Deck 37: Agency

Question 1

A principal may ratify an unauthorized contract of an agent.

Answer 1

True

Question 2

The term apparent authority is used when an appearance of authority has been created by a principal, but actual authority does not exist.

Answer 2

True

Question 3

The burden of proving the existence of an agency relationship rests on the person who seeks to benefit by such proof.

Answer 3

True

Question 4

For a principal to ratify the actions of an agent, all that is necessary is that the principal express the intention to ratify.

Question 5

The intention to ratify an unauthorized act may be expressed by words or conduct.

Question 6

A "right to control" test determines whether an individual is an agent, an employee, or an independent contractor.

Question 7

An agent is distinguished from an ordinary employee in that employees are hired to represent the employer in dealings with third persons.

Question 8

An agency may arise by appointment, conduct, ratification, or operation of law.

Question 9

A written authorization of agency is called a power of attorney.

Question 10

An agency contract may be created by the oral appointment of an agent.

Question 11

Agency is a relationship by which the principal is authorized to act on behalf of an agent in negotiating and making contracts with third persons.

Question 12

An agency may be created to perform almost any act that a principal could lawfully do.

Question 13

A principal may ratify an action taken by an agent that the principal would not have been capable of authorizing at the time that the action was taken.

Question 14

A special agent is authorized by the principal to do all acts that can be delegated lawfully to a representative.

Question 15

The employer of an independent contractor does not have control over the performance of the work by the independent contractor.

Question 16

A special agent is authorized by the principal to transact all affairs in connection with a particular type of business or trade or to transact all business at a certain place.

Question 17

By virtue of an agency, one person can make contracts at numerous places with many different parties at the same time.

Question 18

For ratification to occur, the agent must have purported to act on behalf of, or as agent for, the identified principal.

Question 19

An agent is authorized to make contracts for, and is under the control of, the principal.

Question 20

When the principal ratifies the act of the unauthorized person, such ratification does not release the unauthorized person from liability, since he or she acted without authority.

Question 21

A party working for and under the control of another and authorized to enter into contracts for that other person or entity is called an:

A) employee.
B) agent.
C) independent contractor.
D) attorney.

Question 22

What is not a true statement concerning apparent authority?

A) It is true authority to act for a principal.
B) It is based on appearances created by the principal.
C) It is essential that the third person reasonably believe that the agent has authority.
D) Merely giving possession to another party does not create apparent authority to sell.

Question 23

The scope of an agent's authority is always known by the third party.

Question 24

An agent acting under a power of attorney is referred to as an:

A) implied attorney.
B) attorney in fact.
C) implied agent.
D) attorney at law.

Question 25

An agency coupled with an interest is an exception to the general rule regarding termination of the agency and the agent cannot be discharged or fired before the expiration of the interest.

Question 26

A person has apparent authority as an agent when the principal's words or conduct leads a third person to reasonably believe that the person has that authority and the third person relies on that appearance.

Question 27

A third person who deals with a person claiming to be an agent has the right to rely on the statements made by the agent concerning the extent of the agent's authority.

Question 28

If a principal terminates an agency without giving notice of the termination to third persons, the agent may retain the power to make contracts that will bind the principal and third persons.

Question 29

The term apparent authority is used when there is:

A) no interaction between the principal and third persons.
B) actual authority.
C) only the appearance of authority and that appearance of authority was created by the principal.
D) only the appearance of authority and that appearance of authority was created by the agent.

Question 30

The scope of an agent's authority may be determined from the:

A) express words of the principal.
B) words or deeds of the principal.
C) customs of the trade or business.
D) all of the above.

Question 31

When a person is authorized by the principal to transact all affairs in connection with a particular type of business or trade or to transact all business at a certain place, that person is a __________ agent.

A) general
B) perfected
C) special
D) universal

Question 32

A __________ is authorized by the principal to do all acts that can be delegated lawfully to a representative.

A) special
B) general
C) secret
D) universal

Question 33

The Uniform Durable Power of Attorney Act (UDPAA) changes the general rule that insanity of a principal terminates an agent's authority to act for the principal.

Question 34

An agent's duties must be expressly stated in the agency agreement and may not be implied from the principal's words or conduct.

Question 35

A person who has knowledge of a limitation on an agent's authority cannot disregard that limitation.

Question 36

The usual method of creating an agency is by:

A) express authorization.
B) conduct.
C) operation of law.
D) ratification.

Question 37

Which of the following is true?

A) An agent has the power to contract on behalf of a principal.
B) An employee generally does not have the power to contract on behalf of the employer.
C) An independent contractor controls work performed by the independent contractor.
D) All of the above are true.

Question 38

For an agency to be terminated by operation of law because of the principal's death, the agent must be notified of the death.

Question 39

In performing agency duties, the agent must exercise the care that a reasonably prudent person would exercise under the same circumstances.

Question 40

A __________ is authorized by the principal to handle a definite business transaction or to do a specific act.

A) special
B) general
C) secret
D) universal

Question 41

Ames, an agent for Baker Antiques, had the authority to purchase early 20th-century American furniture costing a maximum of $1,500 per piece. Ames bought a 19th-century French desk for $3,000 from Carter. Baker was furious when she saw the desk, and she fired Ames. Nevertheless, she put the desk on display in the shop with a $5,000 price tag. When the best offer she got for the desk was $2,500, Baker returned the desk to Carter. Baker told Carter that Ames had exceeded his authority in purchasing the desk, and she demanded that Carter refund the $3,000 that Ames had paid for the desk. Will Carter have to do so?

Question 42

A durable power of attorney may be terminated by:

A) revocation by a competent principal.
B) the death of the principal.
C) revocation by a competent principal or by the death of the principal.
D) none of the above, since a "durable" power of attorney is designed by law to be irrevocable under all circumstances.

Question 43

Which of the following is not a condition necessary for ratification?

A) The agent must have purported to act on behalf of or as an agent for the identified principal.
B) The third party benefiting from the ratification must give consideration for the ratification.
C) The principal must have been capable of authorizing the act both at the time of the act and at the time it was ratified.
D) The principal must have full knowledge of all material facts.

Question 44

When the principal's words or conduct leads a third person to reasonably believe that a party is authorized to act as his or her agent but this is not true, and the third person relies on that appearance, this creates a case of __________ authority.

A) express
B) apparent
C) customary
D) incidental

Question 45

An agent is under a duty to obey:

A) all instruction given by the third party.
B) all lawful instructions given by the principal.
C) all instructions given by the principal.
D) none of the above, since "obedience" is not an obligation of the agent.

Question 46

Initially, ratification is a question of:

A) intention.
B) consideration.
C) form.
D) implication.

Question 47

Barnes agrees with Morgan to enter into the management of a new subdivision of residential housing. Morgan appoints Barnes as his manager for the duration of the development program. During the course of the construction, Barnes decides to use funds specified for the subdivision for an office space project that Barnes alone has been interested in completing. Morgan is very angry on learning of Barnes' actions and terminates the agency. Barnes insists that the agency cannot be terminated in this manner. Is Barnes correct?

Question 48

An agent has implied __________ authority to do any act that usually accompanies the transaction for which the agent is authorized to act.

A) express
B) apparent
C) customary
D) incidental

Question 49

It is the duty of an agent to act with the care that:

A) the principal would exercise under the circumstances.
B) a reasonable principal would exercise under the circumstances.
C) a reasonable juror would exercise under the circumstances.
D) a reasonable person would exercise under the circumstances.

Question 50

An agent's duty of loyalty to the principal is breached by:

A) the agent accepting a secret gift from a third person in connection with the agency.
B) the agent acting as agent for both parties to a transaction without disclosure.
C) the agent aiding a principal's competitors.
D) all of the above.

Question 51

John's son was not his agent but contracted to purchase a computer in the name of John. When John learned of this, John sternly rebuked his son but continued to use the computer for several weeks. After losing interest in the computer, John offered to return it, saying that the purchase was unauthorized. John:

A) is not liable on the purchase.
B) expressly ratified the purchase.
C) is liable because all children have the apparent authority to contract for their parents.
D) ratified the purchase by John's conduct.

Question 52

Ann was seriously ill and feared that she might lapse into a coma or somehow become unable to speak or act for herself in her medical emergency. She is aware that agents ordinarily lose their authority to act for principals who become mentally disabled. She nevertheless desires to have her husband Alberto make medical decisions and speak on her behalf. She is particularly concerned about existing on life support in a persistent and incurable vegetative state. Is there any action that she might take to enable Alberto to act for her?

Question 53

An agent's implied authority to perform any act reasonably necessary to execute express authority is called __________ authority.

A) express
B) customary
C) apparent
D) incidental