Deck 6: Agency and Employment

Question 1

Explain under what circumstances the third party can be sued by the principal in the event of default.

Answer 1

When the agent has acted within his actual or apparent authority in his dealings with the third party

Question 2

An agency relationship can be created by:

A)Apparent authority
B)Estoppel
C)Ratification
D)Actual authority
E)All of the above

Answer 2

E

Question 3

Apparent authority is determined by the representation of the agent.

Answer 3

False

Question 4

An agent owes a fiduciary duty to the third party to act in that third party's best interest.

Question 5

When an agent acts beyond the specific authority given by the principal, that action will not be binding on the principal.

Question 6

Grant got a job with Ace Computers Co.(Ace) as a salesman.He was given a course in sales by Ace, business cards, and several of the company's order forms and brochures, and he was assigned an area in which he would sell computers door-to-door on behalf of Ace.Grant would be paid on a commission basis.At his first house, he was so excited by the interest shown that he forgot the explicit instructions he had received-only cash sales permitted.As an agent for Ace, he sold a computer on time to a 70-year-old woman.She was to pay $25 per month for eight years because that was all she could afford.When Brown, Ace's sales manager, heard of the deal, he fired Grant and said Ace would not go through with the contract.However, the old woman liked the computer very much and insisted that Ace provide her with one within the week as required by the contract.Which of the following accurately describes the legal position of the parties?

A)Ace would not be bound because Grant failed to follow the exact instructions he had received.
B)Ace is not bound by the contract because no representations of authority were made by it to the old woman.
C)Ace would be bound because Grant acted within his apparent authority.
D)Brown is personally liable to the old woman because he is the employee of the company who decided not to honour the contract.
E)Grant had implied authority to sell computers on time; selling computers necessitates selling on time, despite the prohibition.

Question 7

Which of the following is an example of an agent as opposed to an employee?

A)Joe worked as a delivery driver for Smith Textiles Ltd.
B)Joe worked as the purchasing agent for Smith Textiles Ltd.
C)Joe worked in the mailroom of Smith Textiles Ltd., sorting mail.
D)Joe worked as a janitor for Smith Textiles Ltd.
E)Joe worked as a mechanic for Smith Used Cars Ltd.

Question 8

An agent cannot bind the principal in a contract with a third party unless there is an agency contract between the principal and the agent.

Question 9

Sam hires Joe to negotiate and sign a contract with Ken on Sam's behalf.Which of the following is true?

A)If Joe acts outside express, implied, and apparent authority, Sam is not bound by the contract, even if he ratifies the contract.
B)If Joe acts within his apparent authority, but outside his express or implied authority, Sam will be bound by the contract.
C)If Joe acts outside his express authority and negotiates and signs the contract with Ken, Sam may not be a party to that contract.
D)If Joe acts outside his express, implied, and apparent authority, he could be sued by Sam, but not by Ken, because he has no contractual relationship with Ken.
E)If Joe acts outside his implied and express authority, Sam will owe him for his services.

Question 10

Distinguish between the actual authority and the apparent authority of an agent.

Question 11

Where Joe was given authority to do "anything necessarily incidental" to carrying out his agency function of selling vacuum cleaners for the principal, this gave Joe the authority to borrow money to purchase a car to be used in the business.

Question 12

With respect to duties owed by an agent to his principal, which of the following statements is false with regard to agency law?

A)Failure of an agent to obey his principal and to act within the authority given him allows the principal to sue the agent for breach of contract.
B)When an agent enters a contract on behalf of his principal but does so in breach of his duties to the principal, the contract is void and cannot bind the principal.
C)An agent must use reasonable care, skill, and diligence in the performance of his duties as agent.
D)Generally, an agent may not delegate his authority without the authorization of his principal.
E)Failure of an agent to perform his duties personally may allow his principal to sue the agent for breach of contract.

Question 13

In the process of assembling land for Ace Construction Ltd.to build a supermarket, Joe entered into a contract with the seller Sam.In which of the following situations would Sam be able to sue the principal, Ace?

A)Where Joe exceeded his apparent and actual authority.
B)Where Joe revealed that he was acting as an agent, but did not disclose that he was acting for Ace in particular, and exceeded both his apparent and actual authority.Ace did not ratify the contract.
C)Where Joe was acting outside his authority and did not disclose that he was acting for Ace.Sam was aware of Joe acting independently at the time he entered into the contract.
D)Where Joe exceeded his actual authority but where Ace had led Sam to believe that Joe had the authority.
E)Where Joe disclosed that he was acting for Ace but made the contract "subject to ratification."

Question 14

Distinguish between an employee and an independent contractor.

Question 15

Distinguish between an agent and an employee.

Question 16

Discuss the extent of an agent's authority to bind a principal in dealings with a third party.

Question 17

Miss Kachur is a training consultant who owns her own business and offers services to public and private organizations.Fortunately, as a result of her effective work, Sigma Corporation contracted with her to develop and provide training at its facilities throughout Canada.What began as a short-term consulting contract was extended for a period of years.Which of the following statements is true?

A)Due to her ongoing relationship with Sigma Corporation, Miss Kachur would likely be considered an employee of the corporation.
B)Because Miss Kachur operates her own business, she is likely an independent contractor in relation to Sigma Corporation.
C)Miss Kachur would be considered an agent of Sigma Corporation.
D)Although Miss Kachur operates her own business, she is likely a dependent contractor in relation to Sigma Corporation.
E)If Sigma Corporation decided to terminate the contract with Miss Kachur, she would be entitled to employment insurance benefits.

Question 18

A principal is bound in contract with the third party with whom the agent dealt if the agent is:

A)Within his implied authority
B)Within his express authority
C)Within his apparent authority
D)Outside his authority but the principal ratified it
E)All of the above

Question 19

In certain cases, a third party can hold a principal to a contract even though the agent acted outside the authorization given him by his principal and even though his principal elected not to ratify the contract made by the agent.The third party can enforce the contract because of:

A)The reasonable agent theory
B)The agent's apparent authority
C)Agency by express agreement
D)Fiduciary duty
E)The failure of the principal to register the agency agreement

Question 20

How is an agency relationship created?

Question 21

Explain how the principle of estoppel can be important in an agency relationship.

Question 22

A contract entered into by an agent cannot be ratified inadvertently by the principal.

Question 23

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

Question 24

Discuss the principle of ratification.In your discussion, consider limitations on its availability.

Question 25

Which of the following is correct with respect to the ratification of an agent's contracts?

A)A principal can ratify a contract where the agent has gone beyond both his actual and apparent authority.
B)A contract can only be ratified if the principal was not able to enter into the contract himself at the time of ratification.
C)Ratification is always an intentional act and must be performed by the principal.
D)When a contract entered into by an agent is ratified by a principal, it commences at the time the principal ratifies the contract.
E)A principal can only ratify an agreement entered into by an agent if his name has not been used.

Question 26

Although Jason had participated in the flower auction for the last nine years as an agent for Thos.Holt's Ltd.(Holt), with the authority to buy whatever he felt the store needed, on this day he was given express instructions to buy only cut flowers.When flats of young camellia bushes with a rare gold flower were being sold, Jason bought them on behalf of the company.Which of the following is true?

A)Holt is not bound by the contract, because Jason's authority was expressly restricted.
B)Holt is estopped from denying Jason's authority.
C)The key to determining whether or not Holt is bound by the contract is this: in the circumstances, should the auctioneer have confirmed with Holt the extent of Jason's authority?
D)Holt is not bound by the contract, because Jason is in breach of his agency agreement.
E)Holt is not bound since Holt didn't ratify the contract.

Question 27

Describe what is meant by an agent's apparent authority.

Question 28

Which of the following statements is false with regard to ratification in agency law?

A)A principal cannot ratify a contract if he did not have the capacity to contract at the time the contract was made.
B)A principal can ratify a contract inadvertently.
C)If an agent exceeds her express authority, ratification is the only means by which the principal would be bound to honour the unauthorized contract.
D)Ratification gives the agent authority retroactive to the time of contract.
E)A principal cannot ratify a contract if at the time of the ratification he could not have entered into the contract.

Question 29

Why is the distinction between employment and an independent contract important?

A)An employee can bind the employer in a contract he enters into on behalf of the employer.
B)An independent contractor cannot be sure that she will be paid.
C)Employees can withdraw their services.
D)An employer may be held responsible for torts committed by the employee.
E)An employee has the right to wages.

Question 30

Joe was a salesman, newly hired by Radio Hut.On his first day on the job, he was left in charge of the store while the manager and the other salesmen went to lunch.They specifically told him not to sell anything over $50 but to tell customers to come back in an hour when they would have returned from lunch.While they were at lunch, a customer came in and decided to purchase a new stereo TV set and several accessories.The total sales price was $1600, and the customer couldn't wait.Joe sold her the merchandise at a $400 discount.When the customer returned the next day to pick up the goods, the manager refused to go through with the deal.Explain the manager's legal obligations in these circumstances.

Question 31

A principal is not bound in contract with the third party with whom the agent dealt if the agent is:

A)Outside his authority but the principal ratified it
B)Within his express authority
C)Outside his actual and apparent authority
D)Within his implied authority
E)Within his apparent authority

Question 32

Discuss the concept of vicarious liability as it relates to employment and agency law.

Question 33

The ratification of a contract by the principal must be done in writing.

Question 34

Apparent authority is the authority the agent has based on what the principal has led the third party to believe.

Question 35

What restrictions are there on a principal's right to ratify?

Question 36

Which of the following is true with respect to the agency relationship?

A)An agent acting gratuitously can never bind the principal.
B)When a principal has specifically limited the authority of the agent, that agent can never bind the principal in a contract, even if the agent acts outside his authority.
C)Actual authority is the authority the principal has implied in conversations with a third party.
D)An agent's authority is limited to whatever authority the principal specifically gives the agent.
E)An agent's apparent authority may be implied from the position that the agent holds in the employer's organization.

Question 37

In which of the following situations will Smith be responsible for the tortious conduct of Jones?

A)Jones is a salesperson at Watson's Warehouse visiting Smith's grocery store.
B)Jones is a computer programmer working for Ace Computer Ltd.and installing new software for Smith's department store.
C)Jones is a self-employed vacuum cleaner salesman and Smith manufactures one of the lines he carries.
D)Jones is a secretary working in Smith's office.
E)Jones is an independent contractor installing drywall for Smith's grocery store.

Question 38

If a third party relies on the principal's representation that the agent has the authority to act, which of the following is true?

A)The principal can claim the agent had no authority.
B)The principal cannot claim the agent had no authority.
C)The principal can claim estoppel.
D)The agent is solely liable for the conduct if it results in injury to the third party.
E)The agent can sue the principal for breach of contract.

Question 39

Joe is a salesman for Harry's Fine Cars Ltd.He had been told specifically that he had no authority to make any sale, take a trade-in, or otherwise deal with the vehicles without the manager's express approval of every deal.Sam, a customer, came in wanting to buy a used Cadillac and agreed to pay the $16 000 asking price.Unfortunately, the manager had left the lot, and so Joe took it upon himself to write up the agreement.When the manager returned, he liked the deal and realized that the customer might change his mind when he realized that the salesman didn't have the authority to bind the seller in contract.Under these circumstances, what could the manager of the car lot do?

Question 40

With respect to the formation of agency by estoppel, which of the following statements is true?

A)If the principal tells an agent specifically not to sell something and the agent, in disobedience of those instructions, sells it anyway, the principal may be bound by the contract because of estoppel.
B)The issue of apparent authority arises only if a person acts as an agent when he or she has express or implied authority.
C)When a party terminates an express agency agreement with an agent and notifies third parties with whom that agent normally dealt, that party will be liable on a contract made for it by that "fired" agent.
D)When a third party suspects that the agent it deals with has no authority, there is no obligation on it to question the agent's alleged authority.
E)When a party represents, by words or conduct, that someone is its agent, that party can later deny liability on a contract made for it by that agent on the basis that no express agency agreement existed.

Question 41

Explain under what circumstances an agent can be liable for his conduct rather than the principal being liable.

Question 42

If an employee was performing some act that he or she was not required to do as part of the job function, the employer would not be vicariously liable for the torts committed while performing that act.

Question 43

Where an agent has been guilty of fraudulent misrepresentation, the agent must sue the principal.

Question 44

"Joe was working for Sam, using his own car to deliver manufactured parts for Sam's business to a client.In the process, Joe was involved in an automobile accident, causing injury to George, a stranger.In these circumstances, George's only recourse is against the employer." Discuss the accuracy of this statement.

Question 45

Explain what is meant by an undisclosed principal and the significance of such a relationship.

Question 46

An employer is responsible for only those torts committed by an employee that take place while the employee is doing what he was employed to do.

Question 47

Only employers are responsible for torts committed by their employees during the course of the employment.

Question 48

When an agent has been dealing with a third party for an undisclosed principal and there is a default, what rights are available to the third party?

Question 49

Which of the following statements is correct with respect to the employer's liability for the conduct of the employee?

A)The employer is always liable for the wrongful conduct of his employee.
B)Any employee can bind an employer in contract.
C)All employees are agents of the employer.
D)An employer is only liable for the wrongful conduct of his employee that takes place during the course of the employment.
E)If a person is injured by an employee acting in the course of the job, that person must sue the employer, not the employee.

Question 50

The only situation in which an agent can be sued by a third party is where he has gone beyond his apparent and actual authority.

Question 51

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

Question 52

Explain under what circumstances a principal who is not an employer will be held responsible for the wrongful acts of its agent.

Question 53

When a principal is undisclosed, the third party is restricted to suing the agent.

Question 54

Joe was an employee of Sam and was using his own car to deliver manufactured goods to a client.Since the client was in North Vancouver, the same area where Joe's girlfriend lived, Joe took time out to visit her for lunch.As he approached her house, he was involved in an automobile accident with George.George sued both Joe and his employer.Explain the likely outcome.

Question 55

Mr.Snarey devised and conducted a fraudulent scheme while working as an agent of Mutual Life.What would the likely result be?

A)Neither the agent nor the company could be liable, because Snarey was only an agent, and the company had no actual knowledge.
B)Only the agent was liable, because the action taken was dishonest and therefore outside the scope of the agency relationship.
C)Since Snarey was an agent with authority to enter into this general type of transaction, the company was vicariously liable for his conduct.
D)The company could be liable only if it were shown Snarey was an employee acting under the direction of a superior.
E)The doctrine of caveat emptor was applied.

Question 56

Explain when an employer can be held liable for the wrongful acts of an employee.

Question 57

An agent with no express, implied, or apparent authority to do so identified himself as an agent for his principal, and on behalf of his principal bought a computer.The principal refused to ratify the contract.On these facts, which of the following is true?

A)The seller could sue the principal for breach of warranty of authority.
B)The principal would have to pay for the computer because the agent was an agent for that principal.
C)The agent could be sued by the seller of the computer for breach of his warranty of authority.
D)The seller of the computer could sue the agent for breach of contract for saying he was an agent.
E)A third party cannot sue an agent even under these circumstances.

Question 58

An employer is vicariously liable for the torts committed on the job by employees and independent contractors.

Question 59

Stu hires Jan to negotiate and sign a contract with Ken on Stu's behalf.Which of the following is false?

A)If Jan acts outside express, implied, and apparent authority, Stu could still approve the contract and be bound by it.
B)If Jan acts within her apparent authority, but outside her express or implied authority, Stu will be bound by the contract but may sue Jan for breach of her agency contract.
C)If Jan acts within her implied authority, Stu will owe her for her services.
D)If Jan contracts with Ken on behalf of Stu but acts outside her express, implied, and apparent authority, Ken could not sue her for breach of contract because Ken has no contract with her.
E)If Jan acts within her express authority and negotiates and signs the contract with Ken, Jan is not a party to that contract.

Question 60

An employer is responsible for all torts committed by his employee.

Question 61

Which of the following is correct with respect to an agent's performance of his duties?

A)The agent must never compete with the principal.
B)The agent must never take advantage of the third party.
C)The principal need not reimburse the agent for any reasonable expenses incurred in the process of performing the agency responsibilities.
D)When an agent fails to act in the best interest of the principal and is an independent contractor, this is just cause for constructive dismissal.
E)The agent may profit at the expense of the principal if the agent acquires some previously unknown information.

Question 62

Which of the following statements is true with regard to an agent's duties?

A)A real estate agent may buy property from a third party if it is at a good price and then sell the property to his principal at a higher price.
B)An agent must always scrupulously account for money coming into his hands on behalf of his principal.
C)An agent need not disclose all relevant information to the principal.
D)An agent is not entitled to the agreed-upon commission and reasonable expenses undertaken on behalf of his principal in carrying out his duties.
E)An agent cannot act for two principals even with the knowledge and consent of those principals.

Question 63

Identify the true statement concerning the law of principal and agent.

A)An agent with no express authority can never bind his principal into a contract with a third party.
B)An agent who puts himself in a position where his interests conflict with those of his principal is in breach of his duties even though no actual harm comes to his principal.
C)Agency is only created by way of a contract.
D)The principal and his agent owe each other the same duties.
E)An agent can never be liable to the third party himself while the principal will bear no such liability.

Question 64

Discuss the extent of the obligations of the agent to the principal based on his fiduciary duty.

Question 65

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

Question 66

List three duties that an agent has to the principal.

Question 67

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

Question 68

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

Question 69

If Matt is an agent for Art, which of the following is false?

A)Matt cannot act as an agent for Art and for the person Art is dealing with at the same time without the permission of both.
B)Matt owes a fiduciary duty to Art.
C)Matt could act as an agent for Art even if he were not paid to do so.
D)Even when Matt is acting as an agent, he need not put the interest of Art above his own.
E)Matt must use reasonable care, skill, and diligence in his service to Art.

Question 70

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

Question 71

Which of the following is an example of an agent's breach of fiduciary duty to his principal?

A)An agent for the vendor makes a profit on the transaction he negotiated for his vendor above his commission and doesn't tell his principal/vendor.
B)An agent negotiates a higher price than the highest sale price reasonably possible at that time.
C)The agent takes presents from the third party and passes them on to the principal.
D)An agent for the vendor collects a commission from the purchaser but told his principal and obtained his consent.
E)An agent discloses to his principal/vendor that he is giving some of his commission to the purchaser to induce the purchaser to sign the contract that the principal/vendor wants.

Question 72

Generally, a third party is bound to the principal only when it knows that the agent is acting for that principal.

Question 73

The fiduciary duty of an agent refers to his obligations to act within the limits of his actual or apparent authority.

Question 74

If you hire Gnowsky to act as your agent, which of the following is true with regard to the duties he owes to you?

A)Gnowsky need not tell you everything relevant to his task that a reasonable person would consider might affect your decision making.
B)Gnowsky need not use reasonable care, skill, and diligence in his service to you.
C)An agent may delegate his authority without the authorization of his principal.
D)Even when Gnowsky is acting as your agent, he need not put your interest above his own.
E)Gnowsky's failure to obey you and to act within the authority given him would allow you to sue him for breach of contract.

Question 75

An agent owes a fiduciary duty to act in the best interests of the principal and the third party.

Question 76

Chris was a systems analyst hired to determine the best system for a retail china shop.After a careful analysis of the shop's needs and the available software, Chris presented a written report, which was approved by the owner of the business.Chris was paid his fee and was asked by the owner of the shop if he would act as agent in purchasing the hardware and software recommended in his report.The purchase was not to exceed $40 000 and the commission was to be $1000.Chris agreed.Read each of the following separately and indicate which is true.

A)The agreement to act as agent fails to be a valid agency contract because it is not in writing.
B)If Chris buys the hardware and software himself for $36 000 and sells it to the owner for $39 000, he is entitled to his commission because the price to the owner is still less than the price allowed.
C)Chris will not be in breach of his fiduciary duty if he buys the recommended system from a firm in which he has an interest, even if he does not mention that fact to the owner.
D)Chris is entitled to accept a commission from both the seller and the purchaser, as long as the total price paid by the purchaser is less than $40 000 and the hardware and software is comparable to that recommended in the report.
E)Chris could be in breach of his duties if he delegated the task to someone else.

Question 77

Which of the following statements related to an agent's fiduciary duty is correct?

A)Despite a recent Supreme Court of Canada decision, it is likely that agents will continue to have a fiduciary duty to their principals, where an agent has agreed to act in the principal's best interest, but only if this agreement is in writing.
B)Despite a recent Supreme Court of Canada decision, it is likely that agents will continue to have a fiduciary duty to their principals, where an agent has agreed to act in the principal's best interest.
C)As a result of a recent Supreme Court of Canada decision, agents no longer have a fiduciary duty to their principals except in matters involving monetary transactions.
D)As a result of a recent Supreme Court of Canada decision, only agents who are also employees have a fiduciary duty to their principals.
E)As a result of a recent Supreme Court of Canada decision, only agents who are employees or dependent contractors have a fiduciary duty to their principals.

Question 78

Which of the following is a true statement about the employer-employee relationship?

A)An employer cannot impose a duty of confidentiality on an employee, as this is a violation of the Charter of Rights and Freedoms.
B)An employee for a company could not also be an agent at the same time for the company.
C)The critical factor in this relationship is control; the employer tells the employee not only what to do but also how to do it.
D)If an employer contracts to paint Mr.Shore's barn and sends an employee to do the painting, if the employee is not paid he can sue his employer or Mr.Shore for his wages.
E)One responsibility of an employer is to provide the employee with lifetime work availability.

Question 79

Information that comes to the agent because of his or her position as agent must be passed on to the principal.

Question 80

Although enduring powers of attorney are sometimes abused, there appears to be little interest on the part of governments to address the issue and limit the abuse.