Deck 20: Agency and Liability to Third Parties

Question 1

Agency relationships must be created by expressed agreement.

Answer 1

False
Explanation: Agency relationships may be created by expressed or implied agreements.When parties form an agency relationship by making a written or oral agreement,the agency is known as expressed agency,or agency by agreement.Expressed agency is the most common type of agency.In some cases,however,an agency relationship is not created by an expressed agreement but is instead implied by the conduct of the parties.The circumstances of a situation determine the extent of an agent's ability to conduct business on behalf of the principal.However,the implied authority cannot conflict with any express authority.

Question 2

All employees are agents of their employers,and all agents are employees.

Answer 2

False
Explanation: Although all employees are considered agents of their employers,the reverse is not true.That is,not all agents are employees.

Question 3

Suppose a principal leads a third party to believe that another individual serves as his or her agent but the principal has made no agreement with the so-called agent.Due to his or her conduct,the principal has created an agency by ratification.

Answer 3

False
Explanation: If a principal leads a third party to believe that another individual serves as his or her agent but the principal has made no agreement with the so-called agent,the principal has created an apparent agency,or agency by estoppel.According to the principal's conduct,the agent has apparent authority to act; thus,the principal is estopped,or prevented,from denying that the individual is an agent.When a third party relies on the principal's conduct and makes an agreement with an apparent agent,the principal must uphold any agreements made by the agent.If the principal attempts to deny an agency relationship existed,the third party must demonstrate that he or she reasonably believed,on the basis of the principal's conduct,that an agency relationship existed.The court will consider the principal's conduct in determining whether an agency relationship existed.

Question 4

A power of attorney is a document that gives an agent the authority to sign legal documents on behalf of the principal.

Question 5

A durable power of attorney is a written document,created by a principal,expressing his or her wishes for an agent's authority to be terminated by the principal's subsequent incapacity.

Question 6

If an agent makes authorized expenditures in the course of working on behalf of the principal,the principal has a duty to reimburse the agent for the amount of money spent.This is known as the duty of subrogation.

Question 7

If the employer has substantial control over day-to-day operations of the worker,the worker is generally considered an employee.

Question 8

An agency relationship can be created only for a lawful purpose.

Question 9

The Restatement of Contracts defines an agent as a person who contracts with another to do something for him but who is not controlled by the other nor subject to the other's right to control with respect to his physical conduct in the performance of the undertaking.

Question 10

An individual who lacks contractual capacity may hire an agent to make contracts on his or her behalf.

Question 11

Not only does the agent have to communicate offers from third parties,but the agent must also communicate any information the agent thinks could be important to the principal.This is known as the duty of collaboration.

Question 12

The principal must assist the agent in the performance of his or her duties,and the principal can do nothing to interfere with the reasonable conduct of the agent.This is known as the duty of indemnification.

Question 13

Agency law is primarily state law.

Question 14

A fiduciary is a person who has a duty to act primarily for another person's benefit.

Question 15

An agent's obligation to act in the interest of the principal is known as the duty of performance.

Question 16

While an agent owes duties to a principal,a principal owes no duties to an agent.

Question 17

Agency is generally defined as a relationship between a principal and a third-party beneficiary.

Question 18

A gratuitous agent is one who acts without consideration.

Question 19

In an agency relationship,the party who has the authority to act on behalf of and bind another party is the principal.

Question 20

A power of attorney can be general or specific.

Question 21

When an agency agreement fails to adhere to the equal dignity rule,the subsequent contracts are typically considered void.

Question 22

How did the appeals court rule in Steven A.B.Hannington v Trustees of the University of Pennsylvania and Dr.Mark Bernstein,the case in the textbook where the plaintiff,a student suing for alleged wrongful expulsion,attempted to avoid a settlement agreement entered into by an attorney acting on his behalf?

A)The settlement agreement would be set aside because the attorney had exceeded his authority.
B)The settlement agreement would be set aside both because the attorney had exceeded his authority and because the doctrine of apparent authority was inapplicable.
C)The settlement agreement would be enforced based on the doctrine of apparent authority,but only in part because the college was comparatively at fault in placing unjustified reliance on the attorney's authority.
D)The settlement agreement would be enforced based on the doctrine of apparent authority,regardless of whether the attorney exceeded the scope of his actual authority.
E)A jury should determine the enforceability of the settlement agreement based upon its reasonableness.

Question 23

An agent's implied authority is derived from an agent's express authority and consists of what is reasonably necessary for carrying out the agent's grant of express authority.

Question 24

When express authority is granted for an agent to enter into a contract that is legally required to be in writing,most states require the grant of authority also to be in writing.This requirement is known as the equitable parity rule.

Question 25

When an agent acts within the scope of her authority on behalf of a disclosed or partially disclosed principal,the agent is liable for the acts of the principal.

Question 26

Which of the following is the most common type of agency?

A)Expressed agency
B)Implied agency
C)Apparent agency
D)Agency by ratification
E)Agency by estoppel

Question 27

Insolvency automatically results in termination of an agency relationship.

Question 28

Which of the following is a person who has a duty to act primarily for another person's benefit?

A)Principal
B)Employer
C)Fiduciary
D)Trustor
E)Bailor

Question 29

In a(n)________ relationship,the agent is authorized to act for and on behalf of the principal,who hires the agent to represent him or her.

A)collusive
B)principality
C)agency
D)subrogated
E)transactional

Question 30

Singapore has outlawed the use of electronic contracts.

Question 31

Which of the following was the result on appeal in Iglesia Cristiana La Casa Del Senor,Inc.,Etc.v.L.M.,the case in the textbook involving the issue of whether a church was liable,pursuant to the doctrine of respondeat superior,for a sexual assault allegedly committed by a church pastor?

A)The church was liable to the plaintiff under the doctrine of respondeat superior.
B)The church was liable under the doctrine of respondeat superior,but only if it could be proven that the pastor sexually assaulted more than one person.
C)The church was liable under the doctrine of respondeat superior,but only if it could be proven that the church had knowledge of at least one sexual assault prior to the plaintiff's but failed to remove the pastor from church assignments.
D)The church was not liable under the doctrine of respondeat superior.
E)The church was not liable under the doctrine of respondeat superior,but only because the pastor was immediately fired when his actions came to light.

Question 32

In order to properly provide notice of the termination of an agency relationship,actual notice of agency termination must be given to third parties who have had business interactions with the agent.

Question 33

Actual notice of agency termination may never be given orally.

Question 34

Expressed agency is also known as agency by ________.

A)agreement
B)estoppel
C)apparent authority
D)ratification
E)endorsement

Question 35

An agent is authorized to act for and on behalf of the ________.

A)fiduciary
B)principal
C)independent contractor
D)third-party beneficiary
E)incidental beneficiary

Question 36

Which of the following is not a form of authority upon which an agency relationship can be created?

A)Expressed agency
B)Implied agency
C)Apparent agency
D)Agency by rescission
E)Agency by ratification

Question 37

Which of the following is a false statement regarding the agency relationship?

A)It is a consensual relationship.
B)It may be formed by a formal written contract.
C)It may be formed by an informal oral agreement.
D)It can be created only for a lawful purpose.
E)As a universal rule,a person must be trained in the area of specialty involved in the agency relationship in order to qualify as an agent.

Question 38

An agency coupled with an interest is created for the principal's benefit.

Question 39

Agents who go beyond their authority when the principal is disclosed or partially disclosed are liable for a breach of contract,not for a breach of implied warranty.

Question 40

Which of the following is generally defined as a relationship between a principal and an agent?

A)Agency
B)Principality
C)Collusion
D)Employment
E)Concordance

Question 41

A document that gives an agent the authority to sign legal documents on behalf of the principal is known as a(n)________.

A)order of authority
B)accord and satisfaction
C)subrogation agreement
D)power of attorney
E)writ of agency

Question 42

What type of relationship typically exists when an employer hires an employee to enter into contracts on behalf of the employer?

A)Principal-agent
B)General partnership
C)Employer-independent contractor
D)Limited partnership
E)Agency by estoppel

Question 43

A worker may be classified as an employee if he or she ________.

A)engages in a distinct occupation
B)performs assigned work as a specialist without supervision
C)receives regular payments according to time
D)supplies her own tools
E)gets paid when the job is completed

Question 44

The question of whether a worker is an employee or an independent contractor has important implications in which of the following areas?

A)Workers' compensation
B)Workplace safety
C)Unemployment statutes
D)Workers' compensation,workplace safety,and unemployment statutes
E)Workers' compensation and workplace safety,but not unemployment statutes

Question 45

Which of the following is an accurate statement regarding the applicability of various laws to the employer-employee and employer-independent contractor relationships?

A)The employer-independent contractor relationship is subject to the workers' compensation,workplace safety,employment discrimination,and unemployment statutes,whereas the employer-employee relationship is not.
B)The employer-independent contractor relationship is subject to the workers' compensation and workplace safety statutes,while the employer-employee relationship is subject to the employment discrimination and unemployment statutes.
C)The employer-employee relationship is subject to the workers' compensation and workplace safety statutes,while the employer-independent contractor relationship is subject to the employment discrimination and unemployment statutes.
D)The employer-employee relationship is subject to the workers' compensation and employment discrimination statutes,while the employer-independent contractor relationship is subject to the workplace safety and unemployment statutes.
E)The employer-employee relationship is subject to the workers' compensation,workplace safety,employment discrimination,and unemployment statutes,whereas the employer-independent contractor relationship is not.

Question 46

A(n)________ power of attorney is a written document,created by a principal,expressing his or her wishes for an agent's authority not to be affected by the principal's subsequent incapacity,or for the agent's authority to become active only after a principal becomes incapacitated in any manner.

A)general
B)specific
C)localized
D)durable
E)equitable

Question 47

Typically,building contractors,doctors,stockbrokers,and lawyers are ________.

A)employees
B)agents by estoppel
C)agents by ratification
D)dependent contractors
E)independent contractors

Question 48

A person who contracts with another to do something for him but who is not controlled by the other nor subject to the other's right to control with respect to his physical conduct in the performance of the undertaking is an ________.

A)employee
B)independent contractor
C)employee contractor
D)agent by estoppel
E)agent by ratification

Question 49

Agency laws are relevant to which of the following relationships?

A)principal-agent
B)employer-employee
C)employer-independent contractor
D)principal-agent,employer-employee,and employer-independent contractor
E)principal-agent and employer-employee,but not employer-independent contractor

Question 50

Which of the following is false regarding the employer-employee relationship?

A)An employee is subject to the control of his or her employer.
B)Generally,all employees are considered to be agents of their employer.
C)Employees who are not legally authorized to enter into contracts binding their employer are considered agents.
D)Employees not legally authorized to interact with third parties are considered agents.
E)All employees are agents,and all agents are employees.

Question 51

An agency relationship that arises when an individual misrepresents herself as an agent for another party and that party accepts the unauthorized act is an agency by ________

A)ratification
B)implication
C)estoppel
D)default
E)agreement

Question 52

Persons who are not employees but who are hired by employers to perform certain tasks are known as:

A)Gratuitous agents
B)Independent contractors
C)Agents by estoppel
D)Agents by ratification
E)Employee contractors

Question 53

A gratuitous agent is one who acts without ________.

A)due care
B)expertise in the area of specialty involved in the agency relationship
C)consideration
D)ratification
E)endorsement

Question 54

Which of the following is true regarding the tort liability of employers for the actions of their employees and independent contractors?

A)Employers are generally liable in tort for the actions of their employees,while they are generally not liable for the actions of independent contractors.
B)Employers are generally liable in tort for the actions of independent contractors,while they are generally not liable for the actions of their employees.
C)Employers are not generally liable in tort for the actions of independent contractors or for the actions of their employees.
D)Employers are generally liable in tort for the actions of independent contractors and their employees.
E)Employers are generally liable in tort for the actions of independent contractors and their employees,but only if the employer has agreed to assume liability in a written contract with the employee or independent contractor.

Question 55

If a principal agrees to hire no other agent for a period of time or until a particular job is done,the principal and agent have entered into a(n)________ agency contract.

A)unlimited
B)mutually exclusive
C)voidable
D)implied
E)exclusive

Question 56

Under which of the following does a principal give authority to an agent only for the specific areas or purposes listed in the agency agreement?

A)A general power of attorney
B)A specific power of attorney
C)A localized power of attorney
D)A durable power of attorney
E)An equitable power or attorney

Question 57

Which of the following is another name for an apparent agency?

A)Expressed agency
B)Equitable agency
C)Implied agency
D)Agency by estoppel
E)Agency by ratification

Question 58

Under which of the following does a principal give an agent broad authority to sign legal documents on behalf of the principal,as opposed to authority for only a specific purpose?

A)A general power of attorney
B)A specific power of attorney
C)A localized power of attorney
D)A durable power of attorney
E)An equitable power or attorney

Question 59

A principal's obligation to pay an agent for his services is the duty of ________.

A)obedience
B)reimbursement and indemnification
C)cooperation
D)compensation
E)accounting

Question 60

Whenever an employer hires an employee to perform some sort of physical service,the parties have created a(n)________.

A)employer-agent relationship
B)employer-employee relationship
C)employer-independent contractor relationship
D)agency by estoppel
E)agency by ratification

Question 61

When a contract exists and a principal agrees to certain conditions but fails to perform,which of the following may the agent seek in order to force the principal to perform the contract as stipulated?

A)Specific performance
B)Substantial performance
C)Anticipatory repudiation
D)Reformation
E)Renunciation

Question 62

Which of the following is the term used to describe the duty an agent has to follow the lawful instruction and direction of the principal?

A)Cooperation
B)Notification
C)Loyalty
D)Performance
E)Obedience

Question 63

A person in a position of trust and confidence is known as a(n)________.

A)third-party beneficiary
B)principal
C)fiduciary
D)independent contractor
E)employer

Question 64

Express authority is often referred to as ________ authority.

A)statutory
B)inherent
C)actual
D)virtual
E)equitable

Question 65

In most situations,how many principals may an agent represent in any one agreement?

A)One
B)Two
C)Three
D)Four
E)Any number of principals

Question 66

When an agency relationship is not contractual or the contract is for personal services,the agent ________.

A)has the right to seek specific performance
B)has the right to seek substantial performance
C)has the right to demand contract ratification
D)has the right to demand contract reformation
E)does not have the right to seek specific performance

Question 67

An agent cannot represent both the principal and a third party in an agreement because there could be a(n)________.

A)consortium
B)collusion
C)conflict of interest
D)conflict of laws
E)abeyance

Question 68

An agent's duty of ________ to the principal includes the agent's obligation to perform the duties as specified in the agency agreement.

A)cooperation
B)notification
C)loyalty
D)performance
E)obedience

Question 69

Which of the following is true if a principal and an agent have no agreement regarding the amount for which the principal will compensate the agent?

A)A court will assume that the agent agreed to work on a gratuitous basis.
B)The agent will be allowed to set the price that a court will enforce unless it is unconscionable.
C)The principal will be allowed to set the price that a court will enforce unless it is unconscionable.
D)A court will appoint a magistrate to set the price.
E)A court will calculate compensation according to the customary fee in the situation.

Question 70

A(n)________ trust is an equitable trust imposed on one who wrongfully obtains or holds legal right to property he or she should not possess.

A)resolute
B)Totten
C)constructive
D)implied-in-fact
E)absolute

Question 71

An agent may demand ________ if the agent believes that he or she is not being properly compensated.

A)specific performance
B)substantial performance
C)an accounting
D)a constructive trust
E)a Totten trust

Question 72

Pursuant to the duty of ________,the agent must communicate to the principal offers from third parties,and he or she must also communicate any information the agent thinks could be important to the principal.

A)notification
B)loyalty
C)performance
D)obedience
E)indemnification

Question 73

________ is the right of a principal to sue an agent to recover any amount assessed against the principal for a breach of contract caused by the agent's negligence.

A)Rescission
B)Indemnification
C)Revocation
D)Contribution
E)Recoupment

Question 74

Which of the following is false regarding a principal's duties to an agent?

A)An agent can sue the principal if the principal does not fulfill the duties owed to the agent.
B)In a successful suit against a principal,an agent is entitled to contract remedies but not tort remedies.
C)If a principal has failed to fulfill the duties owed to the agent,the agent can refuse to act on behalf of the principal until the failure is remedied.
D)A principal has a duty to compensate his or her agent for services provided unless the parties have agreed that the agent will act gratuitously.
E)A principal has a duty to reimburse and indemnify the agent for authorized expenditures.

Question 75

In an express agency relationship,the agent has ________ authority.

A)express
B)implied
C)apparent
D)inherent
E)statutory

Question 76

An agent's obligation to perform the duties specified in the agency agreement with reasonable skill and care is part of the agent's duty of ________.

A)cooperation
B)notification
C)loyalty
D)performance
E)obedience

Question 77

Which of the following is true regarding the status of an agent as a fiduciary?

A)Although a principal is a fiduciary,an agent is not.
B)An agent is only a fiduciary if the principal and agent agreed in a written contract that the agent would be a fiduciary.
C)An agent is only a fiduciary if the principal and agent agreed by written or oral contract that the agent would be a fiduciary.
D)An agent is only a fiduciary to the principal if a transaction of $10,000 or more is involved.
E)An agent is a fiduciary of the principal.

Question 78

When express authority is granted for an agent to enter into a contract legally required to be in writing,most states require the grant of authority to also be in writing.This requirement is known as the ________.

A)equal dignity rule
B)substantial performance doctrine
C)frustration of purpose doctrine
D)rule against perpetuities
E)parol evidence rule

Question 79

In which type(s)of agency is the principal-agent relationship inferred from the conduct of the parties?

A)Expressed agency
B)Agency by estoppel
C)Implied agency
D)Agency by estoppel and implied agency,but not expressed agency
E)Expressed agency,agency by estoppel,and implied agency

Question 80

The equal dignity rule is based upon the ________.

A)rule against perpetuities
B)statute of frauds
C)parol evidence rule
D)substantial performance doctrine
E)frustration of purpose doctrine