Chapter 35: The Agency Relationship

Match the following types of authority under the agency law (left column) to their descriptions (right column).

Actual authority ----- Consent must be communicated to an agent. Apparent authority ----- Consent must be communicated to a third party.

Match the following types of notifications (left column) to their examples (right column).

Actual notification ----- A written notice delivered to third parties Constructive notification ----- Advertising an agency's termination in a newspaper

___________ is the fiduciary relationship that arises when a principal manifests assent to another person who will act on the principal's behalf and be subject to the principal's control.

Agency

The following TWO answers are true about termination of an agency by operation of law an _____________ and an _______________. (Choose two correct answers.)

An agency can be terminated by the suspension of power of an agent or a principal that is not an individual. An agency can be terminated by the principal's loss of capacity.

Identify the TWO duties of agents to avoid conflict of interest with their principals, a(n) ____________ and a(n) _____________. (Choose two correct answers)

An agent may not deal with himself. An agent may not act on behalf of a principal's competing party.

______________ arises when a principal's manifestations cause a third party to believe reasonably that an agent is authorized to act in a certain way.

Apparent authority

Match the types of agents (left column) with their descriptions (right column).

General agents ------ Serve for longer periods and deal with more parties Special agents ----- Serve for shorter periods and deal with fewer parties

Identify the agents appointed by actual authority: ____________ and _____________ (Choose TWO correct answers.)

Maria works as a sales executive for Travel Free Pvt Ltd. Jack is given a job at New Fort Inn as a receptionist by its owner.

Identify TWO true statements about the termination of an agency by act of parties: ____________ and ____________. (Choose two correct answers.)

Termination by act of the parties occurs upon the happening of an event stated in an agreement. Termination by act of the parties occurs by the mutual agreement of a principal and an agent.

An actual notification about the termination of an agency can be accomplished by ____________.

a direct personal statement to third parties

Termination of an agency by operation of law is applicable if _____________.

a principal or an agent dies

ONE true statement about apparent authority under the agency law is that it: ____________.

can be communicated by a principal either directly or through an agent.

A power given as a security or agency coupled with an interest is important because it ____________.

cannot be terminated by the principal's revocation

In a situation where a principal's instructions are ambiguous, an agent is expected to ____________.

communicate with the principal to clarify the instructions

In the context of creation of an agency, identify ONE true statement about capacity: _______________.

corporations have the capacity to appoint agents.

Identify ONE true statement about the nondelegable obligations under the agency law: ______________.

delegation of authority is not possible in contracts that demand the personal performance of a principal.

An agent who is compensated must act with which THREE of the following duties? (Choose three correct answers)

diligence competence care

An agent has a(n) ____________ duty to act loyally for the principal's benefit in all matters connected with the agency relationship.

fiduciary

In contrast to implied authority, express authority is the authority that a principal ___________.

manifests to an agent in very specific language

ONE true statement about termination of an agency by revocation or renunciation is that: ______________.

party can revoke or renounce even if doing so violates the agency agreement.

Agency law implies a promise by a principal to indemnify an agent for ____________.

payments made on the principal's behalf

Agency law's most important social function is to ____________.

stimulate commercial activity

When an agent breaches her fiduciary duty, the principal has the legal right to ____________.

terminate the agency and recover damages from the agent

A principal is not required to indemnify her agent for _______________.

unauthorized acts

Identify all the cases in which a principal is not required to compensate an agent: for ____________, for ____________, and for ____________. (Choose three correct answers.)

unauthorized tasks that are undertaken without pay services to which the principal does not consent services that involve the unauthorized hiring of subagents

Match the following types of actual authority under the agency law (left column) to their examples (right column).

Implied authority ------ A tree removal expert choosing a method to remove a tree after being assigned by a homeowner to remove a tree. Express authority ------ A homeowner tells a tree removal expert to remove a diseased tree from her front yard.

An agency can be terminated by the act of a principal or an agent when _____________.

a specified result for which the agency was created has been accomplished

Identify the factors that determine a principal's duty to compensate agents: ___________ and __________. (Choose TWO correct answers)

accomplishment of specific tasks relationship between parties and surrounding circumstances

ONE general duty of agents that is included in the Restatement (Third) is to: ______________.

act reasonably and refrain from conduct that is likely to damage a principal's enterprise

Daniel enters into a contract with High Volt International for selling its products for two years. High Volt International franchises its business to Daniel by its __________ authority.

actual

A two-party relationship in which one party has the power to act on behalf of, and under the control of, the other party is termed a(n)_______________.

agency

ONE duty of an agent under the agency law is that a(n) ___________.

agent must avoid conflicts of interest with a principal.

Paid ________ who represent that they possess a higher than _________ level of skill may be held to a correspondingly higher standard of performance. (Choose TWO correct answers)

agents customary

Identify TWO exceptions to the duty of an agent to obey instructions offered by a principal: _____________ and _____________. (Choose two correct answers)

agents need not follow directions by a principal to misrepresent the quality of the principal's goods or services. gratuitous agents need not obey their principal's order to continue to act as agents.

Identify ONE true statement about the formation of an agency: _______________.

an agency is formed through an oral or written consent between two parties.

One feature of an agency coupled with an interest is that: ____________.

an agent has an interest in the subject matter of an agency that is distinct from the principal's interest.

Former agents can use their ____________ authority to bind their principals even after the agency has been terminated.

apparent

Identify the TWO main forms of authority under the law of agency: __________ and _________.

apparent authority actual authority

Unlike special agents, general agents ____________.

are continuously employed

An agent's ability to affect her principal's legal relations is referred to as ______________.

authority

A gratuitous agency is terminable _______________.

by either party without liability

Revocation or renunciation occurs when ______________.

either party manifests to the other that he or she does not wish the agency to continue

Identify ONE true statement about agency law, it: ____________.

enables businesses to increase the number of transactions completed within a given time.

Identify the TWO improper material benefits listed under the agency law: _________ and __________. (Choose two correct answers.)

gifts from parties with whom the agent deals on the principal's behalf kick backs

An agency power ____________ for a duty owed by the principal is an exception to the termination of an agency by act of its parties or operation by the law.

given as security

ONE of the following is true about the duties of an agent under the law of agency, agents _____________.

have the duty of confidentiality of information to their principal.

Choose THREE of the following situations when an agent cannot use confidential information of a principal ___________, ___________, and _____________. (Choose three correct answers.)

information about technological discoveries information about manufacturing methods information about the contract bids

Agents can accept certain ___________ from their clients with the _________ of the principal. (Choose two correct answers)

material benefits consent

Unless the principal agrees otherwise, an agent ___________ with the principal regarding the agency business and ____________ so long as he remains an agent. (Choose TWO correct answers)

may not compete may not assist the principal's competitors

Identify the TWO true statements about an agent's duty of holding the principal's property: an agent ______________ and an agent _____________ (Check all that apply.)

must disclose all records and accounts to the principal when demanded. must keep accurate records and accounts of all transactions of the principal.

Agents can avoid conflicts of interest with their principals by _____________.

not acquiring material benefits from a client

An agent's duty requires that she ______________.

not deal with the principal's property so that it appears to be the agent's

In an agency contract, a person has the capacity to be a(n) __________ if that person has capacity to do the acts for which an agent has been retained.

principal

Identify the TWO parties directly involved in an agency contract: the ___________ and the ____________. (Check all that apply.)

principal agent

Finally, an agent who is authorized to make a certain transaction may not act on behalf of the other party to the transaction unless the: _______________.

principal knowingly consents

Certain duties or acts must be performed personally by a(n) __________ and cannot be delegated to a(n) __________. (Choose ONE correct answer)

principal, agent

Which ONE of the following is a general duty of agents as stated in the Restatement (Third) they should _____________.

refrain from making offensive statements to customers.

A principal's most important duties to her agent include all of the following: _____. (Choose THREE correct answers)

reimbursement indemnification compensation

Terminating an agency by act of a principal or an agent at the option of either party is called _____ when done by the principal and _____, when done by the agent.

revocation

When compensation is due to an agent by the principal but its amount is not expressly stated, the amount is _____________.

the market price or customary price of the agent's service

Apparent authority of an agent ends when ______________.

the third party dealing with the principal receives an appropriate notice of the termination

Confidential information of a principal can be used or communicated by agents only if ______________.

their principals agree it

Identify TWO cases for which actual notification is necessary for the termination of apparent authority of third parties: for ____________ and for ____________. (Choose two correct answers)

third parties who have previously dealt with an agent from an agency third parties who have begun to deal with an agent from an agency