Question 1

Agency relationships must be created by expressed agreement.

Accepted Answer

Agency relationships may be created by expressed or implied agreements.When parties form an agency relationship by making a written or oral agreement,the agency is known as expressed agency,or agency by agreement.Expressed agency is the most common type of agency.In some cases,however,an agency relationship is not created by an expressed agreement but is instead implied by the conduct of the parties.The circumstances of a situation determine the extent of an agent's ability to conduct business on behalf of the principal.However,the implied authority cannot conflict with any express authority.

Question 2

All employees are agents of their employers,and all agents are employees.

Accepted Answer

Although all employees are considered agents of their employers,the reverse is not true.That is,not all agents are employees.

Question 3

Suppose a principal leads a third party to believe that another individual serves as his or her agent but the principal has made no agreement with the so-called agent.Due to his or her conduct,the principal has created an agency by ratification.

Accepted Answer

If a principal leads a third party to believe that another individual serves as his or her agent but the principal has made no agreement with the so-called agent,the principal has created an apparent agency,or agency by estoppel.According to the principal's conduct,the agent has apparent authority to act; thus,the principal is estopped,or prevented,from denying that the individual is an agent.When a third party relies on the principal's conduct and makes an agreement with an apparent agent,the principal must uphold any agreements made by the agent.If the principal attempts to deny an agency relationship existed,the third party must demonstrate that he or she reasonably believed,on the basis of the principal's conduct,that an agency relationship existed.The court will consider the principal's conduct in determining whether an agency relationship existed.

Question 4

A power of attorney is a document that gives an agent the authority to sign legal documents on behalf of the principal.

Accepted Answer

A power of attorney is a document that gives an agent the authority to sign legal documents on behalf of the principal.

Question 5

A durable power of attorney is a written document,created by a principal,expressing his or her wishes for an agent's authority to be terminated by the principal's subsequent incapacity.

Accepted Answer

A durable power of attorney is a written document,created by a principal,expressing his or her wishes for an agent's authority to be unaffected by the principal's subsequent incapacity.Alternatively,a durable power of attorney might become active only after a principal becomes incapacitated in any manner.Because the agreement is entered into before incapacitation,a power of attorney is legally binding after the principal becomes incapacitated.

Question 6

If an agent makes authorized expenditures in the course of working on behalf of the principal,the principal has a duty to reimburse the agent for the amount of money spent.This is known as the duty of subrogation.

Accepted Answer

If an agent makes authorized expenditures in the course of working on behalf of the principal,the principal has a duty to reimburse the agent for the amount of money spent.This is part of the principal's duty of reimbursement and indemnification to the agent.

Question 7

If the employer has substantial control over day-to-day operations of the worker,the worker is generally considered an employee.

Accepted Answer

When courts are deciding whether a worker is an employee or an independent contractor,perhaps the most important issue they consider is how much control the employer exerts over the agent.If the employer has substantial control over day-to-day operations of the worker,the worker is generally considered an employee.

Question 8

An agency relationship can be created only for a lawful purpose.

Accepted Answer

An agency relationship can be created only for a lawful purpose in the same way that a contract must have an legal purpose.

Question 9

The Restatement of Contracts defines an agent as a person who contracts with another to do something for him but who is not controlled by the other nor subject to the other's right to control with respect to his physical conduct in the performance of the undertaking.

Accepted Answer

Employers often hire independent contractors,persons who are not employees,to conduct certain tasks.The Restatement of Agency defines an independent contractor as "a person who contracts with another to do something for him but who is not controlled by the other nor subject to the other's right to control with respect to his physical conduct in the performance of the undertaking."

Question 10

An individual who lacks contractual capacity may hire an agent to make contracts on his or her behalf.

Accepted Answer

If an individual does not have contractual capacity,the individual could not hire an agent to make contracts on his or her behalf.For example,because a contract entered into with a minor is voidable,most states do not allow minors to hire agents.

Question 11

Not only does the agent have to communicate offers from third parties,but the agent must also communicate any information the agent thinks could be important to the principal.This is known as the duty of collaboration.

Accepted Answer

Not only does the agent have to communicate offers from third parties,but the agent must also communicate any information the agent thinks could be important to the principal.This is known as the duty of notification.For example,if a third party has made an agreement through an agent with a principal and the third party has failed to meet the agreement,the agent must notify the principal of this information in a timely manner.

Question 12

The principal must assist the agent in the performance of his or her duties,and the principal can do nothing to interfere with the reasonable conduct of the agent.This is known as the duty of indemnification.

Accepted Answer

The principal owes a duty of cooperation to the agent.Therefore,the principal must assist the agent in the performance of his or her duties.Furthermore,the principal can do nothing to interfere with the reasonable conduct of an agent.

Question 13

Agency law is primarily state law.

Accepted Answer

Agency law is primarily state law.Thus,it can vary somewhat from state to state.

Question 14

A fiduciary is a person who has a duty to act primarily for another person's benefit.

Accepted Answer

A fiduciary is a person who has a duty to act primarily for another person's benefit.A lawyer,for example,is a fiduciary for his or her client.

Question 15

An agent's obligation to act in the interest of the principal is known as the duty of performance.

Accepted Answer

Courts suggest that the duty of loyalty is perhaps the most important duty an agent owes to a principal.Because the agency relationship is a fiduciary relationship (i.e.,a relationship of trust),the agent has a responsibility to act in the interest of the principal.The agent carries out her duty of loyalty to the principal in a number of ways,including avoiding conflicts of interest and protecting the principal's confidentiality.

Question 16

While an agent owes duties to a principal,a principal owes no duties to an agent.

Accepted Answer

When a principal contractually agrees that another person can make agreements on his or her behalf,the principal owes certain duties to the agent.Those duties include the duty of compensation,reimbursement and indemnification,cooperation,and safe working conditions.If these duties are not fulfilled,the principal has violated the agent's rights.Consequently,the agent can bring a suit against the principal.

Question 17

Agency is generally defined as a relationship between a principal and a third-party beneficiary.

Accepted Answer

Agency is generally defined as a relationship between a principal and an agent.

Question 18

A gratuitous agent is one who acts without consideration.

Accepted Answer

Agents may perform their services gratuitously.A gratuitous agent is one who acts without consideration; that is,the agent is not paid for his or her services.Gratuitous agents function much like regular agents,with a few specific exceptions.

Question 19

In an agency relationship,the party who has the authority to act on behalf of and bind another party is the principal.

Accepted Answer

In an agency relationship,the agent is authorized to act for and on behalf of the principal,who hires the agent to represent him or her.

Question 20

A power of attorney can be general or specific.

Accepted Answer

A power of attorney can be general or specific.For example,with a general power of attorney,a principal gives an agent broad authority to sign legal documents on behalf of the principal.In contrast,with a specific power of attorney,a principal gives authority to an agent for only the specific areas or purposes listed in the agreement.

Quiz 20: Agency and Liability to Third Parties

Agency relationships must be created by expressed agreement.

All employees are agents of their employers,and all agents are employees.

Suppose a principal leads a third party to believe that another individual serves as his or her agent but the principal has made no agreement with the so-called agent.Due to his or her conduct,the principal has created an agency by ratification.

A power of attorney is a document that gives an agent the authority to sign legal documents on behalf of the principal.

A durable power of attorney is a written document,created by a principal,expressing his or her wishes for an agent's authority to be terminated by the principal's subsequent incapacity.

If an agent makes authorized expenditures in the course of working on behalf of the principal,the principal has a duty to reimburse the agent for the amount of money spent.This is known as the duty of subrogation.

If the employer has substantial control over day-to-day operations of the worker,the worker is generally considered an employee.

An agency relationship can be created only for a lawful purpose.

The Restatement of Contracts defines an agent as a person who contracts with another to do something for him but who is not controlled by the other nor subject to the other's right to control with respect to his physical conduct in the performance of the undertaking.

An individual who lacks contractual capacity may hire an agent to make contracts on his or her behalf.

Not only does the agent have to communicate offers from third parties,but the agent must also communicate any information the agent thinks could be important to the principal.This is known as the duty of collaboration.

The principal must assist the agent in the performance of his or her duties,and the principal can do nothing to interfere with the reasonable conduct of the agent.This is known as the duty of indemnification.

Agency law is primarily state law.

A fiduciary is a person who has a duty to act primarily for another person's benefit.

An agent's obligation to act in the interest of the principal is known as the duty of performance.

While an agent owes duties to a principal,a principal owes no duties to an agent.

Agency is generally defined as a relationship between a principal and a third-party beneficiary.

A gratuitous agent is one who acts without consideration.

In an agency relationship,the party who has the authority to act on behalf of and bind another party is the principal.

A power of attorney can be general or specific.