Question 1

Certain high-technology components may not be exported to nations on the Export Controls List. The export broker for a manufacturer of such components could be held liable for any loss to the manufacturer as a result of recording incorrect part numbers on government export approval applications which the manufacturer reviews and signs.

Accepted Answer

The answer of Certain high-technology components may not be exported...

Question 2

Without Ted's knowledge, Phil, who frequently purchased lumber on Ted's behalf, purchased a large quantity of plywood from Chris as agent for Ted. Phil later advised Ted of the purchase. If Ted wished to ratify the agreement, the act of ratification would make the agreement effective as of the date that it was negotiated by Phil.

Accepted Answer

Ratification has the effect of making the agreement retroactively effective from the date it was originally negotiated by the agent.

Question 3

Without Ted's knowledge, Phil, who frequently purchased lumber on Ted's behalf, purchased a large quantity of plywood from Chris as agent for Ted. Phil later advised Ted of the purchase. If Ted had died before the contract was negotiated by Phil, the purchase agreement would be unenforceable, because the principal did not exist at the time when the agreement was made.

Accepted Answer

Without Ted's knowledge, Phil did not have the authority to act as his agent and make the purchase on his behalf. Therefore, the purchase agreement would be unenforceable if Ted had died before it was negotiated. Additionally, the principle of estoppel would not apply in this situation since Ted did not have knowledge of Phil's actions.

Question 4

Jim was engaged by Nick as his agent to purchase a parcel of land for him. Jim approached the owner of the land, and offered to sell the land for him as his agent if he would pay a commission on the sale. The owner agreed, and the sale was arranged with Nick. Without disclosing details of the transaction, Jim collected a commission on the sale from both Nick and the landowner. The owner of the property, who also thought that Jim was his agent, would be entitled to recover the commission he paid to Jim.

Accepted Answer

Jim breached his fiduciary duty by collecting a commission from both parties without disclosing the details of the transaction. The owner of the property would be entitled to recover the commission he paid to Jim as Jim was acting as his agent as well.

Question 5

Without Ted's knowledge, Phil, who frequently purchased lumber on Ted's behalf, purchased a large quantity of plywood from Chris as agent for Ted. Phil later advised Ted of the purchase. If Ted was bound by the contract which he had not authorised Phil to make, he (Ted) would be entitled to take legal action against Phil for any loss which he suffered.

Accepted Answer

Since Phil acted without Ted's knowledge or authorization, Ted can hold Phil liable for any losses suffered as a result of the unauthorized contract. This would be a case of breach of fiduciary duty by Phil.

Question 6

Adrienne hired an agent to sell a quantity of furniture that she owned. She instructed the agent to sell the furniture without disclosing her identity as owner. The agent eventually sold the furniture to Simple. Adrienne then decided not to deliver the furniture. If the agent merely does not disclose that he is acting as the agent for a principal, Simple may elect to sue either the agent or Adrienne, if he discovers her identity.

Accepted Answer

If the agent does not disclose that he is acting as an agent for a principal, Simple may elect to sue either the agent or the undisclosed principal (Adrienne) if he discovers her identity. This is because Simple entered into a contract with the agent, believing him to be the owner of the furniture. When he discovers that the agent was acting on behalf of someone else, Simple may choose to sue either the agent or the principal for breach of contract.

Question 7

The role of an agent is to carry out a specific task for its principal with a third party such that there are no direct dealings between the principal and third party. The third party need never be told of the existence of the principal.

Accepted Answer

The answer of The role of an agent is to...

Question 8

Adrienne hired an agent to sell a quantity of furniture that she owned. She instructed the agent to sell the furniture without disclosing her identity as owner. The agent eventually sold the furniture to Simple. Adrienne then decided not to deliver the furniture. Simple could sue both the agent and Adrienne, if he discovered her identity, since he knew the agent was acting as an agent only.

Accepted Answer

The answer of Adrienne hired an agent to sell a...

Question 9

Certain high-technology components may not be exported to nations on the Export Controls List. The export broker for a manufacturer of such components could be held liable for any loss to the manufacturer as a result of incorrectly classifying prohibited components on the export approval applications.

Accepted Answer

Export brokers have a responsibility to accurately classify the components on export approval applications and can be held liable for any losses to the manufacturer resulting from incorrect classification of prohibited components.

Question 10

Jim was engaged by Nick as his agent to purchase a parcel of land for him. Jim approached the owner of the land, and offered to sell the land for him as his agent if he would pay a commission on the sale. The owner agreed, and the sale was arranged with Nick. Without disclosing details of the transaction, Jim collected a commission on the sale from both Nick and the landowner. If the secret commission was discovered, Nick would be entitled to collect the secret commission paid to Jim by the landowner.

Accepted Answer

This scenario falls under the concept of secret profits, which is a breach of fiduciary duty by an agent. Nick has the right to recover any secret profits made by his agent in connection with the transaction. Therefore, if the secret commission paid to Jim by the landowner is discovered, Nick would be entitled to collect it.

Question 11

Without Ted's knowledge, Phil, who frequently purchased lumber on Ted's behalf, purchased a large quantity of plywood from Chris as agent for Ted. Phil later advised Ted of the purchase. Ted may ratify the contract made by Phil, if he wishes to do so, provided that he could have made the agreement himself at the time that the agreement was made by Phil.

Accepted Answer

Ted has the option to ratify the contract made by Phil, as long as he had the capacity to make the agreement at the time it was made by Phil.

Question 12

Without Ted's knowledge, Phil, who frequently purchased lumber on Ted's behalf, purchased a large quantity of plywood from Chris as agent for Ted. Phil later advised Ted of the purchase. Ted is bound by the contract made by Phil, because Phil had apparent authority to purchase the lumber on Ted's behalf.

Accepted Answer

Apparent authority is the authority that a third party reasonably believes an agent has based on the actions or statements of the principal. In this case, since Phil frequently purchased lumber on Ted's behalf, and acted as Ted's agent in making the purchase from Chris, a reasonable third party would believe that Phil had the authority to make the purchase on Ted's behalf. Therefore, Ted is bound by the contract made by Phil.

Question 13

A principal who ratifies a contract may begin accepting benefits under the contract before it has been ratified in writing.

Accepted Answer

The principal's acceptance of benefits under the contract is considered as a form of ratification, and therefore can occur before the contract is ratified in writing.

Question 14

Without Ted's knowledge, Phil, who frequently purchased lumber on Ted's behalf, purchased a large quantity of plywood from Chris as agent for Ted. Phil later advised Ted of the purchase. If Ted had died, Phil would be liable to Chris on the basis of Phil's implied warranty that he had authority to negotiate the contract on behalf of a principal that existed.

Accepted Answer

Phil acted as an agent for Ted without Ted's knowledge, therefore he impliedly represented to Chris that he had authority to negotiate the contract on Ted's behalf. If Ted had died, Phil would still be liable to Chris for breach of this implied warranty.

Question 15

Without Ted's knowledge, Phil, who frequently purchased lumber on Ted's behalf, purchased a large quantity of plywood from Chris as agent for Ted. Phil later advised Ted of the purchase. As an agent, Phil must make certain that his principal is in existence at the time the contract is negotiated, otherwise, he would be liable for breach of warranty of authority.

Accepted Answer

As an agent, Phil has the duty to ensure that his principal (Ted) exists at the time of the contract negotiation. If he fails to do so, he would be liable for breach of warranty of authority.

Question 16

Jim was engaged by Nick as his agent to purchase a parcel of land for him. Jim approached the owner of the land, and offered to sell the land for him as his agent if he would pay a commission on the sale. The owner agreed, and the sale was arranged with Nick. Without disclosing details of the transaction, Jim collected a commission on the sale from both Nick and the landowner. Jim acted in breach of his duty to act in good faith when he obtained commissions from both parties.

Accepted Answer

Jim acted in breach of his duty to act in good faith when he obtained commissions from both parties. It is a conflict of interest and goes against the duty of loyalty and the duty to avoid conflicts of interest that an agent owes to their principal.

Question 17

The apparent authority of an agent is not sufficient to bind a principal in a contract with a third party which is negotiated after the agency relationship has been terminated.

Accepted Answer

The answer of The apparent authority of an agent is...

Question 18

In an agency relationship all of the general rules of contract apply to all of the parties except the rules of capacity.

Accepted Answer

In an agency relationship, the rules of capacity apply just as they do in contract law, meaning all parties must have the capacity to enter into a contract for the agency relationship to be legally valid.

Question 19

Without Ted's knowledge, Phil, who frequently purchased lumber on Ted's behalf, purchased a large quantity of plywood from Chris as agent for Ted. Phil later advised Ted of the purchase. If Ted had died the day before the contract negotiated by Phil was made, Chris would be entitled to sue Ted's estate to enforce the agreement.

Accepted Answer

Since Ted had died before the contract was made, there was no principal-agent relationship at the time of the contract, making the agreement unenforceable against Ted's estate.

Question 20

An agent was engaged by a developer to arrange financing and obtained a favourable arrangement from a local lending institution. The lender gave the agent a fee for bringing in such a large account. The agent must disclose this fee to his principal.

Accepted Answer

According to the general rule of agency law, a principal is entitled to full disclosure of all material facts known to the agent. Therefore, the agent must disclose any fees or compensation received from third parties in connection with the transaction to his principal.

Quiz 15: Law of Agency

The role of an agent is to carry out a specific task for its principal with a third party such that there are no direct dealings between the principal and third party. The third party need never be told of the existence of the principal.

A principal who ratifies a contract may begin accepting benefits under the contract before it has been ratified in writing.

The apparent authority of an agent is not sufficient to bind a principal in a contract with a third party which is negotiated after the agency relationship has been terminated.

In an agency relationship all of the general rules of contract apply to all of the parties except the rules of capacity.

An agent was engaged by a developer to arrange financing and obtained a favourable arrangement from a local lending institution. The lender gave the agent a fee for bringing in such a large account. The agent must disclose this fee to his principal.