will happen to the agency agreement between Marta and Lola?
The agency agreement will terminate because Marta has acquired an interest opposed to Lola's interests.
If an agent renounces the agency relationship, which of the following is correct?
The agent can be liable for breach of contract if the agency agreement stated a specific amount of time that the relationship is to exist.
In certain situations, the agent is the only party liable for the contract even when the agent acts within his or her authority on behalf of an undisclosed principal. Identify these situations. (Check all that apply.)
The contract expressly excludes the principal from the contract. The third party enters into a contract with the agent such that the agent's performance is required and the third party may reject the performance of the principal.
What was the result in Taxinet, Corp. v. Leon, the case in the text involving whether an agreement to enter into a joint venture existed from the emails, text messages, and oral conversations between the parties
The court found that a joint venture did not exist because there was no meeting of the minds from the emails, text messages, or oral conversations that would allow the agreement to legally exist.
In the Jerry A. Mais, et al. v. Allianz Life Insurance Company of North America case, the plaintiff sued, claiming the defendant was responsible for acts of its former employee even though he was not employed by the defendant at the time of the alleged acts. Which of the following was the court's decision?
The defendant was held vicariously liable for the acts of its former employee because it did not notify customers that the agent had been terminated.
Which form of business organization is defined as a relationship between two or more persons or corporations created for a specific business undertaking?
The joint venture
When may a principal use the right of avoidance to nullify, at his or her discretion, any contract the agent negotiated?
When the agent breaches his or her fiduciary duties
In which of the following cases is the agent most likely to be personally liable to the third party?
When the agent exceeds his or her authority to act on behalf of the principal
If the Internal Revenue Service (IRS) determines that an independent contractor is really an employee, the employer will be liable for: Blank______.
all applicable taxes, such as Social Security and unemployment taxes
A limited liability company (LLC) combines the tax advantages and management flexibility of a(n) Blank______ with the limited liability of a(n) Blank______.
partnership; corporation
Which of the following is correct regarding the partnership agreement?
A written partnership agreement is not required to form a partnership.
A(n) Blank______ is defined as the fiduciary relationship that results from the manifestation of consent by one person to another that the other shall act in his behalf and subject to his control, and consent by the other so to act.
agency
Apparent agency, also known as ________blank, is when the principal has created by his or her conduct the belief in another individual that a person serves as their agent when, in fact, they do not have the authority to act for the principal.
agency by estoppel
Bill announced to an automobile salesperson that he represented Harold for the purpose of buying Harold a new car. Bill negotiated with the salesperson on the price of a new car and even went so far as to sign a contract of sale. Harold had never authorized Bill to represent him in anything, but he was so happy with the deal that Bill expressed that he accepted the contract for the car. Harold and Bill have an: Blank______.
agency by ratification
If a person represents himself as an agent for an individual and that individual accepts the act of the person representing himself as the agent, this relationship is known as an: Blank______.
agency by ratification
Employees are Blank______ of the employer.
agents
When members form an LLC, they typically draft a(n) ________blank, which is the foundational contract among the entity's owners.
operating agreement
An S corporation cannot have more than Blank______ shareholders.
100
Generally, gratuitous agents function much like Blank______ agents.
regular
If an agent has misrepresented himself or herself to a third party, which of the following options are available to the third party? (Check all that apply.)
Affirm the contract and sue the principal to recover the damages. Cancel the contract with the principal and be compensated for money lost.
Which of the following is a recognized form of agency authority?
Agency by agreement
Which of the following is not a recognized form of agency authority?
Agency by revocation
Which of the following is not a type of business relationship to which agency laws are relevant?
Agent-incidental beneficiary
Which of the following are correct statements regarding a durable power of attorney? (Check all that apply.)
It can be enacted preemptively by the principal. It becomes active only after a principal becomes incapacitated in any matter.
Which of the following is correct regarding a principal's liability for an agent's misrepresentation to a third party?
It depends on whether the principal authorized the agent's misrepresentation.
Which of the following is correct regarding a special power of attorney?
It grants the agent express authority over specifically outlined acts.
Which of the following statements is correct about the requirements of an LLP?
The business name must include the phrase Limited Liability Partnership or an abbreviation of the phrase, and the parties must file a form with the secretary of the state.
Which specialized form of business organization is governed by a group of trustees who operate the organization for the beneficiaries?
The business trust
Which of the following is not a type of partnership?
The conglomerate
Which of the following is not a specialized form of business organization?
The corporate partnership
Which of the following is the most important factor in deciding whether a person is an employee or an independent contractor?
The degree of control the employer has over the individual's work
Which of the following is true about the power of attorneys in England?
The durable power of attorney is called a lasting power of attorney and forms a fiduciary relationship between the agent and the donor.
Which of the following establishes how a franchise agreement will be terminated?
The franchise agreement
In which of the following forms of business organizations are owners personally liable for business debts?
The partnership
If an agent is acting within the scope of his or her authority on behalf of a disclosed principal, who will be liable for the actions of the agent?
The principal
If an independent contractor engages in extremely hazardous activities at the direction of the principal, who will be liable if a third party is injured?
The principal
If the principal fails to train or provide necessary resources that contribute to an agent committing a tort to a third party, who is liable?
The principal
When an agent breaches an agency contract or his fiduciary duties, which of the following remedies may the principal may use to nullify at her discretion any contract the agent negotiated?
The right of avoidance
Which of the following forms of business ownership is terminated automatically when the owner dies?
The sole proprietorship
Which of the following is correct regarding the tort liability of a principal.
The tort liability of a principal can be established either directly or indirectly.
Which of the following is correct regarding a business trust?
The trustees and beneficiaries of a business trust enjoy limited liability.
Which of the following is correct regarding agency relationships?
They can be formed by formal written contracts.
Did Paolo have any legal liability to AAA Computers?
Yes, because he made the purchase from AAA Computers without mention of Joe.
John hired Alex to fly to California and drive back a new car he purchased. Alex successfully drove the car back, and John was satisfied with Alex's services. Has the agency relationship terminated?
Yes, by fulfilment of purpose.
What type of principal is known by the third party when an agreement is made with an agent?
a disclosed principal
An agency relationship, like a contract, can only be made for: Blank______.
a lawful purpose
The duty of performance requires the agent to act with the same skill, care, and professionalism as: Blank______ would provide.
a reasonable person in the same situation
According to the Uniform Commercial Code (UCC), if an agent enters a contract that is a negotiable instrument, the principal cannot be held liable unless the principal's name is on the instrument or the agent's signature indicates that it was made in ________blank.
a representative capacity
If a principal fails to fulfill his or her duties to the agent, that provides the basis for: Blank______.
a tort or contract action against the principal
According to the Copyright Act of 1976, an employer can order an employee to complete work at the request of the employer. This product is known as: Blank______.
a work-for-hire
Arlene wants to give her friend, Marion, the power of attorney over her affairs. To do that, Arlene and Marion will need: Blank______.
a written contract specifying the agreement between them
Agents who work on commission have a right to demand a(n) Blank______ of funds.
accounting
Kyle is on the faculty of a major university. He was directed by his dean to travel to a conference and interview possible candidates for various faculty positions. When Kyle returned, his dean demanded the receipts for his trip. The dean is allowed to request this information and Kyle must comply under the duty of: Blank______.
accounting
The duty of Blank______ requires the agent to keep an accurate account of the transactions of money and property made on behalf of the principal.
accounting
An agent who exceeds his or her authority when the principal is disclosed or partially disclosed is liable for: Blank______.
breach of implied warranty
If the agent breaches his or her duties to the principal and a third party sues the principal for damages, the agent: Blank______.
can be sued by the principal for tort and contract damages
If the agent breaches his or her duties to the principal, the principal: Blank______.
can terminate his or her relationship with the agent and seek remedies
If an agent has misrepresented herself to a third party, the injured third party can either Blank______ the contract with the principal and be compensated for any money lost, or Blank______ the contract and sue the principal to recover damages.
cancel;affirm
Agency relationships are: Blank______.
consensual
Agency is a(n) Blank______ agreement between Blank______ parties.
consensual; two
If the agent illegally benefits from the agency relationship, the principal may enact a(n) Blank______ trust on the goods, profits, or property in question.
constructive
Agency relationships are contractual relationships and the kind of remedies that are available are Blank______ remedies.
contract
Unless they have the authority to do so by the principal, independent contractors are not allowed to enter into: Blank______.
contracts for the principal
Garth hired Marco to sell his house. If Garth refuses to allow Marco to show his house to interested buyers, Garth has failed in his duty of: Blank______.
cooperation
A(n) ________blank is an organization formed by individuals who usually pool their resources to gain an advantage in the market.
cooperative
When a group decides to organize for the purpose of pooling their resources to gain a market advantage, this is known as a(n) ________blank.
cooperative
The joint stock company is a mix of Blank______ and Blank______.
corporation; partnership
Dee works for a software development company. She creates software codes that adhere to specific standards set by the company. She has to go to her office for 9 hours every day and is expected to follow the company's policies and code of conduct. She receives a fixed pay that meets industry standards and she is eligible for all benefits that a full-time worker at a company receives. The relationship between Dee and the company is best described as a(n): Blank______.
employer-employee relationship
Ted hired three men from the Trim-a-Tree Company to take a large, dead tree down in his back yard. The men came to Ted's house with their own tools and proceeded to cut the tree down. The relationship between Ted and the men he hired is: Blank______.
employer-independent contractor
Suppose a principal falsely leads a third party to believe a person is his or her agent. The principal has created an agency by Blank______.
estoppel
A principal who ratifies an agent's tortious act, knowing that the agent acted illegally, is liable: Blank______.
even if the principal does not condone the agent's conduct
For purposes of jurisdiction, an limited liability company (LLC) is considered a citizen of: Blank______.
every state in which its members reside
Nadal hires Simon to be his tennis coach for the next six months to prepare him or the Olympic games. Nadal agrees to hire no one else in this time period to help him train. Nadal and Simon have entered into a(n) ________blank agency contract.
exclusive
A principal always has the right of Blank______, so agents may not use the agency relationship to obtain goods or property for themselves if the principal desired to obtain the same goods or property.
first refusal
A Blank______ is a business organization that exists because of an arrangement between the owner of a trade name or trademark and the person who sells goods or services under the trade name or trademark.
franchise
A Blank______ can become liable for franchise obligations if it exerts too much control over the business operations of the franchise.
franchisor
In a Blank______, the partners divide the profits and the management responsibilities.
general partnership
In a(n) Blank______, the partners share unlimited personal liability for the firm's debts.
general partnership
When an agent is given broad authority to sign legal documents for the principal, this is known as a(n): Blank______.
general power of attorney
An agency by ratification is made when a third party reasonably believes that the "agent" is acting on behalf of the principal and that the principal accepts the acts of the agent. Additionally, the principal must know all the material facts regarding the contract and the principal must: Blank______.
ratify the entirety of the agent's act
Regarding an apparent agency, if the principal attempts to deny that an agency relationship existed, the third party must demonstrate that he or she: Blank______.
reasonably believed, on the basis of the principal's conduct, that the agency relationship existed
If there is no agency agreement or the contract is for personal services and the principal fails to perform as agreed, the agent may: Blank______.
recover for services rendered and future damages
How many states have adopted the latest version of the Uniform Limited Liability Company Act (ULLCA)?
17
How many states in the United States recognize the limited liability company (LLC) as a legitimate form of business ownership?
50
Which of the following is true regarding agency contracts?
A contract is not required to create an agency but if a contract exists, it must meet all requirements prescribed by contract law.
What form of business organization is a voluntary association between two or more persons who co-own a business for profit?
A partnership
Which of the following is required for agency by estoppel?
A reasonable belief by the third party that an agency relationship existed
Which of the following is false regarding a principal's duties to an agent?
An agent may be entitled to contract remedies but not tort remedies.
Which of the following is not a relevant question in determining whether a wrongful act occurred within the scope of employment?
At the time of the wrongful act, did the employer have an established and enforced progressive discipline policy?
Peggy made a contract on behalf of Kay to purchase some sports equipment for Kay. Kay had never formally entered into an agency agreement with Peggy, but Peggy claimed she was the agent for Kay. If Peggy negotiates an order for the sports equipment, shows that agreement to Kay, and Kay signs the contract, Kay and Peggy have: Blank______.
an agency relationship by ratification
In a Blank______, all the partners assume liability for one partner's professional malpractice, but only to the extent of the partnership's assets.
limited liability partnership
In a ________blank the general partners assume unlimited personal liability for the partnership's debts, but the limited partners assume no liability beyond the capital they have invested in it and no part in its management.
limited partnership
Taran is Katey's agent. Taran does not like Katey specifically and when Taran goes to negotiate a contract on Katey's behalf, she does not act in Taran's best interest. This is a breach of ________
loyalty
The law holds a principal directly responsible for his or her own tortious conduct: Blank______.
when the principal directs the agent to commit a tort, thereby authorizing the agent's unlawful behavior
The principal has the duty to indemnify or reimburse the agent for any losses the agent incurs: Blank______.
while working within the scope of authority on the principal's behalf
When members form an LLC, they typically draft Blank______, which is the foundational contract among the entity's owners.
an operating agreement
What type of principal exists when a third party is unaware that the agent is acting on behalf of the principal?
an undisclosed principal
An agency relationship can be formed through the implied Blank______ of the parties.
conduct
Which of the following is not a type of partnership?
Limited liability company
Which of the following may be incorporated or unincorporated?
Cooperatives
Which of the following laws is consistent with the principals' duty to provide safe working conditions for the agent?
The Occupational Safety and Health Act
Which of the following is a recognized source for the definition of agency?
The Restatement of Agency
Assuming all other requirements are met, which of the following entity can avoid double taxation?
The S corporation.
Which of the following is not a type of partnership?
The S-corporation
The ________blank governs partnerships in most states in the absence of an express agreement.
The Uniform Partnership Act
List the advantages and disadvantages of forming a general corporation.
The advantages are (1) limited liability for shareholders, (2) ease of raising capital by issuing stock, and (3) profits are taxed as income to the shareholders. Disadvantages are (1) corporate income is taxed twice and (2) formalities are required in establishing and maintaining a corporate form.
What happens to an agency agreement when the agent declares bankruptcy?
The agency agreement is terminated.
Which of the following is incorrect regarding the employer-employee relationship?
There is no legal distinction between the employer-employee relationship and the employer-independent contractor relationship.
Which of the following is correct regarding the operation of a limited liability company (LLC)?
To obtain limited liability, a member does not have to relinquish his or her right to participate in management.
Sally was the agent of Joe, a freelance writer. It was her task to find writing assignments for Joe at various magazines and newspapers. Sally was authorized to form contracts with these outlets and on one particular occasion, she made a lucrative deal with a local newspaper. She showed Joe the contract, but Joe was so busy that he forgot to write the article. The newspaper was so angry that it sued Sally for the losses they incurred as a result of Joe's negligence. Does Joe have a duty to indemnify Sally for these losses?
Yes, because Sally was acting within the scope of her authority and it was Joe's fault for failing to submit the assignment.
A power of attorney is a specific form of Blank______ authority.
express
Agency by implied authority cannot conflict with agency by: Blank______.
express authority
When parties form an agency relationship through a written or an oral agreement, this is known as an Blank______ agency.
expressed
Bobby and Dustin entered into an agency agreement using a written agreement. This kind of agency relationship is known as an: Blank______.
expressed acengy
Courts suggest that the most important duty that an agent owes to a principal is the duty of: Blank______.
loyalty
An agent who makes an unauthorized agreement may have violated his or her duty of: Blank______.
obedience
A(n) Blank______ power of attorney gives authority only for the designated areas or purposes listed in the agreement.
specific
Brenden agrees to go to work for Margen. In Brenden's contract with Margen, Brenden agrees to create a new computer program and Margen agrees to typeset the program that Brenden creates. Brenden completes the program, but Margen does not typeset the program. At this point, what court remedy is available to Brenden?
specific performance
What type of agency relationship does not allow the principal to terminate it?
An agency coupled with an interest
Donny was Sara's employee. Sara had provided a computer tablet for Donny to use during his work activities. Donny left his employment with Sara to pursue another job. Does the tablet belong to Donny or Sara?
It belongs to Sara, since she was the principal and the principal owns anything the agent may possess through the agency relationship.
Under which of the following types of business organization is the ownership transferable to another person?
Limited liability company and corporation, but not sole proprietorship or general partnership.
Which of the following is false regarding crime and agency relationships?
One of the elements establishing that a crime has been committed is assumption of the risk.
Liz worked on commission at a local store. The commission that was to be paid to a salesperson at the store was 10 percent of the total sales made by that person. Liz looked at her paycheck and noticed that the amount of money was far less than she had anticipated. Liz should do which of the following?
Request that her employer obtain an auditor to perform an audit and determine whether she was, in fact, paid the proper amount for her sales
Which of the following is correct regarding electronic contracts and agency authority in Singapore?
Singapore passed a law by which lack of awareness of a principal for an agent's acts is not recognized as a defense.
In which form of business organization is the owner in sole control of management and profits?
Sole proprietorship
The doctrine of respondeat superior applies to which of the following relationship(s)?
Both the principal-agent relationship and the employer-employee relationship
Which of the following is true regarding any right of reimbursement Paolo is due from Joe?
Paolo is entitled to reimbursement from Joe.
Which of the following is a partnership agreement in which company members hold transferable shares, while all the goods of the company are held in the names of the partners?
A joint stock company
What type of principal exists when his or her identity is not known but the third party is aware that the agent is making an agreement on behalf of the principal?
A partially disclosed principal
Which of the following statements is false regarding a sole proprietorship?
A sole proprietor is not personally liable for obligations of the business.
Raquel is an agent for Occasion Photography, owned by Luke. Without disclosing her agency status, Raquel agrees by contract to take Ella's wedding photographs. When Luke finds out, he explains the agency relationship he has with Raquel to Ella and says that he wants to take the photographs because a person he wants to ask out on a date is expected to be at the wedding. However, despite Luke's explanation, Ella still requests that Raquel take her wedding photographs. Which of the following is true regarding the rights of the parties?
Ella has a right to insist that Raquel take the photographs because Ella's contract required Raquel's services.
If a principal notifies a third party that an agency relationship has ended, at what point does that authority end?
Immediately
Which of the following is not an advantage of operating a business as a sole proprietorship?
Immunity from personal liability
Which of the following is correct regarding agency law?
It is primarily state law and can vary from state to state.
Which of the following is correct regarding an agency coupled with an interest?
It is terminated when an event occurs that discharges the principal's obligation.
Jess wants to open his own business with no partners or no other formalities such as incorporation. Which of the following would he chose?
Sole proprietorship
A third party who believes that an agent is acting with actual or apparent authority may do which of the following?
Sue the principal for any breach of contract
In a Blank______, such as McDonald's and Burger King, the franchise operates under the franchisor's business name and is required to follow the franchisor's standards and methods of business operation.
chain-style business operation
Yusef hired Xavier full-time to perform accounting work in his business. However, when Xavier came to work on the first day, he had no desk, no computer, no phone, and no workspace in which to complete his assigned tasks. Yusef therefore violated his duty of ________blank.
cooperation
Generally, since principals and agents cannot control one country's declaration of war against another country, war cannot terminate an agency agreement.
false
If a specific event fundamental to the essential purpose of the agency relationship occurs, this results in termination of the agency relationship by operation of law.
false
If the purpose of an agency relationship has been fulfilled, this results in termination of the agency relationship by operation of law.
false
Since the Uniform Limited Liability Company Act (ULLCA) has been adopted in all 50 states, managers need not check the laws regarding limited liability companies in each state to ensure that the liabilities, as well as rights and duties, of a company established in one state continue to apply when conducting business outside that state.
false
To terminate a franchise, a franchisor must have: Blank______. (Check all that apply.)
good cause documented the warnings given to the franchisee for violations of the franchise agreement
Rachel has been authorized by her local church to negotiate a contract. She is not receiving any compensation for this action. Rachel is considered a ________blank.
gratuitous agent
If a principal or agent becomes insane, the agency relationship is ordinarily finished. Some states have modified this law so that the agency contract still exists unless the affected person: Blank______.
has been adjudicated insane
To conduct business more effectively around the world, businesses will hire agents from the host country to: Blank______.
help guide the business with respect to local laws and customs
Constructive notice occurs by: Blank______.
publishing a notice in a circulating newspaper in the area where the agency agreement existed
In the same way the principal is responsible for the negligent acts of the employee under the doctrine of Blank______, the principal may also be liable for any intentional torts of the employee.
respondeat superior
If you want to open a lawn-mowing business on your own and want to be in complete control of the management and profits of the business, you should most likely create a(n): Blank______.
sole proprietorship
The most frequently cited advantage of the limited liability company (LLC) is that for tax purposes, the Internal Revenue Service generally treats the LLC like a Blank______ or a(n) Blank______.
sole proprietorship; partnership
Which specialized form of business organization is an investment group that comes together for the explicit purpose of financing a specific large project?
the syndicate
An agency relationship can be terminated on the occurrence of a specific event.
true
The principal can sue the agent, and may be entitled to a variety of contract and tort remedies beyond those stated in the contract, if an agent breaches his or her duties.
true
The remedies available to an agent when a principal violates an agency agreement include the standard tort and contract remedies.
true
