Deck 17: Agency Relationships in Business

Question 1

Agency relationships normally are consensual.​

Answer 1

True

Question 2

An agent can represent two principals in the same transaction as long as neither of them knows about it.​

Answer 2

False

Question 3

Agency relationships can exist between employers and independent contractors.​

Answer 3

True

Question 4

Remedies of the agent for breach of duty by the principal follow normal contract and tort remedies.​

Question 5

Whether a worker is an employee or an independent contractor has no effect on the employer's liability for the worker's actions.​

Question 6

The relationship between an employer and an employee cannot involve an agency relationship.​

Question 7

Employers cannot avoid any tax liabilities by hiring independent contractors instead of employees.​

Question 8

Under the law of agency, notice to the agent is notice to the principal.​

Question 9

The agent has the right to be indemnified.​

Question 10

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

Question 11

Through agents, a principal can conduct more than one business operation at a time.​

Question 12

An agent's duties to the principal are implied from the agency relationship only if the identity of the principal is disclosed to a third party.​

Question 13

When the principal-agent relationship is contractual, the agent may have a right to specific performance.​

Question 14

​A principal has the right to control an agent's conduct in matters entrusted to the agent.

Question 15

Employment laws apply to the employer-independent contractor relationship.​

Question 16

A person does not need contractual capacity to be an agent.​

Question 17

An agent's deviation from the lawful clearly stated instructions of the principal is a violation of the duty of obedience.​

Question 18

Implied authority is authority declared in clear, direct, definite terms.​

Question 19

An agency relationship is enforceable even if it is created for a purpose that is contrary to public policy.​

Question 20

An agency by estoppel arises when the principal's actions have created the appearance of an agency that does not in fact exist.​

Question 21

A principal cannot be estopped from denying that an agent has authority.​

Question 22

An undisclosed principal is not liable to a third party for a contract made by an agent.​

Question 23

Fact Pattern 17-2
Faye works as an administrator and receptionist for Garage Door Store. The store withholds federal taxes from Faye's pay, and controls the methods and details of the performance of her work. Faye is not authorized to modify the prices or other terms of a sale at the store. Homer installs Garage Door products at the buyers' locations.
Refer to Fact Pattern 17-2. At the shop, Faye is​

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

Question 24

Fact Pattern 17-1
Nadine and Orin work at Pumps & Pipes Inc. Nadine is a sales representative who works with Pumps's customers, including contractors, government agencies, farmers, and others, as well as individual consumers. Pumps closely supervises all of its sales reps, and dictates their schedules. Orin is an engineer who works in Pumps's design department.
Refer to Fact Pattern 17-1. With respect to third parties, Orin is Pumps's​

A) ​employee, agent, and independent contractor.
B) ​employee and agent.
C) ​employee but not agent.
D) ​independent contractor.

Question 25

A special power of attorney permits an agent to transact all business for a principal.​

Question 26

High Plains Distribution Inc. hires Inez to work on its shipping dock, accepting deliveries, dispatching trucks, and dealing with customers and other companies' drivers. With respect to High Plains, Inez is most likely​

A) ​an agent.
B) ​an independent contractor.
C) ​a principal.
D) ​a work for hire.

Question 27

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

Question 28

A disclosed principal is liable to a third party for a contract made by the agent acting within the scope of his or her authority.​

Question 29

A principal is not bound to an unauthorized contract unless the principal ratifies it.​

Question 30

If the principal petitions for bankruptcy, the agency is usually terminated.​

Question 31

A partially disclosed principal is only partially liable to a third party for a contract made by an agent.​

Question 32

Vicarious liability is indirect liability.​

Question 33

An agency relationship terminates only when both parties consent to end it.​

Question 34

A principal may be liable if he or she authorizes an agent to commit a tort.​

Question 35

Fact Pattern 17-1
Nadine and Orin work at Pumps & Pipes Inc. Nadine is a sales representative who works with Pumps's customers, including contractors, government agencies, farmers, and others, as well as individual consumers. Pumps closely supervises all of its sales reps, and dictates their schedules. Orin is an engineer who works in Pumps's design department.
​Refer to Fact Pattern 17-1. With respect to third parties, Nadine is Pumps's

A) ​employee, agent, and independent contractor.
B) ​employee and agent.
C) ​employee but not agent.
D) ​independent contractor.

Question 36

The equal dignity rule requires that if a contract entered into by an agent is or must be in writing, the agent's authority must also be in writing.​

Question 37

A principal is not normally liable for the crime of an agent committed within the scope of the agency or employment.​

Question 38

Fact Pattern 17-2
Faye works as an administrator and receptionist for Garage Door Store. The store withholds federal taxes from Faye's pay, and controls the methods and details of the performance of her work. Faye is not authorized to modify the prices or other terms of a sale at the store. Homer installs Garage Door products at the buyers' locations.
​Refer to Fact Pattern 17-2. Garage Door authorizes Homer to sell garage door upgrades and accessories at the buyers' locations at prices that Homer negotiates with those buyers. With respect to sales at those locations, Homer is

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

Question 39

An agency can terminate once its purpose is achieved.​

Question 40

A principal is not normally liable for the tort of an agent committed within the scope of the agency or employment.​

Question 41

Kevin is an agent for Lookout Mountain Accountants, Inc. On Lookout Mountain's behalf and at its request, Kevin pays Nathan for software designed for the management of Lookout Mountain's services. Kevin's right to obtain the amount of those payments from Lookout Mountain arises under the principal's duty of​

A) ​compensation.
B) ​cooperation.
C) ​indemnification.
D) ​reimbursement.

Question 42

Flo, an agent for Grover, enters into a contract on Grover's behalf with Hong that must be in writing to be enforceable under the Statute of Frauds. Failure to comply with the equal dignity rule, with respect to this contract, can make the contract voidable at the option of​

A) ​Flo.
B) ​Grover.
C) ​Hong.
D) ​none of the choices.

Question 43

Donald approves on behalf of Evelyn-but without authorization-a contract with Farouk to build a new silo. Evelyn does not ratify the contract. The deal with Farouk is ​

A) ​an enforceable contract with Donald.
B) ​a voidable contract.
C) ​an enforceable contract with Evelyn.
D) ​an unaccepted offer.

Question 44

Spicy Hot Dog Vendors, Inc., grants its agent Teona an exclusive territory in which to sell Spicy products. Spicy's attempt to compete with Teona in that territory would most likely violate​

A) ​the duty of compensation.
B) ​the duty of cooperation.
C) ​the duty of indemnification.
D) ​no duty.

Question 45

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

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

Question 46

Ben manages a warehouse and its inventory for Coffee Shops, Inc. To operate this part of the business, Ben's authority can be inferred​

A) ​from the position Ben occupies.
B) ​by a reasonable party with whom Coffee Shops does business.
C) ​to contradict Ben's express authority.
D) ​under no circumstances.

Question 47

Insurance Sales Corporation hires Jeremy to act as its agent. Insurance Sales's right not to perform a contract entered into by Jeremy, if he breaches their agency agreement, is the right of​

A) avoidance.​
B) ​indemnification.
C) ​nullification.
D) ​termination.

Question 48

Lynn, an agent for Mindwonder Games LLC, executes an unauthorized contract with NOW Marketing Inc. The deal is highly advantageous to Mindwonder, and the company ratifies the contract. The contract is​

A) ​valid.
B) ​vicarious.
C) ​void.
D) ​voidable.

Question 49

Denny, a certified public accountant and an investor, and Ethel, an insurance salesperson and a realtor, may create an agency relationship for​

A) ​a legal business purpose only.
B) ​any legal purpose.
C) ​any purpose.
D) ​no purpose.

Question 50

Roberta introduces Steve to her friends as "my associate." Steve purports to act as Roberta's agent in several business transactions with those friends. If Roberta is liable for Steve'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 51

​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 hosts of banquets, corporate meetings, concerts, weddings, and other events. In this capacity, Rosario is

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

Question 52

Business Travelers Hotel Corporation hires Conrad, a real estate agent, to locate hotel properties for the company. Conrad learns of a hotel available for $3.2 million, informs Business Travelers, and makes an offer of $2.9 million on Business Travelers's instruction. The offer is rejected. Conrad​

A) ​breached the agent's fiduciary duties to the principal.
B) ​complied with all of the agent's duties to the principal.
C) ​failed to exercise the degree of skill required of an agent.
D) ​did not act strictly for the benefit of the principal.

Question 53

Ingmar asks Jessie to contract with Jessie's high school classmates to babysit Ingmar's new baby. Jessie orally agrees to do so. This is​

A) ​an agency by agreement.
B) ​an agency by estoppel.
C) ​an agency by ratification.
D) ​not an agency relationship.

Question 54

Fact Pattern 17-2
Faye works as an administrator and receptionist for Garage Door Store. The store withholds federal taxes from Faye's pay, and controls the methods and details of the performance of her work. Faye is not authorized to modify the prices or other terms of a sale at the store. Homer installs Garage Door products at the buyers' locations.
Refer to Fact Pattern 17-2. Garage Door hires Janitorial Service Company to clean the store. Garage Door gives Janitorial Service instructions as to what needs to be cleaned and when. With respect to Garage Door, Janitorial Service is​

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

Question 55

Lucille is married to Marcus. Lucille buys food for their children's lunches and charges the cost to Marcus's account. This is​

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

Question 56

Norton grants an ordinary power of attorney to Olena to locate potential real estate investment opportunities on Norton's behalf. This power will terminate on Norton's​

A) ​taking advantage of one of the investment opportunities.
B) ​death or incapacity.
C) ​sixty-fifth birthday.
D) ​hiring an actual attorney to exercise the power granted to Olena.

Question 57

Largo is an agent for MaryElise. MaryElise gives Largo clear instructions to enter into contracts on her behalf only on Mondays, Wednesdays, or Fridays. Largo enters into a contract on her behalf on Tuesday. Largo has breached​

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

Question 58

John contracts with Kelly to buy a certain number of cattle for Kelly's Circle K ranch. John makes a deal with Lawson, the owner of a local herd, and makes a down payment. Kelly fails to pay the rest of the price. Lawson sues John for breach of contract. John's right to hold Kelly liable for any damages that he has to pay is the right of​

A) ​compensation.
B) ​cooperation.
C) ​indemnification.
D) ​reimbursement.

Question 59

Based on Oona's conduct, Porcio reasonably believes that Qasim has the authority to act on Oona's behalf even though Qasim does not have the actual authority to do so. In this circumstance, Qasim has​

A) ​apparent authority.
B) ​express authority.
C) ​implied authority.
D) ​no authority.

Question 60

Bernard is an expert on exotic flowers. Custom Floral Arrangements, Inc., hires Bernard to order exotic flowers for its arrangements. Bernard does not examine the quality of the flowers he orders on behalf of Custom Floral. Bernard has breached​

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

Question 61

Lena is a salesperson for Musical Instruments, Inc. She tells Nayda, a customer, that an instrument has a certain quality when, as Lena knows, it does not. In reliance, Nayda buys the instrument. Liable for this misrepresentation is​

A) ​no one.
B) ​Lena.
C) ​Musical Instruments.
D) ​Nayda.

Question 62

Orin hires Pat, a real estate broker, to sell her oceanfront house. The house is destroyed in a hurricane before being sold. Pat is Orin's agent​

A) ​until Orin's insurer pays Pat's commission.
B) ​until the destroyed house is sold.
C) ​until the destroyed house is rebuilt and sold.
D) ​no more.

Question 63

Olive, an agent for Precision Paving Corporation, enters into an unauthorized contract with Quality Asphalt, Inc., purportedly on Precision's behalf. Precision does not ratify the contract. Liability may be imposed on​

A) Olive to Quality for misrepresenting her authority.​
B) ​Precision to Quality for not ratifying the contract.
C) ​Quality to Precision for entering into an unauthorized contract.
D) ​Precision to Olive for not ratifying the contract.

Question 64

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 65

Beth, acting within the scope of her authority for the Cake Bake Shop, contracts with Eden Valley Orchards to buy an assortment of fruit. Cake Bake is liable on the contract, and Beth is not, if Cake Bake is​

A) ​a disclosed principal.
B) ​a partially disclosed principal.
C) ​an undisclosed principal.
D) ​not a principal.

Question 66

Bayou Development Corporation hires Coastal Brokerage Associates to sell the condominiums in a building at Bayou Development's resort. The agency will terminate​

A) ​after the condos have been sold.
B) ​if the prices of the condos must be reduced to sell them.
C) ​once Bayou Development obtains insurance to cover the property.
D) ​when Bayou Development pays Coastal Brokerage its first commission.

Question 67

Garry drives a truck as an employee for Heavy Hauling, Inc. Garry would most likely be considered acting outside the scope of her employment if he​

A) ​crashed into a car at the airport while off duty.
B) ​hit a pedestrian in a parking lot during a "working" lunch.
C) ​ran over an attendant at Quik's gas station while refueling the truck.
D) ​smashed into a store-front while intoxicated on-duty.

Question 68

Reliable Insurance Company employs Stuart as an agent. To terminate Stuart's authority, Reliable Insurance must notify​

A) ​only third parties who are aware of the agency relationship.
B) ​the public generally.
C) ​Stuart and any third parties who are aware of the agency relationship.
D) ​Stuart only.

Question 69

Rod is an employee of Savers Bank. In deciding whether Rod acts within the scope of his employment when he commits a tort against Tracy, a court will not consider whether​

A) ​Rod indicated that he was acting on behalf of Savers Bank.
B) ​Savers Bank authorized the act.
C) ​Savers Bank furnished the means by which the injury was inflicted.
D) ​the act is one commonly performed by employees for their employers.

Question 70

Private Security Service employs Olsen as an agent. Without Private Security's knowledge but otherwise acting within the scope of employment, Olsen commits a crime. The state can successfully prosecute​

A) ​none of the choices.
B) ​Private Security.
C) ​Private Security or Olsen.
D) ​Olsen.

Question 71

Becca is a purchasing agent for Cable & Wire Corporation. Doyle, a Cable & Wire corporate officer, gives Becca written authority to buy for the firm as much copper as necessary. The next day, Doyle calls Becca and tells her to buy only a certain quantity of copper and no more. Becca shows the written authority to Earthbound Resources, Inc., and enters into a contract to buy more than the quantity specified by Doyle. Earthbound Resources ships the order to Cable & Wire. Is Cable & Wire liable to Earthbound Resources under the contract? Is Becca liable? In each case, if so, why? If not, why not?​

Question 72

Mirena serves in a representative capacity for Netanya. Orla is injured through Mirena's negligence. Netanya may be liable to Orla if Mirena's conduct occurred​

A) ​due to a propensity Netanya was not and could not have been aware of.
B) ​during normal working hours.
C) ​in the course and scope of Mirena's employment.
D) ​outside the parties' employment relationship.