Question 1

Masonry Corporation fails to inspect work areas and to warn agents and employees of unsafe situations in the firm's plant. Noh, an employee, is injured in an accident whose cause can be attributed to the employer's failure. Most likely, Masonry is liable to Noh for breach of the duty

Accepted Answer

Masonry Corporation's failure to inspect work areas and warn agents and employees of unsafe situations directly leads to a breach of the duty to provide safe working conditions, making them liable for Noh's injury.

Question 2

Ana, a sales agent for Bread Company makes claims for a product that the company has told its agents not to make. Croissant Café sues the firm when the product fails to stand up to the claim. The company can sue Ana for

Accepted Answer

The company can sue Ana for indemnification because she made claims that were against the company's instructions, leading to a lawsuit. Indemnification refers to the obligation of one party to cover the losses suffered by another, in this case, the company seeking to recover the losses from Ana due to her actions.

Question 3

Yu contracts with Zach to buy a certain pub, Aficionado's, for Yu, who asks Zach not to reveal her identity. Zach makes a deal with Burke, the owner of the pub, and makes a down payment. Yu fails to pay the rest of the price, and does not pay Zach for his services. Does Zach have any recourse against Yu? If so, on what basis, and to what extent?

Accepted Answer

The answer of Yu contracts with Zach to buy a...

Question 4

If an agent contracts outside the scope of his or her authority, the principal cannot become liable.

Accepted Answer

If an agent acts outside the scope of their authority, the principal can still become liable if they ratify the contract or if the agent was acting with apparent authority, leading the third party to reasonably believe the agent was authorized.

Question 5

Anything that an agent obtains by virtue of an agency relationship is held in a constructive trust and thereby belongs to

Accepted Answer

In an agency relationship, anything obtained by the agent due to their position or actions on behalf of the principal is held in a constructive trust for the principal. This means that such gains or benefits legally belong to the principal, not the agent or any other party.

Question 6

When an agent breaches an agency agreement, the right to avoid the contract can be exercised at the election of

Accepted Answer

The principal has the right to avoid the contract if the agent breaches the agency agreement, as the principal is the party that grants authority to the agent and is directly affected by the breach.

Question 7

The equal dignity rule requires that a principal and an agent act in good faith and with mutual respect in their dealings with each other.

Accepted Answer

The equal dignity rule is a legal principle requiring that if the law requires a contract to be in writing, then the authority of an agent to enter into that contract on behalf of the principal must also be in writing. It does not pertain to the requirement of good faith and mutual respect, although those may be aspects of a healthy principal-agent relationship.

Question 8

Roman is the chief executive officer of Salty Snax Corporation. Roman's responsibilities include decisions on product development, marketing, and other significant business directions. Roman is subject to the approval and oversight of Salty Snax's board of directors. Teri is a Salty Snax manager whose duties include the firm's day-to-day hiring, firing, purchasing, and selling. Umberto is a Salty Snax salesperson, whose daily activities are controlled by Teri. Velma writes sales manuals and promotional materials for Salty Snax's products according to Roman's instructions and subject to Salty Snax's control, but has no dealings with the company's customers or suppliers. Warren writes copy on a contract-per-project basis and is not otherwise subject to Salty Snax's control. Who is a principal? Who is an agent? Who is an employee? Who is an independent contractor?

Accepted Answer

The answer of Roman is the chief executive officer of...

Question 9

Generally, the liability of a principal on a contract formed by an agent with a third party depends on whether the agent was authorized to act.

Accepted Answer

The liability of a principal on a contract formed by an agent with a third party generally depends on the agent's authority to act on behalf of the principal. If the agent was authorized, the principal is usually bound by the contract.

Question 10

Because an agent's authority can be implied by custom, it may contradict his or her express authority.

Accepted Answer

The answer of Because an agent's authority can be implied...

Question 11

Curly Fries Inc. grants its agent Damon an exclusive territory in which to sell its products. The company cannot compete with Damon in that territory under the duty of

Accepted Answer

The duty of cooperation means that Curly Fries Inc. must not compete with Damon in the exclusive territory granted to him, as it would interfere with his ability to perform his duties as an agent.

Question 12

Pho enters into an exclusive agreement with Qin to find suitable property for Qin's enterprise. Later, Qin signs an exclusive agreement with Row for the same purpose. Neither agent knows about the other, and each expends reasonable efforts to perform. Qin buys a building through Pho. Most likely, Qin may be liable to Row for

Accepted Answer

Qin may be liable to Row for breach of the duty of cooperation because by signing an exclusive agreement with both Pho and Row without informing either of them about the other, Qin failed to cooperate and potentially hindered Row's ability to perform under the agreement.

Question 13

Actual authority in an agency relationship arises from what a principal makes clear to a third party .

Accepted Answer

Actual authority arises from what a principal directly communicates to the agent, not to a third party.

Question 14

Watercraft Inc. employs Vern as a sales agent for a trial period. At the end of the period, Watercraft and Vern disagree on the amount of the commissions Vern is due for sales that he made. Vern may demand

Accepted Answer

An accounting is a financial examination and report which, in this context, would detail Vern's sales and the commissions he is owed. It's a common remedy in disputes over money owed under a contract, such as sales commissions.

Question 15

Authority to manage a business implies authority to do what is reasonably required to operate the business.

Accepted Answer

Authority to manage a business typically includes the power to perform acts that are reasonably necessary to carry out the business's operations, even if those specific acts are not explicitly mentioned in the authority granted.

Question 16

An executive corporate officer can normally conduct ordinary business transactions without first obtaining the corporation's written authority.

Accepted Answer

An executive corporate officer, such as a CEO or President, typically has the implied authority to conduct ordinary business transactions on behalf of the corporation without needing specific written authority for each action, as these activities fall within the scope of their normal duties.

Question 17

Using an agent provides benefits to a principal, without potential liability.

Accepted Answer

Using an agent can provide benefits to a principal, such as expertise, representation, and efficiency, but it can also expose the principal to potential liability for the actions or negligence of the agent conducted within the scope of their agency.

Question 18

Roc is an agent for Statistics Inc. On the firm's behalf and at its request, Roc pays Tech LLC for specially customized software. Roc's right to obtain the amount of the payment from Statistics Inc. arises under the duty of

Accepted Answer

Roc's right to obtain the amount of the payment from Statistics Inc. arises under the duty of reimbursement, as this involves repaying Roc for expenses incurred on behalf of the company.

Question 19

The principal-agent relationship between Medical Clinic LLC and Network Referral Service is not contractual. If Medical, the principal, violates a duty to Network, the agent is entitled to

Accepted Answer

In a principal-agent relationship, even if not contractual, the agent can recover for past services and future damages if the principal violates a duty.

Question 20

Jon contracts with Kino to buy a certain number of sheep for Kino's Animal Farm. Jon makes a deal with Lila for the sheep, but neither Jon nor Kino pays the price. Lila sues Jon for breach. Jon's right to hold Kino liable for any damages is the right to

Accepted Answer

Jon's right to hold Kino liable for any damages he has to pay to Lila is known as the right to indemnification. This means Jon can seek compensation from Kino for the losses or damages Jon incurs due to Kino's failure to fulfill their contractual obligations.

Quiz 32: Agency Formation and Duties