Deck 32: Agency Formation and Duties

Question 1

When an agent's acts create the appearance of an agency that does not in fact exist, the principal is estopped to deny the agency relationship.

Answer 1

False

Question 2

Agency relationships come about by voluntary consent and agreement of the parties-consideration is required, and the agreement must be in writing.

Answer 2

False

Question 3

An agency relationship can arise by ratification, which involves a determination of intent expressed by words or conduct.

Answer 3

True

Question 4

In an agency relationship, one party called the principal agrees to represent or act for another called the agent .

Question 5

It is not illegal for a licensed professional to employ an unlicensed agent to perform professional acts.

Question 6

A property owner who hires a realtor to sell the property thereby enters into an agency relationship with an employee for a limited time.

Question 7

When the relationship between a principal and an independent contractor is not an employment relationship, it is an agency relationship.

Question 8

An independent contractor is, by definition, an employee because the person's physical conduct is controlled, or subject to control, by the employer.

Question 9

If an agent has represented himself or herself as possessing special skills, the agent is expected to use them.

Question 10

Agency relationships cannot exist outside employment, so agency law has a narrower reach than employment law.

Question 11

Under the principles of agency law, any sale of goods by a salesperson in a store to a customer can be binding on the owner of the store.

Question 12

Any person can be an agent, regardless of whether he or she has the capacity to contract.

Question 13

A person who cannot legally enter into a certain contract directly can do so indirectly through an agent.

Question 14

The duties that an agent owes a principal must be set forth in the agency agreement because they do not arise by operation of law.

Question 15

For the same reasons that workers may benefit from having employee status, employers may benefit from identifying workers as independent contractors.

Question 16

In some situations, the courts find an agency relationship where there is no formal agreement.

Question 17

A truck driver who drives a company truck on a regular basis is most likely an employee.

Question 18

The greater the employer's control over the work, the more likely it is that the worker is an employee.

Question 19

An agency relationship is based on the attributes of power, control, and financial self-interest-not the trust and confidence of a fiduciary relationship.

Question 20

By using agents, a principal can conduct multiple business operations simultaneously in various locations.

Question 21

Anything that an agent obtains by virtue of an agency relationship is his or hers to keep.

Question 22

Nora works at Oil & Gas Inc. She is a sales representative who works with Oil & Gas customers. The company closely supervises its sales reps, and dictates their schedules. With respect to third parties, Nora is

A)an independent contractor.
B)an employee only.
C)an employee and agent.
D)a principal.

Question 23

When an agent is an employee, he or she is covered by state workers' compensation insurance, which reduces the duty of the principal to provide safe working conditions.

Question 24

For every duty of an agent, the principal has a corresponding right, but not vice versa.

Question 25

There is no condition under which a principal must indemnify an agent for a tort claim arising from the agency relationship.

Question 26

When a third party sues a principal for an agent's negligence, the principal can sue the agent for an equal amount of damages.

Question 27

Motor Parts Sales Inc. hires Nolly to work on its shipping dock, accepting deliveries, and dispatching trucks, and dealing with customers and drivers. With respect to Motor Parts, Nolly is most likely

A)an agent.
B)an agent and a principal.
C)a principal.
D)none of the choices.

Question 28

An agent can represent two principals in the same transaction, so long as neither is aware of the dual capacity.

Question 29

If a principal's instructions are not clearly stated, an agent can fulfill the duty of obedience by acting in good faith and in a reasonable manner.

Question 30

A gratuitous agent can be liable to a principal for breach of contract, even in the absence of a contract, but not liable for the negligent performance of the deal.

Question 31

No breach of a fiduciary duty by an agent justifies a principal's termination of the agency.

Question 32

A principal who creates an exclusive agency and then competes with the agent can be held liable for the agent's lost profits or sales.

Question 33

Lasers Inc. hires Mal to buy rare earth minerals on its behalf. In this relationship, Lasers is

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

Question 34

The agent must maintain separate accounts for the principal's funds and for the agent's personal funds, but may intermingle these accounts.

Question 35

Orin works at Pumps Inc. He works in the company's engineering department, interacting with third parties only to discuss technical issues. With respect to third parties, Orin is

A)an independent contractor.
B)an employee only.
C)an employee and agent.
D)a principal.

Question 36

An agent must keep confidential any information acquired through an agency during the term of the relationship, but can disclose it after the agency ends.

Question 37

Ray is a delivery driver for Sicilian Pasta Company. Ray does exactly what the company tells him. Ray is

A)an employee.
B)an employer.
C)an independent contractor.
D)a principal.

Question 38

A principal has a duty to pay an agent in a timely manner the customary compensation for services rendered.

Question 39

An agent has the discretion whether to notify his or her principal of matters that come to the agent's attention concerning the subject of the agency.

Question 40

If a sales agent and principal disagree on the commissions the agent should have received over a certain period, the agent can demand an accounting.

Question 41

Irv, an agent for Jin, signs an agreement with Kai on Jin's behalf but neglects to tell Jin that the agreement requires the payment of a certain tax. The government prosecutes Jin for failing to pay the tax. Jin is

A)liable, because notice to Irv is notice to Jin.
B)liable, because notice to Kai is notice to Jin.
C)not liable, because Irv did not notify Jin of the tax.
D)not liable, because Kai did not tell Jin about the tax.

Question 42

Rosa introduces Sol to her friend Trey as "my associate." Sol purports to act as Rosa's agent in a business transaction with Trey. If Rosa is liable for Sol's actions, it will be because their relationship is

A)an agency by agreement.
B)an agency by estoppel.
C)an agency by operation of law.
D)not an agency relationship.

Question 43

Dino, a certified public accountant and an investor, and Elma, an insurance salesperson and a realtor, may create an agency relationship for

A)a business purpose only.
B)any legal purpose.
C)any stated purpose.
D)only a purpose related to these parties' professions.

Question 44

Lorane, an attorney, contracts with Melos to incorporate the client's business. Their contract stipulates the amount of the fee. On completion of the work, the attorney's right to be paid this amount arises from the client's duty of

A)none of the choices.
B)compensation.
C)indemnification.
D)reimbursement.

Question 45

Ingmar asks Jess to contract with Kay's Lawn Service to maintain Ingmar's lawn. Jess orally agrees to do so. This is an agency by

A)agreement.
B)estoppel.
C)operation of law.
D)ratification.

Question 46

The most important factor weighted by the courts in determining employee status is

A)the degree of control an employer exercises over the details of the work.
B)the distinction between the occupations of a worker and an employer.
C)the method of payment, whether by time period or completion of work.
D)the skill required of the worker to do a job.

Question 47

Life Insurance Company hires Minh to sell insurance policies for the company. Minh agrees to act on the firm's behalf in the endeavor, and the company trusts Minh to so act. Minh is

A)an employee and an agent.
B)none of the choices.
C)an agent and an independent contractor.
D)a principal and an agent.

Question 48

An agency contract between Trucking Company and United Dispatch does not expressly state that United will use reasonable skill and diligence in performing the work. United fails to meet this standard. The agent is most likely liable for

A)breach of contract.
B)failure to cooperate.
C)an accounting.
D)nothing.

Question 49

Isabel is an agent for Julian. He gives her clear instructions to enter into contracts on his behalf only on Mondays. She enters into a contract on his behalf on Friday. Isabel has breached

A)no duty.
B)the duty of loyalty.
C)the duty of performance.
D)the duty of obedience.

Question 50

Rubio is injured in an accident with Stavros. Unable to use his hands due to the injury, Rubio indicates that Tam should sign a settlement agreement on Rubio's behalf with Stavros's insurance company. This is

A)an agency by agreement.
B)an agency by estoppel.
C)an agency by operation of law.
D)not an agency relationship.

Question 51

Power Company employs Qin to negotiate the purchase of rights of way for a future power transmission project. Qin secretly buys some of the property along the planned route and sells the rights to Power at a profit. Qin has breached

A)the duty of performance.
B)the duty of loyalty.
C)no duty.
D)the duty of notification.

Question 52

Rosario is a chef and caterer who hires out on a per-project basis to companies with on-location work sites, as well as to the hosts of banquets and other events. In this capacity, Rosario is

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

Question 53

Because those who cannot legally enter into contracts directly cannot do so indirectly through an agent, a principal must

A)put an agency agreement into writing.
B)proffer consideration to enter into an agency relationship.
C)have contractual capacity to be a principal.
D)employ only one agent at any given time.

Question 54

Bread Company hires Craig to sell the company's products in a certain area. Bread agrees to pay Craig a salary, plus commission, for a trial period. They also agree that he can sell using any methods and during any hours that seem appropriate. The key factor in whether Craig is Bread's employee is

A)the amount of the salary.
B)the degree of the employer's control over the details of the work.
C)the length of the trial period.
D)the size of the sales area.

Question 55

Hayes, a real estate broker, offers to sell Invers's property at no charge. Hayes negotiates a sale to Jed, but negligently fails to complete the deal. The broker is most likely liable to the seller for

A)breach of contract.
B)negligence.
C)an accounting.
D)nothing.

Question 56

Bern, a salesperson at Carpet Inc., tells Dan, a customer, "Buy your flooring here, and I'll install it for less than the company would charge." Dan buys carpeting, which Bern installs for half the firm's price. Bern keeps the money. With respect Carpet Inc., Bern has breached

A)no duty.
B)the duty of loyalty.
C)the duty of performance.
D)the duty of obedience.

Question 57

Kit hires Lane to obtain insurance for Kit's business. Lane agrees to act on Kit's behalf in the effort, and Kit trusts Lane to so act. Their relationship is

A)an employee and an agent.
B)none of the choices.
C)a broker and an independent contractor.
D)a principal and an agent.

Question 58

Sal, an accountant, contracts with Torre to act on Torre's behalf during a tax audit. Their contract does not expressly state that Sal will be paid for the service. Most likely, Torre must pay

A)the customary compensation for the services.
B)only the expenses accrued in the course of the audit.
C)only the costs incurred if he accountant fails to perform.
D)nothing.

Question 59

Luce is married to Marc. Luce buys food for their children's lunches and charges the cost to Marc's account. This is

A)an agency by agreement.
B)an agency by estoppel.
C)an agency by operation of law.
D)not an agency relationship.

Question 60

Lau, an agent for Mae, acts outside the scope of her authority, to enter into a contract on Mae's behalf. Mae approves of the deal and affirms the contract. This is

A)agency by agreement.
B)agency by estoppel.
C)agency by ratification.
D)the appearance of, but not in fact, an agency.

Question 61

Masonry Corporation fails to inspect work areas and to warn agents and employees of unsafe situations in the firm's plant. Noh, an employee, is injured in an accident whose cause can be attributed to the employer's failure. Most likely, Masonry is liable to Noh for breach of the duty

A)none of the choices.
B)to provide safe working conditions.
C)of cooperation and compensation.
D)of reimbursement and indemnification.

Question 62

Ana, a sales agent for Bread Company makes claims for a product that the company has told its agents not to make. Croissant Café sues the firm when the product fails to stand up to the claim. The company can sue Ana for

A)breach of a constructive trust.
B)failure of specific performance.
C)indemnification.
D)reimbursement.

Question 63

Yu contracts with Zach to buy a certain pub, Aficionado's, for Yu, who asks Zach not to reveal her identity. Zach makes a deal with Burke, the owner of the pub, and makes a down payment. Yu fails to pay the rest of the price, and does not pay Zach for his services. Does Zach have any recourse against Yu? If so, on what basis, and to what extent?

Question 64

If an agent contracts outside the scope of his or her authority, the principal cannot become liable.

Question 65

Anything that an agent obtains by virtue of an agency relationship is held in a constructive trust and thereby belongs to

A)the principal.
B)the agent.
C)the party from whom the agent obtained it.
D)the equitable trust.

Question 66

When an agent breaches an agency agreement, the right to avoid the contract can be exercised at the election of

A)the principal.
B)the agent.
C)any party with whom the agent contracted.
D)any of the choices.

Question 67

The equal dignity rule requires that a principal and an agent act in good faith and with mutual respect in their dealings with each other.

Question 68

Roman is the chief executive officer of Salty Snax Corporation. Roman's responsibilities include decisions on product development, marketing, and other significant business directions. Roman is subject to the approval and oversight of Salty Snax's board of directors. Teri is a Salty Snax manager whose duties include the firm's day-to-day hiring, firing, purchasing, and selling. Umberto is a Salty Snax salesperson, whose daily activities are controlled by Teri. Velma writes sales manuals and promotional materials for Salty Snax's products according to Roman's instructions and subject to Salty Snax's control, but has no dealings with the company's customers or suppliers. Warren writes copy on a contract-per-project basis and is not otherwise subject to Salty Snax's control. Who is a principal? Who is an agent? Who is an employee? Who is an independent contractor?

Question 69

Generally, the liability of a principal on a contract formed by an agent with a third party depends on whether the agent was authorized to act.

Question 70

Because an agent's authority can be implied by custom, it may contradict his or her express authority.

Question 71

Curly Fries Inc. grants its agent Damon an exclusive territory in which to sell its products. The company cannot compete with Damon in that territory under the duty of

A)none of the choices.
B)cooperation.
C)indemnification.
D)reimbursement.

Question 72

Pho enters into an exclusive agreement with Qin to find suitable property for Qin's enterprise. Later, Qin signs an exclusive agreement with Row for the same purpose. Neither agent knows about the other, and each expends reasonable efforts to perform. Qin buys a building through Pho. Most likely, Qin may be liable to Row for

A)none of the choices.
B)breach of the duty of cooperation.
C)negligence.
D)an accounting.

Question 73

Actual authority in an agency relationship arises from what a principal makes clear to a third party .

Question 74

Watercraft Inc. employs Vern as a sales agent for a trial period. At the end of the period, Watercraft and Vern disagree on the amount of the commissions Vern is due for sales that he made. Vern may demand

A)a constructive trust.
B)an accounting.
C)nothing.
D)specific performance.

Question 75

Authority to manage a business implies authority to do what is reasonably required to operate the business.

Question 76

An executive corporate officer can normally conduct ordinary business transactions without first obtaining the corporation's written authority.

Question 77

Using an agent provides benefits to a principal, without potential liability.

Question 78

Roc is an agent for Statistics Inc. On the firm's behalf and at its request, Roc pays Tech LLC for specially customized software. Roc's right to obtain the amount of the payment from Statistics Inc. arises under the duty of

A)none of the choices.
B)compensation.
C)indemnification.
D)reimbursement.

Question 79

The principal-agent relationship between Medical Clinic LLC and Network Referral Service is not contractual. If Medical, the principal, violates a duty to Network, the agent is entitled to

A)recover for past services and future damages.
B)sue for services and damages, and obtain specific performance.
C)force the principal to allow the agent to continue acting as its agent.
D)none of the choices.

Question 80

Jon contracts with Kino to buy a certain number of sheep for Kino's Animal Farm. Jon makes a deal with Lila for the sheep, but neither Jon nor Kino pays the price. Lila sues Jon for breach. Jon's right to hold Kino liable for any damages is the right to

A)none of the choices.
B)compensation.
C)indemnification.
D)reimbursement.