Deck 24: Principal-Agent Relationship

Question 1

To be valid, an agency agreement must be in writing.

Answer 1

False

Question 2

To prevent problems, a principal-agent contract should be in writing.

Answer 2

True

Question 3

A person hired to sell one's car would be considered a

A) general agent.
B) special agent.
C) power of attorney.
D) business agent.

Answer 3

B

Question 4

The bankruptcy of the agent may terminate the agency relationship.

Question 5

A principal has a duty to indemnify an agent if the agent gets a speeding ticket while performing the principal's business.

Question 6

The major difference between an employee and an independent contractor is the length of time during which services will be performed.

Question 7

An agency is created if one person ratifies another's unauthorized act.

Question 8

An agent has a duty to follow all lawful instructions of the principal.

Question 9

A principal-agency relationship may be used for

A) personal purposes.
B) business purposes.
C) both personal and business purposes.
D) employment purposes only.

Question 10

If you hire an agent to sell your house, the agency ends when the house is sold.

Question 11

An independent contractor and an agent are basically the same.

Question 12

An agency is automatically terminated upon the death of the agent.

Question 13

A minor can act as either a principal or an agent.

Question 14

Of the following acts, the one that an agent could not perform for a principal is

A) selling a house.
B) voting in an election.
C) buying a car.
D) hiring new employees.

Question 15

The principal continues to be bound by an agent's actions until the principal notifies third parties that the agency has terminated.

Question 16

The major difference between an agent who is paid and a gratuitous agent is the

A) amount of time spent on agency business.
B) type of work the agent may perform.
C) amount of authority the agent has.
D) right to refuse to carry out the principal's instructions.

Question 17

A special agent is limited in the type of transactions he or she can perform for the principal.

Question 18

A person can be both an agent and an employee at the same time.

Question 19

Of the following acts, the one that an agent could not perform for the principal would be

A) making a will for the principal.
B) voting for the principal.
C) serving on a jury in place of the principal.
D) all of these.

Question 20

An emergency may create a principal-agent relationship by necessity.

Question 21

An agency that may not be unilaterally revoked by the principal is a(n) ____________________.

Question 22

An example of a situation that would terminate an agency by operation of law would be

A) a postal strike.
B) nonpayment of the agent.
C) death of the agent.
D) nonrenewal of the agency contract.

Question 23

Of the following, the one that is not a duty owed by a principal to an agent is

A) reimbursement.
B) compensation.
C) obedience.
D) indemnification.

Question 24

Unless the agency agreement provides otherwise, all profits that result from an agency

A) belong solely to the agent.
B) belong solely to the principal.
C) are divided equally between the principal and the agent.
D) belong to the agent, based on the time spent.

Question 25

A principal-agent contract

A) must be in writing if it involves the sale of real estate.
B) must be in writing if the relationship is to last for less than one year.
C) never needs to be in writing.
D) must always be in writing.

Question 26

The only type of principal-agent relationship that may not be revoked by the principal is a(n)

A) gratuitous agency.
B) independent contractor relationship.
C) renunciable agency.
D) agency coupled with an interest.

Question 27

An agency by estoppel is created

A) by a written contract.
B) when the principal is a minor.
C) when the principal leads others to believe a person is her or his agent.
D) for one specific purpose.

Question 28

A(n) ____________________ agent has the authority to perform acts that relate to all business affairs of the principal.

Question 29

A principal-agent relationship may be terminated by

A) mutual agreement.
B) operation of law.
C) revocation of authority.
D) all of these.

Question 30

An agent who suffers a loss while acting for a principal is entitled to ____________________ from the principal.

Question 31

All of the following may legally be appointed as agents except

A) aliens.
B) insane persons.
C) minors.
D) incompetents.

Question 32

An agent working for two principals at the same time violates the duty of

A) obedience.
B) loyalty.
C) accurate accounting.
D) reasonable skill.

Question 33

Of the following duties, the only one that an agent does not owe the principal is

A) loyalty.
B) reasonable skill.
C) accurate accounting.
D) compensation.

Question 34

A broker is an example of

A) a general agent.
B) an independent contractor.
C) an employee.
D) a special agent.

Question 35

The obligation of a principal to pay an agent for expenses incurred by the agent while performing work for the principal is known as

A) repayment.
B) indemnification.
C) recovery.
D) reimbursement.

Question 36

A contract by a minor appointing an agent is ____________________.

Question 37

A person hired to add an extra room to your house would be a(n)

A) employee.
B) agent.
C) independent contractor.
D) principal.

Question 38

A(n) ____________________ agent is one who does not receive compensation.

Question 39

A written document appointing an agent is a

A) power of attorney.
B) collective bargaining agreement.
C) fiduciary.
D) lien.

Question 40

An agent's actual authority ends when

A) the agent cancels the agency contract.
B) the principal revokes the authority of the agent.
C) the principal refuses to compensate the agent.
D) all of these.

Question 41

A(n) ____________________ is a formal written document appointing an agent.

Question 42

A relationship of trust and confidence is a(n) ____________________.

Question 43

Collins appointed Rubin to sell his car, which needed repairs. Rubin agreed to pay for the repairs and to be repaid from the proceeds of the sale. Two weeks later, Collins changed his mind about selling the car. Is the agency terminated?

Question 44

Clinton appointed DeWitt, a minor, to sell some of his lumber to Broward. Broward signed a contract with DeWitt to purchase the lumber but then refused to go through with the deal when he learned that DeWitt was a minor. May Broward refuse to go through with the transaction?

Question 45

Platt inherited $50,000. She hired an agent and gave the agent specific instructions to invest the money in land. Instead, the agent invested the money in stock, thinking that Platt would get a better return on her money. Is the agent entitled to compensation?

Question 46

Approval by a principal of an unauthorized act of an agent is called ____________________.

Question 47

Charles gave Halston authority to sell several household items for her for $175 in a garage sale. Halston sold the items for $200 and kept the additional $25 for herself. May Charles recover the $25?

Question 48

When an agency is terminated by the bankruptcy of the principal, it is known as termination by ____________________.

Question 49

Bennett hired Ace Plumbing to check the plumbing in his apartment for leaks once a week. If an Ace employee injures a guest in Bennett's house, is Bennett liable?

Question 50

A(n) ____________________ is a person hired to do a specific job but not subject to the direction or control of the hirer.