Deck 33: Agency Formation and Duties

Question 1

Agency law is a blend of both state and federal laws.

Answer 1

False

Question 2

All employees are agents of their employers, and all agents are employees.

Answer 2

False

Question 3

An expressed agency is the most common type of agency but it does not give the agent the authority to contract on behalf of the principal.

Answer 3

False

Question 4

The principal does not owe duties to an agent even though an agent owes duties to a principal.

Question 5

Agents may have both contract and tort remedies available against a principal.

Question 6

Theilan and Llewellyn make an agreement in writing that Theilan will act on behalf of Llewellyn at an auction. This type of agency relationship is a(n) ________ relationship.

A) expressed agency
B) implied agency
C) apparent agency
D) ratification agency
E) applied agency

Question 7

Which of the following is true regarding the form of authority upon which an agency relationship may be created?

A) Agency relationships can be created through expressed agency, but not through implied authority, apparent agency, or through ratification.
B) Agency relationships can be created through expressed agency or through implied authority, but not through apparent agency or through ratification.
C) Agency relationships can be created through ratification, but not through implied authority, apparent agency, or expressed authority.
D) Agency relationships can be created through ratification or expressed agency, but not through implied authority or apparent agency.
E) Agency relationships can be created through expressed agency, implied authority, apparent agency, or ratification.

Question 8

In City of Binghamton v. Whalen, the text case that discussed whether or not the plaintiff should have lost his compensation under the faithless servant doctrine, when he stole money from his job as Director of Parks and Recreation, the court held that:

A) The court that if an employee has an otherwise unblemished record, benefits acquired in previous working years could still be granted to the employee even after they are fired.
B) The court ruled that workers forfeit only their salary and not their benefits under the faithless servant doctrine.
C) The court declined to relax the faithless servant doctrine so as to limit plaintiff's forfeiture of all compensation earned by defendant during the period in which he was disloyal.
D) The court ruled that the Appeal's court overstepped its bounds in reviewing evidence and sent the case back for further review.
E) The court determined that the City of Binghamton owed plaintiff damages for defamation but that no tangible benefits needed to be returned to the plaintiff.

Question 9

In an agency relationship, both parties must agree to their roles as principal and agent.

Question 10

________ have a duty to act primarily for another person's benefit.

A) Principals
B) Employers
C) Fiduciaries
D) Trustors
E) Benefactors

Question 11

The law assumes that the principal is aware only of information actually provided to the principal by the agent.

Question 12

An agent may use the agency relationship to obtain property for himself or herself when the principal desired to obtain the same property.

Question 13

An agency relationship exists when an agent is authorized to act for and on behalf of the principal, who hires an agent to represent him or her.

Question 14

The principal can sue the agent, and may be entitled to a variety of contract and tort remedies beyond those stated in the contract, if an agent breaches his or her duties.

Question 15

An agency relationship may be created only for a lawful purpose.

Question 16

A principal may not enact a power of attorney after becoming incompetent.

Question 17

A gratuitous agent is one who acts without consideration.

Question 18

An individual who lacks contractual capacity may hire an agent to make contracts on his or her behalf.

Question 19

In Ackerman v. Sobol Family Partnership, LLP, the text case that discussed whether the plaintiffs were bound by representations of their attorney regarding settlement that they had not approved, which of the following was the result?

A) The agreement entered into by plaintiffs' attorney would not be enforced because the plaintiffs had not lead the opposing defense attorneys reasonably to believe that the plaintiffs' attorney had full and final authority to settle the litigation.
B) The agreement entered into by plaintiffs' attorney would not be enforced because the plaintiffs had not signed it.
C) The agreement entered into by plaintiffs' attorney would not be enforced because the plaintiffs had not given the attorney express authority to enter into the agreement.
D) The agreement would be enforced because the plaintiffs' attorney had express authority to enter into the agreement.
E) The agreement would be enforced because the plaintiffs' attorney had apparent authority to enter into the agreement.

Question 20

Agents in Australia are obligated to act personally on behalf of the principal.

Question 21

________ relationships are the most common types of agency relationships.

A) Apparent agency
B) Implied agency
C) Express agency
D) Ratification agency
E) Applied agency

Question 22

Which of the following is not one of the criteria listed in the text as indicative of whether a worker is an employee or an independent contractor?

A) Whether the worker is engaged in a distinct occupation or an independently established business.
B) Whether the employer supplying the tools.
C) How the worker is paid.
D) The amount of time the worker has been involved in the trade or area at issue.
E) The length of time for which the worker is employed.

Question 23

Agency by implied authority cannot conflict with any ________.

A) apparent agency.
B) implied agency.
C) express authority.
D) applied agency.
E) alleged agency.

Question 24

Which of the following is true regarding criteria needed for creation of the agency relationship?

A) The agency must be created for a lawful purpose, and the person hiring an agent must have contractual capacity.
B) The agency must be created for an equitable as well as a lawful purpose, and the person hiring an agent must have contractual capacity.
C) The agency must be created for a business and lawful purpose, and the person hiring an agent must have contractual capacity.
D) The agency must be created for a lawful purpose; and, although there is no requirement that the person hiring an agent have capacity, the person acting as an agent must have contractual capacity.
E) The agency must be created for an equitable as well as a lawful purpose; and, although there is no requirement that the person hiring an agent have capacity, the person acting as an agent must have contractual capacity.

Question 25

Under which of the following does a principal give authority to an agent only for the specific areas or purposes listed in the agency agreement?

A) A specific power of attorney
B) An exact order of authority
C) An exact legal empowerment
D) A limited power of responeat superior
E) A specific power of order

Question 26

________ occurs when a principal allows a third party to believe another individual serves as his or her agent, but the principal has actually not granted that party any authority. What type of authority has the principal created?

A) Apparent agency
B) Implied agency
C) Express agency
D) Applied agency
E) Endorsement agency

Question 27

Nadal hires Simon to be his tennis coach for the next six months to prepare him or the Olympic games. Nadal agrees to hire no one else in this time period to help him train. Nadal and Simon have entered into a(n) ________ agency contract.

A) specific
B) demand
C) exemplified
D) guaranteed
E) exclusive

Question 28

In the text case, Penny Garrison v. The Superior Court of Los Angeles, plaintiffs sought to sue a residential care facility and avoid the effect of a durable power of attorney by which the decedent's daughter signed agreements to arbitrate disputes involving the facility. Which of the following was the result?

A) The durable power of attorney was ineffective because it did not grant the holder authority to enter into arbitration agreements and the arbitration agreements, therefore, were unenforceable.
B) The durable power of attorney was ineffective because it did not specifically give the daughter authority to enter into agreements involving health care and the arbitration agreements, therefore, were unenforceable.
C) The durable power of attorney was ineffective because it was revoked after the decedent became ill and the arbitration agreements, therefore, were unenforceable.
D) The durable power of attorney was effective but the arbitration agreements were void as against public policy.
E) The durable power of attorney was effective and the agreements to arbitrate would be upheld.

Question 29

Carolina is leaving the country to visit her ailing mother in Spain. Her worker Carlotta will be responsible for Carolina's company's bills while she is gone. Carolina can sign a(n) ________ giving Carlotta authority to act for her while she is gone.

A) order of authority
B) power of order
C) legal empowerment
D) power of attorney
E) allowable authority order

Question 30

Apparent agency, also known as ________, is when the principal has created by his conduct belief in another individual that a person serves as their agent when in fact they do not have the authority to act for the principal.

A) Exclusive agency
B) Equitable agency
C) Agency by law
D) Agency by estoppel
E) Legal agency

Question 31

Under the Copyright Act of 1976, if an employee completes work at the employer's request, this is known as ________ and the employer owns the copyright.

A) an "employee marked copyright"
B) a "work for hire"
C) an "employee copyright"
D) "hired-out copyright"
E) "employee protected work"

Question 32

As set forth in the text, which of the following is false regarding agency law in relation to sports agents?

A) Over half of the states have enacted statutes governing the behavior of sports agents.
B) Efforts are underway to develop a uniform act addressing regulation of sports agents because none exists at the present time.
C) Players associations' model contracts describe the nature of the services agents can perform on behalf of their principals and the duties the parties owe to one another.
D) Some states have established criminal penalties for athletes who violate the state law addressing regulation of sports agents, but most states focus on criminalizing the activity of sports agents.
E) The Major League Baseball Players Association's Regulations Governing Player Agents expressly state that agents act in a fiduciary capacity vis-à-vis their athlete clients.

Question 33

A person who contracts with another to do something for the other person, but is not controlled by the other, nor subject to the other's right to control with respect to his physical conduct in the performance of the undertaking, is referred to as which of the following?

A) An employee
B) An independent contractor
C) An authorized contractor
D) A task-specific contractor
E) A partial contractor

Question 34

The Case Opener discussed whether FedEx illegally refused to collectively bargain with single-route drivers on the basis that they were independent contractors, not employees. Which of the following is true regarding the result?

A) To determine whether the FedEx drivers should be classified as employees or independent contractors, the court applied federal statutory law.
B) The court found that FedEx did not exercise the degree of control necessary for the relationship to be considered employer-employee.
C) The court found that at times the drivers acted as employees and that other times they acted as independent contractors and that they would, therefore, be classified as independent contractors.
D) The court found that at times the drivers acted as employees and that other times they acted as independent contractors and that they would, therefore, be classified as employees.
E) The court found that all the rights and duties of employees as agents applied to their relationship with FedEx.

Question 35

Which of the following is not a type of independent contractor?

A) Building contractor
B) Stockbroker
C) Elementary school teacher
D) Lawyer
E) Doctor

Question 36

When determining whether or not a person is an employee or an independent contractor for purposes of agency law, what is the most important factor?

A) An employee is subject to the control of the employer.
B) Generally, all working people are considered to be agents or employees of an employer.
C) Whether the person has a close personal relationship with the employer.
D) An independent contract is under the employer's control.
E) Independent contractors fall under the employer-employee relationship for purposes of agency law.

Question 37

Under which of the following does a principal give an agent broad authority to sign legal documents on behalf of the principal?

A) A general power of attorney
B) A specific order of authority
C) A localized legal empowerment
D) A broad power of responeat superior
E) A recognized power of order

Question 38

Which of the following is false regarding civil law and a power of attorney in Luxembourg?

A) In civil law countries, a power of attorney authorizes the agent only to conduct a series of transactions under instruction from the principal.
B) In Luxembourg, the person on whose behalf the power of attorney is created is called a donor, instead of a principal.
C) One type of power of attorney in Luxembourg is a power of attorney that is valid until death.
D) One type of power of attorney in Luxembourg is a power of attorney that has unlimited validity even after death.
E) The law in Luxembourg requires that the power of attorney be authenticated by a public authority or a public notary.

Question 39

Eric is employed by Grassly's Food Service as a full-time delivery person. Eric gets into an accident in a Grassly's Food Service van as he is delivering food to one of Grassly's customers. Is Grassly's liable for Eric's accident?

A) Yes, employers are generally liable in tort for the actions of their employees.
B) Yes, employers are generally liable in tort for the actions of independent contractors.
C) No, employers are not generally liable in tort for the actions of employees.
D) No, employers always have employees sign waivers agreeing not to be bound if an accident occurs.
E) Yes, employers are always liable if employees have a written agreement for employment.

Question 40

A ________ is a written document, created by a principal, expressing his or her wishes for an agent's authority not to be affected by the principal's subsequent incapacity.

A) General purpose order of authority
B) Living legal empowerment
C) Notarized order
D) Durable power of attorney
E) Lasting power of authority

Question 41

Barry is an employee who works as a sales person and receives commission for all sales he receives for a pharmaceutical company. When Alexia, Barry's boss, gives Barry his check on Friday, he believes that he should have been compensated more due to his sales for the week. Barry can ask Alexia for a(n) ________

A) specific performance.
B) accounting performance.
C) audit of accounts
D) compensation check
E) accounting.

Question 42

The duty of an agent to perform specified duties with reasonable skill, care, and professionalism is referred to as which of the following?

A) Duty of action
B) Duty of contract
C) Express duty of action
D) Duty of performance
E) Duty of obedience

Question 43

[Cheap Principal] Paolo, who is very knowledgeable regarding computers, agrees to purchase computers for Joe's business. Paolo is retained for that purpose only, he is paid a set rate for the job, and Joe exercised no control over the manner in which Paolo did his work. Paolo purchased computers from AAA Computers without any mention of Joe. The computers worked well and were not defective in any way. Unfortunately, Joe did not pay AAA Computers on a timely basis. Paolo, therefore, paid AAA Computers out of his own pocket because he wanted to be able to do business with AAA Computers in the future and also because his name was on the invoice. Paolo asked Joe for reimbursement, but Joe refused. Joe claimed that if Paolo had only waited, AAA Computers might have agreed to take less.
Did Paolo have any legal liability to AAA Computers?

A) Yes, because he made the purchase from AAA Computers without mention of Joe.
B) Yes, but only because office equipment is involved.
C) No, because his status was as an agent regardless of whether AAA Computers was aware of that fact.
D) Yes, but only if Joe refused to pay.
E) Yes, but only if Joe were declared judicially insolvent.

Question 44

Which of the following is false regarding a principal's duties to an agent?

A) An agent can sue the principal if the principal does not fulfill duties owed to the agent.
B) An agent may be entitled to contract remedies but not tort remedies.
C) If the principal has failed to meet duties owed to the agent, the agent can refuse to act on behalf of the principal until the failure is remedied.
D) The principal has a duty to compensate an agent for services provided unless the parties have agreed that the agent will act gratuitously.
E) The principal has a duty of reimbursement and indemnification to the agent for authorized expenditures.

Question 45

Which of the following is the term used to describe the duty and responsibilities of the agent as specified in the agency agreement?

A) Duty of action
B) Duty of contract
C) Express duty of action
D) Duty of performance
E) Duty of obedience

Question 46

A(n) ________ arises when an agent tries to represent both a principal and a third party at the same time.

A) express agency
B) dual agency
C) conflict of interest
D) representation agency
E) absolution

Question 47

Which of the following is not one of the duties that a principal would owe an agent?

A) The principal owes a duty of cooperation to the agent.
B) The principal owes a duty of safe working conditions to the agent.
C) The principal owes a duty of reimbursement and indemnification to the agent.
D) The principal owes a duty of compensation to the agent.
E) The principal owes a duty of loyalty not to hire another agent.

Question 48

In non-contractual relationships, in order to force the principal to perform the contract, the agent may seek which of the following?

A) Specific performance
B) Specific recoupment
C) Adequate performance
D) Reformation
E) Recover for services rendered

Question 49

Which of the following is the term used to describe the duty an agent has to follow the lawful instruction and direction of the principal?

A) Duty of action
B) Duty of contract
C) Express duty of action
D) Duty of performance
E) Duty of obedience

Question 50

[High Maintenance] Malcolm, who runs a retail jewelry store, went to a wholesale jewelry store with Ashley, to whom he was engaged to be married. Malcolm had no express, written agreement with Ashley by which she was his agent. The wholesaler jeweler, Rebecca, asked Malcolm if Ashley was buying for him. Malcolm did not want to embarrass Ashley so he nodded in agreement. A few minutes later Malcolm whispered to Ashley, outside the hearing of the wholesaler, that she should not make any purchases. Malcolm and Ashley had a big disagreement over money that evening, and Ashley broke off their engagement. The next day Ashley went back to the wholesale jeweler and purchased a string of pearls for $2,000. Ashley also purchased a fur jacket for $3,000 from a store next door to the jewelry store owned by Harry. She told Harry that Malcolm wanted a fur jacket for a model in his store and that Malcolm would be glad to pay Harry for the jacket.
Which of the following is the most likely result if Harry sues Malcolm for the price of the jacket?

A) Malcolm will win because he did nothing to cause Harry to believe that he would pay for the jacket.
B) Harry will win because Ashley indicated that she had apparent authority to buy the jacket for Malcolm.
C) Harry will win only if he can show that through reasonable investigative efforts on his part Ashley cannot be located.
D) Harry will win only if he can show that Ashley has no assets with which to pay for the necklace.
E) Harry will win on an implied agency theory.

Question 51

Which of the following is a term used to describe the duty of an agent to communicate any information to the principal that the agent thinks could be important to the principal?

A) Duty of notification
B) Duty of information
C) Requirement of conveyance
D) Constructive notification
E) Constructive information

Question 52

Barthalow agrees to go to work for Macy. In Barthalow's contract with Macy, Barthalow agrees to create a new computer program and Macy agrees to video the performance of the program that Barthalow creates. Barthalow completes the program, but Macy does not video the program. At this point, what court remedy is available to Barthalow?

A) Specific performance
B) Indemnification
C) A demand for accounting
D) Avoidance
E) Recognition of rights

Question 53

Raul was employed by Vivian. Raul negligently got into an accident while working with Henry when he ran a stoplight while he was texting and driving. Vivian can seek ________ from Raul to recover any damages assessed by a court against Vivian as the principal for Raul's negligence.

A) reformation
B) indemnification
C) reimbursement
D) contribution
E) recoupment

Question 54

If there is no agreement between a principal and an agent regarding the amount for which the principal will compensate the agent, which of the following statements is true?

A) It will be assumed that the agent agreed to work for free on a gratuitous basis.
B) The agent will be allowed to set the price which will be enforced unless it is unconscionable.
C) The principal will be allowed to set the price which will be enforced unless it is unconscionable.
D) The court will appoint a magistrate to set the price.
E) Compensation will be calculated according to the customary fee in the situation.

Question 55

[High Maintenance] Malcolm, who runs a retail jewelry store, went to a wholesale jewelry store with Ashley, to whom he was engaged to be married. Malcolm had no express, written agreement with Ashley by which she was his agent. The wholesaler jeweler, Rebecca, asked Malcolm if Ashley was buying for him. Malcolm did not want to embarrass Ashley so he nodded in agreement. A few minutes later Malcolm whispered to Ashley, outside the hearing of the wholesaler, that she should not make any purchases. Malcolm and Ashley had a big disagreement over money that evening, and Ashley broke off their engagement. The next day Ashley went back to the wholesale jeweler and purchased a string of pearls for $2,000. Ashley also purchased a fur jacket for $3,000 from a store next door to the jewelry store owned by Harry. She told Harry that Malcolm wanted a fur jacket for a model in his store and that Malcolm would be glad to pay Harry for the jacket.
If Rebecca, the wholesaler jeweler, sues Malcolm for the price of the pearls, which of the following is the most likely result?

A) Rebecca will win assuming that she can prove that she reasonably believed, based on Malcolm's conduct that Ashley was acting as his agent.
B) Rebecca will lose because it was her responsibility to ask Malcolm for written documentation that Ashley was his agent.
C) Rebecca will lose unless it can be established that Ashley at some time in the past had actual authority to act as Malcolm's agent.
D) Rebecca will win only if she can show that through reasonable investigative efforts on her part Ashley cannot be located.
E) Rebecca will win only if she can show that Ashley has no assets with which to pay for the necklace.

Question 56

A[n] ________ trust is an equitable trust imposed on one who wrongfully obtains or holds legal right to property he or she should not possess.

A) Resolute
B) Actual
C) Constructive
D) Defined
E) Absolute

Question 57

Which of the following is true regarding the status of an agent as a fiduciary?

A) Although the principal is a fiduciary, an agent is not a fiduciary.
B) An agent is a fiduciary only if the principal and agent agreed by written contract that the agent is a fiduciary.
C) An agent is a fiduciary only if the principal and agent agreed by written or oral contract that the agent is a fiduciary.
D) An agent is only a fiduciary to the principal only if a transaction in excess of $10,000 is involved.
E) An agent is a fiduciary to the principal.

Question 58

[Cheap Principal] Paolo, who is very knowledgeable regarding computers, agrees to purchase computers for Joe's business. Paolo is retained for that purpose only, he is paid a set rate for the job, and Joe exercised no control over the manner in which Paolo did his work. Paolo purchased computers from AAA Computers without any mention of Joe. The computers worked well and were not defective in any way. Unfortunately, Joe did not pay AAA Computers on a timely basis. Paolo, therefore, paid AAA Computers out of his own pocket because he wanted to be able to do business with AAA Computers in the future and also because his name was on the invoice. Paolo asked Joe for reimbursement, but Joe refused. Joe claimed that if Paolo had only waited, AAA Computers might have agreed to take less.
Which of the following likely represents Paolo's status in regards to his employment with Joe?

A) He was an independent contractor.
B) He was an employee.
C) He had a special status called employee-contractor, a term used to represent a contractor with some responsibilities indicating status as an employee and some responsibilities indicating otherwise.
D) He was an express contractor.
E) He was an implied contractor.

Question 59

In determining whether a worker is an independent contractor or an employee, which of the following areas of law will not be seriously affected?

A) Tort law
B) Wage law
C) Discrimination law
D) Tax law
E) Constitutional law

Question 60

[High Maintenance] Malcolm, who runs a retail jewelry store, went to a wholesale jewelry store with Ashley, to whom he was engaged to be married. Malcolm had no express, written agreement with Ashley by which she was his agent. The wholesaler jeweler, Rebecca, asked Malcolm if Ashley was buying for him. Malcolm did not want to embarrass Ashley so he nodded in agreement. A few minutes later Malcolm whispered to Ashley, outside the hearing of the wholesaler, that she should not make any purchases. Malcolm and Ashley had a big disagreement over money that evening, and Ashley broke off their engagement. The next day Ashley went back to the wholesale jeweler and purchased a string of pearls for $2,000. Ashley also purchased a fur jacket for $3,000 from a store next door to the jewelry store owned by Harry. She told Harry that Malcolm wanted a fur jacket for a model in his store and that Malcolm would be glad to pay Harry for the jacket.
What type of agency, if any, did Ashley have to act on behalf of Malcolm as far as Rebecca is concerned?

A) No type of agency was in effect because no written agreement was in place by which Ashley was Malcolm's agent.
B) No type of agency was in effect because, in fact, Ashley was not Malcolm's agent.
C) An express agency.
D) An implied agency.
E) An apparent agency.

Question 61

The principal's duty of ________ means that the principal should assist the agent in the performance of their duties and cannot interfere with the reasonable conduct of the agent.

A) compensation
B) loyalty
C) affirmation
D) cooperation
E) reservation

Question 62

[Lakeside Property] Kumar agreed to act as the agent of Melanie in finding a piece of lakeside property for her at a good price, and also in obtaining a loan for her with which to purchase the property. She agreed to pay him $500 for doing so. To assist Kumar in his duties, Melanie disclosed to him confidential information about her finances and debts. Kumar decided that he needed help and paid Rick $300 to look for property for Melanie. Rick told Kumar about a great deal on a piece of lakeside property that Phil had for sale. In fact, the deal was so good that Kumar purchased the property for himself. When Melanie found out about the property Kumar bought for himself, she complained to Kumar. He defended himself on the basis that he was not actually working for Melanie when he found out about the deal. At the time, he was playing golf with Phil. He also told Melanie that he had hired Rick for $300 to assist him and that he could not be held liable because he had turned the job over to Rick. He asked Melanie for reimbursement of the amount he paid Rick. Melanie fired Kumar threatening to sue him. Kumar told Melanie that he would counterclaim for the $300 owed to Rick. After he was fired, Kumar disclosed to a number of parties information regarding Melanie's spending habits which he thought were excessive.
Which of the following is the most likely result if Kumar sues Melanie for the $300 paid to Rick?

A) Kumar will lose.
B) Kumar will win because an agent has an implied right to obtain help.
C) Kumar will win only if he can establish by a preponderance of the evidence that he acted reasonably.
D) Kumar will win unless Melanie can establish beyond a reasonable doubt that he acted unreasonably.
E) Kumar will lose only if Melanie can establish that Rick is incompetent to deal in real estate.

Question 63

What type of agency is formed when it appears an agency relationship exists based on the conduct of the parties?

A) Expressed agency
B) Agency by implied authority
C) Apparent agency
D) Agency by ratification
E) An agency relationship cannot be formed based on the conduct of the parties alone.

Question 64

[Cheap Principal] Paolo, who is very knowledgeable regarding computers, agrees to purchase computers for Joe's business. Paolo is retained for that purpose only, he is paid a set rate for the job, and Joe exercised no control over the manner in which Paolo did his work. Paolo purchased computers from AAA Computers without any mention of Joe. The computers worked well and were not defective in any way. Unfortunately, Joe did not pay AAA Computers on a timely basis. Paolo, therefore, paid AAA Computers out of his own pocket because he wanted to be able to do business with AAA Computers in the future and also because his name was on the invoice. Paolo asked Joe for reimbursement, but Joe refused. Joe claimed that if Paolo had only waited, AAA Computers might have agreed to take less.
Which of the following is true regarding any right of reimbursement Paolo is due from Joe?

A) Paolo is not due any reimbursement because he did not get permission from Joe before paying AAA Computers.
B) Paolo is only due 50% of whatever he paid because he did not get permission from Joe before paying AAA Computers.
C) Paolo is not due any reimbursement from Joe unless he can establish that Joe signed a written contract authorizing him to personally pay debts incurred.
D) Paolo is not due any reimbursement from Joe unless Paolo can establish by a preponderance of the evidence that AAA Computers would not have agreed to take a lesser amount.
E) Paolo is entitled to reimbursement from Joe.

Question 65

[Overstock] Mark owns an electronic resale store. Before Mark left for the weekend, he told Charlie, an employee, not to purchase any more compact discs (CDs) from customers because they were already having a difficult time selling the ones they had in stock. While Mark is gone, Charlie forgets Mark's instructions and buys nine CDs from customers.
What if instead of Mark directing Charlie not to buy any CDs he said, "I don't think it is a good idea to buy CDs because we cannot sell the ones we have in stock." Charlie still purchased nine CDs from customers. Would Charlie be liable to Mark?

A) No, because Mark did not put his requirement in writing.
B) No, because Mark cannot control every aspect of Charlie's work performance.
C) No, because Mark's statement was merely advisory and not mandatory.
D) Yes, because Charlie did not follow Mark's instructions.
E) Yes, because Charlie should have known it was not in Mark's best interests to purchase more CDs when they have a massive overstock.

Question 66

What duty does a principal have concerning safe working conditions?

A) The principal has a duty to provide safe working conditions for the agent, but he does not need to warn the agency of any known unsafe working conditions.
B) The principal only has a duty to warn agents of known unsafe working conditions.
C) The principal only has a duty to make necessary repairs to maintain safe working conditions.
D) The principal has a duty to provide safe working conditions for the agent, warn the agent of any known unsafe working conditions, and make necessary repairs.
E) The principal does not owe a duty of safe working conditions to an agent.

Question 67

What should Melanie seek if she wants possession of the lakeside lot Kumar purchased?

A) A resolute trust
B) An actual trust
C) A constructive trust
D) A defined trust
E) An absolute trust

Question 68

Which of the following is true regarding agency contracts?

A) Agency contracts must clearly define the agent's compensation.
B) A contract is not required to create an agency but if a contract exists, it must meet all requirements prescribed by contract law.
C) A contract is required to create a valid agency
D) An agency contract cannot create an agency agreement longer than two years.
E) An agency contract only needs to be signed by the principal.

Question 69

Robert has agreed to act as an agent for Jill. Which of the following scenarios requires the agency agreement be in writing?

A) Robert is given power of attorney.
B) Robert is given authority to make business calls on Jill's behalf.
C) Robert is given authority to read Jill's mail.
D) Agency agreements are never required to be in writing.
E) All agency agreements must be in writing.

Question 70

Philip accompanied his boss Roger to a party where several of his boss's clients were present. Philip was discussing a contract with Salisa that he knew his Roger wanted to close the deal on. Philip started discussing the contract with Salisa. Roger was within earshot and nodded at Philip and Salisa as they were discussing the deal but did not know the details being discussed. Salisa takes Roger's nod as a sign that Philip has the authority to contract. Salisa later signed a contract, but for a much different amount than Roger wanted. Roger would like to rescind the contract on the theory that Philip had not authority to enter into the agreement. Can Roger do so?

A) No, Roger created an expressed agency by allowing Philip to come to the party.
B) No, Roger created an agency by executive authority by nodding at Salisa and Philip.
C) No, Roger created an apparent agency by allowing Philip to negotiate the contract.
D) No, Roger allowed an agency by ratification to exist by allowing Philip to discuss details of the contract.
E) Yes, Philip had not authority

Question 71

[Overstock] Mark owns an electronic resale store. Before Mark left for the weekend, he told Charlie, an employee, not to purchase any more compact discs (CDs) from customers because they were already having a difficult time selling the ones they had in stock. While Mark is gone, Charlie forgets Mark's instructions and buys nine CDs from customers.
Which of the following statements is true regarding Charlie's liability to Mark?

A) Charlie is not liable to Mark because he did not remember Mark's instructions.
B) Mark may recover the cost of the nine CDs because Charlie did not follow his instructions.
C) Charlie is not liable to Mark because he thought the purchase price of the CDs were exceptionally great.
D) Charlie is not liable to Mark because he is his employee.
E) Charlie is not liable to Mark because he believed Mark would have bought the CDs from the customer.

Question 72

[Lakeside Property] Kumar agreed to act as the agent of Melanie in finding a piece of lakeside property for her at a good price, and also in obtaining a loan for her with which to purchase the property. She agreed to pay him $500 for doing so. To assist Kumar in his duties, Melanie disclosed to him confidential information about her finances and debts. Kumar decided that he needed help and paid Rick $300 to look for property for Melanie. Rick told Kumar about a great deal on a piece of lakeside property that Phil had for sale. In fact, the deal was so good that Kumar purchased the property for himself. When Melanie found out about the property Kumar bought for himself, she complained to Kumar. He defended himself on the basis that he was not actually working for Melanie when he found out about the deal. At the time, he was playing golf with Phil. He also told Melanie that he had hired Rick for $300 to assist him and that he could not be held liable because he had turned the job over to Rick. He asked Melanie for reimbursement of the amount he paid Rick. Melanie fired Kumar threatening to sue him. Kumar told Melanie that he would counterclaim for the $300 owed to Rick. After he was fired, Kumar disclosed to a number of parties information regarding Melanie's spending habits which he thought were excessive.
If Melanie sues Kumar for revealing confidential information, which of the following is the most likely result?

A) Melanie will lose because Kumar was no longer her agent when he revealed the information.
B) Melanie will lose because regardless of whether he was working for her or not, he had no legal duty to keep any information confidential.
C) Melanie will lose unless she can establish that revealing the information caused her to suffer economic loss.
D) Melanie will lose unless she can establish that revealing the information caused her to seek psychological counseling.
E) Melanie will win.

Question 73

When determining whether a worker is an independent contract or an employee, one of the most important considerations is ________, which is when the employer has the right to substantially control the worker's day-to-day operations.

A) Specific performance
B) Special performance
C) Oversight
D) Employer control
E) Delegation

Question 74

________ is allowed by a principal when an agent breaches an agency contract, which allows the principal to nullify at his or her discretion any contract the agent negotiated.

A) Avoidance
B) Indemnification
C) First refusal
D) Veto
E) Specific performance

Question 75

Which of the following refers to the agent's duty to act in the best interest of the principal?

A) Loyalty
B) Obedience
C) Specific performance
D) Notification
E) Accounting

Question 76

Meryl is an avid doll collector and has been searching for the Beach Doll to complete her 200-piece collection. There were only 5 Beach Dolls created in the world. Meryl is envious of her neighbor Nancy, who has the first Beach Doll ever created. Nancy refuses to sell the doll because she thinks it will be worth a million dollars someday. While Nancy is on vacation, Meryl hires Alex to steal the doll from Nancy's home. Has an agency relationship been formed?

A) No, because the agreement must be in writing.
B) No, because the agreement has an illegal purpose.
C) No, because the amount or form of compensation was not contemplated.
D) Yes, because the agreement may be oral or in writing.
E) Yes, because Alex's objective was unambiguous.

Question 77

Which of the following is the best solution for a U.S. company that is attempting to enter a foreign market but is having difficulty due to a language barrier and lack of knowledge?

A) The company should open a local business office to become familiar with the area.
B) The company should continue to conduct business the way it would in the U.S.
C) The company should hire an agent familiar with the local laws, customs, and practices to help it function smoothly.
D) The company should focus all of its advertising in the desired market.
E) The company should not do business in a foreign market if there is a language barrier.

Question 78

[Lakeside Property] Kumar agreed to act as the agent of Melanie in finding a piece of lakeside property for her at a good price, and also in obtaining a loan for her with which to purchase the property. She agreed to pay him $500 for doing so. To assist Kumar in his duties, Melanie disclosed to him confidential information about her finances and debts. Kumar decided that he needed help and paid Rick $300 to look for property for Melanie. Rick told Kumar about a great deal on a piece of lakeside property that Phil had for sale. In fact, the deal was so good that Kumar purchased the property for himself. When Melanie found out about the property Kumar bought for himself, she complained to Kumar. He defended himself on the basis that he was not actually working for Melanie when he found out about the deal. At the time, he was playing golf with Phil. He also told Melanie that he had hired Rick for $300 to assist him and that he could not be held liable because he had turned the job over to Rick. He asked Melanie for reimbursement of the amount he paid Rick. Melanie fired Kumar threatening to sue him. Kumar told Melanie that he would counterclaim for the $300 owed to Rick. After he was fired, Kumar disclosed to a number of parties information regarding Melanie's spending habits which he thought were excessive.
If Melanie sues Kumar for purchasing the property from Phil instead of offering it to her, which of the following is the most likely result?

A) Melanie will lose because Kumar had the right to act in his own best interest.
B) Melanie will lose but only because Kumar was not involved in work duties when he heard about the property.
C) Melanie will lose because Kumar had validly assigned all duties to Rick.
D) Melanie will win because as the principal, she has right of first refusal.
E) Melanie will win only if she can establish that she expressly told Kumar that he could not assign the contractual duties under the contract.

Question 79

The Italian legal system has created an agency relationship that gives that agent unique powers. The principal and agent enter into a contract under which the agent agrees to the principal's stipulations. This contract, however, also requires that the agent maintain the principal's property. Under Italian law, the agent then becomes ________.

A) the legal owner of the property and can transfer or contract it without the principal's consent.
B) conservator of the property and must make sure it is returned within 60 days.
C) an independent contractor and the property becomes his or hers.
D) responsible in tort if anything happens on the property or to the property.
E) responsible for the taxes owed to the government on any property that is his or her possession.

Question 80

In the text case Glenn v. Gibbs, Glenn was injured and eventually died from his injuries as a direct result of trimming Gibbs' tree limbs. Glenn's wife sued Gibbs for negligence alleging Gibbs' actions and omissions caused Glenn's death. Which of the following was the result?

A) Gibbs was not liable because Glenn was an employee.
B) Gibbs was not liable because Glenn was an independent contractor.
C) Gibbs was liable because Glenn was an employee.
D) Gibbs was liable because Glenn was an independent contractor.
E) Gibbs settled the lawsuit out of court and admitted fault.