MGT 12A - Chapter 10

Which of the following is not a part of the IRS three-prong test used to determine an agent's classification? The financial details of the agency relationship The substantive equity of the agency relationship The behavioral aspects of the agency relationship The working arrangement of the agency relationship

The substantive equity of the agency relationship

Quiz 7: T or F An agent's status as an "employee" or an "independent contractor" depends on the actual working relationship between the agent and the principal and not necessarily what the parties agreed to when they first formed their agency relationship.

True

True or false: Many states have adopted the ABC test in their agency statutes as a standard for determining agency status. True false question.

True

True or false: Negligent retention occurs when circumstances arise after the hiring process that should have given notice to the employer of a potential for an employee to cause harm.

True

True or false: The consequences of a business owner's or manager's misclassifying an employee can be severe.

True (Reason: The employer is obligated to pay back taxes or benefits owed and may be subjected to civil penalties by the state.)

Professional service providers such as attorneys, outside accountants, and architects are all examples of: __________. independent contractors gratuitous agents employee agents

independent contractors

Principals are generally not liable for the negligent acts of: ______. employees. nonagent employees. independent contractors. agent employees.

independent contractors.

Under the duty to account, the agent may not: ______. intermingle funds act in bad faith act outside the scope of authority act unreasonable

intermingle funds

Agency termination provided for by a statute or through a common law doctrine is said to have terminated by operation of:

law

An agency relationship may be terminated by operation of:

law

If a principal hires an agent to paint a building but the building is destroyed by fire before the agent begins to paint, the agency is terminated by operation of: __________. mediation equity law arbitration

law

The filing of bankruptcy or incapacity of the principal or agent can cause the agency relationship to terminate by operation of ???

law

A principal is generally not ??? for the negligent acts of independent contractors.

liable

As a general rule, if the employee's misconduct causes physical harm to a third party's person or property, the employer is: ______. liable for only the economic losses liable for only the physical injury not liable for either the physical injury or economic losses liable for both the physical injury and any related economic losses

liable for both the physical injury and any related economic losses

Refraining from self-dealing and acting solely for the benefit of the principal are agent requirements under the duty of Blank______. compensation accounting loyalty obedience

loyalty

Refraining from self-dealing and acting solely for the benefit of the principal are agent requirements under the duty of ______. accounting obedience loyalty compensation

loyalty

The duty ??? of is the centerpiece of the fiduciary obligation.

loyalty

The duty of ??? is the centerpiece of the fiduciary obligation.

loyalty

The duty of ??? requires the agent to advance the principal's interest over the agent's own interests.

loyalty

The first step in forming an agency relationship is for the principal to ______ an offer to form an agency. consent to manifest formalize

manifest

The nonagent employee relationship is referred to as the Blank______. paid-agent relationship. principal-servant relationship. master-servant relationship. master relationship.

master-servant relationship.

Reference checks and criminal background checks are steps employers can take to shield themselves from the liability imposed by the: ______. negligent hiring doctrine negligent agent doctrine negligent retention doctrine frolic and detour doctrine

negligent hiring doctrine

Before an employer will be responsible for the negligent acts of an employee, the negligent act must have occurred: ______. within the scope of employment. more than once by the same employee. within a two mile radius of the employer's principal office. more than once by any employee.

within the scope of employment.

Respondeat superior allows an injured party to pursue the: ______. employer. state. employee. federal government.

employer.

Termination due to the the conclusion of a fixed term is referred to as termination by: ???

expiration

An agency relationship is usually created by a(n) ______ agreement. express administrative unilateral implied

express

An agency relationship may be terminated by a(n) ??? action of the parties.

express

In the context of consequences of a business owner or manager misclassifying an employee, a minority of states also impose criminal liability and, in some states, repeat offenders are subject to ??? charges.

felony

An agency relationship is often referred to as a(n) ______ relationship. good faith fiduciary controlling

fiduciary

Duties that define an agency relationship are collectively called a(n) ______ duty. agency relationship fiduciary employee

fiduciary

A(n) ______ falls outside the scope of employment zone covered by respondeat superior. scope frolic detour normal workday activities

frolic

An employee's conduct during the normal workday, but not related to employment and performed for the employee's own benefit is a(n) ???.

frolic

A(n) ??? disclosed agency relationship is where the third party is aware of the identity of the principal and knows the agent is acting on behalf of the principal.

fully

When the agency relationship is ______ disclosed, the agent is not liable to the third party. fully partially minimally not

fully

Actual authority, apparent authority, and ______ are the primary sources of an agent's power. ratification defamation rescission nullification

ratification

Ending the agency relationship is referred to as: ______. replacement. substitution. cancellation. termination.

termination

Which of the following areas of law most often overlap with agency law? Contracts and criminal Contracts and torts Environmental and securities Torts and civil procedure

Contracts and torts

Quiz 2: If a court orders the agent to return funds earned as a result of breaching their duty of loyalty to the principal, this is known as_____.

Desgorgement

??? authority is normally what gives an agent the power to bind the principal.

Actual

Quiz 3: _____ arises either when the parties in an agency relationship expressly agree to create the relationship or when the authority is implied based on custom or course of past dealings.

Actual authority

??? is the legal relationship where the parties agree that one party will act on behalf of the other party.

Agency

Which of the following is fully liable under an undisclosed agency? Jury Principal and agent Agent Principal

Agent

Quiz 4: Dina hires Theo, an auto mechanic, to repair her motorcycle while she is away on a three-week vacation. Dina expects Theo to have the work done by the time she gets home. Theo needs a custom part for the motorcycle but does not have a regular supplier. Assuming he has the authority in Dina's absence, Theo signs a sales contract on Dina's behalf buy the part from a third party. The contract obligates Dina to make payment(s) over next ninety days. When Dina returns, Theo tells her about the contract. Dina neither ratifies nor repudiates the contract. Based on this scenario, which of the following statements is most likely to be true? - Dina and Theo are bound to honor the contract because they are in a fully disclosed agency relationship. - Dina is bound to honor the contract because she did not ratify or repudiate the contract but reaped its benefits. - Dina is not bound to honor the contract because she did not expressly authorize Theo to sign a contract on her behalf. - Dina is not bound to honor the contract because she did not expressly ratify the contract.

Dina is bound to honor the contract because she did not ratify or repudiate the contract but reaped its benefits.

A gratuitous agent is held to a _______ duty of care than is a paid agent. Higher Lower

Lower

__________ authority arises from the actions of a principal that lead a third party to believe that an agent has the authority to act on the principal's behalf. Transparent Redundant Apparent Actual

Apparent

??? occurs when an agent agrees to act for the principal.

Consent

Termination by expiration may be tied to a time period or an ???

Event

Quiz 5: T or F In an agency relationship, the agent authorizes the principal to provide services or accomplish some task on the agent's behalf and under the agent's charge.

False

True or False: A principal is not responsible for the risk of loss from the unauthorized acts of his or her dishonest agent.

False

True or False: A principal is not responsible for the risk of loss from the unauthorized acts of his or her dishonest agent. True false question.

False

True or false: The law requires formal expression of an agency relationship between parties. Most states require that the parties consent to the agency in writing.

False

True or false: For an agency relationship to be effective, the principal must have continuous and total control.

False (Reason: Control over an agency relationship need not be total or continuous.)

Quiz 1: Employers are generally held liable for the tortious acts their employees commit on their way to and from work.

False (because going-and-coming rule)

Quiz 8: T or F When an agent initiates the termination of the agency relationship, it is known as "revocation".

False (from Principal=Revocation, from Agent=Renunciation)

Which of the following act on behalf of a principal, but do not receive compensation? Executive agent Gratuitous agent Independent contractor Employee agent

Gratuitous agent

Identify the broad categories into which agents can be classified. (Check all that apply.) Subcontracting agents Gratuitous agents Independent contractor agents Employee agents Principal agents

Gratuitous agents Independent contractor agents Employee agents

Which government entity has created a three-prong test to determine an agent's status? SEC OSHA FTC IRS

IRS

??? torts by an agent are normally outside the scope of employment and no liability is imposed on the employer unless the agent's action has a close connection to the employer.

Intentional

Which of the following normally falls outside of the doctrine of respondeat superior? Detours Performing employment duties Normal workday activities Intentional torts

Intentional torts

The principal and agent are both liable in which of the following relationships? Fully disclosed agency Completely disclosed agency Partially disclosed agency Undisclosed agency

Partially disclosed agency

In a fully disclosed agency transaction, which of the following is liable to the third party? Agent Neither the principal nor the agent Both the principal and the agent Principal

Principal

Which of the following defines the tasks and objectives of the agency relationship? Jury Principal Agent Judge

Principal

Who may be liable in a partially disclosed agency situation? Principal and agent Agent only Principal only Neither the principal nor agent

Principal and agent

??? occurs when the principal affirms a previously unauthorized act by the agent.

Ratification

Which of the following occurs when the principal affirms a previously unauthorized act of the agent? Apparent authority Rescission Ratification Actual authority

Ratification

What is the term used to describe the principal's termination of the agency relationship? Relocation Revocation Renunciation Rescission

Revocation

Courts use which of the following to analyze the classification of an agent? Substance-over-form Mind-over-matter doctrine The smell test The clean hands doctrine

Substance-over-form

In which of the following instances would the principal not have an obligation to reimburse the agent? The agent commits an illegal act. The agent incurs expenses within the agent's actual authority. There is a third party claim on a contract entered into by an authorized agent on behalf of the principal. An agent commits a tort while operating within the scope of the agent's actual authority.

The agent commits an illegal act.

An agent must keep appropriate written records for any money received or spent in the course of agency business under the duty to: ???

accounting

An agency relationship can be expressed in writing or inferred by the ??? of the parties.

actions

A principal gives ______ authority to an agent by either an express agreement or implied authority. apparent actual absolute complete

actual

Keeping the principal informed is the duty of: ???

agency

The party acting on behalf of another in an agency relationship is the: __________. beneficiary principal agent donor

agent

Individual employees authorized to transact business on behalf of the employer principal are called ______. employee agents. gratuitous agents. independent contractor agents. detrimental agents.

employee agents.

Actual authority, ??? authority, and ratification are an agent's primary sources of power.

apparent

If the duty of loyalty is breached, the principal may ??? any transaction with the agent.

cancel

An agent must act with due ??? when conducting business on behalf of the principal.

care

An agent must give ??? to perform an act on behalf of a principal.

consent

The creation of an agency relationship is defined in terms of: ______. consent and independence consent and control payment and performance control and submission

consent and control

Failure to properly notify third parties of a terminated relationship could result in Blank______. criminal prosecution of the agent for violating the agency relationship. liability to the third party. continued liability of the principal for the agent's acts. criminal prosecution of the principal for the agent's acts.

continued liability of the principal for the agent's acts.

The law of agency often overlays and interacts with other areas of the law, especially ??? and ???.

contracts, torts

If the principal refuses to reimburse the agent, the agent typically can turn to a court to recover: ???

damanges

An agency terminated by ??? occurs when property essential to the agency relationship is no longer available.

destruction

When the essential subject matter of an agency relationship is no longer available, termination occurs by: ______. revocation substitution destruction cancellation

destruction

A(n) ??? is a small-scale deviation from normal work activity and within the scope of employment covered under the doctrine of respondeat superior.

detour

Disclosing negatives and keeping the principal informed are requirements under the duty of: ______. accountability obedience due care disclosure

disclosure

When a court orders a(n) Blank______, the agent should return any funds earned as a result of breaching conduct. disgorgement retaliation purgemen punishment

disgorgement

Under an agent's duty of Blank______, she must act as a reasonable person when conducting business on behalf of the principal. disclosure loyalty obedience due care

due care

Many courts have adopted the ??? -and-??? rule whereby employers are generally not liable for tortious acts committed by employees while on their way to and from work.

going-and-coming

Many courts have adopted the ______ rule whereby employers are generally not liable for tortious acts committed by employees while on their way to and from work. detour detour-and-frolic frolic going-and-coming

going-and-coming

In addition to acting at all times in the principal's best interests, ______ is always an agent's duty in the agency relationship. reimbursement and compensation good faith reasonableness fair treatment

good faith

A(n) ??? agent does not get paid for his or her work.

gratuitous

A(n) ______ agent is an agent who acts on behalf of a principal without compensation. contractor employee gratuitous

gratuitous

For a gratuitous agent to breach his or her duty of care to the principal, he or she must have acted so recklessly that a reasonable person would regard the conduct as ??? negligent.

grossly

The negligent ??? doctrine has been used by courts to impose liability on employers when employees have a high level of public contact or the employees are entrusted in caring for vulnerable populations.

hiring

An agent has the right to be reimbursed and __________ by the principal. actualized certified indemnified ratified

indemnified

If an agent's breach of duty resulted in a principal becoming liable to a third party, then the agent must: ______. file a counterclaim against the third party indemnify and hold the principal harmless withdraw from the contract reimburse the principal for all losses

indemnify and hold the principal harmless

If an agent's breach of duty resulted in a principal becoming liable to a third party, then the agent must: ______. reimburse the principal for all losses withdraw from the contract file a counterclaim against the third party indemnify and hold the principal harmless

indemnify and hold the principal harmless

An agent that does not bind the principal, is not considered an employee, and has no legal protections that an employee has is considered a(n): ______. independent contractor employee agent gratuitous agent non-agent employee

independent contractor

An agent that does not bind the principal, is not considered an employee, and has no legal protections that an employee has is considered a(n): ______. non-agent employee gratuitous agent independent contractor employee agent

independent contractor

An agent that does not bind the principal, is not considered an employee, and has no legal protections that an employee has is considered a(n): ______. non-agent employee independent contractor gratuitous agent employee agent

independent contractor

If an employee's actions results in harm only to a third party's emotional state, reputation, or is a purely economic loss, then the principal is Blank______. - liable for only the economic losses under the doctrine of respondeat superior - liable for both the physical injury or economic losses under the doctrine of respondeat superior - not liable because respondeat superior does not apply - liable for only the physical injury under the doctrine of respondeat superior

not liable because respondeat superior does not apply

An agent, unless otherwise authorized, may not substitute his or her own judgment for the principal's judgment under the duty of ______. obedience. disclosure. loyalty. care.

obedience.

An agent has the duty to ??? lawful instructions from the principal and cannot substitute his or her own judgment for the judgment of the principal unless specifically authorized.

obey

A third party's belief that an agent is acting on behalf of the principal must be __________. subjectively evident objectively extraordinary subjectively reasonable objectively reasonable

objectively reasonable

A third party's belief that an agent is acting on behalf of the principal must be __________. subjectively evident objectively reasonable subjectively reasonable objectively extraordinary

objectively reasonable

The death of the principal or agent results in the agency being terminated by: ______. express act implied act court order operation of law

operation of law

A(n) ??? disclosed agency relationship is one where the third party is aware the agent is acting on behalf of a principal, but the identity of the principal is unknown.

partially

The ______ doctrine presents an exception to the general rule that principals are not responsible for the negligent acts or omissions of independent contractors. scope of employment frolic and detour respondeat superior peculiar risk

peculiar risk

The ______ doctrine requires a principal to take reasonable steps to determine the fitness of an independent contractor agent to perform an inherently dangerous activity? independent contractor exception peculiar risk scope of employment respondeat superior

peculiar risk

Quiz 6: The _____ controls the agency relationship and defines the tasks and objectives of that relationship. principal agent independent contractor third party

principal

The ??? is in control of an agency relationship.

principal

The ??? is responsible for acts of an authorized agent, even if some acts of the agent were unauthorized.

principal

The party whom the agent is acting on behalf of in an agency relationship is the: ____. executive. donor. principal. administrator.

principal

Classification of an agent is important for business owners because of the potential of a(n): ______. agent's liability third party's liability principal's liability contractor's liability

principal's liability

Agents can be classified into any of the following broad categories except: ______. employee-agents independent contractor agents principal-agents gratuitous agents

principal-agents

The most common breach by a principal is failure to: ______. obey. reimburse. act ethically. exercise due care.

reimburse.

A detour is a minor deviation from normal work activities that is covered under the doctrine of ??? superior.

respondeat

Liability for principals of employee agents is derived from the doctrine of: ______. respondeat superior. caveat emptor. habeas corpus. res ipsa loquitur.

respondeat superior

Negligent ??? is a tort that may impose liability on an employer if, after the hiring process, the employer becomes aware that an employee may present harm to third parties.

retention

In most employer-employee agent relationships, the employer exercises: ______. substantial direction and control over the employee-agent. no direction and control over the employee-agent. a little direction and control over the employee-agent.

substantial direction and control over the employee-agent.

The common remedy for an agent when a principal breaches a duty owed is: suing in court for damages. criminal prosecution. nothing. There are no remedies. repossession of an asset owned by the principal that is equivalent in value to the breach.

suing in court for damages.

If an agent's breach of duty to the principal causes damages to the principal, the principal may recover those damages by: suing the agent for the breach. demanding an accounting. rescinding the contract. terminating the agency.

suing the agent for the breach.

If an agent's breach of duty to the principal causes damages to the principal, the principal may recover those damages by: terminating the agency. rescinding the contract. demanding an accounting. suing the agent for the breach.

suing the agent for the breach.

The ABC test that state courts look to to determine independent contractor status includes all of the following factors except: _______. - the service is performed outside the usual course of business of the employer - the individual is free from the direction and control of the employer - the individual is paid by the hour for all of her work and the employer removes all taxes prior to payment - the individual engaged in an independently established trade of the same nature as that involved in the service performed

the individual is paid by the hour for all of her work and the employer removes all taxes prior to payment

Keeping appropriate written records on reimbursable expenses and monies received are obligations under the duty: ______.

to account

A(n) ??? agency is where the third party is completely unaware that an agency relationship exists.

undisclosed

An agent does not violate the duty of obedience if the agent refuses to perform: ______. unlawful activities. lawful activities.

unlawful activities

For agency purposes, a principal can be liable via a contract obligation or through ??? liability (liability for another) in tort.

vicarious

Respondeat superior is a form of ______ liability. peculiar risk frolic and detour implied vicarious

vicarious

For agency purposes, a principal's liability can arise either through a contract obligation or through _______ in tort. vicarious liability statutory actual authority third party

vicarious liability