Deck 31: Agency Formation and Duties

Question 1

Employees who deal with third parties are agents of their employers.

Answer 1

True

Question 2

A minor cannot be appointed as an agent.

Answer 2

False

Question 3

An agent is authorized to act on behalf of a principal in doing business with third parties.

Answer 3

True

Question 4

An employee may act in the capacity of an agent.

Question 5

All employment laws apply to independent contractors.

Question 6

Agency relationships exist only outside employment relationships.

Question 7

An independent contractor may act in the capacity of an agent.

Question 8

An agency relationship does not exist outside employer-employee relationships.

Question 9

An agency relationship can be formed without consideration.

Question 10

An employee may not act in the capacity of an agent.

Question 11

A fiduciary relationship allows the parties to avoid obligations without liability.

Question 12

An independent contractor's physical conduct is controlled, or subject to control, by his or her employer.

Question 13

A corporate officer is not an agent for the corporation.

Question 14

An independent contractor is an employer who controls his or her agent's performance.

Question 15

Building subcontractors are not independent contractors.

Question 16

A minor can be an agent.

Question 17

An officer of a corporation cannot possess the power to bind the corporation.

Question 18

An agency relationship cannot exist in the absence of a formal agreement.

Question 19

An independent contractor always acts in the capacity of an agent.

Question 20

A fiduciary relationship involves trust and confidence.

Question 21

An agent must maintain separate accounts for the principal's funds and the agent's personal funds.

Question 22

An agency relationship may be created for any legal purpose.

Question 23

A principal who causes a third person to believe that another person is the principal's agent can be estopped from denying the agency relationship.

Question 24

An agency relationship may be created for any illegal purpose.

Question 25

A licensed professional can employ an unlicensed agent to perform pro?fessional actions.

Question 26

A principal can ratify an agreement made without authorization on his or her behalf by one who is not his or her agent.

Question 27

A principal owes an agent a duty of ratification.

Question 28

Information acquired through an agency relationship is confidential.

Question 29

A principal may deny the existence of an agency relationship whenever it suits his or her purpose.

Question 30

An agent must use reasonable diligence and skill in acting on be?half of his or her principal.

Question 31

Generally, a principal has a duty to pay an agent for services rendered.

Question 32

An agent can take advantage of an agency relationship to make a "secret" profit.

Question 33

If an agency relationship is contractual, the agent may have a right to specific performance.

Question 34

There does not need to be a written agreement between two parties to cre?ate an agency relationship.

Question 35

If an agent breaches the agency agreement, the principal may avoid the contract.

Question 36

If a principal breaches a duty owed to an agent, an agent may withhold performance and demand an accounting.

Question 37

A principal has a duty to cooperate with the agent.

Question 38

An agent owes his or her principal a duty to act in good faith.

Question 39

A principal owes an agent a duty of accounting.

Question 40

An agency relationship may not occur by operation of law in a family.

Question 41

Fact Pattern 31-1B
Liz and Molly work as clerks in Nia's Dress Shop. Nia withholds federal taxes from their pay, and controls the methods and details of the performance of their work. Liz and Molly are not au?thorized to modify the prices or other terms of a sale at the shop.
Refer to Fact Pattern 31-1B. At the shop, Liz and Molly are

A) independent contractors.
B) Nia's employees only.
C) Nia's employees and agents.
D) Nia's principals.

Question 42

Louis, a certified public accountant and an investor, and Maria, an in?surance salesperson and a realtor, may create an agency relationship for

A) a business purpose only.
B) a legal purpose only.
C) any purpose.
D) no purpose.

Question 43

Jim agrees to act on Kit's behalf, subject to Kit's control, and Kit trusts Jim to so act. This describes a relationship between

A) a business and its competitors.
B) a government and its governed.
C) a parent and a child.
D) a principal and an agent.

Question 44

The Occupational Safety and Health Agency issues regulations to which Precision Machine Company and other businesses are subject. This describes a relationship between

A) a business and its competitors.
B) a government and its governed.
C) a parent and a child.
D) a principal and an agent.

Question 45

Ozzy is an officer of Prudent Financial Corporation. Ozzy serves in a representative capacity for Prudent Financial's owners. With respect to binding Prudent Financial to contracts, Ozzy is

A) an agent and has the authority.
B) an agent but does not have the authority.
C) not an agent and does not have the authority.
D) not an agent but does have the authority.

Question 46

Lenore is the sole proprietor of Mall Kiosks. With respect to contracting for her own business interests, Lenore is

A) an agent and has the authority.
B) an agent but does not have the authority.
C) not an agent and does not have the authority.
D) not an agent but does have the authority.

Question 47

Genetic Seed Company hires Howie to work on Genetic's shipping dock, accepting deliveries and dealing with other companies' drivers. With respect to Genetic, Howie is most likely

A) an agent.
B) an independent contractor.
C) a principal.
D) a work for hire.

Question 48

Sela agrees to act on Thom's behalf, subject to Thom's control, and Thom trusts Sela to so act. They set out the terms in a written document, which they both sign. This is

A) an agency by agreement.
B) an agency by estoppel.
C) an agency by ratification.
D) not the creation of an agency relationship.

Question 49

Dizzy is not Edwina's agent but enters into a contract with Frida on Edwina's behalf. Edwina later contacts Frida to approve the contract. This is

A) an agency by agreement.
B) an agency by estoppel.
C) an agency by ratification.
D) not the creation of an agency relationship.

Question 50

Fact Pattern 31-1B
Liz and Molly work as clerks in Nia's Dress Shop. Nia withholds federal taxes from their pay, and controls the methods and details of the performance of their work. Liz and Molly are not au?thorized to modify the prices or other terms of a sale at the shop.
Refer to Fact Pattern 31-1B. Nia authorizes Liz to sell clothes at remote lo?cations at prices that Liz negotiates in those locations. With respect to sales at those locations, Liz is

A) an independent contractor.
B) Nia's employee only.
C) Nia's employee and agent.
D) Nia's principal.

Question 51

Fact Pattern 31-1B
Liz and Molly work as clerks in Nia's Dress Shop. Nia withholds federal taxes from their pay, and controls the methods and details of the performance of their work. Liz and Molly are not au?thorized to modify the prices or other terms of a sale at the shop.
Refer to Fact Pattern 31-1B. Nia hires O'Reilly's Carpet Company to clean the carpets of her shop. Nia gives O'Reilly's instructions as to what needs to be cleaned and when. O'Reilly's is

A) an independent contractor.
B) Nia's employee only.
C) Nia's employee and agent.
D) Nia's principal.

Question 52

Fact Pattern 31-1A
Janet and Julie work at ABC Interiors. Janet is a designer who works with cli?ents of ABC on interior design projects. ABC closely supervises all of its design?ers, and dictates their work schedules. Julie works part-time in the evenings cleaning the offices.
Refer to Fact Pattern 31-1A. Janet is ABC's

A) employee, agent, and independent contractor.
B) employee and agent.
C) employee but not agent.
D) independent contractor.

Question 53

Fact Pattern 31-2A
Quinn employs Roy as his authorized business agent on April 1. Quinn's son Stan peti?tions a court to declare Quinn mentally incompetent. The court grants Stan's request on May 1.
Refer to Fact Pattern 31-2A. Roy enters into a contract on Quinn's be?half on May 15, before Roy knows of the court's action. The contract is

A) binding on Quinn.
B) binding on Roy.
C) binding on Stan.
D) void.

Question 54

Fact Pattern 31-1A
Janet and Julie work at ABC Interiors. Janet is a designer who works with cli?ents of ABC on interior design projects. ABC closely supervises all of its design?ers, and dictates their work schedules. Julie works part-time in the evenings cleaning the offices.
Refer to Fact Pattern 31-1A. Julie is ABC's

A) agent but not employee.
B) employee and agent.
C) employee or independent contractor, depending on whether ABC controls the details of her physical performance.
D) independent contractor.

Question 55

Fact Pattern 31-2A
Quinn employs Roy as his authorized business agent on April 1. Quinn's son Stan peti?tions a court to declare Quinn mentally incompetent. The court grants Stan's request on May 1.
Refer to Fact Pattern 31-2A. Roy enters into a contract on Quinn's be?half on April 15. After May 1, the contract, which has not been performed, is

A) binding on Quinn.
B) binding on Roy.
C) binding on Stan.
D) void.

Question 56

Omar is Precise Service Company's chief executive officer. On Precise's behalf, Omar solicits business, hires and fires workers, and handles the finances. Precise pays Omar varying amounts, depending on his "needs." Omar is most likely

A) a principal.
B) an employee.
C) an employer.
D) an independent contractor.

Question 57

Irma retains Jerry as her authorized agent, unaware that Jerry is a mi?nor. Jerry enters into a contract with Ken on Irma's be?half. The contract is

A) binding on Irma.
B) binding on Jerry and Ken, but not Irma.
C) binding on Ken, but not Irma or Jerry.
D) void.

Question 58

Delicious Coffee Company hires Elton to sell Delicious's products in a certain area. Delicious agrees to pay Elton a salary, plus commission, for a trial period. They also agree that Elton can sell using any methods and during any hours that seem appropriate. The key factor in whether Elton is Delicious's employee is

A) the amount of Elton's salary.
B) the control Delicious has over the details of the work.
C) the length of the trial period.
D) the title that designates Elton's position.

Question 59

Bubbly Soda Company hires Carlo to work on Bubbly's shipping dock, checking outgoing loads and dispatching Bubbly's drivers. With respect to Carlo, Bubbly is most likely

A) a constructive trust.
B) an agent.
C) an independent contractor.
D) a principal.

Question 60

KupaJava hires Lola to manage one of KupaJava's seven drive-through coffee stands. KupaJava agrees to pay Lola a salary, plus commission. KupaJava stipulates the standards that should be observed, the goals that should be attained, and the methods that should be used. Lola is most likely KupaJava's

A) employee.
B) independent contractor.
C) principal.
D) work for hire.

Question 61

Jill introduces Kelly to her friends as "my associate." Kelly purports to act as Jill's agent in several business transactions with those friends. If Jill is liable for Kelly's actions, it will be under

A) the doctrine of estoppel.
B) the equal dignity rule.
C) the fiduciary principle.
D) the good faith statute.

Question 62

Jody is an agent for Kwik Credit Company (KCC). In the course of Jody's performance for KCC, Jody pays Leo for certain auto maintenance and repair services. Jody's right to obtain the amount of those payments from KCC arises under the principal's duty of

A) avoidance.
B) cooperation.
C) indemnification.
D) reimbursement.

Question 63

Glen is an agent for Hi-Flite, Inc. On Hi-Flite's behalf and at its request, Glen pays Ian for certain plane maintenance and repair serv?ices. Glen's right to obtain the amount of those payments from Hi-Flite arises under the principal's duty of

A) avoidance.
B) cooperation.
C) indemnification.
D) reimbursement.

Question 64

Tri-state Financial Corporation hires Uri, a real estate agent, to locate investment properties for Tri-state. Uri learns of a warehouse available for $100,000, informs Tri-state, and makes an offer of $90,000 on Tri-state's instruction. The offer is rejected. Uri

A) breached the agent's fiduciary duties to the principal.
B) did nothing wrong.
C) failed to take advantage of a business opportunity.
D) made an unreasonable offer based on current market value.

Question 65

Prospective Enterprises (PE) employs Quinn to buy property for a possible com?mercial development. Quinn secretly buys some of the property and sells it to PE at a profit. Quinn has breached

A) no duty.
B) the duty of accounting.
C) the duty of loyalty.
D) the duty of notification.

Question 66

Beta Distribution Company grants its agent Cathy an exclusive terri?tory in which to sell Beta products. Beta cannot compete with Cathy in that territory under the principal's duty of

A) avoidance.
B) cooperation.
C) indemnification.
D) reimbursement.

Question 67

National Computer Corporation (NCC) employs Cynthia as an agent. NCC gives her an exclusive territory in which to sell NCC products. NCC cannot compete with her in that territory under the duty of

A) compensation.
B) cooperation.
C) indemnification.
D) reimbursement.

Question 68

Rita is appointed as an agent for Superior Sales, Inc. The agency agree?ment is silent as to the level of sales that Rita is expected to achieve. She must

A) achieve nothing because the agreement says nothing on the issue.
B) attain the level that Rita achieved with her previous employer.
C) maintain the level Superior attained before Rita became an agent.
D) use reasonable diligence and skill in selling.

Question 69

United Sales Corporation hires Victor to act as its agent. United's right not to perform a contract entered into by Victor, if Victor breaches their agency agreement, is the right of

A) avoidance.
B) indemnification.
C) nullification.
D) termination.

Question 70

Internet Services, Inc., employs Joe as an agent. During the agency, Joe acquires new skills. After the termination of the relationship, Joe uses those skills in a new job. Joe has breached

A) no duty.
B) the duty of loyalty.
C) the duty of notification.
D) the duty of performance.

Question 71

Bob, a salesperson at a Carpets Galore store, tells Dita, a customer, "Buy your carpet here, and I'll install it for half of what the store would charge." Dita buys the carpet, which Bob in?stalls for half the store's price. Bob keeps the money. Bob has breached

A) no duty.
B) the duty of loyalty.
C) the duty of notification.
D) the duty of obedience.

Question 72

Mona is an agent for Nationwide Restaurant Corporation (NRC). In act?ing as an agent, Mona follows all of NRC's clearly stated instructions. This responsibility arises under

A) no agent's duty.
B) the agent's duty of loyalty.
C) the agent's duty of notification.
D) the agent's duty of obedience.

Question 73

Home Development Company employs llya to buy property for a future residential development. Ilya secretly buys some of the property and sells it to Home Development at a profit. Ilya has breached

A) no duty.
B) the duty of accounting.
C) the duty of loyalty.
D) the duty of notification.

Question 74

Regional Investment Corporation (RIC) hires Sam, a real estate agent, to locate investment properties for RIC. Sam learns of a warehouse avail?able for $100,000, buys it himself, and offers it to RIC for $200,000. Most likely, Sam

A) breached the agent's fiduciary duties to the principal.
B) did nothing wrong.
C) failed to take advantage of a business opportunity.
D) set an unreasonable price based on current market value.

Question 75

Dan, an agent for Eve, signs an agreement with Fred on Eve's behalf but ne?glects to tell Eve that the agreement requires the payment of a certain tax. The government prosecutes Eve for failing to pay the tax. Eve is

A) liable, because Dan's knowledge is imputed to Eve.
B) liable, because Fred's knowledge is imputed to Eve.
C) not liable, because Dan did not tell Eve about the tax.
D) not liable, because Fred did not tell Eve about the tax.

Question 76

Elle is an agent for Fine Cosmetics, Inc. Elle owes Fine Cosmetics the duty of

A) avoidance.
B) compensation.
C) indemnification.
D) performance.

Question 77

Pam is an agent for Refined Chemicals Corporation. Refined Chemicals owes Pam the duty of

A) accounting.
B) obedience.
C) performance.
D) safe working conditions.

Question 78

Regional Products, Inc., hires Sam to act as its agent. Tina sues Regional for Sam's negligent conduct. Regional's right to sue Sam for an equal amount of damages is the right of

A) avoidance.
B) cooperation.
C) indemnification.
D) reimbursement.

Question 79

Macro Corporation and National Purchasing Company may create an agency agreement

A) by conduct, in writing, or orally.
B) by conduct or orally only.
C) in writing only.
D) under no circumstances.

Question 80

Jay holds himself out as possessing special accounting skills. As an agent, he must exercise the degree of skill or care expected of

A) a person having those skills.
B) an average, unskilled person.
C) a reasonable person.
D) the principal.