Question 1

Principals only duty to agents is to compensate.

Accepted Answer

The principal's duty to the agent also includes providing a safe working environment, providing necessary resources and tools, communicating clearly and honestly, and acting in good faith towards the agent.

Question 2

In Town Center Shopping Center v. Premier Mortgage, a lease for office space, made by a manager of a mortgage company, was negated by the courts because the leasing company should have known that a person in the position of the manager would not have such authority.

Accepted Answer

The lease was not negated by the courts because of the manager's lack of authority, but rather because the manager did not have the actual or apparent authority to bind the mortgage company to the lease.

Question 3

Actual authority involves powers given by the principal to the agent.

Accepted Answer

Actual authority refers to the express or implied powers that the principal gives to the agent to act on their behalf. Therefore, the statement is true.

Question 4

Principals may be bound by the unauthorized acts of agents if the agent appears to third parties to have the authority to act.

Accepted Answer

The concept of apparent authority holds that if a principal's actions lead a third party to reasonably believe that an agent has authority to act on their behalf, the principal may be held liable for the agent's unauthorized actions.

Question 5

An agent is expected to perform responsibilities with the degree of care that is called ordinary care under the circumstances.

Accepted Answer

The answer of An agent is expected to perform responsibilities...

Question 6

Apparent authority arises when agent concludes that there is an appearance of authority from the principal to act on behalf of the principal in dealing with third parties.

Accepted Answer

Apparent authority arises when a third party concludes, based on the principal's actions or statements, that an agent has authority to act on behalf of the principal, even if such authority has not been explicitly granted.

Question 7

When an agent has the power to do whatever is reasonable and customary to carry out the agency purpose, the agent has implied authority.

Accepted Answer

Implied authority is the authority that is not explicitly stated but is necessary to carry out the agency purpose. It allows the agent to take reasonable and customary actions to fulfill their duties within the scope of their authority.

Question 8

A major duty of principals to their agents is to indemnify them under most circumstances for liabilities incurred in completing the purpose of the agency.

Accepted Answer

Indemnification is a major duty of principals to their agents, which means compensating or reimbursing them for any losses, damages or liabilities suffered while completing the purpose of the agency. However, there may be certain exceptions or limitations to indemnification based on the terms of the agency contract, applicable laws or the fault of the agent.

Question 9

Principals are presumed to have a duty to cooperate with their agents.

Accepted Answer

This is based on the general principles of agency law where the principal-agent relationship is one of trust and mutual benefit. As such, the principal is expected to support the agent in carrying out their duties on behalf of the principal.

Question 10

Legal obligations in an agency run from agent to principal, not principal to agent.

Accepted Answer

In an agency relationship, legal obligations run both from the agent to the principal and from the principal to the agent, including duties such as loyalty, care, and obedience from the agent, and duties such as compensation, reimbursement, and indemnification from the principal.

Question 11

Principals have an obligation to reimburse their agents for their normal business expenses related to the agency, unless otherwise agreed.

Accepted Answer

This statement is true according to the general principles of agency law. However, whether or not expenses are considered "normal" or agreed upon may vary depending on the specific contract or agency relationship in question.

Question 12

In Town Center Shopping Center v. Premier Mortgage, a manager of a mortgage company was held to have apparent authority when she entered into a lease for office space, even though she did not have authority to commit her company to that.

Accepted Answer

In the case of Town Center Shopping Center v. Premier Mortgage, the manager of the mortgage company was considered to have apparent authority even though she did not have the actual authority to commit her company to a lease agreement. This means that the company was still held responsible for the lease agreement entered into by its manager.

Question 13

If an agent is discovered to be representing conflicting interests, she has violated her duty of loyalty.

Accepted Answer

This is true. If an agent represents conflicting interests, it means that she is loyal to two or more parties with competing interests, which violates her duty of loyalty to each individual client. This can lead to legal and ethical issues, and can damage the agent's reputation and business relationships.

Question 14

Apparent authority arises when the principal creates an appearance of authority in an agent that leads a third party to conclude that the agent has authority to act for the principal.

Accepted Answer

Apparent authority is a recognized form of agency in which a principal leads a third party to believe that an agent has authority to act on behalf of the principal. This belief may be created by the principal's words, actions, or past conduct, and the third party relies on this appearance of authority in dealing with the agent. Even if the agent does not have actual authority to act for the principal, the principal may be bound by the agent's actions based on the doctrine of apparent authority.

Question 15

In Town Center Shopping Center v. Premier Mortgage, a lease for office space, made by a manager of a mortgage company, was negated by the courts because the manager did not have authority to commit her company to that.

Accepted Answer

The answer of In Town Center Shopping Center v. Premier...

Question 16

In her relations with her principal, an agent must meet the "ordinary standard of conduct" imposed on people engaged in business dealings.

Accepted Answer

An agent must meet a higher standard of conduct, known as a fiduciary duty, which requires loyalty and acting in the best interest of the principal.

Question 17

Principals are presumed at common law to have no duties to their agents.

Accepted Answer

Principals have several duties to their agents at common law, including the duty to indemnify, duty of good faith, duty to provide compensation, duty to provide safe working conditions, and duty to refrain from interfering with an agent's contractual relationships.

Question 18

If an agency relationship did not establish a rate of compensation for the duties of the agent, the principal must pay the "customary" rate for such services.

Accepted Answer

When there is no established rate of compensation in an agency relationship, the principal is responsible for paying the customary rate for the relevant industry or location. This is because the agent is expected to be reasonably compensated for their services, and the customary rate serves as a reasonable benchmark.

Question 19

Agents have a fiduciary duty to their principals.

Accepted Answer

Agents have a legal and ethical obligation to act in the best interests of their principals and to maintain confidentiality, loyalty, and disclosure. This is known as their fiduciary duty.

Question 20

Fiduciary duties apply to principals; agents have only non-fiduciary duties.

Accepted Answer

Both principals and agents owe fiduciary duties to each other in a principal-agent relationship. The duties of an agent include loyalty, obedience, disclosure of information, and use of skill and care, and these are all fiduciary duties.

Quiz 14: Agency and the Employment Relationship