CHapter 7 QUIZ

Pat hired Mike to manage his deli, but the agency agreement did not state how much Mike is to be paid. In this situation, Mike is a gratuitous agent until a salary is negotiated. The agreement is voidable by Pat. The agreement is voidable by Mike. A court will read in a reasonable salary based on comparable positions in the business community.

A court will read in a reasonable salary based on comparable positions in the business community.

Apparent authority can only be created by the actions of The agent himself A disclosed principal A partially disclosed principal An undisclosed principal

A disclosed principal

Which of the following is not an example of a trade secret? A business's marketing plans for the next five years A list of customers that was published in an ad in a trade journal The formula for a compound used in a manufacturing process The responses of a focus group to a company's product that have been gathered and analyzed.

A list of customers that was published in an ad in a trade journal

Rhonda Realtor was hired to find Client an undeveloped lot that met the following requirements: the lot must be in the mountains, on a pristine lake, consist of at least 10 acres, and be available for no more than $500,000. Rhonda found a property that met all these requirements for only $425,000. Enchanted, she bought the property for herself. She did not tell Client about her find and is still diligently seeking another property that meets Client's needs. Which, if any, agency duties has Rhonda violated? Duty of loyalty Duty to inform Duty to obey instructions All of the above

All of the above

What happens if an agent acts outside the scope of his or her authority when negotiating a contract? The agent loses the right to reimbursement The agent loses the right to indemnification The agent becomes personally liable on the contract to the third party All of the above

All of the above

An agent has a duty to obey the principal's instructions unless The instructions require the agent to perform duties that are not in the agency agreement. The instructions are to perform an illegal act. The instructions are not in the principal's best interest. Both a and b

Both a and b

An agent's actual authority may be Express Implied Ostensible Both a and b

Both a and b

An employee who commits a tort while acting in the scope of his or her employment Has no liability to the injured third party because of the doctrine of respondeat superior. Is entitled to be indemnified by the principal if the tort was committed by following the principal's instructions. Has joint and several liability with the principal to the injured party. Both b and c

Both b and c

In determining the rights and duties of the parties to an agency relationship, the courts look to Case law The Uniform Commercial Code The National Labor Relations Act Federal common law

Case law

Which legal rule will not impose punitive damages on a master for the torts of his servants unless the master himself took some part in the wrongful action? Vicarious liability rule Durham rule Complicity rule Transferred liability rule

Complicity rule

Jill hired Ace Paving Company to pave her driveway. Ace's driver, Tom, carelessly dropped a load of hot tar on the lawn and prized rose bushes of Jill's neighbor, Dan. From whom can Dan seek damages? Dan can only sue Jill because she hired an independent contractor to carry out an unreasonably dangerous activity. Dan can only sue Ace because Tom was clearly acting within the scope of his employment. Dan can only sue Ace and Tom in joint and several liability. Dan can sue Jill and Ace and Tom in joint and several liability.

Dan can only sue Ace and Tom in joint and several liability.

Employers have greater liability for employee torts in states that have adopted the complicity rule than in those states that follow vicarious liability. True False

FALSE

The standard the agent must meet in carrying out the work of the principal is "extraordinary care and diligence." True False

FALSE

Undisclosed principals have no liability to third parties for contracts negotiated by their agents. True False

FALSE

Whether or not a principal has, through his actions, ratified a contract is a question of _________to be decided by the _________. Fact.judge Law.judge Fact.jury Law.jury

Fact.jury

Whether or not a servant was acting in the scope of his employment when he injured a third party is a question of __________ to be decided by the ______. Fact.judge Law.judge Fact.jury Law.jury

Fact.jury

A principal always has the right to terminate an agency. True False

False

An employer cannot be held liable under respondeat superior for the negligence of a person who is working under the employer's control and direction, but who is not being paid. True False

False

It is the duty of an agent to notify third parties when his agency is terminated. True False

False

The Principal and Agent have an ________________relationship with each other. Arms length Statutory Fiduciary equitable

Fiduciary

Jim was called to active duty in the military. Knowing that he would be out of the country for a year or more, he gave his sister Peg authority to pay bills in his name, access his bank accounts, buy and sell stock in his brokerage accounts, and incur expenses to maintain his house and car and boat. Peg is Jim's______________. Independent contractor Broker General agent Special agent

General agent

Matt is employed as the manager of Local Steak House, with wide-ranging responsibilities for all aspects of the business. In this position, Matt is an________ General agent Special agent Broker Factor

General agent

Ann Agent was hired by Buyer to locate a piece of property suitable for building an office complex. Ann and her cousin jointly owned a piece of property that suited Buyer's needs. Without telling Buyer of her ownership interest, Ann negotiated the purchase on Buyer's behalf. The price for the property was its fair market value. What options are available to Buyer when he learns that Ann was the seller? He may rescind the contract because Ann violated her duty of loyalty. He must go through with the contract because the price was objectively fair. He must go through with the contract because her cousin's participation made this an arm's length deal. He must go through with the contract, but does not have to pay Ann her commission.

He may rescind the contract because Ann violated her duty of loyalty

A principal is obligated to pay any judgments against an agent who incurred liability to a third party while carrying out the principal's orders. This duty to hold the agent "harmless" is the duty to___________. Reimburse Indemnify Compensate Account

Indemnify

The duty of the principal to hold an agent "harmless," and to pay any judgments for which the agent becomes liable while carrying out the principal's orders, is the duty to_______________. Mitigate Indemnify Protect Reimburse

Indemnify

Bill hired Acme Paving to pave his driveway. Acme is Bill's __________________. Broker Independent contractor Factor Special agent

Independent contractor

Tucker hired SoClean, a house washing service, to power wash his house and deck. SoClean's status of that of a (n) ________________________. Factor Special agent Independent contractor Proprietor

Independent contractor

Neda, an attorney, has engaged in the following representations this past year. Which one is least likely to violate her duty of loyalty to her clients? Neda represented both the buyer and the seller in the purchase of a business. Neda represented both spouses in their property settlement following the divorce. Neda represented a local restaurant, which she patronizes frequently, in an employment discrimination suit. Neda created a limited partnership with three limited partners; she was one of the limited partners.

Neda represented a local restaurant, which she patronizes frequently, in an employment discrimination suit.

Raines Realty, a property management firm, hired Al Agent to manage an office complex. One of Al's duties was to collect the rents. Raines fired Al for negligence, but did not notify the tenants before the next rent payment was due. Al collected the rents as usual and left town with the money. Are the tenants required to pay that month's rent again to Raines? Yes, because third parties have a duty to verify that agents are acting within the scope of their authority. Yes, because a payment to Al stopped being a payment to Raines when Al's actual authority to accept payments ended. No, because Al still had implied authority to collect the rents until Raines told the tenants otherwise. No, because Al still had apparent authority to collect the rents until Raines told the tenants otherwise.

No, because Al still had apparent authority to collect the rents until Raines told the tenants otherwise.

Apparent authority is also known as _____________authority. Ostensible Incidental Express Constructive

Ostensible

When a third party knows that an agent is acting on behalf of a principal, but dies not know the identity of the principal, the principal is________________. Disclosed Undisclosed Partially disclosed Transparent

Partially disclosed

When a principal decides to adopt and be bound on a contract that his agent did not have the authority to form, the principal _______________ the contract. Indemnifies Reforms Ratifies Restores

Ratifies

The legal doctrine that holds the master liable for the torts committed by a servant while acting within the scope of this employment is Quid pro quo Respondeat superior Caveat emptor Alter ego liability

Respondeat superior

The well-established legal principal that employers are liable for the torts committed by employees while acting within the scope of their employment is _____________________. The rule of transferred intent The rule of ultra vires The rule of corporate complicity. Respondeat superior

Respondeat superior

Barb hired Roofing Company to re-roof her garage. Bill, one of Roofing Company's employees, carelessly let a pallet of tiles fall from the roof onto the car of Barb's next door neighbor. Who is liable to the neighbor for these damages? Barb alone is liable because she hired Roofing Company to do the job. Roofing Company alone is liable under the doctrine of respondeat superior. Bill alone is liable because he committed the tort. Roofing Company and Bill are liable in joint and several liability

Roofing Company and Bill are liable in joint and several liability

A person who is employed to perform services for another and who is under the other's control and subject to the other's direction is a(n) _____________. Independent contractor Agent Servant/employee Factor

Servant/employee

Jim was called to active duty in the military. Knowing that he would be out of the country for a year or more, he gave his sister Peg authority to pay bills in his name, access his bank accounts, buy and sell stock in his brokerage accounts, and incur expenses to maintain his house and car and boat. Jim will be out of the country when a piece of land he sold goes to settlement. He wants to give Peg the authority to convey the deed and sign any necessary settlement papers in his name. To do this he should give Peg _______________. Special power of attorney General power of attorney Factors letters of appointment Broker Authority

Special power of attorney

Ruth had a contract to sell a vacation home she owned in North Carolina. Rather than make the trip from Oregon for the closing, she gave her brother Ian, who lived in North Carolina, the authority to represent her at the closing and to sign all the necessary papers. The notarized document that confers this authority on Ian is a (n) __________________; and Ian is a (n) _____________. General power of attorney-------------------Attorney in fact Special power of attorney--------------------Attorney at law Special power of attorney--------------------Attorney in fact General power of attorney-------------------Attorney at law

Special power of attorney--------------------Attorney in fact

Ted was hired under a one year contract to manage Sue's sub shop. Eight months into the contract, Sue fired Ted in order to hire a new manager who had just graduated with a degree in marketing and had a lot of ideas for increasing sales. Ted had not breached the contract in any way. Which statement best describes Sue's rights in these circumstances? Sue had both the right and the power to terminate Ted's contract. Sue had neither the right nor the power to terminate Ted's contract. Sue had the power, but not the right, to terminate Ted's contract. Sue had the right, but not the power, to terminate Ted's contract.

Sue had the power, but not the right, to terminate Ted's contract.

A minor may act as an agent for an adult principal. True False

TRUE

A principal whose identity is known to a third party is a disclosed principal. True False

TRUE

Normally a master is not liable for torts committed by a servant while traveling from his home to the workplace. True False

TRUE

The general manager of a business will have the implied actual authority to perform duties that are not expressly authorized in the employment agreement. True False

TRUE

Sue hired Harry to sell her prized racing filly, YouGoGirl. Harry's commission was to be 20% of the selling price. Before a buyer could be found, YouGoGirl died of an equine virus. What is the status of the agency agreement between Sue and Harry? The agency terminates by operation of law. The agency continues unless the principal, Sue, takes a unilateral action to end it. The agency continues unless the agent, Harry, takes a unilateral action to end it. The agency continues unless is it terminated by the mutual agreement of Sue and Harry.

The agency terminates by operation of law.

Pat hired Mike, a dealer in livestock, to sell his herd of cattle. Mike was to receive a 20 commission on the sale. Before a buyer could be found, the herd had to be destroyed because of an outbreak of mad cow disease. Which statement best describes the status of the agency agreement? The agency will continue under the same terms when Pat acquires a new herd. The agency was terminated by operation of law The agency was terminated by a unilateral action The agency was terminated by mutual agreement

The agency was terminated by operation of law

Sam is retiring and selling his business to Ed, an employee. They want Larry Lawyer to draw up a sales contract that protects both Sam's interests as the seller and Ed's interests as the buyer. If Larry agrees to this dual agency, which agency duty would he most risk violating? The duty of loyalty The duty not to be negligent The duty to account Dual agencies pose no particular problems in carrying out agency duties.

The duty of loyalty

Which of the following is not a duty of the principal to the agent? The duty to reimburse The duty to indemnify The duty to obey instructions The duty to compensate

The duty to obey instructions

The major distinction between a servant and an independent contractor is that An independent contractor is required to be licensed. An independent contractor is required to be bonded and to carry insurance. The employer has the right to tell a servant how to do the job, while an independent contractor has exclusive control over the manner in which the job is done. Independent contractors are hired under individual contracts, while servants must be hired under collective bargaining agreements.

The employer has the right to tell a servant how to do the job, while an independent contractor has exclusive control over the manner in which the job is done.

Which of the following events would not terminate an agency by operation of law? The principal breaches his or her duty to reimburse the agent. The agent dies. The principal dies. The purpose of the agency becomes illegal.

The principal breaches his or her duty to reimburse the agent.

In which of the following situations would an undisclosed principal be liable to the third party on a contract? The agent was acting within the scope of his or her authority. The principal retained the benefits of the contract. The contract negotiated by the agent was not for the agent's personal services. The principal is liable in all of the situations above.

The principal is liable in all of the situations above.

Which of the following statements is false about a principal's ratification of an authorized contract? The principal must have been either disclosed or partially disclosed at the time the contract was formed. The principal may not change any of the provisions of the contract. The principal must be aware of all material facts surrounding the negotiations and formation of the contract. The third party must not have withdrawn from the contract.

The principal must have been either disclosed or partially disclosed at the time the contract was formed.

An agent is a fiduciary of the principal. True False

True

An agent will not be indemnified for injuries caused to third parties if the agent's negligence caused the injury. True False

True

If a third party does not know that he is dealing with an agent and believes that the agent is acting on his own behalf and will perform on the contract, the principal in this situation is ______________. Disclosed Undisclosed Partially disclosed Transparent

Undisclosed

The general legal doctrine that holds one person responsible for the torts committed by another because of the relationship they have to each other is _______________ Respondeat superior Vicarious liability Primary liability Transferred liability

Vicarious liability

Which legal principal always imposes punitive damages on a master if the wrongful conduct of the servant justifies punitive damages ? Vicarious liability rule Complicity rule Transferred liability rule Durham rule

Vicarious liability rule

The general legal principal under which an innocent person can be held liable for the wrongdoing of another is The rule of transferred intent The rule of ultra vires The rule of corporate complicity Vicarious liability.

Vicarious liability.

Which of the following is not a factor in determining if a servant was acting within the scope of his employment? Was the servant carrying on the master's business when the tort was committed? Was the servant disobeying the instructions of the master when the tort was committed? Was the instrumentality of the injury furnished by the master? Did the master authorize the servant to use the instrumentality of the injury?

Was the servant disobeying the instructions of the master when the tort was committed?

The last semester of his senior year, Marc had an unpaid internship in the sales department of a local TV station. When Marc left, he took a copy of the station's client list with him, reasoning that it would prove useful in the future when he graduated and got a permanent job at some other company in sales. Has Marc violated any agency duties? No, it was an unpaid position so he had no agency duties. No, Marc's duties to the TV station ended when his agency relationship ended. Yes, Marc violated a duty to protect confidential information Yes, Marc violated a duty not to be negligent

Yes, Marc violated a duty to protect confidential information

Parker is a dealer in Oriental antiques and rugs. A sign in his store recommends that customers bring in their rugs to him for cleaning and repair. In fact, Parker does none of the cleaning or repair work himself. He sends the rugs to Local Cleaners, for whom he works as an agent making a 20 commission. Due to a mishap at Local's plant, the rug belonging to Parker's customer was damaged. Is Parker liable to the customer for the damage? No, Parker is Local's agent and has no fiduciary duties to third parties. No, Parker has no liability because he was acting within the scope of this authority as Local's agent. No, Parker has no liability because agents are not responsible for the torts of the principal. Yes, Parker is liable because he is the agent of an undisclosed principal.

Yes, Parker is liable because he is the agent of an undisclosed principal.

Jim was called to active duty in the military. Knowing that he would be out of the country for a year or more, he gave his sister Peg authority to pay bills in his name, access his bank accounts, buy and sell stock in his brokerage accounts, and incur expenses to maintain his house and car and boat. Jim received several dividend checks from his stock broker while he was gone. Peg deposited the checks in her own bank account because her funds were low. Several weeks later she made out a personal check for the amount of the dividends and deposited it into Jim's account. Has Peg breached any agency duties? No, this is a gratuitous agency and her only duty is the duty of loyalty. No, her action made no difference because Jim ended up with the amount due him. No, there was no intent to convert Jim's money. Yes, she breached her duty to account.

Yes, she breached her duty to account

Tim is the delivery person for a small local bakery. Tim often accepts payments from the bakery's customers when making his deliveries. Tim puts the payments that made by check in an envelope. He uses the cash payments to pay for his daily personal expenses. At the end of each week, he makes out a check to the bakery for the amount that he took in as cash payments. Has Tim breached any of his fiduciary duties as an agent? Yes, the duty not to be negligent Yes, the duty to account Yes, the duty of loyalty No, so long as he keeps careful accounts and gives the bakery all that it is due.

Yes, the duty to account

An agent incurs personal liability on a contract with a third party when he acts outside the scope of his authority in negotiating the contract he is an agent for an undisclosed principal he is an agent for a partially disclosed principal all of the above would impose personal liability on the agent .

all of the above would impose personal liability on the agent .

Another term for ostensible authority is _______________authority. Apparent Incidental Express Constructive

apparent

A person who is given power of attorney is called an______________. Attorney at law Attorney in fact Factor General agent

attorney in fact

A principal whose identity is known to a third party is an _____________principal. Disclosed Undisclosed Partially disclosed Transparent

disclosed

In order to ratify an agent's contract, the principal must have been __________at the time the contract was formed. Disclosed Partially disclosed Either disclosed or partially disclosed Undisclosed

disclosed

The only principal who can ratify a contract is an _____________ principal. Disclosed Undisclosed Partially disclosed Both a and c can ratify a contract.

disclosed

Mike is a sole proprietor who buys, sells and repairs kilns and other equipment used in pottery making. He has an arrangement with K&M, a large equipment maker, to sell K&M's kilns in both his own name and in K&M's name and to receive payments from customers. Mike's relationship with K&M is that of a ________________. Independent contractor Special agent Broker Factor

factor

A factor is an agent with the special limited authority of procuring a customer so that the principal can affect a sale or exchange of property. True False

false

A multiple listing agreement lists real property with several brokers, but only the selling broker earns a commission on the sale. True False

false

A principal may terminate the agency of a disloyal agent only if the principal suffered a financial loss because of the agent's disloyalty. True False

false

A store manager is an example of a special agent. True False

false

Agency agreements must always be in writing. True False

false

An agent operating under a written power of attorney is called an attorney-at-law. True False

false

An agent whose agency appointment has terminated has implied authority to continue to conduct the principal's business until third parties are notified of the termination. True False

false

An employer is responsible for the torts committed by an employee while the employee is on a frolic, but not for those torts committed while the employee is on a detour. True False

false

An employer may have liability for the negligent hiring of a servant, but not for the negligent hiring of an independent contractor. True False

false

Apparent authority is created when a third party reasonably believes, based on the agent's conduct, that an unauthorized agent has the authority to act for the principal. True False

false

Assume that you hire an independent contractor to transport hazardous chemicals for your company. If he negligently causes damages to a third part while carrying out the job, you will not be liable because of his status as an independent contractor. True False

false

Employers have greater liability for employee torts in states that have adopted the complicity rule than in those states that follow vicarious liability. True False

false

In contracts negotiated by an agent acting within the scope of his authority for a disclosed principal, the agent, the principal and the third party are equally liable on the contract. True False

false

Officers of corporations have unlimited actual authority to sell the real property and intangible assets of the corporation. True False

false

The legal test to determine whether someone is a general agent or a special agent is whether or not the agent is paid for his services. True False

false

In some states, a parent-owner is liable for any damages caused by a family member operating the vehicle. This is the __________doctrine. Durham Family car In loco parentis Family negligence

family car

A master will not be liable for the torts committed by a servant if the servant was on a ______when the tort was committed. Lark Errand Frolic Detour

frolic

Implied authority is also known as ____________authority. Apparent Ostensible Incidental Constructive

incidental

A person who breaches a duty that is neither a contractual duty nor a crime commits a ____________. Tort Misdemeanor Malum in se Malum prohibitum

tort

A master can not normally avoid liability for damages caused by a servant even if he can show that the servant misunderstood his instructions. True False

true

A principal has the duty to notify third parties when an agency terminates. True False

true

A proprietor will be liable for the torts of an independent contractor if the duties that the contractor is hired to perform are inherently dangerous to the public. True False

true

Agents are personally liable to third parties on contracts when the principal was undisclosed. True False

true

Agents of undisclosed principals are entitled to be indemnified if held personally liable on contracts that were within the scope of their authority. True False

true

An agent who comingles the principal's funds with his or her own violates the duty to account. True False

true

An agent who is wrongfully terminated may sue the principal for damages. True False

true

An agent who represents both the buyer and the seller in the purchase of a business is acting as a dual agent. True False

true

An agent's knowledge is imputed to the principal. True False

true

If a principal ratifies the unauthorized act of an agent, he releases the agent from any liability for the unauthorized act. True False

true

If the principal dies, the agency agreement terminates by operation of law. True False

true

In a multiple listing agreement, real estate is listed with several brokers who divide the commission on the sale. True False

true

Masters and servants have only joint liability for torts committed by the servant in the course of his employment. True False

true

Normally a master is not liable for torts committed by a servant while traveling from his home to the workplace. True False

true

The secret formula for a soft drink is an example of a trade secret. True False

true

To ratify a contract, the principal must have been disclosed at the time the contract was formed True False

true

When a principal files for Chapter 7 bankruptcy, all agency appointments end when the court grants an order of relief. True False

true