Deck 26: Operation and Termination of an Agency

Question 1

The principal may terminate the agency by taking actions that are inconsistent with the continuation of the agency. ​

Answer 1

True

Question 2

Any expense incurred as a result of an agent's unlawful act must be borne by the agent. ​

Answer 2

True

Question 3

Which of the following is a duty a principal has toward the agent?

A)A principal must provide the agent with a record of all monetary transactions.
B)A principal must obey routine instructions from the agent.
C)A principal must keep the agent informed of all financial activities.
D)A principal must reimburse the agent for expenses incurred during the agency.

Answer 3

D

Question 4

An agent does not incur personal liability for fraud or any other wrongdoing caused by disobedience. ​

Question 5

​ Agents have a duty to keep principals informed of all facts pertinent to the agency. ​

Question 6

An agent does not incur liability for any losses caused by disobeying a principal's instructions. ​

Question 7

Kerry appointed Stacy as his agent to manage Kerry's antique shop. In addition to stocking the antiques Kerry owned, without Kerry's knowledge, Stacy brought in some items from her attic and sold them too. Since she kept only one cash drawer, she estimated the total amount of money her items had sold for and turned the rest over to Kerry. Kerry learned about that and revoked the agency. What recourse does Stacy have? ​

Question 8

A principal may ratify an unauthorized contract and thus be bound on it. ​

Question 9

The acts of an agent that constitute a breach of loyalty are limited and very specific. ​

Question 10

When an agency agreement does not state the amount of compensation, any compensation will be set on a contingent basis. ​

Question 11

When there is a contract of agency, on whom does the law impose duties not specified in the contract? ​

A)On both the agent and principal.
B)On only the agent.
C)On only the principal.
D)On neither the agent nor the principal.

Question 12

Jones acted as Blake's agent for 12 years before this contract of agency was dissolved by Blake. However, Blake failed to convey this fact to those vendors with whom Jones contracted in the past. Which of the following is likely to occur if Jones negotiates future contracts with these vendors on Blake's behalf?

A)Blake can rescind those contracts since Jones is no longer an agent.
B)Blake can sue the vendors for contracting without authorization.
C)Blake would be bound by those contracts and would have to pay the contracted price.
D)Blake can claim compensation from Jones for any profits made.

Question 13

Destruction of the subject matter to be sold by the agent does not terminate the agency. ​

Question 14

The termination of a corporation's operation except for activities needed for liquidation is known as . ​

A)renunciation
B)dissolution
C)destruction
D)incapacitation

Question 15

When an agency is terminated by operation of law, notice need not be given to third parties who have dealt with the agent. ​

Question 16

A principal ordinarily does not have liability to third parties for contracts made within the actual or the apparent scope of an agent's authority. ​

Question 17

Which of the following best describes an agency coupled with an interest? ​

A)It is an agency in which an agent has a financial stake in performance of the contract.
B)It is an agency in which the agent and the principal are one and the same.
C)It is an agency in which an agent is authorized to invest in foreign exchange.
D)It is an agency in which an agent contracts under his or her own name.

Question 18

Jack, as a disclosed agent for Mike, purchases two tons of wheat on credit from Bryan. According to the agency contract, Jack is entitled to make such purchases under Mike's name. However, Mike refuses to make payment. Which of the following is true? ​

A)Jack can make part-payment and thereby complete the sale.
B)Bryan can sue Mike for damages.
C)Jack can refuse payment to Bryan on the basis of an unauthorized sale.
D)Mike can sue Jack for wrongful purchase and terminate the contract.

Question 19

Which of the following best describes a durable power of attorney? ​

A)It is a verbal agreement designed to be effective even though the principal is dead.
B)It is a written appointment of agency designed to be effective even though the principal is dead.
C)It is a verbal agreement designed to be effective even though the principal is incapacitated.
D)It is a written appointment of agency designed to be effective even though the principal is incapacitated.

Question 20

Which of the following is the way an agent should sign a contract in order to bind the principal and not the agent?

A)When the agent is known to be an agent, he or she should sign only his or her name.
B)The agent should sign only his or her name whether known to be an agent or not.
C)The agent should sign only with his or her initials.
D)The agent should sign  his or her name "as agent for principal".