Question 1

What are the advantages and disadvantages of being a sole proprietor?

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Question 2

Distinguish between a sole proprietorship and a corporation.

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Question 3

Explain the limitations of the liability of partners for the acts of other partners.

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Question 4

Explain the liability of a partner for another partner's actions.

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Question 5

Joe, Harry, and Sam opened up a partnership supplying accounting services to the general public in a small town. Harry and his wife, unknown to Joe and Sam, also carried on a mail-order business at night that had nothing to do with accounting. He would, however, often come into the partnership office to use the photocopier and computer for correspondence related to his mail-order business. Joe and Sam found out about this activity when Harry forgot to erase one of the files on the computer one night. Explain the legal position of Harry.

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Question 6

Joe is in the process of assembling land for Ace contractors Ltd. to build a supermarket. He entered into a contract with the seller Sam. He did not disclose that he was acting for someone else when he entered into the contract. Explain Sam's rights when the contract is breached and he learns that Joe was acting for Ace.

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Question 7

A chauffeur, going against specific instructions, purchases a new car on behalf of his employer. The employer has done nothing to lead the seller to believe the chauffeur has authority but is persuaded by the chauffeur to go for a drive before returning the vehicle. Explain the legal position of the parties.

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Question 8

Joe entered into partnership with two others in the establishment of a real estate sales agency. The other two, Sam and Harry, had considerable experience in the real estate business but no money. Joe, on the other hand, had his own home and several significant assets, and although he didn't have any experience in the real estate business, his monetary contribution made him an equal partner with Sam and Harry. Unfortunately, Harry misused some trust funds that had come into his care as a result of business, investing it in the business of one of his sons rather than an interest-bearing account. The business of the son went sour and the money was lost. The client sued Harry, Sam, and Joe. Explain the legal position of Joe here.

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Question 9

Explain what is meant by limited liability.

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Question 10

Joe, Sam, and Harry set up an accounting partnership in a small town. Harry, to earn money on the side, did some accounting for friends at night, for which he received a fee. When Joe and Sam found out about this, they demanded that the fees received be paid into the partnership business. Explain the legal position of Harry.

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Question 11

"A principal can ratify an agent's contract that was done without authority as long as the agent makes it clear that they are entering into the contract 'subject the principal's ratification.'" Discuss the accuracy of that statement.

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Question 12

Explain what is meant by an agent's fiduciary duty. Give three examples of how that fiduciary duty can be breached.

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Question 13

Distinguish between a partnership and a corporation.

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Question 14

"An agent is free to withhold information from the principal as long as it doesn't hurt the principal." Discuss the accuracy of that statement.

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Question 15

Joe was a lawyer and agreed to pay Sam, a banker, 25% of any fees that he received as a result of mortgage referral business directed his way by Sam. Because of Joe's carelessness, one of the customers referred to him by Sam lost his property. The customer sued both Joe and Sam. Explain the likelihood of his success.

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Question 16

When two people enter into a partnership by agreement but neglect to set out the terms of such agreement, or where the parties becomes partners inadvertently, the terms and arrangements of that partnership are set out where?

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Question 17

A salesman in a men's clothing store has heard rumours that the store is going out of business. The boss is out of the store when a customer who has heard the same thing comes in and offers to purchase the entire stock, the display cases, and the fixtures. The salesman accepts on behalf of the employer. Discuss the legal position of the parties.

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Question 18

"For a partnership to exist, the parties must have consented to its creation." Comment on the accuracy of that statement.

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Question 19

Joe sold Harry his barber shop for $100,000. He was paid $20,000 in cash, the other $80,000 to be paid by Harry giving Joe 20% of the profits of the business until the amount was paid off. Unfortunately, a customer, Sam, was injured by Harry, who managed to cut off his right ear while shaving. Sam sued both Harry and Joe. Explain his likelihood of success.

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Question 20

A real estate salesperson, without disclosing the fact to his client, purchases the house the client is selling for himself. Discuss the legal position of the parties.

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Quiz 11: Agency and Partnership