Question 1

Agents can compete with the principal during the course of the agency if the principal agrees.

Accepted Answer

It is possible for agents to compete with the principal during the course of the agency if the principal agrees to such competition. However, this agreement must be explicit and stated in the terms of the agency agreement. Otherwise, such competition would be a breach of the agent's fiduciary duty to act in the best interest of the principal.

Question 2

Undisclosed self-dealing by an agent is not regarded as violation of the duty of loyalty.

Accepted Answer

Undisclosed self-dealing is considered a breach of an agent's duty of loyalty, as it involves the agent acting in their own interests rather than in the best interests of their principal. Such behavior can result in significant harm to the principal, and therefore the agent has a legal and ethical obligation to disclose any conflicts of interest and avoid any actions that could be perceived as self-dealing.

Question 3

Which of the following statements is true of an agent taking an opportunity?

Accepted Answer

The principle is permitted to recover an opportunity usurped by an agent. When an agent acts adversely to the interests of their principal, the principal is entitled to redress, including the recovery of any profits made by the agent. Therefore, option D is the correct answer. Option A is incorrect as an agent cannot legally take an opportunity that actually belongs to the principal. Option B is also incorrect as an agent must convey any offer made by a third-party to their principal. Option C is incorrect as an agent cannot appropriate an offer even if the principal rejects it.

Question 4

Middlemen and finders are not considered dual agents.

Accepted Answer

Middlemen and finders are typically not considered dual agents as their role is typically limited to introducing and facilitating communication between parties, rather than representing both parties in a transaction. However, their specific legal status may vary depending on the jurisdiction and the specific circumstances of the transaction.

Question 5

Dual agency is permitted if all parties to a transaction agree to it.

Accepted Answer

According to real estate laws in most states, dual agency is permitted if all parties involved in a transaction consent to it. However, it is important to note that dual agency can create conflicts of interest and it is always recommended to seek guidance from a licensed real estate professional.

Question 6

If an agent competes with the principal without the principal's permission, the principal may recover profits made by the agent.

Accepted Answer

This is known as the doctrine of "secret profits" or "profiting by service" and is a fundamental principle of agency law. If an agent competes with their principal or makes a secret profit without their principal's knowledge or consent, they may be required to disgorge those profits and return them to the principal.

Question 7

An agent does not violate his or her duty of loyalty by serving two parties with the same interest.

Accepted Answer

An agent violates the duty of loyalty if they serve two parties with the same interest without full disclosure and consent, as it creates a conflict of interest.

Question 8

A third-party offer to an agent must be conveyed to the principal.

Accepted Answer

As per the law of agency, any third-party offer must be communicated to the principal by the agent in a timely and accurate manner. Failure to do so can result in legal liabilities for the agent.

Question 9

Which of the following is true of dual agency?

Accepted Answer

Dual agency is only permitted if all parties in the transaction agree to it. It is illegal to have undisclosed dual agency, and the interests of both principals do not have to be similar for dual agency to take place. Examples of dual agents are not limited to finders and middlemen.

Question 10

Which of the following is an instance of misuse of confidential information?

Accepted Answer

Divulging private details of a past employer to a principal constitutes a breach of the agent's duty of confidentiality to third parties. Choices A and B do not involve confidential information, while Choice C describes a breach of the agent's duty of loyalty to the principal.

Question 11

If an agent reveals confidential information of a principal to a third party, one of principal's courses of action may be to obtain an injunction against the third party.

Accepted Answer

If an agent reveals confidential information of a principal to a third party, the principal can seek legal remedies, including obtaining an injunction against the third party to prevent further disclosure of the confidential information.

Question 12

Dual agency occurs when an agent acts for two or more different principals in the same transaction.

Accepted Answer

Dual agency occurs when an agent represents both the buyer and seller, or multiple buyers or sellers in the same transaction. This can create conflicts of interest and is regulated by state real estate laws.

Question 13

If a casting agent works for two Hollywood actors, the agent is liable for ________.

Accepted Answer

Dual agency occurs when an agent or broker represents two parties with conflicting interests in the same transaction. In this case, the casting agent is representing two actors who may be vying for the same role or have competing interests, which puts the agent in a position of dual agency. This can create conflicts of interest and potentially harm one or both actors' chances of success.

Question 14

Which of the following is true of an agent's undisclosed self-dealing?

Accepted Answer

The principal can ratify the purchase made by the agent if they choose to do so, but the agent's undisclosed self-dealing does violate the duty of loyalty. The principal may also have the option to rescind the purchases depending on the circumstances. The agent is responsible for any liability that may arise from the self-dealing.

Question 15

A principal has no course of action if an agent discloses his or her confidential information to a third party.

Accepted Answer

A principal can take legal action against an agent who discloses confidential information to a third party. The principal can sue for breach of confidentiality and seek damages or injunctions to prevent further disclosure. The extent of the legal remedies available may depend on the terms of the agency agreement and the nature of the confidential information.

Question 16

Which of the following is a fiduciary duty owed by an agent not to act adversely to the interests of the principal?

Accepted Answer

The duty of loyalty is the fiduciary duty that requires an agent to not act adversely to the interests of the principal. This means that the agent must put the principal's interests above their own and avoid any conflicts of interest. The duty of undertaking refers to the duty to take on tasks assigned by the principal, the duty of discharge refers to the duty to perform tasks with reasonable care and skill, and the duty of resolution is not a commonly recognized fiduciary duty.

Question 17

Harrison hires an agent to look for a three-bedroom house in Atlanta. Elaine, the agent, finds a three-bedroom house in Harrison's budget but buys it herself without informing Harrison. This is an instance of an agent ________.

Accepted Answer

Elaine, the agent, is usurping an opportunity by purchasing the house herself instead of presenting it to Harrison, who is her principal.

Question 18

Why can an agent generally not take an opportunity meant for the principal? Is an agent ever permitted to take such an opportunity? Give an example of an agent's violation of the duty of loyalty.

Accepted Answer

The answer of Why can an agent generally not take...

Question 19

Which of the following is a course of action for a principal if an agent is found competing with him or her?

Accepted Answer

If an agent is found competing with the principal, the principal can recover profits made by the agent. This is because the agent owes a duty of loyalty to the principal and cannot use confidential information or trade secrets to compete with the principal. Recovering profits is a way to deter the agent from engaging in such conduct in the future. Option A is incorrect because damages can only be recovered while the agency is still in effect. Option C is incorrect because the principal may not want to purchase the agent's competing venture. Option D is incorrect because the principal can recover for lost sales due to the agent's competing venture.

Question 20

An agent owes a fiduciary duty not to act adversely to the interests of the principal.

Accepted Answer

A fiduciary duty is a legal obligation that requires an agent to put the interests of the principal above their own. This means that an agent cannot act in a way that would harm the principal or benefit themselves at the expense of the principal.

Quiz 30: Liability of Principals, Agents, and Independent Contractors