Question 1

To be valid, an agency agreement must be in writing.

Accepted Answer

An agency agreement does not necessarily need to be in writing to be valid; it can also be oral or implied based on the conduct of the parties involved.

Question 2

To prevent problems, a principal-agent contract should be in writing.

Accepted Answer

A written contract helps to clearly define the expectations, duties, and responsibilities of both the principal and the agent, reducing misunderstandings and potential conflicts.

Question 3

A person hired to sell one's car would be considered a

Accepted Answer

A special agent is someone hired to perform a specific duty, such as selling a car, and does not have broad authority to act on behalf of the principal in all matters.

Question 4

The bankruptcy of the agent may terminate the agency relationship.

Accepted Answer

The bankruptcy of the agent can terminate the agency relationship because it may impair the agent's ability to perform their duties or affect the trust and confidence between the principal and agent, which are essential for the relationship.

Question 5

A principal has a duty to indemnify an agent if the agent gets a speeding ticket while performing the principal's business.

Accepted Answer

The principal is generally not responsible for indemnifying the agent for fines resulting from the agent's own illegal actions, such as speeding, even if it occurred while performing the principal's business.

Question 6

The major difference between an employee and an independent contractor is the length of time during which services will be performed.

Accepted Answer

The major difference between an employee and an independent contractor is the degree of control and independence in the work arrangement, including factors such as how the work is performed, financial control, and the relationship between the parties, rather than the duration of service.

Question 7

An agency is created if one person ratifies another's unauthorized act.

Accepted Answer

Ratification occurs when a principal approves an act performed by another on their behalf but without their prior authorization, thereby creating an agency relationship retroactively.

Question 8

An agent has a duty to follow all lawful instructions of the principal.

Accepted Answer

An agent is obligated to follow all lawful and clearly stated instructions of the principal, as part of their fiduciary duty to act in the principal's best interest.

Question 9

A principal-agency relationship may be used for

Accepted Answer

A principal-agency relationship can be used for both personal and business purposes, as it involves one party (the agent) acting on behalf of another party (the principal) in various contexts.

Question 10

If you hire an agent to sell your house, the agency ends when the house is sold.

Accepted Answer

When an agent is hired to sell a house, the agency relationship typically ends upon the successful completion of that specific task, which in this case is the sale of the house.

Question 11

An independent contractor and an agent are basically the same.

Accepted Answer

An independent contractor works independently and is not subject to the control of the employer except for the final result of their work, whereas an agent acts on behalf of and is subject to the control of the principal in matters related to the agency.

Question 12

An agency is automatically terminated upon the death of the agent.

Accepted Answer

An agency is automatically terminated upon the death of the agent because the agent's authority to act on behalf of the principal is derived from the principal's consent. When the agent dies, the principal's consent is terminated, and the agency is automatically terminated.

Question 13

A minor can act as either a principal or an agent.

Accepted Answer

A minor can act as an agent for a principal, as the capacity to contract in the role of an agent depends on the principal's capacity, not the agent's. However, when acting as a principal, a minor's contracts are generally voidable at their discretion due to their lack of capacity to contract.

Question 14

Of the following acts, the one that an agent could not perform for a principal is

Accepted Answer

An agent cannot vote in an election on behalf of a principal because voting is a personal right that cannot be delegated to another person.

Question 15

The principal continues to be bound by an agent's actions until the principal notifies third parties that the agency has terminated.

Accepted Answer

The principal is bound by the agent's actions until third parties are notified of the agency's termination because third parties might still believe the agent has authority to act on the principal's behalf.

Question 16

The major difference between an agent who is paid and a gratuitous agent is the

Accepted Answer

A gratuitous agent, who is not paid for their services, generally has a greater right to refuse to carry out the principal's instructions compared to an agent who is paid and therefore has a contractual obligation to perform the tasks as agreed. The other options (A, B, C) do not directly relate to the payment status of the agent and its impact on their duties or rights.

Question 17

A special agent is limited in the type of transactions he or she can perform for the principal.

Accepted Answer

A special agent is authorized by the principal to perform specific acts or transactions, limiting their authority to those designated activities.

Question 18

A person can be both an agent and an employee at the same time.

Accepted Answer

An individual can act as an agent, representing another party in transactions or negotiations, while also being an employee of that party, fulfilling roles and responsibilities as defined by their employment contract.

Question 19

Of the following acts, the one that an agent could not perform for the principal would be

Accepted Answer

All of these acts (making a will for the principal, voting for the principal, serving on a jury in place of the principal) are highly personal legal actions that cannot be delegated to an agent.

Question 20

An emergency may create a principal-agent relationship by necessity.

Accepted Answer

In law, an emergency can create a principal-agent relationship by necessity, allowing someone to act on behalf of another without their express consent, typically to prevent harm or loss.

Quiz 24: Principal-Agent Relationship