Chapter 29 Business Law

13 A principal-employer may be vicariously liable for the unauthorized acts of an agent-employee.

True

4. If an agent has actual or apparent authority to appoint a subagent to perform the agent's duties, then the subagent's conduct is binding on the principal.

True

7. Under the doctrine of respondeat superior, a principal may be held liable for the torts of her agent even though the agent is sufficiently solvent to pay for the damage himself.

True

8. Under the Third Restatement, a principal's death does not necessarily terminate an agent's actual and apparent authority.

True must give notice

11. General authority to manage or operate a business for a principal confers implied authority on the agent to do all except which one of the following: a. hire employees. b. purchase equipment and supplies. c. make repairs. d. the agent may do all of the above

the agent may do all of the above

6. Ratification of an unauthorized contract is effective to bind the principal and a third person to the contract unless: a. the principal ratifies only a portion of the contract. b. the principal does not manifest any intent to ratify the contract. c. the principal only manifests an intent to ratify the contract by his conduct. d. a and b, but not c.

A and B only

10. Under the Second Restatement, assume that A enters into a contract with T on behalf of A's undisclosed principal, P. If T discovers the existence and identity of P, whom may T hold to performance of the contract? a. A only b. P only c. A or P but not both d. Neither A nor P

A or P but not both

1. What is the difference between actual authority and apparent authority?

Actual authority is based upon words or conduct of the principal manifested to the agent. Apparent authority is based upon words or conduct of the principal that lead a third person to believe that the agent has actual authority, on which belief the third person justifiably relies. Actual authority gives an agent both the power and the right to bind the principal in legal relations with third persons, while apparent authority gives the agent the power but not necessarily the right to bind the principal.

6. A principal may not be held liable for the wrongful acts of his agent if the agent acted in disobedience of the principal's instructions.

False responsible if it is within the scope of the employee's job even if it is total disobedience

12. An agent who enters into a contract on behalf of a nonexistent principal may be personally liable on that contract.

True

2. Unless the principal is disclosed, an agent has no apparent authority.

True

9. CPA: When an agent acts for an undisclosed principal, the principal will not be liable to a third party if the: a. principal ratifies a contract entered into by the agent. b. agent acts within an implied grant of authority. c. agent acts outside the grant of actual authority. d. principal seeks to conceal the agency relationship.

agent acts outside the grant of actual authority

3. An agent has apparent authority to bind the principal in a transaction if the third party: a. has no knowledge of the agency relationship. b. the principal has lead the third party to mistakenly believe that the agent has actual authority. c. has no knowledge of the existence and identity of the principal. d. none of the above

the principal has lead the third party to believe that the agent has actual authority

4. Explain vicarious liability of the principal for unauthorized acts of an agent.

A principal may be liable to third parties for the tortious acts of agents under the doctrine of respondeat superior. If the act that created the problem was committed during or within the line and scope of the agent's employment, the principal will likely be liable. Under certain circumstances, a principal may also be liable for the conduct of an independent contractor, though not generally if the act was an unauthorized one.

5. Dan entered into a contract to remodel the Majestic Restaurant owned by Riverside Restaurant, Inc. Rob, part owner and president of Riverside, signed the contract, "Rob Swanton." When a dispute arose over the contract, Dan brought suit against Rob for breach of contract. Rob contends that he has no personal liability for the contract and that only Riverside is liable. What is the result?

To avoid personal liability, an agent must disclose both that he is acting as an agent and the identity of his principal. Therefore, because Rob is acting on behalf of an undisclosed principal, he would be personally liable on the contract with Dan.

1. For an agent to bind a principal, the agent must have either actual or apparent authority coming from the conduct or words of the principal.

True

14. Actual implied authority is authority that an agent reasonably infers from the words and conduct manifested to the agent by the principal.

True

15. A principal may be liable to a third party based upon an agent's apparent authority even though the agent had no actual authority.

True

3. An agent's actual authority is automatically terminated by a principal's revocation of authority.

True

2. An agent may be liable to the principal for exceeding his actual authority even though his acts are within the scope of his: a. actual express authority. b. actual implied authority. c. apparent authority. d. none of the above.

apparent authority

13. P writes a letter to A authorizing her to sell his car and sends a copy of the letter to T, a prospective buyer. The next day P writes a letter to A revoking the authority to sell the car but does not send a copy of this letter to T. If A contracts to sell the car to T: a. P will be liable on the contract based upon A's implied authority. b. P will be liable on the contract based upon A's apparent authority. c. P will not be liable because A did not have actual authority. d. none of the above

P will be liable on the contract based upon A's apparent authority

7. Assume that P and P's agent A, conspire to and actually injure C so that she can't run in the big race. Which of the following is true? a. P has committed both a crime and a tort. b. P has committed a tort but not a crime. c. A has committed a tort and a crime. d. Two of the above

Two of the above

4. Select the correct answer under the Third Restatement regarding termination of an agent's apparent authority. a. The agent's apparent authority terminates automatically upon the principal's death. b. The agent's apparent authority terminates automatically upon the principal's incapacity. c. The agent's apparent authority terminates only when the third party has notice that the principal is dead, has notice that the principal's loss of capacity is permanent, or that the principal has been judicially determined to lack capacity. d. a and b, but not c.

the agent's apparent authority terminates only when the third party has notice that the principal is dead, has notice that the principal's loss of capacity is permanent, or that the principal has been judicially determined to lack capacity.

5. An agent's apparent authority is automatically ended by a principal's revocation of authority.

False 2nd restatment and third restament must give notive

10. An agent who is personally liable on a contract has no right of action against the third person for breach of the contract.

False if an agent is personably liable such in an undisclosed or unidentifed agency then they have rights against the third party,because they are bound to the third party

11. An undisclosed principal is one whose existence is known but whose identity is not known.

False this is an unidentified undiclosed principal is one ehose existence is not known and identity is not known

12. P writes a letter to A authorizing her to sell his car. A tries to sell the car to C, telling him that although it isn't her car, she has authority to sell it. In this case P would be a(n): a. disclosed principal. b. unidentified principal. c. undisclosed principal. d. none of the above.

unidentified principal

8. CPA: A principal will not be responsible to a third party for a tort committed by an agent: a. unless the principal instructed the agent to commit the tort. b. unless the tort was committed within the scope of the agency relationship. c. if the agency agreement limits the principal's liability for the agent's tort. d. if the tort is also regarded as a criminal act

unless the tort was committed within the scope of the agency relationship

5. Under the Second Restatement, select the correct answer. a. Termination of an agent automatically terminates an agent's actual authority - notice to third parties is not required. b. Impossibility automatically terminates an agent's apparent authority - notice to third parties is not required. c. Death or incapacity of the principal or agent automatically terminates an agent's apparent authority - notice to third parties is not required. d. All of the above.

All of the above

2. What is the difference between having the power to bind one's principal and having the right to bind the principal?

An agent has the power to bind the principal when the principal is legally bound by the act of the agent. An agent has the right to bind the principal whenever the agent may do so without violating the duty of obedience by exceeding actual authority. For example, an agent with apparent authority but not actual authority has the power, but not the right, to bind the principal. Thus, the principal is legally bound by the act of the agent, but by exceeding actual authority, the agent has violated the duty of obedience and is liable to the principal for any resulting loss.

3. Discuss the negligent hiring doctrine.

One of the ways liability to third parties may be imposed upon the principal would be in a situation where the principal was not careful in the hiring process. Called the negligent hiring doctrine, this arises when the principal does not exercise proper care in selecting an agent for the job to be performed. This doctrine has also been used to impose liability on a principal for intentional torts committed by an agent against customers of the principal.

15. Page and Company hires Ed to deliver merchandise to Page's customers. After making the scheduled deliveries, Ed drives the company's truck to a nearby city to visit his girlfriend. While in the city, Ed negligently causes the truck to hit Tony's car and injure Tony. a. Page is not liable to Tony because Ed is an independent contractor. b. Page is liable to Tony because Ed was acting within the scope of employment. c. Page is not liable to Tony because Ed was not acting within the scope of employment. d. None of the above.

Page is not liable to Tony because Ed was not acting within the scope of employment

1. Dianna tells Ray that he may sell her bicycle for her. Ray's authority is: a. actual express authority. b. actual implied authority. c. apparent authority. d. (b) and (c), but not (a).

atual express authority

14. Durocom hires Ed as an employee to deliver goods to its customers. While driving the firm's truck to make a delivery, Ed negligently causes the truck to hit Tim's car and injure Tim. a. Page is liable to Tim because Ed was acting within the scope of employment. b. Page is not liable to Tim because Ed was not acting within the scope of employment. c. Page is not liable to Tim because Ed is an independent contractor. d. None of the above.

page is liable to Tim because Ed was acting within the scope of employment