Question 1

A principal may be held liable for the torts of an independent contractor:
A) whenever the contractor is performing work or rendering services for the principal.
B) if the principal fails to supervise the contractor.
C) if the contractor negligently performs an inherently dangerous activity.
D) All of these.

Accepted Answer

The principal may be held liable for the torts of an independent contractor if: the contractor negligently performs an inherently dangerous activity. This is known as the rule of nondelegable duty. The principal cannot delegate the duty of care owed to third parties for inherently dangerous work to an independent contractor. Therefore, the principal remains responsible for any harm caused by the independent contractor's work.

Question 2

Seth grants express authority to Reba to enter contracts on his behalf. If Reba discloses to third parties that she is an agent for Seth, she has liability on a contract in all but which of the following situations?
A) Reba makes a contract in her own name.
B) Reba makes a contract within the scope of her authority and discloses that she is acting for Seth.
C) Reba co-makes a contract with Seth.
D) Reba guarantees that Seth will perform the contract.
E) Reba cannot be held liable on a contract when she discloses she is Seth's agent as long as the contract is within her scope of authority.

Accepted Answer

The answer of Seth grants express authority to Reba to...

Question 3

When there was a contract with a previously undisclosed principal, the Third Restatement:
A) holds that a third party's rights against the principal are alternative to the third party's rights against the agent
B) rejects the election rule.
C) follows the same rules as the Second Restatement regarding a third person's rights against a principal and agent.
D) All of these.

Accepted Answer

The Third Restatement rejects the election rule in cases where there was a contract with a previously undisclosed principal. The election rule holds that a third party must elect whether to sue the principal or the agent, and cannot recover from both. Instead, the Third Restatement allows the third party to recover from both the principal and the agent, subject to the usual rules of joint and several liability. The Third Restatement also follows the same rules as the Second Restatement regarding a third person's rights against a principal and agent, except in cases where there was a contract with a previously undisclosed principal.

Question 4

Under the Third Restatement, an agent who represents an undisclosed principal is discharged from liability if:
A) the third party's judgment against the principal is satisfied.
B) the third party becomes aware of the principal.
C) after learning the identity of the principal, the third party gets a judgment against the principal.
D) The agent is never discharged from liability.

Accepted Answer

The answer of Under the Third Restatement, an agent who...

Question 5

Apparent authority may arise in all but which of the following ways?
A) The acts are customary of an agent in similar positions in an organization.
B) The principal has acquiesced to prior similar transactions between the agent and the third party.
C) The agent shows the third party a power of attorney from the principal authorizing the agent to enter such a transaction.
D) An agent tells the third person she has the authority to transact such business on behalf of the principal.

Accepted Answer

The answer of Apparent authority may arise in all but...

Question 6

An agent is not normally liable on a contract he makes with a third party on behalf of a(n) principal.
A) undisclosed
B) disclosed
C) partially disclosed
D) All of these are correct.

Accepted Answer

When an agent makes a contract with a third party on behalf of a disclosed principal, the agent is not liable for the contract. This means that the third party is aware that the agent is acting on behalf of a principal and the identity of that principal is known. In this case, the principal is responsible for fulfilling the terms of the contract, not the agent.

A) This is incorrect because if the agent does not disclose the identity of the principal, they may be held personally liable for the contract.

C) This is incorrect because in a partially disclosed agency, the third party knows the agent is acting on behalf of a principal, but does not know the identity of that principal. In this case, both the agent and the principal may be held liable.

D) This is incorrect because only option B is correct.

Question 7

Authority that is not found in the express or explicit words of the principal, but that is inferred from the words is known as:
A) apparent authority.
B) indirect authority.
C) delegated authority.
D) None of these.

Accepted Answer

The answer of Authority that is not found in the...

Question 8

If an agent at his principal's direction fixes prices with the principal's competitors:
A) only the agent is criminally liable.
B) only the principal is criminally liable.
C) both the principal and agent are criminally liable.
D) any liability would be civil only.

Accepted Answer

Both the principal and the agent are criminally liable if they fix prices with the principal's competitors. This is considered an antitrust violation and is a criminal offense punishable by law.

Question 9

Ratification:
A) can only occur after the third person withdraws from the transaction and gives notice of such withdrawal.
B) can be effected by a disclosed or an undisclosed principal according to the Second Restatement.
C) relieves the agent of any liability she may have to the third party by reason of her having induced the third party to enter the contract without the principal's authority.
D) may be made by a principal that was not in existence at the time the contract was made.

Accepted Answer

The answer of Ratification:
A) can only occur after the third...

Question 10

The purpose of an agency relationship is to:
A) allow the principal to extend his business activities by authorizing agents to enter into contracts with third persons on the principal's behalf.
B) encourage business growth by protecting employers from liability for torts or criminal activity.
C) allow a principal to contract through agents in ways he would not be able to contract on his own, such as creating valid contracts in situations where the principal could only create voidable contracts on his own.
D) eliminate the distinction between employees and independent contractors.

Accepted Answer

The purpose of an agency relationship is to allow the principal to extend their business activities by authorizing agents to enter into contracts with third persons on the principal's behalf. This allows the principal to delegate certain tasks and responsibilities to the agent while still maintaining control over their business operations.

Question 11

Under the Second Restatement, except in cases of death or incapacity or where performance of an authorized transaction becomes impossible, actual notice of termination of agency is required to the third party if she is one:
A) with whom the agent has dealt on credit.
B) to whom the agent has been specially accredited.
C) with whom the agent has begun to deal.
D) All of these.

Accepted Answer

According to the Second Restatement, actual notice of termination of agency is required to third parties in all three situations mentioned in the answer choices - (A) where the agent has dealt on credit, (B) where the agent has been specially accredited, and (C) where the agent has begun to deal. Therefore, the best answer is (D) all of these.

Question 12

Pat bought a cotton sweater at Ivey's Fashion Store. Sue, the salesperson, told her the sweater was guaranteed not to shrink if washed in cold water by hand. Pat washes the sweater as directed and it shrinks. Which of the following is correct?
A) Pat has no recourse against the store, because it was only the salesclerk who misrepresented the sweater.
B) Sue has apparent authority to make warranties such as the one that she made. Therefore, the store is bound.
C) If Sue is only a part-time employee, Ivey has no responsibility for misrepresentations she makes.
D) Salesclerks are usually independent contractors. Thus, there is no liability on the part of Ivey.

Accepted Answer

Sue had apparent authority as a salesperson to make warranties about the sweater. Therefore, the store is bound by the warranty she made, and Pat may seek recourse against the store for the misrepresentation.

Question 13

Which of the following is true with regard to contractual relations between the principal and a third party?
A) There is no liability on the part of the principal if the agent acts with implied authority.
B) An undisclosed principal and the third party are contractually bound if the agent acts within her actual authority, unless the contract specifies otherwise.
C) Under the Second Restatement, no principal is bound if the agent acts without any authority.
D) A partially disclosed principal is bound only if the agent acts within the scope of actual authority.

Accepted Answer

An undisclosed principal and the third party are contractually bound if the agent acts within her actual authority, unless the contract specifies otherwise. This is known as the doctrine of "respondeat superior" which holds the principal responsible for the actions of the agent acting within their authority. However, if the agent acts beyond their authority or if the principal is partially disclosed, the principal may not be bound by the contract.

Question 14

Richard writes a letter to Sarah authorizing her to sell his car and sends a copy of the letter to Timothy, a prospective purchaser. If the next day Richard sends a letter to Sarah revoking her authority, but he fails to notify Timothy, Sarah:
A) has actual authority to sell the car to Timothy.
B) has implied authority to sell the car to Timothy.
C) has apparent authority with respect to Timothy to sell the car.
D) is empowered under the doctrine of respondeat superior to negotiate the contract.

Accepted Answer

Sarah has apparent authority to sell the car to Timothy because Timothy received a copy of the letter authorizing her to do so and had no reason to suspect that her authority had been revoked. The revocation of authority only affects Richard's relationship with Sarah, not Timothy's relationship with Sarah. Therefore, Timothy can reasonably rely on the apparent authority of Sarah to sell the car.

Question 15

Under the Second Restatement, which of the following is correct with regard to a contract entered into with a third person by an agent of an undisclosed principal?
A) The agent has no liability to the third person if the agent has acted within the scope of her authority.
B) The agent is personally liable upon the contract unless the third person discovers the existence and identity of the principal and elects to hold the principal to the contract.
C) Once the third person learns of the existence and identity of the principal, that third person may hold both the principal and the agent to the performance of the contract.
D) If the third party obtains a judgment against the principal, the agent may still have liability to that third party.

Accepted Answer

The Second Restatement provides that an agent of an undisclosed principal is personally liable upon a contract entered into with a third person unless the third person discovers the existence and identity of the principal and elects to hold the principal to the contract. Once the existence and identity of the principal are disclosed, the third person may then hold both the principal and the agent liable to the performance of the contract. If the third party obtains a judgment against the principal, the agent is relieved of any further liability to the third party.

Question 16

Jack was fired by Larry but decided to try to win back his job as agent by getting a big new contract. He approached Sharon, a new client, and made a pitch to sell Larry's product. Sharon agreed to buy 100. Jack tells Larry. What are the legal consequences?
A) Larry has to hire Jack again and then make the deal.
B) Larry would have to ratify the deal to get the benefit of the contract.
C) Larry would have to negotiate the deal with Sharon himself.
D) Jack would forfeit his commission if Larry ratified the contract.

Accepted Answer

Since Jack was fired by Larry before making the sale, he was not authorized to act on behalf of Larry. However, if Larry ratifies the contract, he can still receive the benefit of the sale. Larry is not obligated to rehire Jack, but he may choose to do so if he wishes. Jack would still be entitled to his commission if Larry ratifies the contract.

Question 17

Spoken or written words the principal communicates to the agent create:
A) actual, express authority.
B) actual, implied authority.
C) apparent authority.
D) incidental authority.

Accepted Answer

Actual authority refers to the authority granted explicitly by the principal to the agent, and express authority occurs when the authority is conferred through spoken or written words. Therefore, spoken or written words from the principal to the agent create actual, express authority.

Question 18

Regarding the termination of an agency, the Third Restatement:
A) distinguishes between terminations based on death of a principal and terminations based on incapacity of the principal.
B) applies the same rule to all causes of termination; it applies a reasonableness standard.
C) applies the same rule to all causes of termination; it applies the actual notice standard.
D) applies the same rule as under the Second Restatement; a principal's death automatically ends the agent's apparent authority.

Accepted Answer

The Third Restatement applies the same rule to all causes of termination, which is a reasonableness standard. This means that termination must be reasonable and may require notice to the agent and third parties. It does not distinguish between terminations based on death or incapacity of the principal. The Second Restatement does have a rule that a principal's death automatically ends the agent's apparent authority, but the Third Restatement departed from that rule.

Question 19

Respondeat superior:
A) imposes vicarious liability on the agent.
B) makes a principal liable for the acts of independent contractors.
C) imposes vicarious liability on the principal for employees' acts committed within the scope of employment.
D) makes the agent responsible for his own acts

Accepted Answer

Respondeat superior is a legal doctrine that holds an employer or principal liable for the wrongful acts committed by an employee or agent within the course and scope of their employment or agency. Therefore, it imposes vicarious liability on the principal for employees' acts committed within the scope of employment. This is the correct definition, while the other options are incorrect.

Question 20

For a ratification to be effective, the principal must:
A) have knowledge of all material facts concerning the transaction.
B) communicate her intent to ratify to the third party.
C) renegotiate the contract with the third party.
D) All of these are correct.

Accepted Answer

The answer of For a ratification to be effective, the...

Quiz 20: Relationship With Third Parties

A principal may be held liable for the torts of an independent contractor:

Seth grants express authority to Reba to enter contracts on his behalf. If Reba discloses to third parties that she is an agent for Seth, she has liability on a contract in all but which of the following situations?

When there was a contract with a previously undisclosed principal, the Third Restatement:

Under the Third Restatement, an agent who represents an undisclosed principal is discharged from liability if:

Apparent authority may arise in all but which of the following ways?

An agent is not normally liable on a contract he makes with a third party on behalf of a(n) principal.

Authority that is not found in the express or explicit words of the principal, but that is inferred from the words is known as:

If an agent at his principal's direction fixes prices with the principal's competitors:

Ratification:

The purpose of an agency relationship is to:

Under the Second Restatement, except in cases of death or incapacity or where performance of an authorized transaction becomes impossible, actual notice of termination of agency is required to the third party if she is one:

Pat bought a cotton sweater at Ivey's Fashion Store. Sue, the salesperson, told her the sweater was guaranteed not to shrink if washed in cold water by hand. Pat washes the sweater as directed and it shrinks. Which of the following is correct?

Which of the following is true with regard to contractual relations between the principal and a third party?

Richard writes a letter to Sarah authorizing her to sell his car and sends a copy of the letter to Timothy, a prospective purchaser. If the next day Richard sends a letter to Sarah revoking her authority, but he fails to notify Timothy, Sarah:

Under the Second Restatement, which of the following is correct with regard to a contract entered into with a third person by an agent of an undisclosed principal?

Jack was fired by Larry but decided to try to win back his job as agent by getting a big new contract. He approached Sharon, a new client, and made a pitch to sell Larry's product. Sharon agreed to buy 100. Jack tells Larry. What are the legal consequences?

Spoken or written words the principal communicates to the agent create:

Regarding the termination of an agency, the Third Restatement:

Respondeat superior:

For a ratification to be effective, the principal must: