Question 1

Which of the following is false regarding termination of agency in the Netherlands? A) The agent is entitled to compensation if his or her duties are concluded within a reasonable time after termination. B) Compensation is due if the agent received the orders for a certain action before the termination of the contract. C) The agent is entitled to goodwill compensation in certain situations. D) An agent is not entitled to additional compensation based on bringing the principal new customers or because agreements with clients obtained by the agent remain profitable. E) There are requirements on the agent in regard to time limits in filing for certain compensation.

Accepted Answer

In the most interesting triggering event for mandatory compensation, the agent is entitled to "goodwill compensation" if (1) the agent brought the principal new customers, (2) the agent brought new agreements with clients who are still profitable to the principal, and (3) such payment is financially reasonable for the principal (the relationship is not being terminated due to bankruptcy).

Question 2

"Unreliable Boyfriend." Bobby needs a business law book. He hears that Gwen has one for sale. Bobby asks his girlfriend Susie to buy it for him from Gwen if Susie can get it for under $40. Susie sees Gwen in the hall and asks if she will sell the book for $30, and Gwen agrees. They are between classes, and Susie does not mention that the book is for Bobby although all the parties were on good terms, and the identity of the buyer should not have affected Susie's agreement. Later, however, Polly agrees to give Bobby her used business law book. Bobby tells Susie that he no longer wants the book. Susie tells Gwen about the situation with Bobby. Gwen replies that she does not care if Bobby wants the book or not. Gwen says that she passed up a couple of opportunities to sell the book because she thought she already had it sold and that she wants her money from either Gwen or Bobby - she doesn't care who pays.
-What type of principal is Bobby?
A) Disclosed
B) Undisclosed
C) Partially disclosed
D) Unidentified
E) Legally nonexistent

Accepted Answer

If the third party does not know that an agent is acting on behalf of a principal, we have an undisclosed principal.

Question 3

Which of the following is an agency agreement created for the agent's benefit, not for the principal's?
A) Agency interest principle
B) Agency coupled with an interest
C) Agency benefit interest
D) Agency compensation principle
E) Agency entitlement principle

Accepted Answer

An agency coupled with an interest is a special kind of agency relationship created for the agent's benefit, not the principal's.

Question 4

"The Big Sale." Christy, the owner of ABC department store, needed to hire a number of employees in a hurry because of a big summer sale she was planning. Bob was hired by Christy to run a cash register and to assist customers with taking large purchases to their cars. Bob encountered a particularly annoying customer, Frank. Frank started complaining the minute he saw Bob. Frank complained about having to wait for Bob to assist him with carrying his television purchase to his car, about the merchandise in the store, and about the quality of the store's employees. Bob tried to control himself while he carted Frank's television to the car. The final straw, however, came when Bob told Frank that he should get the earring out of his ear, cut his hair, and act professionally. Bob threw the television to the ground and punched Frank in the nose. Frank did investigation and discovered that Bob has been fired from his previous three jobs for taking violent action against customers. Two of his former employers are willing to testify that if Christy had called them, they would have disclosed Bob's tendencies to her. Bob listed the former employers on his application, but because she was in a hurry to hire employees, Christy did not take the time to check with the former employers. Another problem confronting Christy during the big sale is that Susie, a long-time employee of Christy who had never caused any problem before, accidentally, but negligently, dropped a box on the foot of Greg, a customer. Greg had to have an X-ray and is threatening to sue both Christy and Susie.
-Which of the following is true regarding whether Greg has any right of recovery against Christy for his injured foot?
A) Greg has no right of recovery against Christy because Susie had not dropped any boxes before, and Christy had no reason to suspect she would injure Greg.
B) Greg has a right of recovery against Christy only if Susie is insolvent.
C) Greg has a right of recovery against Christy, but only for 50% of his damages.
D) Greg has no right of recovery against Christy unless he is able to establish wrongdoing on her part in hiring Susie.
E) Greg has a right of recovery against Christy.

Accepted Answer

The principal/employer holds vicarious liability, which is liability assigned without fault, for any harm the agent/employee causes while working for the principal.

Question 5

Which of the following is false regarding termination of agency based on operation of law? A) Impossibility of performance terminates the agency relationship. B) An agency agreement is terminated whenever the agent, unknown to the principal, acquires an interest against the principal's interest. C) The agency agreement is terminated if the agent breaches the duty of loyalty he or she has to the principal. D) A change in law passed subsequent to the formation of an agency agreement may not result in termination of the agency agreement. E) If there is an unusual change in circumstances that leads the agent to believe that the principal's instructions do not apply, the agency relationship terminates.

Accepted Answer

When a new law makes the commission of an existing agency agreement illegal, the agreement is terminated.

Question 6

"The Big Sale." Christy, the owner of ABC department store, needed to hire a number of employees in a hurry because of a big summer sale she was planning. Bob was hired by Christy to run a cash register and to assist customers with taking large purchases to their cars. Bob encountered a particularly annoying customer, Frank. Frank started complaining the minute he saw Bob. Frank complained about having to wait for Bob to assist him with carrying his television purchase to his car, about the merchandise in the store, and about the quality of the store's employees. Bob tried to control himself while he carted Frank's television to the car. The final straw, however, came when Bob told Frank that he should get the earring out of his ear, cut his hair, and act professionally. Bob threw the television to the ground and punched Frank in the nose. Frank did investigation and discovered that Bob has been fired from his previous three jobs for taking violent action against customers. Two of his former employers are willing to testify that if Christy had called them, they would have disclosed Bob's tendencies to her. Bob listed the former employers on his application, but because she was in a hurry to hire employees, Christy did not take the time to check with the former employers. Another problem confronting Christy during the big sale is that Susie, a long-time employee of Christy who had never caused any problem before, accidentally, but negligently, dropped a box on the foot of Greg, a customer. Greg had to have an X-ray and is threatening to sue both Christy and Susie.
-Which of the following is true regarding whether Greg has any right of recovery against Susie for his injured foot?
A) Greg has no right of recovery against Susie because of her status as an employee.
B) Greg has no right of recovery against Susie because she did not intentionally harm him.
C) Greg has a right of recovery against Susie only if Christy cannot be located for service of process.
D) Greg has a right of recovery against Susie only if Christy is bankrupt.
E) Greg has a right of recovery against Susie.

Accepted Answer

A third party injured through the negligence of an employee can sue either the employee or the employer.

Question 7

Which of the following is true regarding notice of termination of an agency relationship?
A) Notice of termination of an agency relationship must be given by actual notice.
B) Depending on the circumstances, notice of termination can be actual or constructive.
C) Notice of termination of an agency must be given in writing.
D) Actual notice of termination of an agency relationship is not needed once 30 days have passed since the termination because at that point notice is presumed.
E) Actual notice of termination of an agency relationship is not needed once 60 days have passed since the termination because at that point notice is presumed.

Accepted Answer

Depending on the circumstances, notice of termination can be actual or constructive.

Question 8

Which of the following is false regarding revocation of the authority of an agent and renunciation by an agent? A) At any time a principal can revoke an agent's authority. B) A principal's revocation of an agent's authority may result in a breach of contract entitling the agent to damages. C) An agent can terminate the agency relationship by renouncing the authority given to the agent. D) An agent's wrongful ending of the agency relationship may be a breach of contract entitling the principal to damages. E) If an agent has breached a fiduciary duty to the principal, the principal can revoke the agent's authority; but the agent may be entitled to damages.

Accepted Answer

If the agent has somehow breached the fiduciary duty to the principal, the principal can revoke the agent's authority without liability.

Question 9

"Furniture Store Woes." Manny was hired by John to deliver furniture purchased from John's furniture store, Good Furniture. John had authorized Manny to drive the delivery truck home from work, but Manny was not authorized to use the truck for any personal errands. Manny decided to help his friend Helen move believing that John would never find out. Unfortunately, while moving Helen's furniture to her new home, Manny was speeding and hit Bobby's vehicle in the rear causing whiplash to Bobby. Bobby is threatening to sue both John and Manny. Then, on his way to work in the same truck the next day, Manny again bumped a car driven by Joan who is threatening to sue both Manny and John. John also has another problem involving Connie, his niece, an aspiring interior designer who John hired to provide design services to customers. Both Connie and John were aware that customers would likely have no interest in the services of Connie if they knew she had no experience and no training in design. Therefore, they inflated her accomplishments to customers telling them that she had both training and experience. In reliance on those claims, Beth agreed to have Connie do the interior design work for her new business building while Beth was out of town on an extended business trip. Unfortunately, Connie did a terrible job. For example, she put in purple carpeting and painted the walls orange. Beth was outraged when she returned. She found out from Sandy, a disgruntled employee of John, that Connie actually had no training or experience in interior design. Sandy wants to sue both Connie and John.
-If John pays for the damage to Joan's car, does he have any remedy against Manny?
A) If John covers Joan's damages, then John may receive full reimbursement from Manny based upon the right of indemnification.
B) If John covers Joan's damages, then John is not entitled to any reimbursement from Manny.
C) If John covers Joan's damages, John is only entitled to reimbursement from Manny for 50% of whatever he paid.
D) Any recovery John receives from Manny will be based upon principles of comparative negligence.
E) Any recovery John receives from Manny will be based upon principles of contributory negligence.

Accepted Answer

If the third party is able to establish employee negligence such that the employer is liable, the employer has the right to recover from the employee any damages he paid the third party as a result of the employee's negligence. The right to recover damages is referred to as the right of indemnification.

Question 10

"Furniture Store Woes." Manny was hired by John to deliver furniture purchased from John's furniture store, Good Furniture. John had authorized Manny to drive the delivery truck home from work, but Manny was not authorized to use the truck for any personal errands. Manny decided to help his friend Helen move believing that John would never find out. Unfortunately, while moving Helen's furniture to her new home, Manny was speeding and hit Bobby's vehicle in the rear causing whiplash to Bobby. Bobby is threatening to sue both John and Manny. Then, on his way to work in the same truck the next day, Manny again bumped a car driven by Joan who is threatening to sue both Manny and John. John also has another problem involving Connie, his niece, an aspiring interior designer who John hired to provide design services to customers. Both Connie and John were aware that customers would likely have no interest in the services of Connie if they knew she had no experience and no training in design. Therefore, they inflated her accomplishments to customers telling them that she had both training and experience. In reliance on those claims, Beth agreed to have Connie do the interior design work for her new business building while Beth was out of town on an extended business trip. Unfortunately, Connie did a terrible job. For example, she put in purple carpeting and painted the walls orange. Beth was outraged when she returned. She found out from Sandy, a disgruntled employee of John, that Connie actually had no training or experience in interior design. Sandy wants to sue both Connie and John.
-Which of the following is true regarding John's liability to Bobby?
A) John will likely be held liable for Bobby's injuries because while Manny was acting outside the scope of his duties at the time of the accident, he had not substantially departed from the course of his employer's business.
B) John will likely be held liable for Bobby's injuries because Manny was driving John's truck at the time of the accident.
C) John will likely be held liable for Bobby's injuries because Manny allowed John to take the truck home regardless of John's instructions regarding the use of the truck.
D) It is unlikely that John will be held liable for Bobby's injuries because Manny had substantially departed from the course of his employer's business.
E) It is unlikely that John will be held liable for Bobby's injuries unless it can be proven that Manny had no insurance and lacks the ability to pay.

Accepted Answer

If an agent makes a substantial departure from the course of the employer's business, the employer is not liable.

Question 11

"Unreliable Boyfriend." Bobby needs a business law book. He hears that Gwen has one for sale. Bobby asks his girlfriend Susie to buy it for him from Gwen if Susie can get it for under $40. Susie sees Gwen in the hall and asks if she will sell the book for $30, and Gwen agrees. They are between classes, and Susie does not mention that the book is for Bobby although all the parties were on good terms, and the identity of the buyer should not have affected Susie's agreement. Later, however, Polly agrees to give Bobby her used business law book. Bobby tells Susie that he no longer wants the book. Susie tells Gwen about the situation with Bobby. Gwen replies that she does not care if Bobby wants the book or not. Gwen says that she passed up a couple of opportunities to sell the book because she thought she already had it sold and that she wants her money from either Gwen or Bobby - she doesn't care who pays.
-Which of the following is true regarding whether Susie is personally bound on the contract with Gwen?
A) Susie is not personally bound because she was acting on behalf of Bobby.
B) Susie is personally bound unless she can establish that Gwen would not have sold her the book if she had known that Bobby was involved.
C) Susie is personally bound unless she can establish that Bobby has the funds with which to pay Gwen.
D) Susie is not personally bound unless Bobby is legally insolvent.
E) Susie is personally bound.

Accepted Answer

When the agent acts within her authority on behalf of an undisclosed principal, the law will likely hold her liable for the agreement. In the eyes of the third party, the agent is the only person who could be liable.

Question 12

"Unreliable Boyfriend." Bobby needs a business law book. He hears that Gwen has one for sale. Bobby asks his girlfriend Susie to buy it for him from Gwen if Susie can get it for under $40. Susie sees Gwen in the hall and asks if she will sell the book for $30, and Gwen agrees. They are between classes, and Susie does not mention that the book is for Bobby although all the parties were on good terms, and the identity of the buyer should not have affected Susie's agreement. Later, however, Polly agrees to give Bobby her used business law book. Bobby tells Susie that he no longer wants the book. Susie tells Gwen about the situation with Bobby. Gwen replies that she does not care if Bobby wants the book or not. Gwen says that she passed up a couple of opportunities to sell the book because she thought she already had it sold and that she wants her money from either Gwen or Bobby - she doesn't care who pays.
-Which of the following is true regarding whether Bobby is liable to Susie for the cost of the book if Susie pays Gwen the purchase price?
A) Bobby is liable to Susie for the cost of the book.
B) Bobby is liable to Susie for the cost of the book only if Susie had Bobby sign a document affirming his liability before Susie paid Gwen.
C) Bobby is liable to Susie only if she resells the book and is unable to recover as much as she paid for it.
D) Bobby is not liable to Susie for the cost of the book.
E) Bobby can avoid liability to Susie only if he can establish that his actions constituted "justifiable expectations" under the law absolving him from liability.

Accepted Answer

When the agent acts within her authority on behalf of an undisclosed principal, the law will likely hold her liable for the agreement. In the eyes of the third party, the agent is the only person who could be liable. Yet, if the agent is liable to the third party, then the undisclosed principal is liable to the agent.

Question 13

Which of the following is the most typical way in which to provide constructive notice of agency termination?
A) By telephone
B) By letter
C) By posting a notice at the courthouse
D) By newspaper publication
E) By e-mail

Accepted Answer

Constructive notice usually consists of publication in a generally circulating newspaper for the area where the agency agreement existed.

Question 14

If a manager has business transactions in one of the European Union countries and wants to terminate an agency relationship, he or she would want to have access to knowledge about which of the following?
A) Chapter IV of the Agency Relationship Law
B) Chapter VII of the Employment Relationship
C) Article VI of the European Union Regulations
D) Article VII of the European Union Regulations
E) Section X of the Agency Regulations

Accepted Answer

A U.S. manager conducting business in the European Union needs access to the intricacies of Chapter IV of the Agency Relationship Law that focuses on termination.

Question 15

"Furniture Store Woes." Manny was hired by John to deliver furniture purchased from John's furniture store, Good Furniture. John had authorized Manny to drive the delivery truck home from work, but Manny was not authorized to use the truck for any personal errands. Manny decided to help his friend Helen move believing that John would never find out. Unfortunately, while moving Helen's furniture to her new home, Manny was speeding and hit Bobby's vehicle in the rear causing whiplash to Bobby. Bobby is threatening to sue both John and Manny. Then, on his way to work in the same truck the next day, Manny again bumped a car driven by Joan who is threatening to sue both Manny and John. John also has another problem involving Connie, his niece, an aspiring interior designer who John hired to provide design services to customers. Both Connie and John were aware that customers would likely have no interest in the services of Connie if they knew she had no experience and no training in design. Therefore, they inflated her accomplishments to customers telling them that she had both training and experience. In reliance on those claims, Beth agreed to have Connie do the interior design work for her new business building while Beth was out of town on an extended business trip. Unfortunately, Connie did a terrible job. For example, she put in purple carpeting and painted the walls orange. Beth was outraged when she returned. She found out from Sandy, a disgruntled employee of John, that Connie actually had no training or experience in interior design. Sandy wants to sue both Connie and John.
-Which of the following is true regarding any liability John has to Sandy?
A) John has no liability to Sandy.
B) John has liability to Sandy under the theory of misrepresentation but only if Connie is insolvent.
C) John is liable to Sandy under the theory of negligence.
D) John is liable to Sandy for only 50% of any damages she can prove.
E) John is liable to Sandy under the theory of misrepresentation.

Accepted Answer

If the principal authorizes the agent to engage in an act and the agent misrepresents herself intentionally or unintentionally, the principal is always liable in tort to someone who relied on the agent's misrepresentation.

Question 16

"The Big Sale." Christy, the owner of ABC department store, needed to hire a number of employees in a hurry because of a big summer sale she was planning. Bob was hired by Christy to run a cash register and to assist customers with taking large purchases to their cars. Bob encountered a particularly annoying customer, Frank. Frank started complaining the minute he saw Bob. Frank complained about having to wait for Bob to assist him with carrying his television purchase to his car, about the merchandise in the store, and about the quality of the store's employees. Bob tried to control himself while he carted Frank's television to the car. The final straw, however, came when Bob told Frank that he should get the earring out of his ear, cut his hair, and act professionally. Bob threw the television to the ground and punched Frank in the nose. Frank did investigation and discovered that Bob has been fired from his previous three jobs for taking violent action against customers. Two of his former employers are willing to testify that if Christy had called them, they would have disclosed Bob's tendencies to her. Bob listed the former employers on his application, but because she was in a hurry to hire employees, Christy did not take the time to check with the former employers. Another problem confronting Christy during the big sale is that Susie, a long-time employee of Christy who had never caused any problem before, accidentally, but negligently, dropped a box on the foot of Greg, a customer. Greg had to have an X-ray and is threatening to sue both Christy and Susie.
-Which of the following is true regarding Christy's liability, if any, for her own conduct in regards to Frank's injury?
A) Christy would likely be held liable for negligent hiring.
B) Regardless of whether she did anything to directly cause injury to Frank, Christy would likely be held liable on a strict liability theory because her customer was injured.
C) Christy would likely be held liable for breach of customer warranty.
D) Christy would likely be required to split the damages with Bob because Bob was her employee.
E) There is no theory on which Christy could be held liable for her own conduct in this situation.

Accepted Answer

A principal may be liable for negligent hiring who fails to do a background check to learn about the tendencies of potential employees.

Question 17

While making a delivery, Barry, a delivery driver for XYZ Company, went through the drive through at a local restaurant to get a cup of coffee and bumped into the car in front of him doing some damage to the car's bumper. Which of the following is true regarding the liability of XYZ Company for the damage to the car?
A) As a matter of law, XYZ Company is not liable because Barry was acting on his own behalf.
B) As a matter of law, XYZ Company is not liable because only property damage is involved.
C) As a matter of law, XYZ Company is liable because a company is liable for any torts committed by an employee during working hours.
D) Whether or not XYZ Company is liable depends on whether Barry's acts are seen as substantial departure from his work.
E) Whether or not XYZ Company is liable depends on how long Barry has worked for the company.

Accepted Answer

If an agent makes a substantial departure from the course of the employer's business, the employer is not liable.

Question 18

How long does an agent's apparent authority continue once an agency relationship is terminated?
A) It ends immediately
B) 24 hours
C) 7 days
D) 30 days
E) Until the principal notifies third parties that the agency relationship has ended.

Accepted Answer

The agent's apparent authority continues until the principal notifies third parties that the relationship has ended.

Question 19

Which of the following refers to an employer's right, if any, to recover from an employee damages the employer paid a third party as a result of the employee's negligence?
A) The right of recompense
B) The right of reimbursement
C) The entitlement to equity
D) The right of indemnification
E) There is no such right

Accepted Answer

If a third party is able to establish employee negligence such that the employer is liable, the employer has the right to recover from the employee any damages he paid the third party as a result of the employee's negligence. The right to recover damages is referred to as the right of indemnification.

Question 20

Which of the following is not necessarily a means may an agency relationship be terminated? A) Fulfillment of purpose B) Occurrence of a specific event C) Revocation of authority D) Insolvency of the principal E) Renunciation by the agent

Accepted Answer

An agency relationship can be terminated in a number of ways including fulfillment of purpose, occurrence of a specific event, revocation of authority, and renunciation by the agent. Insolvency, the inability to pay debts or the condition in which liabilities outweigh assets, does not necessarily result in the termination of the agency relationship.

Quiz 34: Liability to Third Parties and Termination

Which of the following is false regarding termination of agency in the Netherlands?

Which of the following is an agency agreement created for the agent's benefit, not for the principal's?

Which of the following is false regarding termination of agency based on operation of law?

Which of the following is true regarding notice of termination of an agency relationship?

Which of the following is false regarding revocation of the authority of an agent and renunciation by an agent?

Which of the following is the most typical way in which to provide constructive notice of agency termination?

If a manager has business transactions in one of the European Union countries and wants to terminate an agency relationship, he or she would want to have access to knowledge about which of the following?

How long does an agent's apparent authority continue once an agency relationship is terminated?

Which of the following refers to an employer's right, if any, to recover from an employee damages the employer paid a third party as a result of the employee's negligence?

Which of the following is not necessarily a means may an agency relationship be terminated?