Question 1

Mark, who is 16 years old, appoints Joe, age 21, as his agent to purchase a videotape recorder from VideoWorld. The transaction between Joe and VideoWorld is:
A)void because Mark is a minor.
B)voidable by VideoWorld because Mark is a minor.
C)voidable by Mark because he is a minor.
D)not voidable because Joe is not a minor.

Accepted Answer

The transaction is voidable at the discretion of Mark because he is a minor. Minors have the legal right to disaffirm contracts to protect them from exploitation, but the contract is not automatically void.

Question 2

Which of the following would NOT be considered an agent?
A)A salesman who sells his employer's goods
B)An independent contractor without authority to act on behalf of the person hiring her
C)A factory worker hired to operate a machine
D)A buyer who regularly buys merchandise for a store

Accepted Answer

An independent contractor without authority to act on behalf of the person hiring her would not be considered an agent, as an essential aspect of an agency relationship is the authority to act on behalf of another.

Question 3

Carolyn, a cashier at Tops Supermarkets, may cash checks for up to $20 over a purchase amount.A friend needs money for a dress, so Carolyn cashes a check for $50 with no purchase.If the check bounces, Carolyn is:
A)liable because she violated her duty of obedience.
B)liable because she breached her duty to inform.
C)not liable since she has apparent authority to take the check.
D)not liable unless she knew her friend did not have the money in the bank.

Accepted Answer

Carolyn is liable because she violated her duty of obedience by cashing a check for $50 with no purchase, which goes beyond the policy of Tops Supermarkets allowing cashing checks only for up to $20 over a purchase amount.

Question 4

Mark hires Joe's real estate agency to sell his estate, telling Joe he has lost too much money playing the stock market to afford to keep it up.Then Mark wins the three million-dollar lottery! Joe reads this in the newspaper and that afternoon makes a contract with Sharon to sell the estate.Is the contract valid?
A)No, the agency terminated because of the change in conditions.
B)No, the agent has no right to sell without consent.
C)Yes, Mark would have to notify Joe if he wanted to stop the sale.
D)Yes, Joe had apparent authority to sell.

Accepted Answer

The contract is not valid because the agency terminated due to a change in conditions. When Mark won the lottery, he no longer had a financial need to sell the estate and therefore, the agency's authority to sell terminated.

Question 5

An agency will terminate on the occurrence of all but which one of the following?
A)The goal of the agency is accomplished.
B)The agent decides to quit.
C)The subject matter of the agency is destroyed.
D)The principal leaves the country.

Accepted Answer

The termination of agency occurs when the principal leaves the country, when the goal of the agency is accomplished, or when the subject matter of the agency is destroyed. However, the agent deciding to quit does not terminate the agency since the principal can still choose to continue the agency relationship with a different agent.

Question 6

Carl loans Dan $1,500 for Dan's honeymoon.Dan gives Carl his ruby ring as security for the loan and after a year, tells Carl he may as well sell it to recoup the $1,500.When Dan's wife hears of this, she persuades Dan to call Carl and get back the ring.Can Carl sell it anyway?
A)No, because Carl's agency has been revoked
B)No, because an unreasonable amount of time has elapsed
C)Yes, because Carl has apparent authority
D)Yes, because Dan cannot terminate this agency

Accepted Answer

The answer of Carl loans Dan $1,500 for Dan's honeymoon.Dan...

Question 7

All of the following except which one is a duty of an agent?
A)Account for money received on behalf of the principal
B)Inform the principal of any information relevant to the agency
C)Refrain from competing with the principal
D)Refrain from using any information gained while an agent

Accepted Answer

Agents are expected to use information gained while acting on behalf of their principals to fulfill their duties effectively. However, they must not misuse this information for personal gain or in a way that harms the principal's interests. Choices A, B, and C are direct duties of an agent towards their principal.

Question 8

Milton owns a business delivering coffee and donuts within the downtown area of the city.Smith Co.calls him to deliver a large quantity of his products to their local office.While taking a coffee urn through the Smith Co.'s office, Milton drops it on Lester, scalding him.Who is liable?
A)Smith Co.and Milton are liable
B)Milton alone is liable
C)Lester has to absorb the cost himself since he assumed the risk by working at Smith Co
D)Smith Co.alone is liable

Accepted Answer

Milton alone is liable for dropping the coffee urn and causing injury to Lester. As the owner of the business delivering the coffee and donuts, Milton has a duty to ensure the safe delivery of his products. By dropping the urn and causing injury, he breached that duty and is therefore liable for Lester's injuries. Smith Co. would not be liable unless they were somehow negligent in their handling of the situation. Lester cannot be held liable as he did not assume the risk of being scalded by hot coffee in the workplace.

Question 9

When is an agency relationship irrevocable?
A)It is never irrevocable.
B)When the agency is coupled with an interest of the agent in the subject matter
C)When the principal violates his duties to the agent
D)When the agency is gratuitous

Accepted Answer

An agency relationship can be irrevocable when it is coupled with an interest of the agent in the subject matter. This means that the agent has a stake in the outcome of the agency, such as owning property that is being managed by the agent. In this situation, the principal cannot revoke the agency without the agent's consent.

Question 10

Robert advances money to John so that John can purchase inventory for his business.In return and for security on the loan, John makes Robert his agent.If John:
A)becomes incapacitated, Robert's agency is terminated by operation of law.
B)files for bankruptcy, Robert's agency is terminated by operation of law.
C)dies, Robert's agency is terminated by operation of law.
D)Robert's agency is irrevocable.

Accepted Answer

The answer of Robert advances money to John so that...

Question 11

Identify at least six factors a court will consider in determining whether a person acting for another is an employee or an independent contractor.

Accepted Answer

The answer of Identify at least six factors a court...

Quiz 19: Relationship of Principal and Agent

Mark, who is 16 years old, appoints Joe, age 21, as his agent to purchase a videotape recorder from VideoWorld. The transaction between Joe and VideoWorld is:

Which of the following would NOT be considered an agent?

Carolyn, a cashier at Tops Supermarkets, may cash checks for up to $20 over a purchase amount.A friend needs money for a dress, so Carolyn cashes a check for $50 with no purchase.If the check bounces, Carolyn is:

An agency will terminate on the occurrence of all but which one of the following?

Carl loans Dan $1,500 for Dan's honeymoon.Dan gives Carl his ruby ring as security for the loan and after a year, tells Carl he may as well sell it to recoup the $1,500.When Dan's wife hears of this, she persuades Dan to call Carl and get back the ring.Can Carl sell it anyway?

All of the following except which one is a duty of an agent?

Milton owns a business delivering coffee and donuts within the downtown area of the city.Smith Co.calls him to deliver a large quantity of his products to their local office.While taking a coffee urn through the Smith Co.'s office, Milton drops it on Lester, scalding him.Who is liable?

When is an agency relationship irrevocable?

Robert advances money to John so that John can purchase inventory for his business.In return and for security on the loan, John makes Robert his agent.If John:

Identify at least six factors a court will consider in determining whether a person acting for another is an employee or an independent contractor.