2213-agency-prac-quest-f06

True/False Indicate whether the sentence or statement is true or false. ____ ____ ____ ____ ____ ____ ____ ____ ____ 1. Agents are fiduciaries of their principals. 2. In a principal-agent relationship, the agent is authorized to act on behalf of and in place of the principal in negotiating and transacting business with third parties. 3. An employee or an independent contractor may act in the capacity of an agent. 4. An employee is one whose physical conduct is controlled, or subject to control, by his or her employer. 5. All employer-employee laws apply to employer-independent contractor relationships. 6. Agency relationships do not exist outside employment relationships. 7. An independent contractor may not act in the capacity of an agent. 8. Independent contractors are always agents of their employers. 9. Federal laws governing employment discrimination apply to employer-independent contractor relationships.

____ 10. There does not need to be a written agreement between two parties to create an agency relationship. ____ 11. A minor can be an agent but cannot normally be a principal appointing an agent. ____ 12. Agency relationships may be created for both legal and illegal purposes. ____ 13. A principal who places an agent in a situation in which he or she may be presumed to have authority to act is estopped as against third persons from denying the agent's apparent authority. ____ 14. A party who creates the appearance of an agency is free to deny that an agency exists, even if a third party has reasonably relied on that appearance to his or her detriment. ____ 15. An agent who fails to use reasonable diligence and skill in acting on behalf of his or her principal may be liable for breaching a duty of performance. ____ 16. All agency relationships are based on contract. ____ 17. A principal is not ordinarily required to indemnify an agent for liabilities incurred because of authorized and lawful acts and transactions by the agent. ____ 18. A principal's liability in a contract with a third party may arise from the authority given to the agent to enter into legally binding contracts on behalf of the principal. ____ 19. A principal may confer authority on an agent only in writing. ____ 20. The failure of a principal to repudiate promptly an unauthorized transaction by an agent is a ratification of the transaction. ____ 21. Business customs have no effect on the scope of an agent's implied authority. ____ 22. Apparent authority exists if a principal causes a third party to believe reasonably that an agent has authority to act, even if the agent does not. ____ 23. A principal can ratify a contract signed by his or her purported agent either expressly or by implication. ____ 24. A principal may affirm the desirable parts of a contract and reject the undesirable parts of the contract.

____ 25. A partially disclosed principal is one whose identity is not known by a third party, even though the third party knows that the agent is or may be acting for a principal. ____ 26. If an agent acts within the scope of his or her authority, a disclosed principal is liable to a third party for contracts made by the agent. ____ 27. If an agent acts within the scope of his or her authority, a partially disclosed principal is liable to a third party for contracts made by the agent. ____ 28. An undisclosed principal is not liable to a third party for contracts made by the agent acting outside the scope of his or her authority. ____ 29. When a principal places an agent in a position to defraud a third party, the principal is liable for the agent's fraudulent acts. ____ 30. Under the theory of respondeat superior, liability for the wrongful acts of employees within the scope of their employment is imposed on employers because they are deemed to be in a better financial position to bear the loss. ____ 31. All travel time of a traveling salesperson is normally considered to be within the scope of employment for the duration of the business trip, including the return trip home. ____ 32. A principal is not liable for an agent's crime simply because it was committed while the agent was acting within the scope of employment. Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 33. Erin is the agent of Franco, an actor. Erin makes a deal for Franco to act in a new movie for Great Productions, Inc. The contract is binding on Franco if it is signed on his behalf by a. Erin. b. Great Productions. c. the Screen Actors Guild. d. none of the above. ____ 34. American Products, Inc., employs Bill as a salesperson, with the authority to sell American's products at prices that Bill negotiates in the field. With respect to those prices, Bill is a. American's employee only. b. American's employee and agent. c. an independent contractor. d. none of the above. Fact Pattern 31-1 Janet and Julie work at ABC Interiors. Janet is a designer who works with clients of ABC on interior design projects. ABC closely supervises all of its designers, and dictates their work schedules. Julie works part-time in the evenings cleaning the offices. ____ 35. Refer to Fact Pattern 31-1. Janet is ABC's

a. employee but not agent. b. employee and agent. c. independent contractor. d. employee, agent, and independent contractor. ____ 36. Refer to Fact Pattern 31-1. Julie is ABC's a. agent but not employee. b. employee and agent. c. independent contractor. d. employee or independent contractor, depending on whether ABC controls the details of her physical performance. ____ 37. Mike is an architect who works for General Construction Company. The most important factor in determining whether Mike is General's employee or an independent contractor is a. the degree of control that General exercises over Mike. b. the distinction between General's business and Mike's occupation. c. the length of the working relationship between General and Mike. d. the method of payment. ____ 38. Warren hires Sam and Toby to paint his barn one time only. Sam decides it would be easier to paint the top of the barn by climbing up a nearby tree and jumping onto the roof. Sam falls out of the tree and breaks his leg. Warren is liable for a. nothing, because Sam is an independent contractor. b. Sam's medical costs, because Sam is an agent. c. Sam's lost income and medical costs, because Sam is an employee. d. none of the above. ____ 39. Mick contracts with Brian to act as Mick's agent to direct smuggling operations into the United States. Brian does not successfully complete the smuggling operations. Mick can recover from Brian for a. nothing. b. breach of contract. c. malpractice. d. incompetence. ____ 40. Helen retains Jack to act as her authorized business agent. Helen does not know that Jack is a minor. Jack enters into a contract on Helen's behalf. The contract is a. binding on Helen. b. binding on Jack.

c. void. d. voidable. ____ 41. Fred is legally incompetent. Fred can be a. an agent only. b. a principal only. c. an agent or a principal. d. none of the above. ____ 42. Bonnie and Dave may create their agency agreement a. orally. b. by written contract. c. by conduct. d. all of the above. ____ 43. Ellen, a salesperson at Top Tile Company, tells a customer, "Buy your tile here, and I'll install it myself for half of what Top would charge you." The customer makes the purchase based on Ellen's representation. Ellen installs the tile, charges the customer $500, and keeps the money. Ellen has breached the duty of a. loyalty. b. notification. c. obedience. d. none of the above. ____ 44. Donna holds herself out as possessing special engineering skills. As an agent, she must exercise the degree of skill or care expected of a. a person having those skills. b. a reasonable person. c. a reasonable person under similar circumstances. d. none of the above. ____ 45. Alex, an agent for Paul, signs an agreement on Paul's behalf but neglects to tell Paul that the agreement requires the payment of certain taxes. The government prosecutes Paul for failing to pay the taxes. Paul is a. not liable, because he was not informed of the tax liability by Alex. b. not liable, because he was not given adequate notice. c. liable, because Alex's knowledge is imputed to Paul. d. liable, because paying taxes is mandated by the Constitution.

____ 46. International Software, Inc., employs Jill as an agent. During the agency, Jill acquires new knowledge and skills. She also learns International's trade secrets, including customer lists. After the termination of the relationship, Jill uses her acquired skills and knowledge, but not International's trade secrets, in a new job. Jill has breached the duty of a. loyalty. b. obedience. c. performance. d. none of the above. ____ 47. Gil is an agent for Best Farm Products, Inc., in the Midwest. Gil owes Best Farm Products the duty of a. performance. b. notification. c. loyalty. d. all of the above. ____ 48. National Computer Corporation (NCC) employs Cynthia as an agent. NCC gives her an exclusive territory in which to sell NCC products. NCC cannot compete with her in that territory under the duty of a. compensation. b. cooperation. c. indemnification. d. reimbursement. ____ 49. Andy hires Bree to act as his agent. Clyde sues Andy for Bree's negligent conduct. Andy's right to sue Bree for an equal amount of damages is the right of a. nullification. b. avoidance. c. termination. d. indemnification. ____ 50. Paul employs Executive Personnel Agency as an agent. They sign a written agreement that describes the rights and duties of both parties. This is an example of a. apparent authority. b. express authority. c. implied authority. d. none of the above. ____ 51. Lynn may hire employees to work in the computer store she manages despite the fact that her employment agreement with the owner says nothing about her being able to hire employees. This is an example of a. apparent authority.

b. equal authority. c. express authority. d. implied authority. ____ 52. U.S. Sales, Inc., employs Barb as a sales agent. U.S. Sales gives Barb a furnished office and an expense account. Techton Company orders goods from Barb, who fills the order with goods from Fast Products Corporation. The goods are defective. Techton may recover damages from U.S. Sales on the ground of a. apparent authority. b. express authority. c. implied authority. d. none of the above. ____ 53. Sue is an agent for Topical Productions, Inc. Topical may not rescind an unauthorized contract with United Catering Company executed by Sue if a. Sue caused United reasonably to believe that she was authorized to enter into the contract on Topical's behalf. b. Topical caused United reasonably to believe that Sue was authorized to enter into the contract on Topical's behalf. c. United assumed that Sue was authorized to enter into the contract on Topical's behalf. d. none of the above. ____ 54. Without authorization, Arnold contracts on behalf of Peter to have Brice paint the interior and exterior of Peter's house. Peter wishes to have Brice paint only the interior. Peter's attempt to rescind that part of the contract relating to the exterior and ratify that part of the contract relating to the interior will be a. successful. b. unsuccessful. c. illegal. d. none of the above. ____ 55. Greta hires David to act as her agent in the purchase of a home. Greta does not want the seller to know that she is the buyer, so she asks David to represent that he is making the purchase for himself. Greta is a. a disclosed principal. b. a partially disclosed principal. c. an undisclosed principal. d. an independent contractor. Fact Pattern 32-1 Al indicates that he is acting as an agent on behalf of an unidentified client when he enters into a contract with Stacey.

____ 56. Refer to Fact Pattern 32-1. The principal is a. disclosed. b. partially disclosed. c. undisclosed. d. none of the above. ____ 57. Refer to Fact Pattern 32-1. Who is liable to the third party for nonperformance of the contract? a. Al b. Al's principal c. Both a and b d. None of the above ____ 58. Brenda is a salesperson for Scot's Home Supply. She advises a customer that certain lumber will last for twenty years without treatment to prevent water damage. In reliance on this advice, the customer purchases the wood. Brenda's statement is in error, and the lumber deteriorates within three years. Scot's Home Supply is a. not liable-only Brenda is liable. b. not liable, nor is Brenda, because the customer should have known that the wood could not last for twenty years. c. liable, because the misrepresentation occurred within the scope of Brenda's employment. d. liable, with Brenda, under the rule of shared liability. ____ 59. Karen orders Tad, her real estate agent, to tell prospective buyers that there is a sparkling water spring beneath her land, even though she knows there is no spring. Tad tells prospective purchasers Larry and Helga about the spring. Helga buys the property. Karen is liable for any damages arising from her misrepresentation to a. Tad. b. Larry. c. Helga. d. none of the above. ____ 60. Jill is an employee of Kandy Shoppes, Inc. In deciding whether Jill was acting within the scope of her employment when she committed a tort against Loren, a court will not consider whether a. the act was one commonly performed by employees on behalf of their employers. b. Jill made statements indicating that she was acting on behalf of Kandy Shoppes. c. Kandy Shoppes authorized the act. d. Kandy Shoppes furnished the means or instrumentality by which the injury was inflicted.

____ 61. Tri-State Trucking Company employs Warren as a delivery agent. While making a delivery within the scope of employment, Warren causes an accident in which Yvonne is injured. Yvonne can recover from a. Tri-State Trucking only. b. Warren only. c. Tri-State Trucking or Warren. d. none of the above. ____ 62. Electronics Warehouse Company employs Statewide Financial, Inc., as a collection agent. While repossessing goods from Todd, one of Electronics's delinquent customers, Statewide causes an accident in which Todd is injured. Todd can recover from a. Electronics Warehouse only. b. Statewide Financial only. c. Electronics Warehouse or Statewide Financial. d. none of the above. ____ 63. Tina is a sales agent for American Sales, Inc. They may terminate their agency relationship by a. mutual agreement. b. the occurrence of a specific event. c. the achievement of the purpose of the agreement. d. any of the above. ____ 64. Gil is a purchasing agent for H&H Ranch with the authority to buy cattle at a certain auction. After the cattle have been bought, the agency relationship terminates a. automatically. b. following notice to all actual cattle sellers. c. following notice to all potential cattle sellers. d. following published notice in a local newspaper. ____ 65. Eagle Manufacturing Company employs Linda as an agent. To terminate Linda's authority, Eagle must notify a. Linda only. b. only third parties who know of the agency relationship. c. Linda and third parties who know of the agency relationship. d. none of the above. ____ 66. Mike hires Candy, a real estate broker, to sell his house. The house burns down before being sold. The existing agency agreement is likely a. still in force if Candy says nothing about the fire to prospective customers.

b. still in force if Mike gives Candy additional consideration. c. terminated by operation of law. d. terminated by mutual consent of the parties.

2213-agency-prac-quest-f06 Answer Section

TRUE/FALSE 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: T T T T F F F F F T T F T F T F F T F T F T T F T T T T T T T T REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: 572 572 573 573 573 573 573 573 573 577 577 577 578 578 580 580 583 587 587 587 588 589 592 592 592 592 592 593 594 595 597 601 OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: Type: = Type: = Type: = Type: = Type: + Type: N Type: N Type: = Type: + Type: N Type: = Type: = Type: = Type: N Type: + Type: N Type: = Type: = Type: + Type: + Type: = Type: + Type: = Type: = Type: = Type: = Type: = Type: N Type: N Type: = Type: = Type: N

MULTIPLE CHOICE 33. 34. 35. 36. 37. 38. ANS: ANS: ANS: ANS: ANS: ANS: A B B D A A REF: REF: REF: REF: REF: REF: 572 573 573 573 573 573 OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: Type: N Type: N Type: = Type: = Type: N Type: =

39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. 66.

ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS:

A A A D A A C D D B D B D A B B C B C C C B C C D A C C

REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF:

577 577 577 577 580 580 580 580 580 582 583 587 588 589 589 592 592 592 592 594 594 595 596 596 601 602 603 603

OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ:

Type: = Type: N Type: N Type: = Type: + Type: + Type: = Type: N Type: = Type: N Type: N Type: N Type: + Type: N Type: + Type: = Type: = Type: = Type: = Type: = Type: = Type: + Type N Type N Type: = Type: N Type N Type: =