Question 1

Jack was fired by Larry but decided to try to win back his job as agent by getting a big new contract.He approached Sharon,a new client,and made a pitch to sell Larry's product.Sharon agreed to buy 100.Jack tells Larry.What are the legal consequences?

Accepted Answer

Even though Jack was fired by Larry, he still attempted to sell Larry's product to a new client. This could be considered an unauthorized act on Jack's part. However, if Larry ratifies the deal and accepts the benefits of the contract, it can be assumed that Larry has given his approval, and thus the deal would be legally binding. Larry would not be obligated to rehire Jack in this scenario.

Question 2

Spoken or written words the principal communicates to the agent create:

Accepted Answer

Actual express authority refers to the specific instructions or directions given by the principal to the agent, either in spoken or written form. These instructions create a clear scope of authority for the agent to act on behalf of the principal.

Question 3

Under the Second Restatement,except in cases of death or incapacity or where performance of an authorized transaction becomes impossible,actual notice of termination of agency is required to the third party if she is one:

Accepted Answer

Under the Second Restatement, actual notice of termination of agency is required to the third party if she is one with whom the agent has dealt on credit, to whom the agent has been specially accredited, or with whom the agent has begun to deal. Therefore, all of the choices are correct.

Question 4

Authority that is not found in the express or explicit words of the principal,but that is inferred from the words is known as:

Accepted Answer

The correct term for authority inferred from the words of the principal is "implied authority," which is not listed among the options.

Question 5

Richard writes a letter to Sarah authorizing her to sell his car and sends a copy of the letter to Timothy,a prospective purchaser.If the next day Richard sends a letter to Sarah revoking her authority,but he fails to notify Timothy,Sarah:

Accepted Answer

Sarah has apparent authority with respect to Timothy to sell the car because Timothy had received a copy of the letter authorizing Sarah to sell the car before Richard revoked her authority. Timothy could reasonably assume that Sarah still had authority to sell the car, based on the previous communication he received from Richard. Therefore, Richard could be bound by a contract between Sarah and Timothy for the sale of the car, even though Richard had revoked Sarah's authority.

Question 6

Respondeat superior:

Accepted Answer

Respondeat superior is a legal doctrine that holds employers responsible for the negligent acts of their employees committed within the scope of employment. This means that if an employee causes harm to another person while doing work for their employer, the employer can be held liable for that harm. This is a form of vicarious liability, as the employer is being held accountable for the actions of their employee.

Question 7

Which of the following is true with regard to contractual relations between the principal and a third party?

Accepted Answer

According to the doctrine of implied authority, if an agent acts within her actual authority or the authority that the principal appears to have given her, then the principal is contractually bound to a third party. If the principal is undisclosed, then the third party is also bound. However, if the contract specifies otherwise, then the principal may not be bound. Option A is incorrect because the principal may still be liable even if the agent acts with implied authority. Option C is incorrect because the Second Restatement recognizes the concept of apparent authority. Option D is incorrect because a partially disclosed principal is bound by the acts of the agent within the scope of both actual and apparent authority.

Question 8

Pat bought a cotton sweater at Ivey's Fashion Store.Sue,the salesperson,told her the sweater was guaranteed not to shrink if washed in cold water by hand.Pat washes the sweater as directed and it shrinks.Which of the following is correct?

Accepted Answer

Sue, the salesperson, had apparent authority to make warranties about the sweater. Therefore, the store is bound to honor the guarantee, and Pat has recourse against the store.

Question 9

For a ratification to be effective,the principal must:

Accepted Answer

For a ratification to be effective, the principal must have knowledge of all material facts concerning the transaction to make an informed decision about ratifying the agent's actions.

Question 10

If an agent at his principal's direction fixes prices with the principal's competitors:

Accepted Answer

Both the principal and agent would be criminally liable for price fixing with competitors. This activity is illegal under antitrust laws and both parties would be held responsible.

Question 11

Regarding the termination of an agency,the Third Restatement:

Accepted Answer

The Third Restatement applies a reasonableness standard to all causes of termination, rather than distinguishing between specific reasons for termination such as death or incapacity. This means that a termination must be reasonable under the circumstances and adequate notice must be given to the agent.

Question 12

A principal may be held liable for the torts of an independent contractor:

Accepted Answer

A principal may be held liable for the torts of an independent contractor only if the contractor negligently performs an inherently dangerous activity. This is known as the nondelegable duty exception, which applies when a principal employs an independent contractor to perform inherently dangerous work that the principal retains a duty to ensure is performed safely. In such cases, the principal may be held liable for any injuries resulting from the contractor's negligence, even if the principal did not personally cause the harm and even if the principal properly supervised the contractor.

Question 13

An agent is not normally liable on a contract he makes with a third party on behalf of a(n)____ principal.

Accepted Answer

When an agent makes a contract with a third party on behalf of a disclosed principal, the agent is not liable on the contract. This is because the third party knows that the agent is acting on behalf of a principal and therefore does not expect the agent to be personally liable. In contrast, an agent who makes a contract with a third party on behalf of an undisclosed or partially disclosed principal may be held liable on the contract because the third party did not know that the agent was acting as an agent and therefore reasonably believed that the agent was personally liable.

Question 14

Seth grants express authority to Reba to enter contracts on his behalf.If Reba discloses to third parties that she is an agent for Seth,she has liability on a contract in all but which of the following situations?

Accepted Answer

When Reba acts within the scope of her authority and discloses she is acting for Seth, she is not personally liable on the contract.

Question 15

Apparent authority may arise in all but which of the following ways?

Accepted Answer

Apparent authority arises from the principal's actions or representations, not merely from the agent's claims of authority.

Question 16

The purpose of an agency relationship is to:

Accepted Answer

The purpose of an agency relationship is to allow the principal to extend his business activities by authorizing agents to enter into contracts with third persons on the principal's behalf. This allows the principal to increase the scope of his business and reach more customers.

Question 17

When there was a contract with a previously undisclosed principal,the Third Restatement:

Accepted Answer

The Third Restatement rejects the election rule, which means it allows a third party to hold both the principal and the agent liable, rather than having to choose one over the other.

Question 18

Under the Second Restatement,which of the following is correct with regard to a contract entered into with a third person by an agent of an undisclosed principal?

Accepted Answer

Under the Second Restatement, an agent of an undisclosed principal is personally liable upon the contract unless the third person discovers the existence and identity of the principal and elects to hold the principal to the contract. Therefore, the correct choice is B. Choice A is incorrect because the agent does have liability if the principal is undisclosed. Choice C is partly correct but incomplete as it does not mention that the agent is also liable. Choice D may or may not be true depending on the circumstances of the case.

Question 19

Ratification:

Accepted Answer

The answer of Ratification:
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Question 20

Under the Third Restatement,an agent who represents an undisclosed principal is discharged from liability if:

Accepted Answer

The Third Restatement provides that an agent who represents an undisclosed principal is discharged from liability if the third party's judgment against the principal is satisfied.

Quiz 20: Relationship With Third Parties