Legal Chap 20

If an agent at his principal's direction fixes prices with the principal's competitors: a. only the agent is criminally liable. b. only the principal is criminally liable. c. both the principal and agent are criminally liable. d. any liability would be civil only.

C

If Carol, acting as agent for Steve, signs a contract, she alone will be personally bound by it: a. if Steve's name or the fact that Carol is an agent is never mentioned and Steve does not carry out the contract. b. never; as an agent she is only a representative. c. if she decides to sue. d. if Steve is discovered by the third party to be the principal and the third party elects to hold him liable for performance.

A

Spoken or written words the principal communicates to the agent create: a. actual, express authority. b. actual, implied authority. c. apparent authority. d. incidental authority.

A

The purpose of an agency relationship is to: a. allow the principal to extend his business activities by authorizing agents to enter into contracts with third persons on the principal's behalf. b. encourage business growth by protecting employers from liability for torts or criminal activity. c. allow a principal to contract through agents in ways he would not be able to contract on his own, such as creating valid contracts in situations where the principal could only create voidable contracts on his own. d. eliminate the distinction between employees and independent contractors.

A

Under the Third Restatement, an agent who represents an undisclosed principal is discharged from liability if: a. the third party's judgment against the principal is satisfied. b. the third party becomes aware of the principal. c. after learning the identity of the principal, the third party gets a judgment against the principal. d. The agent is never discharged from liability.

A

Which of the following is true regarding an agent who is acting for an undisclosed principal? a. The agent with actual authority will bind both himself and the principal on most contracts. b. The third party will never be bound in a contract with the principal. c. An undisclosed principal will bind only himself and not the agent. d. Failure to disclose the name of the principal is a form of fraud.

A

An agent acts for a(n) ____ principal when she appears to be acting on her own behalf and the third person with whom she is dealing has no knowledge that she is an agent. a. unidentified b. undisclosed c. unauthorized d. disclosed

B

An agent is not normally liable on a contract he makes with a third party on behalf of a(n) ____ principal. a. undisclosed b. disclosed c. partially disclosed d. All of the above are correct.

B

Bryant, doing business as Fair Realty, employs Chris and Deborah as salespersons. Tammy contracts with Bryant to sell her house because she is aware of the good reputation of Fair Realty's salespersons. In this situation: a. Chris and Deborah are agents of Tammy and Fair Realty but they have no authority to show Tammy's house to prospective purchasers and to make representations about the house unless Tammy expressly and explicitly grants this authority directly to them. b. Chris and Deborah are employees/agents of Fair Realty and subagents of Tammy, and they have authority to show Tammy's house to prospective purchasers and to make representations about the house. c. Bryant cannot appoint subagents because Tammy's appointment of him reflected her confidence in and reliance upon his personal skill, integrity, and other qualifications. d. Chris and Deborah are subagents of Fair Realty and, as such, have a fiduciary duty only to Fair Realty.

B

Jack was fired by Larry but decided to try to win back his job as agent by getting a big new contract. He approached Sharon, a new client, and made a pitch to sell Larry's product. Sharon agreed to buy 100. Jack tells Larry. What are the legal consequences? a. Larry has to hire Jack again and then make the deal. b. Larry would have to ratify the deal to get the benefit of the contract. c. Larry would have to negotiate the deal with Sharon himself. d. Jack would forfeit his commission if Larry ratified the contract.

B

Pat bought a cotton sweater at Ivey's Fashion Store. Sue, the salesperson, told her the sweater was guaranteed not to shrink if washed in cold water by hand. Pat washes the sweater as directed and it shrinks. Which of the following is correct? a. Pat has no recourse against the store, because it was only the salesclerk who misrepresented the sweater. b. Sue has apparent authority to make warranties such as the one that she made. Therefore, the store is bound. c. If Sue is only a part-time employee, Ivey has no responsibility for misrepresentations she makes. d. Salesclerks are usually independent contractors. Thus, there is no liability on the part of Ivey.

B

Regarding the termination of an agency, the Third Restatement: a. distinguishes between terminations based on death of a principal and terminations based on incapacity of the principal. b. applies the same rule to all causes of termination; it applies a reasonableness standard. c. applies the same rule to all causes of termination; it applies the actual notice standard. d. applies the same rule as under the Second Restatement; a principal's death automatically ends the agent's apparent authority.

B

Seth grants express authority to Reba to enter contracts on his behalf. If Reba discloses to third parties that she is an agent for Seth, she has liability on a contract in all but which of the following situations? a. Reba makes a contract in her own name. b. Reba makes a contract within the scope of her authority and discloses that she is acting for Seth. c. Reba co-makes a contract with Seth. d. Reba guarantees that Seth will perform the contract. e. Reba cannot be held liable on a contract when she discloses she is Seth's agent as long as the contract is within her scope of authority.

B

Susan is planning to incorporate a new landscaping company, "Evergreen and Growin'." She has held herself out as an agent for Evergreen and has contracted to buy a truck, tools, fertilizer, and seed and also has entered into a lease on behalf of Evergreen for an office. When she fails to get the loan from the bank, she cannot start the business, so she cancels all the contracts. What are the consequences? a. Susan can cancel all the contracts with no personal liability if she told them she was acting as an agent and expressly warranted that she would not be responsible. b. Susan may be held personally liable on the contracts because she misrepresented to third parties that she had authority to make contracts on behalf of a non-existent corporation. c. Since the company never existed, she gave no implied warranty. d. Susan will be held liable for the contracts only if she ever gets the loan.

B

The doctrine of ____ is the basis for an employer's liability for an unauthorized tort committed by his employee in the course of his employment. a. indemnification b. respondeat superior c. apparent authority d. direct liability

B

Under the Second Restatement, which of the following is correct with regard to a contract entered into with a third person by an agent of an undisclosed principal? a. The agent has no liability to the third person if the agent has acted within the scope of her authority. b. The agent is personally liable upon the contract unless the third person discovers the existence and identity of the principal and elects to hold the principal to the contract. c. Once the third person learns of the existence and identity of the principal, that third person may hold both the principal and the agent to the performance of the contract. d. If the third party obtains a judgment against the principal, the agent may still have liability to that third party.

B

When there was a contract with a previously undisclosed principal, the Third Restatement: a. holds that a third party's rights against the principal are alternative to the third party's rights against the agent b. rejects the election rule. c. follows the same rules as the Second Restatement regarding a third person's rights against a principal and agent. d. Both (b) and (c).

B

Which of the following is correct under the Second Restatement with regard to actual notice to a third party of the termination of an agent's authority to act on behalf of the principal? a. Publication in a newspaper of general circulation in the area is sufficient if the third party is one with whom the agent had previously dealt on credit. b. If notice is given by mail, it is effective as actual notice upon delivery to the third party. c. A personal telephone call to the third party will not suffice, because actual notice must be in writing. d. Actual notice is not required when the agent has been specially accredited to deal with the third party.

B

Which of the following is true with regard to contractual relations between the principal and a third party? a. There is no liability on the part of the principal if the agent acts with implied authority. b. An undisclosed principal and the third party are contractually bound if the agent acts within her actual authority, unless the contract specifies otherwise. c. Under the Second Restatement, no principal is bound if the agent acts without any authority. d. A partially disclosed principal is bound only if the agent acts within the scope of actual authority.

B

Leonard is a traveling salesman for Bighorn, Inc. He calls on Ralphyl, one of his regular accounts, in order to solicit another order. While in the store, Leonard collects a past due account for Bighorn, but he doesn't get another order. It has been a bad day in which Leonard hasn't had any orders. He is so angry about this when he leaves the store that he drives negligently and hits a pedestrian with his car. In this case: a. Bighorn has no liability for Leonard's negligence, because Leonard is responsible for his own negligent conduct. b. since he was driving at the time of the negligent conduct, Leonard was no longer within the scope of his employment. c. Bighorn will be liable for Leonard's negligence under the doctrine of respondeat superior. d. Leonard is an independent contractor and, therefore, Bighorn will have no liability for his negligence.

C

Ratification: a. can only occur after the third person withdraws from the transaction and gives notice of such withdrawal. b. can be effected by a disclosed or an undisclosed principal according to the Second Restatement. c. relieves the agent of any liability she may have to the third party by reason of her having induced the third party to enter the contract without the principal's authority. d. Both (a) and (b) are correct.

C

Richard writes a letter to Sarah authorizing her to sell his car and sends a copy of the letter to Timothy, a prospective purchaser. If the next day Richard sends a letter to Sarah revoking her authority, but he fails to notify Timothy, Sarah: a. has actual authority to sell the car to Timothy. b. has implied authority to sell the car to Timothy. c. has apparent authority with respect to Timothy to sell the car. d. is empowered under the doctrine of respondeat superior to negotiate the contract.

C

Sam is a sales representative for the INC Corporation. Sam has a terrible driving record and has had his driver's license revoked, but nevertheless he continues to drive the company car for his job. One day he drives too fast for conditions, goes through a red light, and strikes a pedestrian. The accident happened despite the fact Sam's supervisor at INC had repeatedly reprimanded him and advised him to drive more cautiously. INC has: a. no liability, because they did not authorize Sam to drive carelessly. b. no liability, because Sam's actions were not a tort. c. liability even though it did not authorize Sam to drive carelessly, because it employed an improper person as its agent. d. no liability, because it has adequately supervised Sam as its agent.

C

Apparent authority may arise in all but which of the following ways? a. The acts are customary of an agent in similar positions in an organization. b. The principal has acquiesced to prior similar transactions between the agent and the third party. c. The agent shows the third party a power of attorney from the principal authorizing the agent to enter such a transaction. d. An agent tells the third person she has the authority to transact such business on behalf of the principal.

D

Authority that is not found in the express or explicit words of the principal, but that is inferred from the words is known as: a. apparent authority. b. indirect authority. c. delegated authority. d. None of the above.

D

For a ratification to be effective, the principal must: a. have knowledge of all material facts concerning the transaction. b. communicate her intent to ratify to the third party. c. have been in existence when the act was done. d. Both (a) and (c) are correct.

D

John agreed to build a new house for Ted. Unknown to John, Ted was an agent for Russell Realty. John built the house as agreed. When Ted refused to pay, John became aware that Ted was an agent for Russell. John wants to sue on the contract. Under the Second Restatement, John: a. must sue Ted, because Ted is the person with whom he dealt. b. can collect judgments against Ted and Russell. c. must sue Russell, because Russell is the principal. d. can sue either Ted or Russell.

D

Respondeat superior: a. imposes vicarious liability on the principal. b. makes a principal liable for the acts of independent contractors. c. makes a principal liable for employees' acts committed within the scope of employment. d. Both (a) and (c) are correct.

D

Under the Second Restatement, except in cases of death or incapacity or where performance of an authorized transaction becomes impossible, actual notice of termination of agency is required to the third party if she is one: a. with whom the agent has dealt on credit. b. to whom the agent has been specially accredited. c. with whom the agent has begun to deal. d. All of the above.

D

A principal may be held liable for the torts of an independent contractor: a. whenever the contractor is performing work or rendering services for the principal. b. if the principal fails to exercise reasonable care in selecting the contractor. c. if the contractor negligently performs an inherently dangerous activity. d. All of the above. e. Both (b) and (c).

E