Deck 24: Liability of Principals and Agents to Third Parties

Question 1

Between the agent and the principal,it is the principal who is ultimately liable for the acts of the subagent.

Answer 1

False

Question 2

An agent who commits a criminal act under instruction from the principal is guilty of that crime.

Answer 2

True

Question 3

An agent's exercise of apparent authority,in the absence of actual authority,is in violation of the agent's duty to the principal.

Answer 3

True

Question 4

The test of an agent's express authority is:

A) the justifiable belief of the agent.
B) the specific language used by the principal in granting the authority.
C) the appearance of authority in the agent created by the principal.
D) the deduction of the third party dealing with the agent.

Question 5

When a corporation is made an agent,of necessity the principal is served by subagents.

Question 6

Express authority:

A) is created when the principal specifically describes the extent of the agent's powers.
B) arises from the principal's failure to inform third persons that the relationship between the principal and the agent is not what it appears to be.
C) arises from the justifiable belief of a third party dealing with the agent.
D) is created by the conduct of the principal that causes a third person to incorrectly believe that another has the authority to act for the principal.

Question 7

An attorney-in-fact:

A) is the label given to an agent whose authority is in writing.
B) is the label given to an agent whose authority is implied.
C) is the label given to an agent whose authority is apparent.
D) is the label given to an agent whose authority is passed on after the demise of the principal.

Question 8

An agent can exercise his implied authority when:

A) third persons believe that authority exists because past actions of the agent were ratified by the principal.
B) the agent is a special agent and not a general agent.
C) the principal's property interests need to be protected by the agent during an emergency.
D) the principal does not grant the agent any powers.

Question 9

An agent possesses the implied authority to do whatever is reasonably necessary to accomplish the objectives of the agency.

Question 10

Agents cannot delegate to employees acts for the principal that involve no judgment or discretion.

Question 11

Ratification must be explicitly expressed and may not be implied from the actions of the agent or the principal.

Question 12

Many courts allow a third person to rescind a sales contract when the person has relied on a misrepresentation by the agent even though the contract contains an exculpatory clause.

Question 13

If the agent exceeds his or her authority,liability results-unless the principal ratifies the act.

Question 14

Ratification does not give the principal full benefit of the contract.

Question 15

A person may have apparent authority even though he or she has never been appointed as an agent by the principal.

Question 16

When the agent colludes with a third party to withhold knowledge or money from the principal,the principal will be liable.

Question 17

Generally,notice to the agent does not imply notice to the principal even if it relates to the business of the agency.

Question 18

The test of an agent's implied authority is:

A) the justifiable belief of the agent.
B) the specific language the principal used in granting the authority.
C) the explicit agency agreement between the principal and the agency.
D) the deduction of the third party dealing with the agent.

Question 19

When an agent commits a tort or crime while working for the principal,the agent is not liable for the consequences of his actions if he is acting at the direction of the principal.

Question 20

The agent is held liable on contracts entered into on behalf of an undisclosed principal.

Question 21

For ratification to be effective:

A) the agent cannot disclose the name of the principal.
B) the principal must have been in existence at the time of the agent's action.
C) the agent must have the capacity to complete the unauthorized act and ratify it.
D) the necessity of the principal should not be served by subagents.

Question 22

When an agent takes an unauthorized action:

A) the action cannot be ratified by the principal.
B) the principal can transfer liability to the agent while enjoying the benefits of the action.
C) the principal may not ratify only a portion of the action.
D) the action may be ratified provided that the principal is a corporation.

Question 23

Which of the following statements is true of the liability of an agent who is acting for a nonexistent or incompetent principal?

A) If the third person is unaware of the lack of capacity of a nonexistent or incompetent principal, the agent is not personally liable on the contract.
B) A minor is considered an incompetent principal, and an agent acting on behalf of such principals is personally liable on the contract.
C) If the principal is judged insane, the law imposes an apparent warranty by the agent that the principal has the capacity to be bound.
D) A person judged insane is considered to be nonexistent or incompetent and is personally liable for acts undertaken by an agent.

Question 24

Misrepresentations by an agent made with the intent to deceive a third person:

A) will make the agent liable to the third person.
B) will absolve the principal of any liabilities toward the third person.
C) will make the third person liable to the principle.
D) will make the principal liable to the agent and the third person.

Question 25

Which of the following statements is true about apparent authority?

A) Only a general agent can have apparent authority.
B) Only a special agent can have apparent authority.
C) If the agent justifiably believed he or she had authority, this authority would be apparent.
D) If a third party justifiably believed the agent had authority, the agent's authority would be apparent.

Question 26

Ratification may be inferred by a court:

A) from the principal's acceptance of benefits of an unauthorized contract.
B) from the agent's failure to repudiate an unauthorized contract after becoming aware of it.
C) from the third party's extent of knowledge about the contract.
D) from the principal's failure to give express authority to the agent.

Question 27

Which of the following is true about ratification?

A) It releases the principal from liability to the third person.
B) It gives the agent the same right to compensation that he or she would have had if there had been prior authorization.
C) It requires the principal to have full understanding of the legal significance of all material facts.
D) It is inferred by a court from the fact that the agent accepted the benefits of an unauthorized contract.

Question 28

A large and well-known corporation wants to acquire a plot of ground for a new plant.To avoid the extra cost,the corporation purchases the land through several agents,each purporting to be buying personally.In such cases,the corporation is a(n)_____.

A) undisclosed principal
B) disclosed principal
C) partially disclosed principal
D) subagent

Question 29

Ratification releases:

A) the principal from liability.
B) the agent from liability.
C) the third party from liability for acts of the principal.
D) the principal and the third party from liability.

Question 30

A principal's intent to ratify a contract:

A) can only be inferred by the agent's actions.
B) may not be implied by his acts or failure to act.
C) may be inferred by a court from the fact that the agent accepted the benefits of an unauthorized contract.
D) may be inferred from the principal's failure to repudiate an unauthorized contract after becoming aware of it.

Question 31

Apparent authority may exist:

A) only if actual authority has been conferred on the agent.
B) if a principal has unintentionally permitted third persons to believe a person is him/her agent.
C) if the principal specifically describes the extent of the agent's powers in writing or orally and makes him/her a special agent.
D) when the conduct of the principal causes a third person reasonably to believe that another has the authority to act for the principal.

Question 32

The principal is bound by representations:

A) that are necessary for the agent to make in order to accomplish the purpose of the agency since they would be apparently authorized.
B) that the agent is expressly authorized to make.
C) that the agent makes even if the third person is aware that the agent has exceeded his actual authority.
D) that may not be customary in the kind of business being transacted by the agent.

Question 33

An agent can limit the liability for the acts of a subagent to the principal by _____.

A) issuing express authority
B) using a ministerial clause
C) issuing implied authority
D) using an exculpatory clause

Question 34

Marissa,the CEO of Carmine Laboratories,appointed Raphael as a marketing manager and gave him express authority to hire other people to help him carry out his duties.Raphael hired Dana as his secretary.Based on these facts,which of the following statements is true?

A) Only Marissa is bound to a third party by Dana's actions.
B) Neither Marissa nor Raphael is bound to a third party by Dana's actions as an employee.
C) Between Marissa and Raphael, it is Raphael who is ultimately liable for Dana's actions as an employee.
D) Dana is solely bound to third parties for her actions as an employee.

Question 35

When Nancy's aunt left for her annual Christmas vacation,she left Nancy in charge of her coffee shop.During this time,there was a riot in the city and the door of the café got damaged.Under such circumstances,Nancy can make necessary repairs if she cannot reach her aunt for further instructions because:

A) she has apparent authority.
B) she has power of attorney.
C) she has express authority.
D) she has inherent agency power.

Question 36

A general agent:

A) has a limited range of implied authority than a special agent.
B) is authorized by the principal to do a specific act.
C) is an agent who does not possess the authority to contract on behalf of the principal.
D) acts for the principal in a number of transactions over a period of time.

Question 37

Pascal is a buyer for Kelly Benjamin department store in Kentucky.While Pascal was buying visiting California,he found a solar car on sale for $3,000.Pascal contracts to buy the car for Kelly Benjamin,who wants to buy a solar car.Kelly instructs the seller to ship the car.Under these circumstances:

A) Kelly is considered to have ratified the contract.
B) Kelly is not liable since Pascal made the purchase.
C) Pascal and Kelly are both liable on the contract.
D) Pascal is considered to have ratified the contract.

Question 38

Liability is imposed on an agent who has exceeded his authority on the basis of an:

A) implied warranty of authority.
B) actual warranty of authority.
C) direct warranty of authority.
D) definitive warranty of authority.

Question 39

An agent will be relieved from liability for representations in excess of the agent's authority if:

A) the agent hired subagents to do some of his work.
B) the third party knows that the agent is acting in excess of his authority.
C) the principal does not ratify the act.
D) the act was undertaken with a good intent.

Question 40

Which of the following statements is true of a principal's liability for notice and payments to the agent?

A) The agent is not legally bound to inform the principal of knowledge gained in the course of his or her responsibilities.
B) Payment to the agent of a debt owed to the principal discharges the debt if the agent has authority to receive such payments.
C) An agent who makes over-the-counter sales is viewed as having express authority to collect for the goods.
D) The principal is not bound by the information that is passed on by the agent if it does not relate to the scope of the agent's responsibilities and authority.

Question 41

Ralph and Aisha engaged Emma,a realtor,to sell their variety store.Emma represented to buyer Pavel that "this was a typical general store," selling gas,oil,hardware,beer,and groceries.She reported that the store had an annual gross income of over $1 million.Emma failed to inform Pavel that one-third of the store's profit was attributable to an accompanying lawn and garden equipment distributorship that Ralph and Aisha were not including in the sale.When Pavel visited the business,Emma directed him away from the garage area where the lawn and garden equipment was stored.Throughout all of these negotiations,Ralph and Aisha were unaware of Emma's misrepresentations.After purchasing the store,Pavel learned of the importance of the equipment sales from Ralph and Aisha.Are Ralph and Aisha liable for Emma's misrepresentation?

Question 42

Under the theory of _____ the principal basically is liable because of its own tort.

A) direct liability
B) respondeat superior
C) joint liability
D) vicarious liability

Question 43

After Bart and Veronica were involved in an automobile accident,Bart retained Rhonda as an attorney to negotiate an out-of-court settlement.After a lengthy discussion with Veronica's insurance company,Rhonda settled the case for $5,000.However,Bart personally rejected the $5,000 offer.Veronica filed suit to enforce the settlement,claiming that Rhonda was authorized to accept the settlement on behalf of Bart.Discuss Rhonda's express,implied,and apparent authority.

Question 44

Direct liability occurs when:

A) the agent is not acting at the direction of the principal.
B) the principal is negligent in the hiring and/or the supervision of the agent.
C) the agent's criminal behavior occurs outside the scope of employment.
D) the principal has liability insurance and the agent commits a tort.

Question 45

Which of the following statements is true for the principle of respondeat superior?

A) When an agent commits a tort or crime while working for the principal, the agent is always personally liable for the consequences of his actions.
B) A principal's liability under respondeat superior is called direct liability.
C) If the agent was acting within the scope of the agency when the tort occurred, he is liable for his own actions.
D) This theory of liability makes the principal responsible without regard to whether the principal was actually at fault.

Question 46

An agent acting at the direction of the principal may render the principal liable if the agent:

A) delegates ministerial activities to other employees of the principal.
B) commits a tort or crime.
C) is acting on behalf of a nonexistent or incompetent principal.
D) does not disclose the principal's name for the duration of the performance under the contract.

Question 47

David signs a contract to purchase Orrin's property.David informs Orrin that the property is being purchased for one of his clients but refuses to tell Orrin who the client is.The principal here is _____.

A) disclosed
B) undisclosed
C) partially disclosed
D) illegal

Question 48

Briefly describe the doctrine of respondeat superior.

Question 49

Is a principal liable for the acts committed by the employees of an agent? Discuss.

Question 50

Explain the concept of apparent authority.