Deck 20: Agency and Other Methods of Carrying on Business

Question 1

Satinder is an employee of Bog Systems Inc. She acts as an agent on behalf of the corporation in that she buys office furniture on behalf of the corporation. Which of the following is TRUE?

A) Satinder can be terminated as an employee by Bog only with reasonable notice from Bog.
B) Satinder is automatically terminated as an employee by Bog if Bog goes bankrupt.
C) Satinder can be terminated as an employee at any time by Bog.
D) Satinder cannot be terminated as an employee by Bog except for just cause.
E) Satinder can be terminated as an employee by Bog only for just cause or with reasonable notice or compensation in lieu of notice.

Answer 1

E

Question 2

A commercial representation agreement

A) is no longer legal in Canada.
B) is always a type of franchise relationship.
C) is always governed by provincial partnership law.
D) occurs when someone sells goods to a retailer on behalf of a manufacturer.
E) occurs anytime that an agency relationship is created.

Answer 2

D

Question 3

Agency relationships arise in which of the following circumstances?

A) Agency can be created by the principal telling someone that another person is their agent.
B) Agency can be created by express contract.
C) Each partner is an agent of the partnership.
D) Directors, officers, and employees of a corporation can be agents of the corporation for particular purposes.
E) All of the above.

Answer 3

E

Question 4

Laurna hired Ned to act as her stockbroker. Ned purchased certain stocks on Laurna's behalf and at her specific direction. Ned advised her not to buy them, saying that they were too risky, but she insisted. Because those stocks subsequently dropped in value, Laurna has sued Ned for compensation. Which of the following is TRUE?

A) Ned may be held liable for breach of fiduciary duty because it is his job to prevent her from making mistakes.
B) Ned is not liable for breach of fiduciary duty because everyone knows that stocks can fall in value.
C) Ned may be held liable for breach of fiduciary duty because he did not act in Laurna's best interests.
D) Ned is not liable for breach of fiduciary duty even though buying the stocks was not in Laurna's best interests because he acted on her direct instructions.
E) Ned is not liable because stock brokers are governed by a licensing scheme .

Question 5

Which of the following business arrangements might involve an agency relationship?

A) distributorship
B) strategic alliance
C) joint venture
D) stockbroker
E) all of the above

Question 6

Which of the following statements regarding a principal's liability for the torts of its agents is TRUE?

A) A principal is only responsible for the torts of it agents if it specifically authorized the activity by the agent that constituted the tort.
B) A principal is only responsible for torts committed by agents who are also employees of the principal.
C) A principal is always responsible for the torts of its agents.
D) A principal is never responsible for the torts of its agents.
E) None of the above.

Question 7

Orton Corp is incorporated under the Canada Business Corporations Act. It carries on a business running tour boats on the Bow River in Calgary. The articles of the corporation provide that Orton Corp may not enter into a lease unless the board of directors approves it. Joe, the president of the corporation, goes to West End Real Estate Inc, tells West End that he has authority to enter into a lease on behalf of the corporation, and signs a lease for some office space for the business. The board of directors never approves the lease. Which of the following is TRUE?

A) The lease is not enforceable because West End should have obtained proof that the president had sufficient authority to enter the lease on behalf of the corporation.
B) The lease is not enforceable because the president did not have authority to enter into a lease on behalf of the corporation.
C) The lease is enforceable because leases of offices are transactions within the usual authority of the president of a corporation, and even though the articles provide that the president does not, in fact have authority to enter into a lease.
D) The lease is not enforceable because leases of offices are not transactions within the usual authority of the president of a corporation.
E) The lease is enforceable because all businesses must lease premises from time to time.

Question 8

Petropolis Co is a manufacturer of auto parts and is looking for distributors in New Brunswick. They already have distributors in the other provinces. Jacob is negotiating to become the distributor for New Brunswick. Unlike the distributors in the other provinces, Jacob does not want to take responsibility for buying the parts and then reselling them. Instead, he wants to sell the parts as an agent for Petropolis. Which of the following factors would be relevant to Petropolis in deciding how to respond to Jacob's proposal?

A) Petropolis will be concerned about the potential for Jacob to bind Petropolis to unauthorized obligations.
B) Distributors can never be agents.
C) Distributors must provide warranty service.
D) Distributors have better incentives than agents to work hard.
E) An agency does not require a written agreement.

Question 9

Mathilde enter into an agreement with Pascal saying that she was acting on behalf of Citron Used Cars to purchase cars. In fact, Mathilde had no actual or apparent authority to do so. Moreover, Citron now refuses to ratify the agreement. In this situation, Pascal can hold

A) Mathilde liable under the contract.
B) Citron liable for breach of fiduciary duty.
C) Mathilde liable for breach of warranty of authority.
D) Mathilde liable for breach of fiduciary duty.
E) Citron liable under the contract.

Question 10

Oxford Management Inc is a management consulting firm. It has hired Jerome as its agent to buy new computers for its offices across the country. Jerome owns 10 computers, which are ideal for Oxford's needs. Oxford is a valued client, and he decides to sell the computers to Oxford for a price which is $10 000 less than their market value. As agent for Oxford, he decides to buy the computers for this price from himself. Which of the following is TRUE?

A) Jerome can buy the computers for Oxford from himself if Oxford consents to the sale.
B) Jerome can never buy the computers for Oxford from himself because his personal interest as the seller would conflict with his duty to obtain the best price for Oxford.
C) Jerome cannot buy the computers for Oxford from himself if there is an alternative supplier willing to sell the computers at their market value.
D) Jerome can buy the computers for Oxford from himself so long as he is satisfied that the price is fair.
E) All of the above.

Question 11

A strategic alliance includes

A) an agreement between several businesses to share information regarding a new foreign market.
B) an arrangement between two software producers to cooperate on research.
C) an arrangement between a telephone long distance carrier and an Internet service provider to jointly market their services.
D) an arrangement between two technology companies to licence their patents to each other.
E) all of the above

Question 12

Artemis has entered into a contract with Saskatoon Berry Pies Inc for the supply of pies. After the contract was entered into, Artemis disclosed that he was negotiating the contract on behalf of ABC Food Mart, which operates three grocery stores in Regina, Saskatchewan. Which of the following best describes the situation with respect to the contract?

A) Saskatoon Berry Pies is not bound to the contract because Artemis did not disclose that he was contracting on behalf of a principal until after the contract was entered into.
B) Only ABC is liable under the contract to Saskatoon Berry Pies.
C) Now that the principal's existence and identity have been disclosed, Saskatoon Berry Pies can hold either ABC or Artemis liable under the contract.
D) Artemis cannot be held liable under the contract because he was not contracting on his own behalf.
E) Artemis cannot be held liable under the contract, but will be liable for breach of warranty of authority.

Question 13

Silvio began work as an agent for Midnight Skateboards Inc. He is responsible for selling Midnight's skateboards to retail sporting goods stores. In his first month, he worked very hard, visiting dozens of stores, but did not sell any skateboards. Which of the following is TRUE?

A) Silvio is entitled to reasonable remuneration for his work unless his agency contract says he is working for free.
B) Silvio is only entitled to reasonable remuneration for his work if ultimately he sells some skateboards for Midnight.
C) Midnight can pay Silvio whatever remuneration it chooses, unless his remuneration is fixed in his agreement.
D) Silvio is not entitled to any remuneration for his work unless his agency contract says he is.
E) Silvio is not entitled to any remuneration for his work because it has been unsuccessful.

Question 14

Digital Technologies Inc entered into an agreement with Gray under which Gray agreed to act as Digital's agent for the purpose of finding new offices for Digital. Gray had never done this kind of work before and Digital knew this. He found offices that he believed would be satisfactory to Digital, and Digital entered into a five- year lease. Unfortunately, it turned out that the offices did not have air- conditioning and so could not be used in the summer, making them completely unsuitable for Digital. Gray had forgotten to ask about air- conditioning. Anyone with experience as a real estate agent would have found out about this problem. Which of the following best describes Gray's legal position?

A) Gray breached his duty of care because he did not obtain the best possible offices for Digital.
B) Gray did not breach his duty of care, so long as the price was fair for non- air- conditioned offices.
C) Gray breached of his fiduciary duty because he failed to act in good faith.
D) Gray probably breached his duty of care by failing to take reasonable care in performing his responsibilities, but Digital may be denied recovery because Digital knew that Gray had no experience in finding office space.
E) Gray did not breach his duty of care because Digital did not specify that it wanted air- conditioned offices.

Question 15

On January 1, 2001, Daniel negotiated a contract on behalf of Compu/sys Inc for the supply of a computer system to Leader Co. The contract called for the supply by Compu/sys Inc of hardware and maintenance services for two years in return for $1 000 000. Daniel had no authority to negotiate this contract on behalf of Compu/sys. Subsequently, after 18 months of negotiations, he got Compu/sys to agree to perform the contract in part. The corporation agreed to provide the hardware but not the maintenance services. At the time it made this commitment it had gone bankrupt. Which of the following is TRUE?

A) Compu/sys has not ratified the contract because a bankrupt corporation cannot ratify a contract.
B) If Compu/sys has not ratified the contract, Daniel will only be personally liable if Daniel and Leader Co intended that the contract would be binding on the agent personally.
C) Compu/sys has not ratified the contract because it has not agreed to all of the obligations under the contract.
D) Compu/sys has not ratified the contract because it did not agree to the obligations under the contract within a reasonable time.
E) all of the above.

Question 16

Stone entered into an agreement with Star Alarms Inc, a corporation that sells alarm systems for personal residences, under which he would act as an agent for Star to find customers for Star's alarm systems. In the course of his work for Star, Stone learns quite a bit about alarm systems. A friend offers to sell him an alarm system business for commercial buildings, a segment of the market that Star has never pursued. Stone decides that he would like to buy the business. Which of the following is TRUE? Stone's fiduciary duty requires that he

A) advise Star of this opportunity.
B) act in the best interests of Star.
C) refrain from competing with Star.
D) refrain from using information from Star for his own benefit.
E) all of the above

Question 17

Alannis is an agent but not an employee of Tesky's Inc, a large department store business. She acts as an agent for the corporation in entering contracts with suppliers to buy clothes. While she is on a trip to Toronto to visit a long- time supplier, Tesky's goes bankrupt. The next day, Alannis, while still unaware of the bankruptcy, enters into a contract with the supplier on behalf of Tesky's to buy $20 000 worth of clothes. Which of the following are TRUE?

A) The contract is enforceable against Tesky's because Alannis was not aware of the bankruptcy.
B) The contact is enforceable by the supplier because the supplier could rely on Alannis having apparent authority to contract on behalf of Tesky's based on its past experience in dealing with her.
C) The contract is enforceable against Tesky's because the supplier had no notice of the bankruptcy at the time of contracting.
D) The contract is enforceable against Alannis, since she could not have contracted as the agent of Tesky's after the bankruptcy.
E) The contract is not enforceable against Tesky's because Tesky's bankruptcy terminates the agency relationship.

Question 18

Anton has entered into a contract with Donut Country Inc. to supply Donut Country with coffee. Anton never intended to be responsible under the contract personally. He intended to find a commercial coffee supplier to undertake the obligations and pay him a fee for giving the supplier the contract. He did not disclose any of this to Donut Country, which thinks that they have contract with Anton. Which of the following best describes the situation with respect to the contract?

A) Anton would not be responsible under the contract if it is ratified by a coffee supplier.
B) If a coffee supplier ratified the contract it would be considered an undisclosed principal.
C) Anton is personally responsible under the contract despite his intentions.
D) Anton is not responsible under the contract but would be liable to Donut Country for breach of warranty of authority.
E) If a coffee supplier ratifies the contract, Donut Country would have the option of holding either Anton or the supplier responsible under the contract.

Question 19

Agents have a fiduciary duty to their principals. Which of the following is TRUE with respect to the fiduciary duty?

A) The fiduciary duty of an agent may be breached even in circumstances where the principal does not experience any loss as a result of the breach.
B) The fiduciary duty of an agent is a duty to act in good faith and in the best interests of the principal.
C) The fiduciary duty of an agent requires the agent to avoid conflicts between the interests of the principal and their personal interests.
D) The fiduciary duty of an agent requires the agent to disclose to the principal any information that may be relevant to the principal's interests.
E) All of the above.

Question 20

Puporting to act on behalf of Otton Mining Inc, Gaetan signed a contract to purchase some mining claims from Boucher. Boucher believes it is contracting with Otton. In fact, Gaetan had no authority from Otton to contract on its behalf. He had never discussed buying the claims with Otton, but he thought that Otton would be interested in the claims and would pay him a commission for arranging for Otton to buy them. Which of the following is TRUE?

A) The contract is binding on Gaetan personally.
B) The contract will be binding on Otton if Otton ratifies the contract either expressly or impliedly.
C) The contract can never be binding on Otton since it was negotiated without any authority from Otton.
D) The contract is binding on Gaetan personally but he can avoid liability if Otton ratifies the contract.
E) The contract is binding on Otton and Gaetan.

Question 21

Maja is negotiating to become a Bread King franchisee with Bread King Inc. Maja is interested in getting a location near her home in Hamilton, Ontario. If Maja becomes a Bread King franchisee, which of the following are TRUE?

A) Maja could never be an agent of Bread King.
B) Bread King will be liable for the acts of Maja in carrying out the franchise business.
C) The franchise agreement will likely provide that Maja is not an agent of Bread King.
D) Maja will be an agent of Bread King.
E) None of the above.

Question 22

Sureeya sells jewellery at her store premises. Sureeya agreed to sell Janet's ring as her agent. Janet agreed to pay Sureeya a commission of $100 regardless of the sale price. Under their agreement, Sureeya did not have authority to sell the ring without Janet's approval. After Sureeya put the ring up for sale, Talia offered Sureeya $7500 for it. This was far above the regular fair market price of $5000 because the ring would complete a set that Talia had. Sureeya sold the ring to Talia. Which of the following best describes Sureeya's legal position?

A) Sureeya did not breach her duties to Janet because she did not benefit in any way from the sale to Talia at the higher price.
B) Sureeya breached her duties to Janet because she could not be sure that the price Talia offered was the best possible price.
C) Sureeya did not breach her duties to Janet because she exercised adequate care to ensure that she received the best price for the ring.
D) Sureeya breached her duties to Janet because she failed to follow Janet's instructions.
E) Sureeya did not breach her duties to Janet because she acted in the best interests of Janet.

Question 23

Sharona entered into a contract with Deepak. Under the terms of that agreement, Deepak was obliged to sell his car for $25 000 to Myrna. Sharona subsequently asked Myrna to ratify the transaction and to actually pay the price to Deepak in exchange for the vehicle. Which of the following statements is TRUE?

A) Myrna can acquire the right to receive the vehicle, while leaving the obligation to pay the price on Sharona.
B) Myrna can ratify the contract if she has capacity at the time of ratification, even if she lacked a capacity at the time that the contract was made.
C) If Myrna refuses to ratify the contract, Sharona cannot be held liable to Deepak on the contract as long as she said, before the contract was created, that she was acting as an agent for someone.
D) Myrna cannot ratify the contract even if Sharona said, at the time of creating the contract, that she was doing so on behalf of a person named Myrna.
E) Ratification can only be effective if Myrna expressly ratified the contract.

Question 24

Serena was selling her house and she entered into a contract with Jatinder under which he would act as her agent. Armin was interested in buying the house which had a vacant lot next door. Jatinder told Armin that the lot was too small to build on. Armin relied on this representation and bought the house for $200 000. Later the owner of the lot did build a house on it. Jatinder knew that the lot was big enough for a house but had lied to Armin to get him to buy Serena's house. Serena knew nothing about what Jatinder had told Armin. The true value of the house was $175 000. Which of the following are TRUE?

A) Serena is not responsible for Jatinder's fraud because she did not authorize Jatinder to lie to Armin.
B) Serena is responsible to Armin for the difference between what Armin paid and the true value of the house because she benefited from Jatinder's fraud.
C) Serena is not responsible for Jatinder's fraud because she knew nothing about it.
D) Serena is responsible to Armin for the difference between what Armin paid and the true value of the house because Jatinder was acting within the scope of his apparent authority.
E) None of the above

Question 25

Jasmine enters into a contract to provide limousine services to Erin. Later, Jasmine tells Erin that she was acting as an agent on behalf of Big White Limousine Services Ltd. Which of the following is TRUE?

A) Erin can enforce the contract against Jasmine alone.
B) Erin can enforce the contract against Jasmine or Big White, whichever she chooses.
C) Erin cannot enforce the contract.
D) Erin can enforce the contract against Big White alone.
E) none of the above

Question 26

I- Jack Inc and Sys/Com Ltd are two large corporations carrying on telecommunications businesses. They want to work together to set up a new business that would develop and sell telephones specifically designed to take advantage of the new Internet services each is offering. Their idea is that the new telephones could be sold with their telecommunications services as a package. Sys/Com will be responsible for the management of the business. This joint venture could be set up as

A) a partnership, in which each of I- Jack and Sys/Com are partners, and the parties' respective rights and obligations are set out in a partnership agreement.
B) a relationship in which the parties' respective rights and obligations are set out completely in a contract between I- Jack and Sys/Com.
C) a corporation, in which each of I- Jack and Sys/Com are shareholders, and the parties' respective obligations are set out in a shareholders' agreement.
D) a relationship in which the parties' respective rights and obligations are set out completely in a contract between I- Jack and Sys/Com, where Sys/Com is an agent with authority to bind I- Jack for obligations incurred to carry out the joint venture business.
E) any of the above.

Question 27

For several years, Jelena worked as an agent for Vladimir, a hockey player for the St Catharines Blackhawks. Jelena regularly negotiated Vladimir's contracts and agreed to them on his behalf. In August 2009, Vladimir terminated the agency. He had decided that he could negotiate his own contracts. He neglected to tell Jelena or the Blackhawks. In September 2009, Jelena signed a contract on his behalf with the Blackhawks for the 2009- 2010 season. Which of the following is TRUE?

A) The contract is not enforceable by the Blackhawks because Jelena's authority had been terminated.
B) The contract is enforceable so long as Jelena negotiated a fair deal for Vladimir.
C) The contract is enforceable because, in the absence of notice to the Blackhawks that Jelena's authority had been terminated, she continued to have apparent authority to act for Vladimir.
D) The contract is not enforceable because Jelena was no longer acting in the best interests of Vladimir by negotiating the contract after she was terminated as an agent.
E) None of the above.

Question 28

Stein has agreed to act as an agent for Tayman Resources Inc for two years. Under the agreement, Stein is responsible for finding mining claims for Tayman to invest in. During the two- year term, Stein has agreed not to work for anyone else. No other terms have been agreed to in the agency agreement. Which of the following is TRUE?

A) The agency is terminated at the end of the two- year term.
B) The agency is terminated if Stein becomes physically unable to look for mining claims for Tayman.
C) Either Stein or Tayman can terminate the agency on notice to the other.
D) The agency is terminated if Tayman goes bankrupt.
E) All of the above.

Question 29

Nora has entered into a joint venture with Scott to sell diet supplements. They have set up a corporation to carry on the business. They are the sole shareholders and directors. Nora is the president. Which of the following are TRUE?

A) Nora can only bind the corporation to contracts that Scott has expressly consented to.
B) Nora is not an agent of the joint venture because the participants in a joint venture cannot be agents.
C) Nora is liable as a principal for all obligations of the joint venture business.
D) Nora is an agent of the joint venture with the authority which would be usual for a president to have.
E) Nora can only bind the corporation to contracts that are within her actual authority.

Question 30

In the absence of some specific contractual requirement, an agency arrangement may be terminated by

A) The agent giving notice to the principal.
B) The principal losing the authority to contract as a result of the principal's death, insanity or bankruptcy.
C) The performance of the agency becoming impossible.
D) The principal giving notice to the agent.
E) All of the above.

Question 31

For many years, Street Sounds Inc, a music retailer, purchased its supply of CDs from Smithee Entertainment Ltd, a major music producer. And for all of those years, Smithee Entertainment entered into those supply contracts by using Alan as its agent. Alan would meet with the manager of Street Sounds, that manager would request a selection of CDs, immediately pay for the order, and Alan would arrange for Smithee Entertainment to deliver the goods to Street Sounds within one week. In March 2010, as he had done countless times before, Street Sounds' manager met with Alan, selected a number of CDs, paid for the order by giving $15 000 to Alan, and was told that a shipment from Smithee Entertainment would arrive within a week. What Street Sounds did not know, unfortunately, was that Smithee Entertainment had fired Alan several days earlier. Because it has not yet received any money from Alan, Smithee Entertainment refuses to deliver any CDs to Street Sounds. Which of the following statements is most likely to be TRUE?

A) Because it had already fired Alan, Smithee Entertainment cannot possibly be held liable for the contract in question unless it ratifies that agreement
B) While it may enjoy other options, Street Sounds is certainly entitled to enforce the contract against Alan.
C) Smithee Entertainment may be held liable for breach of warranty of authority.
D) Smithee Entertainment may avoid all liability to Street Sounds by simply refusing to ratify the contract in question.
E) Street Sounds may be able to enforce the contract against Smithee on the basis that Alan had apparent authority to contract even though his authority was terminated.

Question 32

Four people, who are not partners, buy and sell a large number of apartment buildings. One of them, Marius, enters into a listing agreement with a real estate agent to sell one building. Marius says that he has authority to bind all four owners to the listing agreement. In fact, none of the others have authorized Marius to enter into the listing agreement, and they have no intention of selling their interests in the building. Which of the following is TRUE?

A) Even if the agreement may not be enforced, the real estate agent may have a claim against Marius for breach of warranty of authority.
B) If the group of four people were partners, the listing agreement may be enforceable on the basis that it was entered into by one partner in the normal course of the partnership business.
C) The listing agreement cannot be enforced against the other owners because Marius did not have actual or apparent authority to act on their behalf.
D) The listing agreement cannot be enforced against the other owners because the real estate agent cannot rely on the statements of Marius to give him apparent authority to enter the contract on behalf of the others.
E) All of the above.

Question 33

Carleton Computer Sales Inc carries on a business of buying and selling computers. Tara is negotiating to sell her computer to Carleton but no agreement has been reached between Tara and Carleton. In anticipation of selling it to Carleton, Tara agreed to leave her computer on a display rack at Carleton's store. Carleton sells Tara's computer to Eli for $1000, telling Eli that Carleton owned the computer. Which of the following best describes Tara's legal position based on the law of agency?

A) Tara has no remedy of any kind.
B) Tara will not be able to get her computer back because Eli reasonably relied on the statement by Carleton that it owned the computer.
C) Tara is entitled to get her computer back because Eli cannot rely on the statement by Carleton that it owned the computer.
D) Tara may not be able to get her computer back because by leaving her computer with a computer dealer on its display rack, she represented to anyone who came into the store, including Eli, that Carleton had authority to sell the computer for her.
E) Tara is entitled to get her computer back because she never gave Carleton authority to sell it to Eli.

Question 34

Silken is a producer of snowboards. She wants to enter into a commercial representation agreement with Jason. Under the agreement, he will sell her snowboards on her behalf to retail ski shops. Which of the following is TRUE?

A) Jason will have no authority to contract with the retail ski ships. Instead, he will buy the snowboards from Silken and resell them to the ski shops.
B) Jason will only have the authority to contract with the retail ski shops that Silken actually gives him.
C) Jason will only have the authority to contract with the retail ski shops that Silken represents to the ski shops that he has.
D) Jason will have the authority to contract with the retail ski shops that Silken represents to the ski shops that he has and the authority she actually gives him.
E) None of the above.

Question 35

Nathan and Oliver are fishermen. They agreed that Oliver would take Nathan's fish to the market in Vancouver and sell them on Nathan's behalf along with Oliver's own fish. Oliver took Nathan's fish and his own fish to the market and set up a stall. As it happened, Oliver sold all of his fish and only half of Nathan's fish. Oliver did nothing to try to promote the sale of his fish over Nathan's. He simply put all the fish on a table in two piles and let the customers choose. Which of the following is TRUE?

A) Oliver is not in breach of his fiduciary duty because he did not violate any express instructions from Nathan regarding how he was to sell the fish.
B) Nathan can claim damages from Oliver for breaching his fiduciary duty as an agent to act in the best interests of Nathan.
C) As a fiduciary, Oliver should never have put himself in a position where his personal interest in selling his fish conflicted with his duty as Nathan's agent to do his best to sell Nathan's fish.
D) Oliver is not in breach of his fiduciary duty because Nathan knew and impliedly authorized Oliver to sell his own fish along with Nathan's.
E) None of the above.

Question 36

You contract with Sal, a stock broker, to act as your agent to buy stocks for you. You specifically instruct Sal that you only want him to buy stocks for you that have a good dividends payment history. Sal carelessly buys you some shares that have never paid dividends.. Which of the following does NOT describe a legal basis upon which you could claim relief?

A) Sal's breach of his duty of care as an agent.
B) Sal's breach of his warranty of authority.
C) Sal's negligence.
D) Sals breach of your express instructions.
E) none of the above.

Question 37

Rula hired Mike to act as her stockbroker. In that capacity, Mike was authorized to buy and sell stocks on behalf of Rula as her agent. Rula paid very little attention to the details of the transactions that Mike entered into on her behalf. She adopted a very different attitude, however, after she received an anonymous tip that Mike was intentionally inflating the commissions that he received for buying and selling stocks for Rula by making an unreasonably large number of trades for her account. Which of the following statements is TRUE?

A) Mike is liable for breach of his duty of care to Rula.
B) Mike is only liable fo breach of fiduciary duty if Rula can prove that she took reasonable steps to monitor Mike's behaviour.
C) Mike may be held liable for breach of fiduciary duty only if Rula can prove, as a result of that breach, either that she suffered a loss or that Mike received a benefit.
D) Mike may be held liable for breach of fiduciary duty even if Mike made money for Rula in the end.
E) Mike may be held liable only if he breached an express instruction from Rula.

Question 38

Which of the following statements is TRUE with respect to franchises?

A) Franchisors do not worry about whether they may be held liable for actions of franchisees because each franchisee is a separate business.
B) Franchise agreements do not contain trademark licences.
C) Although other arrangements are available for other types of business, a true franchise is always concerned with the food service industry.
D) A franchise arrangement always includes, among other things, an agency relationship.
E) Franchisors typically include a provision in their franchise arrangements that says that the franchisee is not an agent of the franchisor.

Question 39

The concept of "apparent authority" is also sometimes known as

A) reflective authority.
B) ostensible authority.
C) actual authority.
D) delegable authority.
E) all of the above.

Question 40

Minnie and Maximum Realty Inc have entered into a real estate agency agreement. In this situation, it is almost certain that

A) Minnie owes a duty of care to the company.
B) Minnie is legally known as the beneficiary.
C) the company has complete authority to purchase or sell a house on behalf of Minnie.
D) Minnie is legally known as the agent.
E) the company owes a fiduciary duty to Minnie.

Question 41

How can a prinicipal manage the risk that an agent will commit the principal to contracts that it does not want to be bound by?

Question 42

Grosjean is employed as a truck driver by Newcastle Co. One day while he is making deliveries for Newcastle in its delivery van, he notices that the van is low on gas. He uses his own money to buy gas so that he can complete his deliveries that day. In the absence of a provision in Grosjean's contract with Newcastle to the contrary, Newcastle is obliged to reimburse Grosjean for the cost of the gas because it was an expense reasonably incurred by him in carrying out his duties for Newcastle.

Question 43

Sherwood entered into a contract to buy some real estate from Idris Real Property Inc. on behalf of Mento Corp, a major developer. Sherwood told Idris that he was the Vice President of Acquisitions at Mento. In fact Sherwood is not affiliated with Mento in any way and has no authority to act on behalf of Mento. Sherwood is not liable to Idris under the contract, but would be liable to Idris for breach of warranty of authority.

Question 44

What are the purposes of the rules of agency?

Question 45

Samantha was the Vice President of Purchasing for Amsterdam Books Inc, a chain of retail bookstores. She hired Anthea as a buyer of children's books for the chain. Storm Coast Books Ltd had never dealt with Amsterdam before. Anthea turned up at their offices, told them she was a buyer for Amsterdam and gave out the business cards that Amsterdam had printed for her. Anthea entered into a contract with Storm Coast Books Ltd to buy 5000 copies of a new adventure book. Unfortunately, Samantha had no authority to hire Anthea. A section in the corporation's bylaws provides that only the president of the corporation can hire buyers. The contract is nevertheless enforceable by Storm Coast Books.

Question 46

Jeremy is a singer. For several months, he and his friend George have discussed the fact that Jeremy needs an agent if he is to move forward with his career. George has proposed that he be that agent. Jeremy has never agreed to George acting as his agent. A few weeks later, however, George attended a negotiating session between Jeremy and a record company. After several hours, George said that Jeremy would agree to the terms of the recording contract proposed by the record company. Jeremy said nothing. There is a contract between Jeremy and the record company.

Question 47

TopCo Inc appointed Ethel as its agent to negotiate a building lease on its behalf with DeGroot Realty Inc. At one point in the negotiations, DeGroot says to Ethel that it will buy her a new car if the negotiations are completed by the end of the week. Ethel cannot accept the car unless she obtains the permission of TopCo.

Question 48

Mori is an employee of Garvie Corp, a film production business. Mori's job is to negotiate with screenplay writers for the rights to use the screenplay writers' work. He was given authority to sign a contract on behalf of Garvie with Joseph, a screenplay writer, for a specific screenplay. In October, a contract is concluded by Mori on behalf of Garvie with Joseph for the rights to that screenplay. In November, Mori enters into another contract with Joseph for a different screenplay. Neither Mori nor Garvie have ever said anything to Joseph about Mori's authority to act for Garvie. The contract is binding on Garvie.

Question 49

Wayne is an agent for Sarah, a professional hockey player. For two seasons, he has helped Sarah negotiate her contract with the Saskatoon Hilltops Hockey Team. He has never signed her contract. Sarah always signed her contract herself and usually she participates in the negotiations. This year, after a hard negotiating session that Sarah did not attend, he signed a contract on her behalf. The contract is binding because as an agent, Wayne has the power to act on behalf of Sarah, his principal.

Question 50

Jennifer is the president and chief executive officer of Starburst Co, a corporation incorporated under the Canada Business Corporations Act carrying on a television production business. She has been discussing a new show with Stein. She enters into an agreement to buy Stein's idea for a new show. The bylaws of the corporation state that the president cannot agree to buy new story ideas without the approval of the board of directors. Jennifer did not obtain the approval of the board to buy Stein's idea. The contract is binding on Starburst nevertheless.

Question 51

Marta agrees to buy two tons of tomatoes from Argus Farm Products Inc hoping that she can find a principal to take responsibility for the contract. In her discussions with Argus, she does not indicate that she intends only to contract as an agent for a principal that she hopes to find. If Fresh Vegetables Ltd ratifies the contract, it can only be enforced by Argus against Fresh Vegetables Ltd.

Question 52

Bruner and Santos have entered into a joint venture for the purpose of building a housing development. They call the joint venture Brantwood Housing. Santos will provide the financing, and Bruner will build and sell the houses. Under the terms of the joint venture agreement, the profits from selling the houses will be split evenly between Santos and Bruner, and Santos agrees that expenses incurred by Bruner for the purpose of building the housing development "will be the responsibility of Bruner and Santos, to be shared equally." Bruner enters into a contract on behalf of Brantwood Housing with an Internet service provider, ISP Inc, to host a web site for advertising the houses built by Brantwood Housing for $100 per month. Bruner defaults on the payments required under the contract. ISP Inc was not aware of Santos involvement in Brantwood Housing until it began investigating the joint venture after Bruner defaulted on the contract. Is Santos liable to ISP Inc?

Question 53

Tony is a sophisticated businessman. Tony's stock broker advises him to buy 1000 shares of Q- Tel at the current market price of $10 per share. The broker's advice is based on a careful assessment of the market and Tony's advice to the broker about his risk tolerance. Tony takes the advice and directs his broker to buy the shares. The shares turn out to be a very bad investment and, after six months, are worthless. Tony has no claim against his broker.

Question 54

Berta has entered into an agreement with Boys R'Us Inc to operate a men's clothing store as a franchisee in Scarborough, Ontario. Boys R'Us operates franchise stores in all provinces and has a great reputation as a place where men can get good quality clothes for a good price. One of the advantages to Berta of operating a men's clothing store as a Boys R'Us franchise is that she will get a licence of the Boy's R'Us trademark and the assistance of Boys R'Us in the operation of the business.

Question 55

Alma contracts with Comvey Corp to act as its agent in purchasing fork lift trucks. Alma told Comvey that she did not know anything about fork lift trucks or Comvey's business but was willing to learn and happy to have the opportunity. Comvey said that it would train her but the training never occurred. Comvey needed five fork lift trucks to operate a freight terminal. Alma bought five fork lift trucks for Comvey. It turned out that the trucks were too large for use in the terminal. Comvey cannot get its money back. It has an action for breach of duty of care against Alma for damages to compensate for its losses.

Question 56

An agent is never liable for a contract that it negotiates on behalf of an identified principal.

Question 57

Sureet has a small gardening business. He recently won the lottery and had $50 000 to invest. He went to James, a stock broker, and told him that he would like to invest his money in shares that would give him a high return because he would be relying on this money to fund his retirement. He told James that he had few other assets and needed to grow this investment into a substantial sum if he was to live on it when he retired in 20 years. He said that he was relying on James because he had no investment experience. James recommended investing in options, a strategy which, if successful, would yield high returns. James did not explain to Sureet that there was a substantial risk that he could lose all his money. Sureet, attracted by the prospect of the high returns agreed to give all of the $50 000 to James to invest in options. Within six months all the money was gone. James was not negligent in how he pursued his options trading strategy, it simply was not successful. However, James did not keep Sureet informed on a regular basis about the losses. Sureet is now very angry and frustrated. Does Sureet have any claim against James?

Question 58

Janus entered into an agreement with Ashley under which he made Ashley his agent for the purpose of selling his car. He agreed to pay Ashley a commission of 5% of whatever price she could get for the car. A week later, he cancelled the agency arrangement. At the end of the following week, Ashley showed up at his house with Simon. In front of Simon, she told Janus that Simon was interested in buying the car and asked for the keys so she could show it to him. Janus gave her the keys. An hour late she came back with Simon and told Janus that she had agreed to sell the car to Simon for $10 000. How would you describe Simon's legal rights?

Question 59

Selma Corp and Kor Industries Inc are steel producers that have entered into a joint venture to recycle their waste. They have set up a corporation, Re- Steel Co, to carry on the joint venture business. Selma and Kor are shareholders and each has a nominee on the board of directors. The employees of Selma and Kor must be agents of the joint venture.

Question 60

Information Highway Inc enters into an agreement with Groulx under which Groulx agrees to act as Information Highway's agent in obtaining a permit for Information Highway to build an office tower in St. John. Groulx pays a bribe of $1000 to an employee of the city to issue the permit. Information Highway must reimburse Groulx for the bribe because it is an expense incurred in performing his responsibilities.

Question 61

Shari entered into an agreement with Taiga Developments Inc under which she would act as an agent to find real estate for Taiga to buy in a suburb of Regina, Saskatechewan. Taiga had told her that it wanted to buy up all the land and buildings in a three block area to build a mall. No one but Taiga and Shari knew about Taiga's plans. Shari found a piece of property for sale across the street from the area Taiga was interested in for a great price. She knew that once the mall went in the property would be worth much more than it was today. Shari bought the property and then sold it after Taiga had built the mall for twice what she paid. Did Shari breach of her fiduciary duty?

Question 62

Seldon owned several apartment buildings. Sheila is the president of Ivest- co Inc, a corporation incorporated under the Canada Business Corporations Act. Sheila entered into a lease with Seldon to rent some office space in one of Seldon's buildings on behalf of Invest- co. Seldon was confident that the lease would be enforceable against Ivest- co Inc because the president of the corporation had signed the lease on behalf of the corporation. Unknown to Seldon, the bylaws of the corporation said that the corporation could only enter into leases if two directors of the corporation signed them. Discuss whether the lease is enforceable.

Question 63

Explain how a third party can determine the scope of an agent's authority to bind the principal it represents? In your answer, specifically identify barriers make it difficult for a third party to discover an agent's authority.

Question 64

Jackson is the shipping clerk for Coldpoint Inc, an appliance manufacturer. For five years, Jackson has regularly taken orders from Knight's TV and Appliances Inc for refrigerators. Jackson does not approve the orders himself. He submits them to the sales manager. Once the sales manager has approved the order, an invoice specifying the price and terms of payment is issued and signed by the sales manager. Each invoice is then sent to Knight's. A contract is formed on the terms of the invoice. Jackson then arranges for Coldpoint to ship the refrigerators. In October, Knight's gets an invoice in response to its order for two refrigerators that is signed by Jackson. Knight's calls Jackson and asks about this change in procedure. Jackson says that he has been promoted and he can now approve and sign invoices. Knight's accepts this explanation. In fact, Jackson has not been promoted and invoices still require approval by the sales manager. Can Knight's rely on the invoices a forming a contract for the two refrigerators enforceable by Knight's against Coldpoint?

Question 65

Knowing that Michele is looking for a house, Fatima negotiated a contract for her to buy a house from Owen. Fatima and Owen have agreed on the price, the deposit, the closing date and all other relevant terms of the deal. Michele, however, has not authorized Fatima to negotiate this transaction her behalf and had no knowledge of what Fatima has done. When Fatima tells her, however, Michele is delighted by the house and all the terms of the contract except for the deposit of $20 000 that Fatima and Owen have agreed to. Is it possible for Michele to accept this contract with Owen, such that it becomes a binding obligation between them, but not accept the deposit requirement to which she did not consent?

Question 66

MC Electric Inc sold circuit boards. Dortmund was the director of sales for MC Electric. His employment contract said he was responsible for managing the sales force of five employees, including promoting sales. Pricing decisions and overall sales strategy were the responsibility of the president. In October, Dortmund was approached by GB Circuits Co, another supplier of circuit boards which had been asked to quote on a large order from a manufacturer of telephones, A- Tel. GB could not fill all the A- Tel order itself and proposed that MC should submit a quote for what GB could not supply and, if MC were successful, it would pay over 50 percent of its profits on the order to GB as compensation for giving the MC the opportunity to bid and the introduction to A- Tel. Dortmund agreed to this deal on behalf of MC. Subsequently, MC supplied 2500 circuit boards to A- Tel which were paid for. MC refused to pay the 50 percent commission to GB. Is there any legal basis upon which it could be argued that MC is NOT OBLIGED to pay the commission? Do you think that MC will be successful in avoiding payment?

Question 67

Mireille recently sold her house in Kitchener, Ontario, through a real estate agent, and she is not very happy about the service she received. The agent, Emily, did not listen to her instructions. For example, Mireille told Emily that she would not allow the house to be shown to people on weekend mornings. Emily showed up with clients on several weekend mornings anyway. Emily was always late for appointments and did not work very hard to sell the house. She never had an open house. Eventually Mireille sold her house to a friend. She feels she got no service of value from Emily and paid a commission of 6 percent of the $300 000 price ($18 000). Is there anything that Mireille can do?

Question 68

Orestes was employed as the manager of Coral Gables Horse Farm. a business carried on by Coral Gables Inc. Orestes was responsible for the day- to- day operations of the farm, including the care and maintenance of the horses and the management of the staff. Calum owned all the shares in the corporation and was the sole director and officer of Coral Gables Inc. He was the only one who had authority to buy new horses. In January, Calum asked Orestes to go to the local horse dealer and buy two stallions. Orestes bought the horses. Orestes thought that he had been given a general authority to buy horses for the farm, but that was not Calum's intention. In February, Orestes went to the horse dealer without Calum's permission and purported to buy from
the horse dealer two more stallions on behalf of the corporation. When the horse dealer delivered the horses and asked for payment, Calum refused. Can the horse dealer enforce the contract? If not, does the horse dealer have any other remedy?

Question 69

Alice entered into an agreement with a real estate agent to help her find a house in Windsor, Ontario. Alice found a house that she wanted and asked the agent to present an offer on Monday. The agent got busy with some other work and did not present the offer until Wednesday. Unfortunately for Alice, the owner of the house accepted another offer presented on Tuesday. Describe the bases upon which Alice could seek relief from the actions of the agent.

Question 70

Ruby is a junior sales clerk employed in the sporting goods department of Lear's, a large department store. Because of her work she gets to know Basinger, the supplier of tennis racquets to Lear's. After talking to Basinger for some time, she asks Basinger if it would agree to sell 100 tennis racquets to Lear's for 10% less than the price Lear's usually pays if Lear's would agree to send all its racquet stringing and repair business to Basinger. Basinger agrees to this proposal. That afternoon, Ruby advises the president of Lear's about the deal she has worked out with Basinger. The president says that while she likes the price reduction, Lear's cannot accept the commitment regarding the stringing and repair business. Lear's has an existing commitment to send all such business to someone else. Is Lear's bound by the contract negotiated by Ruby? Can Lear's accept the contract excluding the commitment to send Basinger all the stringing and repair business? Can Ruby have the contract ratified by Beaton's, a competing department store? Is Ruby bound personally?