BLAW441 Exam 1: Ch 23 & 33

A sales representative sells products from two competing companies without disclosing to either company. Which agent duty owed to a principal applies to this situation? a. Conflict of Interest b. Outside Benefits c. Duty to Account d. Secretly Dealing with the Principal

a. Conflict of Interest

For a professional to be liable under the Ultramares rule, which of the following THREE elements must be present? Choose 3 answer choices. a. The third-party plaintiff must see the work product of the professional b. The third-party plaintiff must be a party to the contract with the professional c. The third-party plaintiff must rely on the professional's work product d. The professional must know the identity of the third-party plaintiff

a. The third-party plaintiff must see the work product of the professional c. The third-party plaintiff must rely on the professional's work product d. The professional must know the identity of the third-party plaintiff

Expressed Authority

actual authority that is declared in clear, direct, and definite terms. The principal clearly asks the agent to do some particular task and the agent agrees to do it. Can be oral or written

Is a principal under a duty to compensate an agent who works on the principal's behalf? a. Yes, if the agent does a really good job above and beyond what is expected b. No, an agent is never paid. c. Yes, if the contract requires compensation d. No, if a salary has not been agreed on

c. Yes, if the contract requires compensation

Who is liable to third parties for damage caused by an agent's tortious conduct if the principal had directed the agent to take that action? a. only the principal b. neither the agent nor the principal if the principal has insurance coverage c. only the agent d. both the agent and the principal

d. both the agent and the principal

Implied Authority

provides the agent with the authority to do what is necessary to perform his/her express duties agent also has implied authority according to what is customary or usually granted to the agent's position

Two parties are in privity of contract if

they have entered into a contract with each other

Agency by estoppel

when a principal creates an appearance of an agency that does not exist

Establishing Negligence

1. A duty of care existed 2. Duty of care was breached 3. The plaintiff suffered an injury 4. The injury was proximately caused by the defendant's breach of the duty of care

Duties that the agent owes to the principal

1. performance 2. notification 3. loyalty 4. obedience 5. accounting

Equal Dignity Rule

A rule requiring that an agent's authority be in writing if the contract to be made on behalf of the principal must be in writing

(Duty of Loyalty) Confidential Information

The agent is not allowed to share or use confidential information, such as customer lists and trade secrets

(Duty of Loyalty) Appropriate Behavior

The agent must not act inappropriately in a way that reflects poorly on the principal, both while working and outside of work

Works for hire

When an employer hires an independent contractor The independent contractor owns the copyright

What are the two types of actual authority? Choose 2 answer choices. a. Implied authority b. Apparent authority c. Express authority d. Fiduciary relationship authority

a. Implied authority c. Express authority

Liability of Attorneys to third parties

attorneys may be held liable under the common law to third parties who rely on legal opinions to their detriment

If harm is done by an agent, and it is discovered that this agent has been convicted of the same harm before at a previous job, what might a principal be liable for? a. negligent retention b. negligent hiring c. gratuitous hiring d. breach of fiduciary duty

b. negligent hiring

When a professional acts in self-interest, rather than the best interest of a client, the professional has: a. misappropriated his or her power b. committed criminal misconduct c. breached his or her fiduciary duty d. created a usurious contract

c. breached his or her fiduciary duty

The reasonably foreseeable users rule

liability is imposed if the third party's use was reasonably foreseeable

If the two parties have entered into a contract with each other that affects a third party

that third party is not in privity

Agency relationships come about by

voluntary consent and agreement

Three types of authority

1. Express Authority 2. Implied Authority 3. Apparent Authority

Termination by act of parties

1. Lapse of time 2. Purpose achieved 3. Occurrence of a specific event 4. Mutual agreement 5. At the option of one party

Under the Ultramares rule, a professional who fails to exercise reasonable care is liable to a third party only if they knew the third party:

1. Would see their work product 2. Would rely on their work product for a particular, known purpose 3. And the professional knew the identity of the third party

Due diligence

A required standard of care that certain professionals, such as accountants, must meet to avoid liability for securities violations

Ratification

a party's act of accepting or giving legal force to a previously unenforceable contract or other obligation entered into on that party's behalf of another party

What does the ratification of an agency relationship include? a. A party affirms the contract another person made with a third party b. The law creates an agency relationship in the case of an emergency c. The principal led a third party to believe someone was an agent. d. There is an agreement between the principal and the agent

a. A party affirms the contract another person made with a third party

Three elements that create an agency relationship

1. Consent 2. Control 3. Fiduciary Duty

Apparent Authority

A principal is liable for the acts of an agent if the principal's conduct causes a third party to reasonably believe the agent is authorized to act on behalf of the principal

Fully Disclosed Principal

If a principal is fully disclosed, the third party both knows that the agent is working on behalf of the principal and knows the identity of the principal the agent is not liable for any contracts he or she makes on behalf of the principal

(Duty of Loyalty) Conflicts of Interest

The agency cannot act for two principals with conflicting interest

Is a principal liable for the tortious actions of the principal's agent? a. Yes, but the agent must reimburse the principal b. Yes, but only if the principal authorized the tortious conduct. c. No, unless the principal authorized the tortious conduct. d. No, only the agent is liable for the agent's torts

a. Yes, but the agent must reimburse the principal

Under the common law, professionals such as attorneys and accountants may be liable to their clients for: (Choose 3 answers.) a. breach of contract b. negligence c. mistake of fact d. fraud

a. breach of contract b. negligence d. fraud

In order to prevail in a claim for breach of fiduciary duty, you must be able to prove the following elements: (Choose 3 answers.) a. duty b. malice c. damages d. breach

a. duty c. damages d. breach

A professional's liability for negligence is determined by: a. state law b. federal law c. professional organizations. d. the terms of the contract between the professional and the client

a. state law

What are the main principles of the doctrine of privity? Choose 2 answers. a. Contracts are private transactions and only the parties involved should know the terms of the contract b. A contract cannot impose obligations upon any person who is not a party to the contract c. Only parties to contracts should be able to sue to enforce their rights or claim damages as such d. Contracts must be formed according to certain legal standards and with legal terminology appropriate to the type of contract

b. A contract cannot impose obligations upon any person who is not a party to the contract c. Only parties to contracts should be able to sue to enforce their rights or claim damages as such

How do agency relationships affect businesses and the business world? Choose 2 answer choices. a. Agency relationships eliminate legal concerns b. Principals are benefited, but agents are not benefited. c. Businesses can grow by hiring employees d. Workers can specialize and become experts

c. Businesses can grow by hiring employees d. Workers can specialize and become experts

Who can terminate an agency relationship? a. Only the agent may terminate b. Neither may terminate the agency until the terms of the agreement have transpired c. Either the agent or the principal may terminate d. Only the principal may terminate

c. Either the agent or the principal may terminate

What does agency by ratification require? Choose 2 answer choices. a. The principal must have hired the agent before the contract was signed b. The agent must have followed all of the principal's rules in negotiating and signing the contract c. The principal affirms the agent's entire act, not just a portion d. The principal must have the legal capacity to contract

c. The principal affirms the agent's entire act, not just a portion d. The principal must have the legal capacity to contract

In which situation does an agent have the least exposure to liability? a. Unidentified principal b. Undisclosed principal c. An agent's liability exposure is the same, regardless of the degree of disclosure. d. Fully disclosed principal

d. Fully disclosed principal

What is required to form an agency relationship? a. The agency agreement must be in writing b. The agent must have contractual capacity c. The principal must pay the agent d. The agent and principal must agree to enter the relationship

d. The agent and principal must agree to enter the relationship

What was the original decision in the Ultramares case? a. The defendant was ruled liable for fraud even though there was no privity of contract b. The defendant was ruled liable for negligence due to the privity of contract c. The defendant was ruled liable for fraud due to privity of contract. d. The defendant was ruled liable for negligence even though there was no privity of contract

d. The defendant was ruled liable for negligence even though there was no privity of contract

(Duty of Loyalty) Outside Benefits

the agent must work solely for the principal and cannot benefit from payments from other parties in connection with the agency activities without disclosure or the principal

4 ways an agency can arise

1. by agreement of parties 2. by ratification 3. by estoppel 4. by operation of law

Third-party beneficiaries of a contract are: a. only in privity if they are intended beneficiaries b. only in privity if they are incidental beneficiaries c. not in privity d. in privity

c. not in privity

If it is reasonably foreseeable that a third party may rely on the work product of a professional, that professional may owe duties to that third party to act: a. with anticipatory care b. with extraordinary skill and care c. with the skill of an expert in the field d. without negligence and without fraud

d. without negligence and without fraud

(Duty of Loyalty) Secretly dealing with the principal

The agent must not act inappropriately in a way that reflects poorly on the principal, both while working and outside of work

What factors are required for professional-client privilege to arise? Choose 2 answers. a. A professional and his or her client have communicated for the purpose of seeking, obtaining, or providing legal assistance to the client b. A professional and his or her client have communicated about a legal case c. A professional and his or her client have communicated about fees d. A professional and his or her client have communicated in confidence

a. A professional and his or her client have communicated for the purpose of seeking, obtaining, or providing legal assistance to the client d. A professional and his or her client have communicated in confidence

Which of the following scenarios illustrates a business world without agency relationships? a. The owner prepares the tax returns b. Hiring an expert as an independent contractor c. A corporation with only one employee d. Hiring an expert as an employee

a. The owner prepares the tax returns

When is an agent liable on a contract that the agent entered into in the business of the agent's principal? Choose 3 answers. a. when the principal is undisclosed b. when the principal is not satisfied with the terms of the contract c. if the agent entered into the contract in a personal capacity d. when the agent is acting without authority

a. when the principal is undisclosed c. if the agent entered into the contract in a personal capacity d. when the agent is acting without authority

What is the key factor in apparent authority? a. The agent's actions b. The actions of both the principal and the agent c. The principal's actions d. Apparent authority is dictated by operation of law in case of emergencies

c. The principal's actions

A third-party relationship is reasonably foreseeable if: a. it is a remote possibility that the relationship is possible b. an expert of the field could anticipate it arising out of the circumstances c. an ordinary person could anticipate it arising out of the circumstances d. this type of relationship has arisen out of these circumstances before

c. an ordinary person could anticipate it arising out of the circumstances

Agency by agreement

can be implied by conduct can take the form of an express written contract or be created by an oral agreement

Undisclosed Principal

the third party does not know the agency exists or the identity of the principal the third party believes he or she is dealing solely with the agent. the third party has the right to sue the agent, as well as the principal.

What are the fiduciary duties of an agent to her principal? Choose 3 answers. a. loyalty b. indemnification c. obedience d. accounting

a. loyalty c. obedience d. accounting

The restatement rule

an accountant is liable to known third-party users of the accountant's work product and also to those in the limited class whose reliance on the work the accountant specifically foresaw

What is the term for the legal right to keep confidential communications between an attorney and a client secret? a. attorney-client relationship b. professional courtesy c. the right to remain silent d. attorney-client privilege

d. attorney-client privilege

How may an agency relationship be formed? Choose 3 answers. a. by express oral agreement between agent and principal b. implied by the conduct of the agent c. implied by the conduct of the principal d. by express written agreement between agent and principal

a. by express oral agreement between agent and principal c. implied by the conduct of the principal d. by express written agreement between agent and principal

What are some good reasons to refrain from disclosing an agency or a principal's identity? Choose 2 answer choices. a. When a principal wishes to avoid exposure to liability b. When a principal does not have adequate resources in case he or she is held liable for damages related to an agency relationship c. When a principal wishes to enter into transactions, but is concerned that if third parties knew his or her identity they would be less likely to enter into the agreement d. When a principal wishes to remain anonymous for privacy reasons

c. When a principal wishes to enter into transactions, but is concerned that if third parties knew his or her identity they would be less likely to enter into the agreement d. When a principal wishes to remain anonymous for privacy reasons

What is the term for professional negligence that arises when a professional fails to exercise reasonable care and professional judgment? a. criminal misconduct b. inequity c. malpractice d. misappropriation

c. malpractice

Under the Ultramares rule, accountants who fail to exercise due care are liable to a third party only if they know: (Choose 3 answers.) a. that the third party will rely on the work product for a particular, known purpose b. that there is a mistake in their work c. that the third party will see their work product d. the identity of the third party

a. that the third party will rely on the work product for a particular, known purpose c. that the third party will see their work product d. the identity of the third party

What rules are included in an agent's duty of loyalty? Choose 2 answer choices. a. Requirement to provide outside benefits b. An agent cannot secretly deal with the principal c. obeying the principal's instructions d. An agent cannot share or use confidential information

b. An agent cannot secretly deal with the principal d. An agent cannot share or use confidential information

What is the term for a legal contact, connection, or mutual interest between parties, such as the parties to a contract? a. attorney-client relationship b. entanglement c. privity d. attorney-client privilege

c. privity

How does a principal become liable to third parties on contracts? a. The agent ratifies the contract. b. A principal is not liable to third parties on contracts c. The principal directly signs a d. The principal's agent has the authority to bind the principal in a contract with a third party

d. The principal's agent has the authority to bind the principal in a contract with a third party

Partially Disclosed Principal

the third party is aware of the agency relationship, but does not know the principal's identity the third party can recover any damages from either the principal or the agent Both parties can be held liable because the third party can only assess the reputation and reliability of the agent, not the principal