Chapter 13 The Agency Relationship PDF

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Chapter 13 - The Agency Relationship 1. Which of the following employees is mostly likely an agent on behalf of their employer? a. custodian b. sales clerk c. typist d. maintenance

worker ANSWER: b 2. Which of the following requires formal recognition with respect to an actionable claim arising from an alleged agency relationship? a. a wide array of transactions b. the cornerstone of a business c. a delegation of authority d. the commonality of occurrence ANSWER: c 3. Why do agency relationships, in general, operate with few difficulties? a. Agents simply represent principals in transactions with others. b. Engaging external specialists is a cornerstone of business. c. Businesspeople cannot operate their businesses alone. d. Parties use agents instead of dealing face to face. ANSWER: a 4. What is the term for a third party with whom an agent conducts business on behalf of a principal? a. principal b. agent c. defendan

t d. outsider ANSWER: d 5. Which of the following is a distinguishing characteristic of the law of agency? a. It is derived largely from special statutes. b. It is derived largely from tort and contract law. c. It is derived largely from provincial legislation. d. It is derived largely from contract law. ANSWER: b 6. Although Geraldine’s job title at a local car dealership is “sales director,” in reality, all car deals must be

approved by the dealership’s owner. One day, Geraldine exceeded her authority and approved a sales contract when the owner was away. Why might the contract be binding on the dealership? Copyright Cengage Learning. Powered by Cognero.

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Chapter 13 - The Agency Relationship a. because she was acting with apparent authority b. because she was an agent of necessity c. because she is an employee of the car dealership d. because she had actual authority ANSWER: a 7. Bonita and Laraleigh want to create a relationship with insurance broker Lee Kim. How should they proceed

if they want to use the most common method available to accomplish the desired outcome? a. deposit b. retainer c. contract d. letter of intent ANSWER: c 8. Sherif is the general manager of a clothing store. His authority to hire an electrician to repair a faulty light in

the store would likely arise from which of the following? a. personal care power b. his implied authority c. his fiduciary duty d. his legal authority ANSWER: b 9. Tom’s photographs will be exhibited for two weeks in Natural WildLife Gallery Inc., commencing May 1.

The gallery is authorized to sell any of Tom’s works, as long as they adhere to the agreed price list. What is the nature of the relationship between these parties? a. agency by commitment b. employment agreement c. agency by agreement d. retainer agreement ANSWER: c 10. Which of the following terms is synonymous with “apparent authority”? a. actual authority b. implied authority c. ostensible

authority d. agency by estoppel ANSWER: c 11. In what way are an agent’s actual authority and an agent’s apparent authority similar? a. Both must be expressed in writing. Copyright Cengage Learning. Powered by Cognero.

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Chapter 13 - The Agency Relationship b. Both bind the principal. c. Both restrict an agent to a single purpose. d. Both are defined by statute. ANSWER: b 12. Which of the following is a distinguishing characteristic of the implied authority of an agent? a. It may be intuitively deduced by the agent’s position. b. It typically takes the form of an informal power of attorney. c. It is customarily limited to a short time period. d. It is inherently inflexible and narrowly defined. ANSWER: a 13. Garnett Fashions Ltd. just terminated its long-term agency relationship with the Higa Agency, which it has

retained for many years to negotiate purchase contracts with retail outlets for Garnett’s manufactured goods. What advice would you give Garnett at this time? a.that Higa has the onus to inform outsiders that it is no longer Garnett’s agent b.that Garnett has the onus to inform outsiders that Higa is no longer its agent c.that outsiders have an obligation to prove whether or not there is an ongoing agency relationship between Garnett and Higa d.that Higa can no longer bind Garnett to contracts ANSWER: b 14. The employment contract of a manager of a business expressly recites her authority. How do other

components of her authority come into existence? a. via the more tangible form of a detailed job description b. by conducting a fact-specific inquiry of the position’s job description c. via the nature of the position and business management requirements d. by the strict utterance of instructions to the manager ANSWER: c 15. Which of the following occurs when a person represents himself as another’s agent, even though he is not, and the purported principal then adopts the acts of the “agent”? a. implicated authority b. actual authority c. expressed authority d. agency by ratification ANSWER: d 16. What approach would a court most likely take to determine the type of authority an agent has? a. an inherently flexible inquiry Copyright Cengage Learning. Powered by Cognero.

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Chapter 13 - The Agency Relationship b. a fact-specific inquiry c. a broad informal inquiry d. a narrow informal inquiry ANSWER: b 17. An agent has been given authority to act for the principal in relation to a directive that sets out conditions

required for the removal of life-support systems. What form of authority has the agent been given? a. a general power of attorney b. a specific-care directive c. a personal care power of attorney d. a health care directive ANSWER: c 18. Jacqueline is a real estate agent and her clients are a young couple who are hoping to purchase their first home. Which of the following statements is true regarding Jacqueline’s role as “real estate agent”? a. She likely has the actual authority to make binding contracts on behalf of her clients. b. She has implied and ostensible authority to make binding contracts on behalf of her clients. c. She likely has no authority to make binding contracts of sale on behalf of her clients. d. She now fulfills the role of purchasing agent for her clients. ANSWER: c 19. How will a power of attorney operate if it states that the occurrence of a specific event will make it

operational? a. as a variation of a general power of attorney b. as a variation of an enduring power of attorney c. as a variation of a springing power of attorney d. as a variation of a specific power of attorney ANSWER: b 20. Which of the following is an example of a fiduciary duty owed by an agent to a principal? a. duty to avoid conflicts of interest b. duty of personal performance c. duty not to breach the agency contract d. duty to ratify on behalf of the principal ANSWER: a 21. From which of the following does a third party typically derive an agent’s ostensible authority? Copyright Cengage Learning. Powered by Cognero.

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Chapter 13 - The Agency Relationship a. the conduct of the principal b. reasonable inference of usual authority c. an expression of the limitations of authority d. inferring typical authority ANSWER: a 22. Jack sent a cover letter with his new purchasing agent, Kuan Huo, advising suppliers of Kuan’s authority to transact purchases under $33 000. How would a court considering a dispute in which a plaintiff alleges Kuan had apparent authority to enter into a $42 000 purchase contract most likely resolve this dispute? a. Deny the third party’s claim based on the principal’s stated limitation. b. Deny the second-party claim because the agent’s limited authority was reasonably known. c. Deny a first-party claim on the grounds it ought to have known of the reasonable limitation. d. Deny the outsider’s claim based on the agent’s unenduring authority. ANSWER: a 23. Dora is an investment advisor who is also part owner of a new business. Without disclosing her ownership, Dora has recommended that clients purchase shares in her new business. Which of the following wrongs has Dora likely committed? a. breach of duty of agency b. breach of fiduciary duty c. breach of authority d. estoppel ANSWER: b 24. Which of the following would a court require confirmation of in order to establish the validity of an agency

relationship where circumstances involve agency by estoppel? a.the adoption by the principal of a contract the agent lacked authority to enter at the time b.circumstances that necessitated acting without authority from the principal c.an agreement by the third party to be bound by commitments made to the agent d.the principal’s actions are readily viewed by outsiders as denoting an existing agency relationship ANSWER: d 25. Which of the following is a feature of agency by estoppel? a. Under agency by estoppel, the principal is not bound unless she chooses to be. b. Under agency by estoppel, the agent is bound unless the principal ratifies the

contract. c. Under agency by estoppel, the principal can be sued by the third party for

breach of contract. Copyright Cengage Learning. Powered by Cognero.

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Chapter 13 - The Agency Relationship d. Under agency by estoppel, the third party cannot be sued for breach of

contract. ANSWER: c 26. Kyrie negotiated a contract in good faith with a party whose introductory letter from his employer reasonably led her to believe he had the proper authority to do so. What would be the most likely outcome of any dispute challenging the existence of an agency relationship? a. The law sides with the principal through ratification. b. A court will determine the agent had actual authority. c. The law sides with the customer through estoppel. d. A court will determine the agent had apparent authority. ANSWER: c 27. In which way are a reduction of an agent’s authority and the severance of an agent’s authority similar? a. The same general principles will apply. b. Both require representation by authority. c. Both are governed by agency of estoppel. d. Both require ratification by the principal. ANSWER: a 28. Marta sold Phillip’s racing cycle to Bill while Phillip was away on business in Toronto. Phillip hadn’t

expected Marta to act in this way, but he happily accepted the $1500 cash and signed a receipt. In this instance, the agency relationship exemplifies which of the following? a. implied authority b. agency by estoppel c. agency by ratification d. actual authority ANSWER: c 29. In which of the following situations would a principal be unable to ratify a contract by its “agent”? a. where the contract favours the principal b. where the contract favours the agent c. where the principal fails to act within a reasonable time d. where the agent lacked actual authority ANSWER: c 30. What are the duties required of an agent? a. reimburse the principal for out-of-pocket

expenses b. pay the principal for services rendered Copyright Cengage Learning. Powered by Cognero.

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Chapter 13 - The Agency Relationship c. abide by the terms of the agency agreement d. indemnify the principal for agency business losses ANSWER: c 31. Which of the following is a duty owed by a principal in an agency relationship? a. reimburse the agent for out-of-pocket expenses b. fiduciary duty to uphold the trust placed by the

agent c. retroactively acknowledge authority of agents d. ratify all contracts within prescribed time limits ANSWER: a 32. Which of the following is a distinguishing feature of fiduciary duties? a. They only arise in agency relationships. b. They only arise in cases of power imbalance. c. They arise in many business relationships. d. They arise in all employment relationships. ANSWER: c 33. What constrains a lawyer’s ability to place herself in a position where her own interests conflict with the interests of the principal? a. a profit rule b. a trust rule c. a constraint rule d. a conflict rule ANSWER: d 34. What would an insurance agent who fails to advise a client that a form of requested coverage is unavailable

likely be found by a court to have committed? a. breach of insurance standard b. breach of fiduciary duty c. breach of agency of insurance d. breach of enduring contract ANSWER: b 35. Which of the following is considered, as a general rule, to be within the scope of an agent’s fiduciary duties? a. full disclosure of acceptance of each secret commission and profit b. absolute prohibition against acting for two principals c. sending a client’s file for storage with an outside storage facility d. personal interests supersede the interests of the principal Copyright Cengage Learning. Powered by Cognero.

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Chapter 13 - The Agency Relationship ANSWER: d 36. Which of the following would a court require evidence of in order to establish the existence of a fiduciary duty owed to a plaintiff? a. the principal’s influence and trust b. the defendant’s reliance, power, and influence c. the agent’s influence and reliance d. the plaintiff’s reliance, trust, and vulnerability ANSWER: d 37. Although he was not really an agent and had no authority to do so, Gordon thought his employer would be

delighted when he purchased a truck “on behalf of” his employer. Although the price was very reasonable, his employer now refuses to ratify the contract. Which statement best describes the parties’ liability under the contract? a. Gordon and his employer are bound by the contract. b. The employer is solely liable as an undisclosed principal. c. The employer is solely liable under the doctrine of estoppel. d. Gordon is bound by the contract. ANSWER: d 38. A lawyer is researching the damages relating to his client’s breach of a fiduciary duty that ought to be

recoverable. Which of the following would the lawyer most likely have to consider? a. damages arising from contract and the equities b. contract, tort, and punitive remedies c. damages arising from contract and tort remedies d. contract, tort, and equitable remedies ANSWER: d 39. Which of the following is most important for agents to comprehend with respect to equitable remedies? a. when a fiduciary relationship exists with the full scope of the duties b. the whole range of equitable remedies that are available c. that business relationships can be easily categorized as fiduciary d. the remedies that are available when the agent lacks “clean hands” ANSWER: a 40. Which of the following exemplifies the liability of an agent who acts without authority and contracts with a third party? a. The agent is liable to the principal for breach of warranty of authority. b. The third party is liable to the principal for breach of warranty of authority. c. The principal is liable to the agent for breach of agency by ratification. Copyright Cengage Learning. Powered by Cognero.

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Chapter 13 - The Agency Relationship d. The agent is liable to the third party for breach of warranty of authority. ANSWER: d 41. A large land developer granted Kyrie authorization to act as agent on its behalf, as an undisclosed principal, for the purchase of three tracts of land. Kyrie believes that, as long as she remains within the scope of that authority, the developer will be liable on the contracts. Which of the following is noted as being a valid criticism of this rule of agency law? a. The agent has no liability. b. It’s an area of unsettled law. c. It’s inconsistent with the general principles of contract law. d. The terminology in this area is not consistently employed by the judiciary. ANSWER: c 42. The application of which of the following is most likely to be created by the liability arising from agency principles with respect to employees and independent contractors? a. the doctrine of vicarious liability b. the common law principle of agency c. the common law neighbour principle d. the doctrine of primary liability ANSWER: a 43. Which of the following is an advisable step for a principal to take after terminating an agency relationship? a. Ensure the termination agreement is put into writing. b. Ensure that third parties are notified. c. Ensure an indemnity agreement is in place. d. Ensure the agent is informed in writing of the termination. ANSWER: b 44. Which of the following would a risk manager indicate as being a key point with respect to managing agency relationships? a. Choosing to avoid conflicts of interests is an agent’s duty. b. Choose wisely, instruct carefully, and review regularly. c. Fiduciary duties must be specified in the agency agreement. d. Fiduciary duties are automatically owed to the principal. ANSWER: b 45. Partners in a partnership are agents and can bind the partnership to contracts. a. True b. Fals e ANSWER: True Copyright Cengage Learning. Powered by Cognero.

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Chapter 13 - The Agency Relationship 46. Actual authority is a relationship that exists when one party represents another party in the formation of legal relations. a. True b. Fals e ANSWER: Fals e 47. The individual who permits another to act on his or her behalf is legally known as a principal. a. True b. Fals e ANSWER: True 48. The law of agency is derived largely from tort and contract law. a. True b. Fals e ANSWER: True 49. There must be three key relationships at play in any given agency situation. a. True b. Fals e ANSWER: Fals e 50. It is possible to form an agency relationship by words or actions. a. True b. Fals e ANSWER: True 51. When an agent acts within the scope of the agent’s authority, the principal is bound by the contract, whether

the principal likes it or not. a. True b. Fals e ANSWER: True 52. Agency relationships generated difficult complications resulting from unethical practices, necessitating the legislation of numerous special statues to govern agent’s duties and responsibilities. a. True b. Fals e Copyright Cengage Learning. Powered by Cognero.

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Chapter 13 - The Agency Relationship ANSWER: Fals e 53. Express authority is a narrowly interpreted legal term describing the oral communication of authority to any

agent. a. True b. Fals e ANSWER: Fals e 54. Amir was given verbal permission to buy a truck for his employer with a spending limit of $20 000. Amir’s

agreement to pay $21 000 for a truck will not be binding on his employer. a. True b. Fals e ANSWER: Fals e 55. The onus is on outsiders to inquire as to the limits of an agent’s authority. a. True b. Fals e ANSWER: Fals e 56. An agency relationship created when one party adopts a contract entered into on his behalf by another who

acted without authority at the time is legally known as an agency by estoppel. a. True b. Fals e ANSWER: Fals e 57. An agency relationship created when the principal acts such that third parties reasonably conclude that an

agency relationship exists is legally described as an agency by ratification. a. True b. Fals e ANSWER: Fals e 58. A duty imposed on a person who has a special relationship of trust with another is legally known as a

fiduciary duty. a. True Copyright Cengage Learning. Powered by Cognero.

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Chapter 13 - The Agency Relationship b. Fals e ANSWER: True 59. All fiduciaries are agents of principals. a. True b. Fals e ANSWER: Fals e 60. An agent who has been given permission to “download responsibility for performance” is requ...