Question 1

Unless an agent does not act in exchange for payment, the principal must pay the agreed-on value for the agent's services.

Accepted Answer

This statement is true according to the basic principles of agency law. If an agent performs services for a principal in exchange for payment, the principal is generally obligated to pay the agreed-upon compensation or value for those services rendered.

Question 2

Generally, the law assumes that the principal is aware of any information acquired by the agent that is relevant to the agency.

Accepted Answer

This is known as the "knowledge imputation rule". It means that an agent's knowledge is imputed, or attributed, to their principal.

Question 3

High Plains Distribution Inc. hires Inez to work on its shipping dock, accepting deliveries, dispatching trucks, and dealing with customers and other companies' drivers. With respect to High Plains, Inez is most likely​

Accepted Answer

Inez is likely an agent because she is hired by High Plains to perform tasks on its behalf, such as accepting deliveries, dispatching trucks, and dealing with customers and other companies' drivers. As an agent, she is acting on behalf of High Plains and helping to further its business interests. An independent contractor would typically have more control over their work and how it is done, whereas an agent is under the control and direction of the company. A principal is the person or entity that hires an agent, so High Plains is the principal in this situation. Work for hire generally refers to a specific type of employment arrangement in which the employer owns the intellectual property rights to any work created by the employee in the course of their employment.

Question 4

Under the law of agency, notice to the agent is notice to the principal.

Accepted Answer

This statement is true in the law of agency. When a notice is given to the agent, it is considered as notice given to the principal as well. This is because the agent acts on behalf of the principal and any information received by the agent is deemed to be received by the principal too.

Question 5

Anything that an agent obtains by virtue of the agency relationship is his or hers to keep.

Accepted Answer

Anything obtained by the agent belongs to the principal, not the agent themselves. The agent is only entitled to their commission or other compensation as agreed upon in the agency agreement.

Question 6

Dewey is a corporate officer of Energy Corporation. Dewey serves in a representative capacity for the corporation's owners. With respect to binding the corporation to contracts, Dewey is​

Accepted Answer

Dewey is an agent of Energy Corporation and as a corporate officer, he has the authority to bind the corporation to contracts. As an agent, Dewey acts on behalf of the corporation and his actions can legally bind the corporation to contractual obligations.

Question 7

Fact Pattern 32-1
Nadine and Orin work at Pumps & Pipes Inc. Nadine is a sales representative who works with Pumps's customers, including contractors, government agencies, farmers, and others, as well as individual consumers. Pumps closely supervises all of its sales reps, and dictates their schedules. Orin is an engineer who works in Pumps's design department.
-Refer to Fact Pattern 32-1. With respect to third parties, Nadine is Pumps's​

Accepted Answer

Nadine is both an employee and an agent of Pumps because she works as a sales representative and interacts with customers on behalf of the company.

Question 8

An agent has a duty to keep and make available to the principal an account of all property and funds received and paid out on the principal's behalf.

Accepted Answer

It is a basic duty of an agent to keep accurate and timely records of all financial transactions made on behalf of the principal, and to make those records available to the principal upon request. This duty is commonly known as the duty of accounting or duty of loyalty.

Question 9

The agent has the right to a safe working environment.

Accepted Answer

According to labor laws and regulations, every worker including agents, has the right to a safe working environment free from any hazards that can cause harm or injury.

Question 10

Remedies of the agent for breach of duty by the principal follow normal contract and tort remedies.

Accepted Answer

The relationship between an agent and principal is governed by contract law principles and thus, remedies for breach of duty by the principal would follow normal contract and tort remedies.

Question 11

An agent can represent two principals in the same transaction as long as neither of them knows about it.

Accepted Answer

It is a violation of an agent's fiduciary duty to represent two principals in the same transaction without the informed consent of both parties. This is known as dual agency, and it is generally not allowed unless both parties agree to it in writing.

Question 12

A principal owes an agent a duty of estoppel.

Accepted Answer

The principal owes an agent a duty of indemnification, not estoppel. Estoppel is a legal principle that prevents someone from arguing against something they previously said or did, and it does not typically apply to principal-agent relationships.

Question 13

The agent has the right to be reimbursed and indemnified.

Accepted Answer

According to agency law, an agent is entitled to be reimbursed for any expenses they incur on behalf of the principal and is also entitled to be indemnified for any losses they suffer as a result of carrying out their duties as an agent. Therefore, the statement is true.

Question 14

An agency by estoppel arises when the principal's actions have created the appearance of an agency that does not in fact exist.

Accepted Answer

An agency by estoppel occurs when a principal's actions create the appearance of an agency that does not actually exist. This can occur when a third party reasonably believes that an agent has authority to act on behalf of a principal, even though no such authority has been explicitly granted. As a result, the principal may be held responsible for the actions of the purported agent.

Question 15

When the principal-agent relationship is not contractual, the agent has no right to specific performance.

Accepted Answer

Specific performance is the right to compel the other party to fulfill their contractual obligations. In a non-contractual principal-agent relationship, there is no explicit agreement outlining specific obligations, therefore the agent has no right to demand specific performance from the principal.

Question 16

An agent's deviation from the lawful clearly stated instructions of the principal is a violation of the duty of obedience.

Accepted Answer

This is because the agent's duty is to follow the instructions and act in the best interest of the principal, and any deviation from this duty is considered a violation.

Question 17

An agency relationship is enforceable even if it is created for a purpose that is contrary to public policy.

Accepted Answer

An agency relationship that is created for an unlawful purpose, such as committing fraud or engaging in illegal activities, is not enforceable as it would be against public policy.

Question 18

Fact Pattern 32-1
Nadine and Orin work at Pumps & Pipes Inc. Nadine is a sales representative who works with Pumps's customers, including contractors, government agencies, farmers, and others, as well as individual consumers. Pumps closely supervises all of its sales reps, and dictates their schedules. Orin is an engineer who works in Pumps's design department.
-Refer to Fact Pattern 32-1. With respect to third parties, Orin is Pumps's​

Accepted Answer

Orin is an employee because he works in Pumps's design department, but he is not an agent because his role does not involve representing or acting on behalf of Pumps in dealings with third parties.

Question 19

Ray is a delivery driver for Sicilian Pasta Company. Ray does exactly what the company tells him. Ray is​

Accepted Answer

Ray is an employee because he follows the company's directions and is likely paid regular wages or salaries, which are typical characteristics of an employment relationship.

Question 20

An agent's duties to the principal are implied from the agency relationship only if the identity of the principal is disclosed to a third party.

Accepted Answer

An agent's duties to the principal are implied from the agency relationship regardless of whether the identity of the principal is disclosed to a third party.

Quiz 32: Agency Formation and Duties