Deck 14: Agency and the Employment Relationship

Question 1

A person appointed by an agent to help the agent for certain specific transactions is a special agent.

Answer 1

True

Question 2

When an agent is authorized to execute all transactions connected with a business, the person is a general agent.

Answer 2

True

Question 3

Gratuitous agents are appointed by other agents to undertake some work for the principal.

Answer 3

False

Question 4

A principal's major reason for developing agency relationships is to expand business opportunities.

Question 5

When an agent is allowed to delegate duties to other agents, the other agents are subagents who assist the agent.

Question 6

A general power of attorney is usually given to a universal agent.

Question 7

All valid agency relationships are contracts.

Question 8

If Hilda volunteers to sell Heidi's horse for her, because Hilda knows lots of potential buyers, and Heidi agrees, Hilda is a gratuitous agent.

Question 9

When an agent pays for the right to exercise authority for a business, there is an agency coupled with an interest.

Question 10

A principal may designate someone to do all acts that can be legally delegated to an agent. That agent is called a general agent.

Question 11

If someone volunteers to act as a gratuitous agent, and performs a task, such as selling a car, for a principal, the legal consequences are the same as if the agent were paid.

Question 12

In an agency relationship, the agent is a neutral party regarding contracts between the principal and third parties.

Question 13

A general power of attorney is usually given to a special agent.

Question 14

A subagent is an agent of an agent, not an agent of the principal, so owes no duty to the principal, only to the agent.

Question 15

Agency relationships used to be common in decades past, but in recent years they have fallen out of favor.

Question 16

Agency relationships must be evidenced by a written contract.

Question 17

The agency relationship is a key part to most business operations.

Question 18

A principal may designate someone to do all acts that can be legally delegated to an agent. That agent is called a universal agent.

Question 19

An agent may not legally bind a principal to contracts without the principal agreeing to each contract.

Question 20

A principal may designate someone to execute all transactions connected with running a business. Such a person is known as a special agent.

Question 21

The two general classifications of authority an agent can possess are general authority and implied authority.

Question 22

Power of attorney is based on a legal document.

Question 23

Agency relationships may be based on an oral agreement.

Question 24

In an emergency, when someone acts on behalf of someone else in order to avoid a loss, the law may create an agency by operation of law.

Question 25

An express ratification takes place when the principal gives a clear signal to be bound by an action that would otherwise be unauthorized.

Question 26

The two general classifications of authority an agent can possess are actual authority and implied authority.

Question 27

When a principal's conduct appears consistent with the existence of an agency relationship, an agency by estoppel may be created.

Question 28

An agent's authority is the power to change the principal's legal obligations.

Question 29

Express or actual authority may only be created by written instruction or written contract.

Question 30

An implied ratification takes place when the principal behaves as if she has the intention of ratifying an unauthorized agreement.

Question 31

The legal document intended for the purpose of expressly establishing an agency is the attorney-in-fact.

Question 32

Ratification is an affirmation by the principal of an unauthorized agreement by a person acting as an agent with a third party.

Question 33

Power of attorney may only be held by a licensed attorney.

Question 34

An agency that is to last more than one year usually must be evidenced by a written contract.

Question 35

If a hurricane is coming and you spend $800 to buy supplies to protect your neighbor's house against storm damage, when they are gone and cannot be reached, you may have created an agency by operation of law.

Question 36

An agency that is for the sale of land usually must be evidenced by a written contract.

Question 37

Agents rarely can change a principal's legal obligations.

Question 38

If a principal behaves as if he intended to ratify an unauthorized agreement between his agent and a third party, a court will find that implied ratification has occurred.

Question 39

An express ratification takes place when the principal behaves as if she has the intention of ratifying an unauthorized agreement.

Question 40

Power of attorney is given to an agent called an attorney-in-fact.

Question 41

Principals only duty to agents is to compensate.

Question 42

In Town Center Shopping Center v. Premier Mortgage, a lease for office space, made by a manager of a mortgage company, was negated by the courts because the leasing company should have known that a person in the position of the manager would not have such authority.

Question 43

Actual authority involves powers given by the principal to the agent.

Question 44

Principals may be bound by the unauthorized acts of agents if the agent appears to third parties to have the authority to act.

Question 45

An agent is expected to perform responsibilities with the degree of care that is called ordinary care under the circumstances.

Question 46

Apparent authority arises when agent concludes that there is an appearance of authority from the principal to act on behalf of the principal in dealing with third parties.

Question 47

When an agent has the power to do whatever is reasonable and customary to carry out the agency purpose, the agent has implied authority.

Question 48

A major duty of principals to their agents is to indemnify them under most circumstances for liabilities incurred in completing the purpose of the agency.

Question 49

Principals are presumed to have a duty to cooperate with their agents.

Question 50

Legal obligations in an agency run from agent to principal, not principal to agent.

Question 51

Principals have an obligation to reimburse their agents for their normal business expenses related to the agency, unless otherwise agreed.

Question 52

In Town Center Shopping Center v. Premier Mortgage, a manager of a mortgage company was held to have apparent authority when she entered into a lease for office space, even though she did not have authority to commit her company to that.

Question 53

If an agent is discovered to be representing conflicting interests, she has violated her duty of loyalty.

Question 54

Apparent authority arises when the principal creates an appearance of authority in an agent that leads a third party to conclude that the agent has authority to act for the principal.

Question 55

In Town Center Shopping Center v. Premier Mortgage, a lease for office space, made by a manager of a mortgage company, was negated by the courts because the manager did not have authority to commit her company to that.

Question 56

In her relations with her principal, an agent must meet the "ordinary standard of conduct" imposed on people engaged in business dealings.

Question 57

Principals are presumed at common law to have no duties to their agents.

Question 58

If an agency relationship did not establish a rate of compensation for the duties of the agent, the principal must pay the "customary" rate for such services.

Question 59

Agents have a fiduciary duty to their principals.

Question 60

Fiduciary duties apply to principals; agents have only non-fiduciary duties.

Question 61

In Bearden v. Wardley Corp., where real estate agent Gritton cheated Bearden on a house deal, the court held that his employer, Wardley, was liable for his actions because it failed to monitor Gritton's improper actions sufficiently.

Question 62

An agent makes a contract with a third party on behalf of the disclosed principal. The principal then breaches the contract. The third party may sue the agent to recover damages.

Question 63

Agencies may be terminated by operation of law, without either party taking any action.

Question 64

The death of a principal would affect the validity of contracts then made by the agent for the principal.

Question 65

In the case of an undisclosed principal, a third party is unaware of the identity of the principal as well as the existence of an agency relationship.

Question 66

An undisclosed principal is a principal whose identity is unknown to the third party with whom the agent is involved.

Question 67

Destruction of the subject matter of an agency ends an agency relationship.

Question 68

An agent has a duty to notify his principal of all facts relevant to the purpose of the agency.

Question 69

In Bearden v. Wardley Corp., where real estate agent Gritton cheated Bearden on a house deal, the court held that his employer, Wardley, was liable for breach of fiduciary duty.

Question 70

Agents have no obligation to engage in activity on behalf of principals that could lead to personal liability.

Question 71

If money is commingled (funds of agent mixed with funds of the principal), a violation of duty to account occurs only if the principal can show actual harm.

Question 72

Agents have a duty of obedience to their principals, which means that if the agent ignores the principal's instructions, she violates her duty.

Question 73

In Bearden v. Wardley Corp., where real estate agent Gritton cheated Bearden on a house deal, the court held that his employer, Wardley, was not liable because it had no way to know of his actions.

Question 74

A contract made by an agent on behalf of an undisclosed principal is never binding on a third party who did not know about the principal.

Question 75

In Yin v. J's Fashion Accessories, the court found that Yim was an agent for his company, Hosung, so was not liable for debts owed by Hosung, the principal.

Question 76

An agency relationship may terminate by lapse of time.

Question 77

If either the principal or agent dies, the agency relationship is suspended until replacements continue the agency's purpose.

Question 78

In Yin v. J's Fashion Accessories, the court found that Yim was an undisclosed agent for his company, Hosung, but was liable for debts owed by Hosung, the principal.

Question 79

In Yin v. J's Fashion Accessories, the court stated that in most cases if an agent makes a contact without identifying his principal, the agent incurs personal liability for the contract.

Question 80

A principal is contractually liable to a third party if that party enters into a contract presented by an agent with apparent authority to act for the principal.