Question 1

Which of the following is a distinguishing characteristic of the law of agency?

Accepted Answer

The law of agency is distinguished by its derivation from tort and contract law, as it involves principles that govern the relationship between an agent and their principal, including duties and liabilities that can arise in tort and contract contexts.

Question 2

The employment contract of a manager of a business expressly recites her authority.How do other components of her authority come into existence?

Accepted Answer

Authority beyond what is expressly stated in an employment contract often arises from the inherent nature of the position and the general requirements of managing a business. This includes the authority to make decisions and take actions that are reasonably necessary to perform the role effectively, even if not specifically mentioned in the contract.

Question 3

What approach would a court most likely take to determine the type of authority an agent has?

Accepted Answer

Courts typically engage in a fact-specific inquiry to determine the type of authority an agent has, considering the specific circumstances and details of each case to ascertain the nature and extent of the agent's authority.

Question 4

How will a power of attorney operate if it states that the occurrence of a specific event will make it operational?

Accepted Answer

The answer of How will a power of attorney operate...

Question 5

Cory,the owner of ABC Industries,jokingly introduced his executive assistant as the 'vice-president' of sales to a prospective client.Assuming the customer is unaware of the truth,what type of agency may Cory's action have created?

Accepted Answer

Cory's action may have created an agency by estoppel because when he introduced his executive assistant as the 'vice-president' of sales, he was essentially representing the assistant in a position of authority to the prospective client. If the client relied on this representation, the law may prevent Cory from denying the assistant's authority, thus creating an agency by estoppel.

Question 6

An agent has been given authority to act for the principal in relation to a directive that sets out conditions required for the removal of life-support systems.What form of authority has the agent been given?

Accepted Answer

The answer of An agent has been given authority to...

Question 7

Tom's photographs will be exhibited for two weeks in Natural WildLife Gallery Inc.,commencing May 1.The gallery is authorized to sell any of Tom's works,as long as they adhere to the agreed price list.What is the nature of the relationship between these parties?

Accepted Answer

The relationship is an "agency by agreement" because Tom (the principal) has given Natural WildLife Gallery Inc. (the agent) the authority to sell his photographs on his behalf, based on a mutual agreement and an agreed price list.

Question 8

Bonita and Laraleigh want to create a relationship with insurance broker Lee Kim.How should they proceed if they want to use the most common method available to accomplish the desired outcome?

Accepted Answer

Contracts are the most common method used to formalize relationships in business, including those with insurance brokers, by clearly defining the terms, conditions, and expectations of the partnership.

Question 9

Which statement best describes the actual authority of an agent?

Accepted Answer

Actual authority of an agent may be express, meaning it is given by direct instruction, or implied, meaning it is inferred from the actions or circumstances. This allows for flexibility in the agent's role and responsibilities.

Question 10

Hamish is the purchasing agent for an automobile parts chain and regularly goes on buying trips to find new products for the business.Which of the following is an example of a fiduciary duty owed by Hamish to his employer?

Accepted Answer

A fiduciary duty, such as the duty to avoid conflicts of interest, requires Hamish to act in the best interest of his employer rather than in his own personal interest.

Question 11

Which of the following employees is mostly likely an agent on behalf of their employer?

Accepted Answer

A sales clerk acts on behalf of their employer in transactions with customers, making them an agent as they have the authority to affect the employer's legal relationships with third parties.

Question 12

Eve's best friend,Amrita,knew Eve wanted to buy a delivery van for her new business and when Amrita saw a great van that met all of Eve's specifications at an auction,she decided to bid on it without telling Eve.Can Eve ratify the contract entered into by Amrita?

Accepted Answer

Eve can ratify the contract entered into by Amrita if Amrita identified Eve as her principal when she bought the van. This is because ratification is the adoption of a contract made by an agent without authority. In order for ratification to be valid, the agent must have acted on behalf of the principal and the principal must have the capacity to enter into the contract. In this case, Amrita acted on behalf of Eve when she bought the van, and Eve has the capacity to enter into a contract. Therefore, Eve can ratify the contract if Amrita identified Eve as her principal when she bought the van.

Question 13

Which of the following terms is synonymous with "apparent authority"?

Accepted Answer

Ostensible authority is synonymous with apparent authority, both terms refer to a situation where a third party reasonably believes an agent has the authority to act on behalf of a principal, even if the agent does not have such authority.

Question 14

Garnett Fashions Ltd.just terminated its long-term agency relationship with the Higa Agency,which it has retained for many years to negotiate purchase contracts with retail outlets for Garnett's manufactured goods.What advice would you give Garnett at this time?

Accepted Answer

Garnett has the responsibility to inform outsiders that Higa is no longer its agent to prevent any unauthorized actions or assumptions of authority by Higa.

Question 15

Although Geraldine's job title at a local car dealership is "sales director," in reality,all car deals must be approved by the dealership's owner.One day,Geraldine exceeded her authority and approved a sales contract when the owner was away.Why might the contract be binding on the dealership?

Accepted Answer

Geraldine might have been acting with apparent authority, meaning that a reasonable person could believe she had the authority to approve the contract based on her job title and role within the dealership, even though she technically did not have the actual authority to do so.

Question 16

Jacqueline is a real estate agent and her clients are a young couple who are hoping to purchase their first home.Which of the following statements is true regarding Jacqueline's role as "real estate agent"?

Accepted Answer

Real estate agents typically do not have the authority to make binding contracts of sale on behalf of their clients. Their role is to facilitate the buying and selling process by acting as intermediaries between buyers and sellers, providing advice, and handling negotiations, but the final decision and contract signing are usually done by the clients themselves.

Question 17

What do agency by estoppel and agency by ratification have in common?

Accepted Answer

In both agency by estoppel and agency by ratification, the agent acts without actual authority from the principal. In agency by estoppel, the principal's actions or inactions create the appearance of authority in the agent, leading third parties to believe the agent is authorized. In agency by ratification, the principal approves or affirms an agent's unauthorized act after it has occurred, thereby granting it legitimacy.

Question 18

Why do agency relationships,in general,operate with few difficulties?

Accepted Answer

Agents act on behalf of principals in transactions, simplifying processes and reducing direct interactions, which generally leads to fewer difficulties in agency relationships.

Question 19

What is a distinguishing characteristic of the implied authority of an agent?

Accepted Answer

Implied authority refers to the authority an agent has by virtue of being reasonably necessary to carry out his or her express authority. It is often deduced from the position the agent holds, as it encompasses the powers that are not explicitly granted but are essentially implied in order to fulfill the duties of the position.

Question 20

Sherif is the general manager of a clothing store.His authority to hire an electrician to repair a faulty light in the store would likely arise from which of the following?

Accepted Answer

His implied authority as a general manager likely includes the power to make decisions necessary for the day-to-day operations of the store, such as hiring an electrician to repair a faulty light.

Quiz 13: The Agency Relationship