Question 1

Which of the following is not acting as an agent in the eyes of the law?

Accepted Answer

B

Question 2

If a third party relies on the principal's representation that the agent has the authority to act, which of the following is true?

Accepted Answer

D

Question 3

Reese Publishing Inc. hosts a golf tournament. In attendance are Jennifer Reese, the owner, director, and manager of Reese Publishing Inc.; her husband, Aaryn, a professional race-car driver and voracious reader who reads everything Reese Publishing Inc. publishes; her sales force, Laura, Catherine, and Keighla (each of whom signed deals that day); and Gena, the office manager, who is responsible for all of the company's office supply purchases. Which of these people act as agents?

Accepted Answer

An agent is a person who acts on behalf of another person or organization in performing business activities. In this scenario, Laura, Catherine, Keighla, and Gena all perform business activities on behalf of Reese Publishing Inc. Laura, Catherine, and Keighla signed deals, which indicates they are likely sales agents, while Gena is responsible for purchasing office supplies and is therefore an administrative agent. Jennifer Reese is the owner, director, and manager of the company and is not acting as an agent for anyone else. Aaryn is simply attending the tournament and reading the company's publications, so he is not considered an agent either. Therefore, the answer is C - all of them except Aaryn.

Question 4

Although Jason had participated in the flower auction for the last nine years as an agent for Thos. Holt's Ltd. (Holt) with the authority to buy whatever he felt the store needed, this day he was given express instructions to buy only cut flowers. When flats of young camellia bushes with a rare gold flower were being sold, Jason bought them on behalf of the company. Which of the following is true?

Accepted Answer

The answer of Although Jason had participated in the flower...

Question 5

An agent contracted with a third party on behalf of a principal, but went beyond both his actual and apparent authority. The third party was never paid. Which of the following indicates the legal position of the third party?

Accepted Answer

The third party can sue the agent for breach of warranty of authority if the principal fails to ratify the contract. This is because the agent went beyond their actual and apparent authority, so the third party can hold the agent responsible for making a contract they had no right to make. If the principal does not ratify the contract, the third party can sue the agent for the breach of warranty of authority.

Question 6

If an agent breaches his duty to his principal, his principal can sue the agent successfully for

Accepted Answer

The answer of If an agent breaches his duty to...

Question 7

John Agent entered into a contract with Joe Third Party to buy 50 stoves, payment to be made two weeks after John Agent picked up the stoves from Joe Third Party's warehouse. The stoves were picked up, but eight weeks later Joe still had not been paid. Joe found out that John Agent had been authorized to buy 50 stoves for Gord Principal. For some reason, John had not made it clear to Joe that he was acting as an agent, nor had he indicated that he was buying the goods for himself. Under the circumstances, which of the following is true?

Accepted Answer

The answer of John Agent entered into a contract with...

Question 8

Which of the following is an example of just being an agent as opposed to an employee?

Accepted Answer

Joe worked as a purchasing agent, which is a role typically associated with being an agent rather than an employee. Agents are individuals who act on behalf of another party (in this case, Smith Textiles Ltd.), whereas employees are individuals who work directly for a company and receive regular compensation.

Question 9

An agent with no express, implied, or apparent authority to do so identified himself as an agent for his principal, and on behalf of his principal bought a computer. The principal refused to ratify the contract. On these facts, which of the following is true?

Accepted Answer

The agent had no authority to purchase the computer on behalf of the principal, and the principal did not ratify the contract. Therefore, the seller of the computer can sue the agent for breach of his warranty of authority. The other options are not correct because the principal did not authorize or ratify the purchase, and the agent did not have the authority to make the purchase in the first place.

Question 10

In which one of the following situations will the transaction not be binding on the principal?

Accepted Answer

The answer of In which one of the following situations...

Question 11

A principal is not bound in contract with the third party with whom the agent dealt if the agent is

Accepted Answer

If the agent acted outside both his actual and apparent authority, the principal is not bound by the contract. However, if the principal ratifies the contract, he becomes bound by it.

Question 12

Novada worked as a salesperson for White Water Yachts Inc. Yates, who was looking at a 30-foot sailboat called the "Mostly Toad," approached him. Yates asked Novada if the boat has been surveyed (inspected) recently, and he was told that it had been just last year and it was in great shape. In fact, it had never been surveyed and had serious fiberglass delaminating problems below in the bilge. Yates bought the boat and in the first month of sailing the boat delaminated and sank. Yates and his family survived, but both he and his wife suffered some serious long-term injuries. Which of the following is correct with respect to the legal position of the parties?

Accepted Answer

Novada made a false statement with the intention to deceive Yates, which constitutes fraud. As a result, Yates can sue Novada and White Water for fraud. Novada's status as an independent agent rather than an employee does not absolve him from liability for fraud.

Note: The other options are incorrect because they do not take into account Novada's misrepresentation and possible fraud. Option B assumes that Novada made an innocent mistake, which is not the case. Option C wrongly assumes that the buyer has no recourse in a "buyer beware" situation, which is not always true. Option D is incorrect because an inaccurate description of the survey could also give rise to a claim for misrepresentation or breach of contract. Option E is incorrect because the principal (White Water) could also be held liable for Novada's misrepresentation under the principle of vicarious liability.

Question 13

In which one of the following situations is the principal not responsible for the conduct of his agent?

Accepted Answer

The answer of In which one of the following situations...

Question 14

Chris was a systems analyst hired to determine the best system for a retail china shop. After a careful analysis of the shop's needs and the available software, Chris presented a written report, which was approved by the owner of the business. Chris was paid his fee and was asked by the owner if he would act as his agent in purchasing the hardware and software recommended in the report. The purchase was not to exceed $40,000 and the commission was to be $1000. Chris agreed. Read each of the following separately and indicate which is true.

Accepted Answer

Chris, as an agent, has a fiduciary duty to act in the best interest of the principal (the owner). Delegating the task to someone else without the owner's consent could breach this duty, as it may not ensure the best interest of the principal is maintained.

Question 15

Which of the following is an example of an agent's breach of fiduciary duty to his principal?

Accepted Answer

In this scenario, the agent is making a profit without disclosing it to his principal, which is a breach of fiduciary duty. The agent has a duty to act in the best interest of his principal and not take advantage of the situation. The other choices may not necessarily be a breach of fiduciary duty or may have been disclosed to the principal with their consent.

Question 16

To what does the term "estoppel" refer?

Accepted Answer

The answer of To what does the term "estoppel" refer?...

Question 17

An agency relationship can be created by

Accepted Answer

All the options (actual authority, estoppel, ratification, and apparent authority) are ways in which an agency relationship can be created. Actual authority is when the principal gives explicit authority to the agent to act on their behalf. Estoppel is when the principal leads a third party to believe that the agent has authority, which creates a binding agency relationship. Ratification is when the principal accepts or acknowledges that the agent's actions were within the scope of their authority. Apparent authority is when the principal leads a third party to believe that the agent has authority, even if the agent may not have actual authority, which creates a binding agency relationship. Therefore, all options are valid ways to create an agency relationship, making choice (E) the best answer.

Question 18

When an agent's authority is terminated by mutual agreement, what is the impact on the agent's actual and apparent authority?

Accepted Answer

When an agent's authority is terminated by mutual agreement, the actual authority of the agent ceases immediately. However, the apparent authority continues until the third party is notified of the termination. This means that the agent may still have apparent authority to act on behalf of the principal in the eyes of third parties who are not aware of the termination. Therefore, it is important for the principal to notify all relevant third parties about the termination to avoid any confusion or misunderstanding.

Question 19

Because of an alarming drop in the earnings of Microminds Ltd., Roger, the principal contract negotiator and president of the software development company, called a meeting to discuss productivity and customer satisfaction. At the meeting were Michael, a troubleshooter who helped customers over the phone who needed guidance in using the company's software; Ralph, the receptionist and purchaser of the office supplies for the company; Keith and Jason, salesmen hired on a commission basis (i.e., not as employees but as independent contractors); Mr. Toman, purchasing agent for the Vancouver School Board, an important customer; and Mr. Rice, purchasing agent for Matol Toys Ltd., also a customer. Which of these is acting as an agent?

Accepted Answer

The answer of Because of an alarming drop in the...

Question 20

Which of the following is correct with respect to the agency relationship?

Accepted Answer

The answer of Which of the following is correct with...

Quiz 10: Agency and Partnership