Question 1

When an agent is interacting with a third party on behalf of a principal, the principal is said to be undisclosed if:

Accepted Answer

A principal is undisclosed if, when an agent and a third party interact, the third party has no notice that the agent is acting for a principal.

Question 2

Which of the following statements is NOT true regarding a general partnership?

Accepted Answer

Loss sharing may be a consequence of being a partner, but is not a condition of partnership.

Question 3

Which of the following is referred to as ratification?

Accepted Answer

Ratification is the affirmation by a person of a prior act which did not bind him but which was done on his account.

Question 4

In the case of an agency relationship, the termination of authority occurs in all of the following cases EXCEPT:

Accepted Answer

In the case of an agency relationship, termination of authority can result from the death of the agent, but not due to the loss of capacity of the agent by insanity, whether temporary or permanent, since an agent does not need capacity to possess authority.

Question 5

Which of the following is referred to as respondeat superior?

Accepted Answer

The liability of a principal for the tort of an agent is referred to as respondeat superior.

Question 6

With reference to the agency relationship, which of the following is a duty of an agent to a principal?

Accepted Answer

Duty of good conduct is a duty of an agent to a principal. An agent must act with reasonable skill and care in the performance of the work for which he is employed. He must also exercise any special skill that he may have.

Question 7

In the case of a third party contract, if the principal is _____ the agent is not a party to the contract.

Accepted Answer

Where the principal is fully disclosed, the agent is not a party to the contract. That is because the third party knows the agent is acting on the principal's behalf and understands that though she is dealing with the agent, it is only in a representative capacity, and she is actually dealing with the principal only.

Question 8

In the case of limited partnership, which of the following statements is true regarding the general partners?

Accepted Answer

Only general partners manage the business and only the general partners have the power to bind the partnership. Because of their management role, general partners owe fiduciary duties of loyalty and care to the partnership.

Question 9

Which of the following statements is true regarding a limited partnership?

Accepted Answer

In order to form a limited partnership, the owners must file a certificate of limited partnership with the state and operate under the state's statute. Most limited partnerships are governed by a partnership agreement and it is the partnership agreement, not the certificate of limited partnership filed with the state, that details and determines the rights, responsibilities, and relationships of the partners.

Question 10

With reference to the agency relationship, which of the following is a duty of a principal to an agent?

Accepted Answer

An agent may incur expenses or make payments on behalf of the principal. If so, the principal has a duty to indemnify the agent for such payments made or expenses incurred within the scope of the agency.

Question 11

If an agent has always done a certain act that was not expressly authorized by the principal, but the principal has acquiesced in the conduct, the principal assents to the conduct. The authority granted to the agent in such a way is known as an _____ authority.

Accepted Answer

An agent has the power to do those acts that are usual and incidental to the authorized acts and those which are reasonably necessary to accomplish the principal's purpose. This power is referred to as an implied authority.

Question 12

With reference to a third party contract, under which of the following circumstances the agent alone is party to the contract?

Accepted Answer

When an agent purports to be acting in his or her own behalf but is, in fact, acting for a principal (undisclosed principal), the agent alone is party to the contract.

Question 13

Which of the following terms best represents the authority that is communicated to an agent in writing or orally?

Accepted Answer

Express authority is communicated to the agent in writing or orally.

Question 14

The most important duty of the principal toward his agent is to:

Accepted Answer

A principal is under a duty to perform his part of the contract according to its terms. The most important duty of the principal toward his agent is to compensate him according to the terms of the contract. If the contract does not specify the terms of compensation, the principal is under a duty to pay the reasonable value of the authorized services.

Question 15

Which of the following terms best represents an unincorporated business owned by a single individual?

Accepted Answer

One unincorporated business owned by a single individual is called a sole proprietorship.

Question 16

With reference to the two characteristics of an agency relationship, the principal's right to control the agent and the fiduciary nature of the relationship, the relationship between a trustee and a beneficiary:

Accepted Answer

The relationship between a trustee and a beneficiary is fiduciary in nature but lacks control.

Question 17

A principal is _____ if, when an agent and a third party interact, the third party has notice that the agent is acting for a principal but it does not know the principal's identity.

Accepted Answer

A principal is partially disclosed if, when an agent and a third party interact, the third party has notice that the agent is acting for a principal but it does not know the principal's identity.

Question 18

Which of the following statements is true regarding limited partners in a limited partnership?

Accepted Answer

A limited partnership consists of one or more general partners and one or more limited partners. Limited partners are essentially passive investors in the partnership who do not make management decisions. Generally, limited partners share profits and losses in proportion to their investment.

Question 19

Which of the following statements is true regarding a sole proprietorship?

Accepted Answer

One unincorporated business owned by a single individual is called a sole proprietorship. The sole proprietor is personally liable on all business obligations since there is no legal separation between the owner and the business. A limited partnership is different from a sole proprietorship.

Question 20

If the principal has given the agent a document such as the power of attorney and which the agent has shown to the third party, it is most likely to result in _____ authority.

Accepted Answer

An agent has apparent authority to act if actions of the principal to the third party would lead a reasonable person in the third person's position to believe that the principal has authorized the agent to act.

Quiz 10: Agency and Business Organizations