Business Law Chapter 10

Authority that is only apparent, not real. In agency law, a person may be deemed to have had the power to act as an agent for another party if the other party;s manifestations to a third party led the third party to believe that an agency existed when, in fact, it did not.

Apparent authority

When a third party reasonably believes a person has authority to act on another's behalf, even if that person does not have such authority, the situation is known as ____.

Apparent authority

A principal may be liable for the tortious conduct of an agent based on the principal's own actions, including all of the following EXCEPT: a. establishing improper rules that result in the agent's committing a tort. b. authorizing the use of improper materials or tools. c. providing explicit accurate written instructions to the agent. d. giving improper instructions.

C. providing explicit accurate written instructions to the agent

If an agent commits a crime, the employer-principal is not liable unless the principal participated in the crime by ____.

Conspiracy

An agent's implied authority can be inferred by____.

Custom

Which of the following is NOT a valid reason for a termination of an agency by operation of law? a. death or insanity b. impossibility c. changed circumstances d. prior engagement e. bankruptcy f. war

D. Prior engagement

We all have a social duty that requires us to manage our affairs so as to not injure another. This duty applies even when we act through an agent.

True

A principal whose identity is unknown by a third person, and the third person has no knowledge that the agent is acting for a principal at the time the agent and the third person form a contract.

Undisclosed principal

With an agency at will, the principal who wishes to terminate must give the agent ____.

reasonable notice

An agent will have emergency powers:

to protect the principal's property and rights when the agent is unable to communicate with the principal

Which of the following is not a classification of a principal? a. disclosed b. partially disclosed c. undisclosed d. materially disclosed

D. materially disclosed

Power given by one party to another in clear and definite terms to act on that person's behalf.

Express authority

An agency coupled with an interest is created solely for the principal's benefit.

False

If an agent has authority to sign a contract on behalf of a disclosed principal, the third party may hold either the principal or the agent responsible to perform.

False

Authority that is created not by an explicit oral or written agreement buy by implication. In agency law, implied authority of the agent can be conferred by custom, inferred from the position the agent occupies, or implied by virtue of being reasonably necessary to carry out express authority.

Implied authority

A public official authorized to attest to the authenticity of signatures.

Notary public

If an agent contracts with a third party without authority from the principal, the ____ is not liable on the contract. If the third party knows of the existence of a principal, either disclosed or partially disclosed, then the ____ is liable to the third party who relied on the agency status. In this situation, there is a breach of the ____ warranty of authority. If the third party knows that the agent does not have authority, then the agent ____ liable to the third party.

Principal, agent, implied, is not

The act of accepting and giving legal force to an obligation that previously was not enforceable.

Ratification

A doctrine under which a principal or an employer is held liable for the wrongful acts committed by agents or employees while acting within the course and scope of their agency or employment.

Respondeat superior

The unilateral termination of the agency agreement by the principal.

Revocation

____ is required to inform third parties who know of the existence of an agency that the agency has been terminated.

The principal

A principal who authorizes an agent to commit a tort be liable to persons or property injured because the act is considered to be the principal's.

True

Apparent authority usually comes into existence through a principal's pattern of conduct over time.

True

Legal responsibility placed on one person for the acts of another.

Vicarious liability

A court can apply the doctrine of ____ when a principal has given a third party reason to believe that an agent has authority to act.

agency by estoppel

An agent's authority to act for a principal:

may be actual or apparant

A principal is always responsible for an agent's ____ made within the scope of the agent's authority.

misrepresentations

Either party has the ____ to terminate the agency agreement, but they may not have the ____ to do so without legal consequence.

power, right

When the principal does not ratify an unauthorized contract resulting in an unaccepted offer, the third party can:

revoke the offer at any time without liability.

An agency coupled with an interest involves a situation in which the agent has:

some legal right or interest in the property that is the subject of the agency

An ordinary power of attorney ends when:

the person giving the power dies or becomes incapacitated

A principal will be liable for the intentional torts of an employee-agent in all of the following situations, except: a. if the tort is within the scope of the employment. b. if the principal knew or should have known that the agent had a propensity to commit the tort. c. if the principal knowingly allowed the agent to engage in conduct that was dangerous to others. d. if the agent committed the intentional tort while on a frolic.

D. if the agent committed the intentional tort while on a frolic

A principal whose identity is known to a third party at the time the agent makes a contract with the third party.

Disclosed principal

In most states, a rule stating that authority given to an agent must be made in writing if the contract to be made on behalf of the principal is also required to be in writing.

Equal dignity rule

An undisclosed principal can require the third party to fulfill the contract unless the undisclosed principal was expressly ____ as a party in the written contract, the contract is a negotiable instrument signed by the agent with no indication of signing in a(n) ____ capacity, or the performance of the agent is ____ to the contract, thus allowing the third party to refuse the principal's performance.

Excluded, representative, personal

If the third party knows at the time the contract is made that the agent does not have authority, the principal nonetheless remains liable.

False

When an agency is terminated all of the agency's authority is terminated as well.

False

A principal whose identity is unknown by a third person, but the third person knows that the agent is or may be acting for a principal at the time the agent and the third person form a contract.

Partially disclosed principal

A written document authorizing another to act as one's agent. This may be special, permitting the agent to do specified acts only, or general, permitting the agent to transact all business for the principal.

Power of attorney

The unilateral termination of the agency agreement by the agent.

Renunciation

Agency law is similar to contract law in that both an agency and a contract may be terminated by the parties or by operation of law.

True

Generally, the liability of the principal will depend on whether the agent was authorized to form a contract.

True

If an agent has no authority but nevertheless contracts with a third party, the principal cannot be held liable on the contract.

True

Liability for contracts formed by an agent depends on how the principal is classified and on whether the actions of the agent were authorized or unauthorized.

True

The employer is charged with knowledge of any dangerous conditions discovered by an employee and pertinent to the employment situation.

True

Today, standard agency principals also apply to e-agents.

True

In determining whether a particular act occurred within the scope of employment, courts will evaluate whether the employee's act was ____ by the employer; the time, place, and ____ of the act; whether the act was one ____ performed by the employees on behalf of their employers; the extent to which the employer's ____ was advanced by the act; the extent to which the ____ interests of the employee were involved; whether the employer ____ the means by which an injury was inflicted; whether the employer had reason to know that the employee would ____ the act in question, and whether the employee had done it before; and whether the act involved the commission of a(n) ____ crime.

authorized, purpose, commonly, interest, private, furnished, perform, serious

Generally, death or insanity of either party will ____ and immediately terminate the agency relationship. If performance becomes ____, the agency relationship will terminate. A significant change in ____ may trigger termination of the agency if the agent can ____ infer that the principal will not want the relationship to continue. Bankruptcy of the ____ most likely will terminate the agency, but bankruptcy of the ____ may or may not terminate the agency. Finally, if the nationality of the two parties is different and those nations are ____, the relationship is terminated because there is no way to legally enforce the rights of either party.

automatically, impossible, reasonably, principal, agent, at war

If an agent is on a ____, the principal will be liable, but if the agent is on a ____, the principal will not be liable.

detour, frolic

One or more parties may terminate an agency relationship by placing into the agreement a time period for termination. When that time ____, the agency ends. In addition, the parties can specify that the agency is for a particular ____. Once that is achieved, the agency ends. Alternatively, the parties can include a specific event as a trigger for termination; once that event ____, the agency ends. The parties can terminate an agency relationship prior to any of the proceeding events by ____ agreement, or revocation by ____ individual party.

lapses, purpose, occurs, mutual, either

To give adequate notice of the termination of the agency relationship, the principal:

must directly contact all persons the principal knows interacted with the agent, & may give constructive notice, such as through publication in a newspaper, to any person who has not yet dealt with the agent but who may have heard about the agency relationship.

The equal dignity rule has several exceptions. For example, an executive officer of a corporation ____ can conduct ____ business transactions without written authority. Likewise, when an agent acts in the ____ of a principal, the rule does not apply. Finally, when the agent's signature is merely a ____, the agent does not need written authority to sign.

normally, ordinary, presence, formality

Ratification occurs when the principal accepts responsibility for the agent's ____ acts. For ratification to be valid, the agent must have acted on behalf of an ____ principal, that principal must know all of the material ____, must ____ the agent's act in its entirety, and must have the legal ____ to ratify the transaction both at the time the agent engages and at the time the principal ratifies it. The principal's ratification must occur before the third party ____ from the transaction, and the principal must ____ the same formalities when ratifying the act as would have been required to authorize it initially.

unauthorized, identified, facts, affirm, authorization, withdraws, observe