Question 1

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

Accepted Answer

Duty D, refraining from using any information gained while an agent after the agency is terminated, is not a general duty of an agent. The primary duties of an agent include accounting for money received on behalf of the principal, informing the principal of relevant information, and refraining from competing with the principal. However, the obligation regarding the use of information after termination of the agency can vary based on the terms of the agreement and specific laws, but it is not considered a general duty like the others listed.

Question 2

An agent is not required to keep which of the following information confidential?
A) Unique business methods.
B) Customer lists.
C) Information that his or her principal is engaged in criminal activity.
D) Business plans.

Accepted Answer

An agent is not required to keep confidential any information related to the criminal activity of their principal. In fact, if the agent becomes aware of any criminal activity, they may have a legal obligation to report it to the proper authorities. However, unique business methods, customer lists, and business plans are typically considered confidential information that an agent should keep confidential.

Question 3

Steven is a manufacturer's representative for Incell Corporation. One day he receives a big-screen television as a gift from one of the clients he contacts on behalf of Incell.
A) Steven must account to Incell for the gift he has received.
B) The big-screen television belongs to Incell rather than to Steven.
C) If he keeps the TV without telling Incell, he will have breached his fiduciary duty.
D) All of these are correct.

Accepted Answer

As a manufacturer's representative, Steven has a fiduciary duty to act in the best interests of the company he represents, which includes being transparent about any gifts or benefits he receives from clients. Therefore, he must account to Incell for the gift he has received, and if he keeps the TV without telling Incell, he will have breached his fiduciary duty. Additionally, as the gift was received in the course of conducting business on behalf of Incell, it belongs to the company rather than to Steven personally.

Question 4

Bob 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, Bob drops it on Lester, scalding him. Who is liable?
A) Smith Co. and Bob are liable.
B) Bob alone is liable.
C) Lester has to absorb the cost himself since he assumed the risk by working at Smith Co.
D) Only Smith Co. is liable.

Accepted Answer

Bob, as the owner of the business, is responsible for maintaining control over his products while delivering them. He is the one who dropped the coffee urn, so he alone is liable for Lester's injuries. Smith Co. did not contribute to the accident and did not have control over the situation, so they are not liable. Lester also did not assume the risk of being scalded while working at Smith Co., as it is not a job-related hazard.

Question 5

Mark (age 16) appoints Joe (age 21) as his agent to purchase a digital camcorder from Electronic World. The transaction is:
A) void because Mark is a minor.
B) voidable by Electronic World 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

Mark, being a minor, has the capacity to void the contract, making the transaction voidable at his discretion.

Question 6

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 agent is a fiduciary.

Accepted Answer

An agency relationship is irrevocable when it is coupled with an interest of the agent in the subject matter. This means that the agent has some sort of ownership or financial stake in the subject matter of the agency relationship, making it more difficult for the principal to revoke the agency.

Question 7

Which of the following is not a breach of an agent's duty of obedience?
A) Entering into an unauthorized contract for which his or her principal is then liable.
B) Committing a tort for which the principal is now liable.
C) Improperly delegating her authority.
D) Not following a principal's instruction to misrepresent the quality of a competitor's goods to a potential customer.

Accepted Answer

Not following a principal's instruction to misrepresent the quality of a competitor's goods to a potential customer is not a breach of an agent's duty of obedience, as it goes against ethical and legal standards. The other choices all involve actions that would violate an agent's duty of obedience to their principal.

Question 8

Which of the following agents would not have authority to contract with third parties on behalf of the principal?
A) A salesman who sells his employer's goods.
B) A manager who hires employees for the store owner.
C) A factory worker hired to operate a machine.
D) A buyer who regularly buys merchandise for a store.
E) All agents have authority to contract with third parties on behalf of their principals.

Accepted Answer

A factory worker hired to operate a machine would not have authority to contract with third parties on behalf of the principal. They would only have the authority to operate the machine and carry out their assigned tasks. The other options involve agents who have been given specific authority to do certain tasks on behalf of the principal, including contracting with third parties.

Question 9

An agent may lose the right to compensation:
A) by breaching the agency contract willfully and deliberately.
B) if the specified result of the contract is not obtained.
C) if the duty of loyalty is breached.
D) All of these
E) None of these.

Accepted Answer

An agent may lose the right to compensation if they willfully and deliberately breach the agency contract, fail to obtain the specified result of the contract, or breach the duty of loyalty. Therefore, all of the choices are correct.

Question 10

A durable power of attorney differs from a power of attorney in that the durable power of attorney:
A) is a formal written instrument, whereas the power of attorney may be informal and oral.
B) must follow a standardized form set forth in the federal Uniform Durable Power of Attorney Act.
C) becomes effective upon the principal's subsequent incapacity or the agent's authority is not affected by the principal's subsequent incapacity.
D) is governed by Article 3 of the UCC.

Accepted Answer

A durable power of attorney becomes effective upon the principal's subsequent incapacity or the agent's authority is not affected by the principal's subsequent incapacity, whereas a regular power of attorney terminates upon the principal's incapacity. The other options are incorrect: A) Both durable and regular power of attorney must be in writing; B) The requirement to follow Uniform Durable Power of Attorney Act only applies to certain states; D) Article 3 of the UCC governs negotiable instruments, not powers of attorney.

Question 11

The contractual duties owed by a principal to an agent are the duties of:
A) compensation.
B) reimbursement.
C) indemnification.
D) All of these.
E) None of these.

Accepted Answer

The contractual duties owed by a principal to an agent are the duties of compensation, reimbursement, and indemnification. Therefore, all choices are correct.

Question 12

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. 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 cashing checks for up to $20 over a purchase amount.

Question 13

Carson, who is an agent for Peter, breaches his fiduciary duty to Peter. Carson:
A) is liable to Peter for breach of contract.
B) is liable to Peter in tort for any losses caused by the breach.
C) must make restitution for any profits or property received in breach of this duty.
D) All of these are correct.

Accepted Answer

A) While there may have been a contract between Carson and Peter, the breach of fiduciary duty goes beyond just a breach of contract. Therefore, this answer is not completely correct.

B) Carson's breach of fiduciary duty would likely cause losses to Peter, and Carson would be liable in tort for those losses. Therefore, this answer is correct.

C) If Carson received any profits or property as a result of breaching his fiduciary duty to Peter, he would have to return those to Peter. Therefore, this answer is correct.

D) Since both B and C are correct, this answer is the best choice.

Question 14

Lewis employs Donna under a one-year contract to sell Lewis's line of leather wallets and checkbook covers. If without Donna's knowledge, Lewis dies:
A) under the Second Restatement, Donna's actual authority will not terminate until the end of the one-year contractual term.
B) under the Second Restatement, Donna's actual authority will not terminate until she has notice of Lewis's death.
C) under the Third Restatement, Donna's actual authority will not terminate until she receives notice of Lewis's death.
D) under both the Second and Third Restatements, Donna's actual authority will terminate at either the end of her one-year contractual term or when she receives notice of Lewis's death, whichever occurs first.
E) under both the Second and Third Restatements, Donna's actual authority will terminate upon Lewis's death, whether she has notice or not.

Accepted Answer

The Third Restatement of Agency provides that the authority of an agent terminates upon the death of the principal, except that the agent's authority continues for acts that are appropriate to accomplish the purposes of the agency until the agent receives notice of the principal's death. Therefore, Donna's actual authority will not terminate until she receives notice of Lewis's death.

Question 15

The concept of conflict of interest as it relates to the law of agency includes which of the following?
A) An agent may take a position that conflicts with the principal only if the principal, with full knowledge of all the facts, consents.
B) An agent may not represent her principal in a transaction in which the agent has a personal interest.
C) An agent may not act on behalf of adverse parties to a transaction without both principals' approval of the dual agency.
D) All of these.

Accepted Answer

The concept of conflict of interest as it relates to the law of agency includes all three options: (A) an agent may take a position that conflicts with the principal only if the principal, with full knowledge of all the facts, consents; (B) an agent may not represent her principal in a transaction in which the agent has a personal interest; and (C) an agent may not act on behalf of adverse parties to a transaction without both principals' approval of the dual agency.

Question 16

a. What is a fiduciary? 
b. What are the implications of an agent's fiduciary obligation? What is an agent prohibited from doing as a result of this obligation? Explain.

Accepted Answer

The answer of a. What is a fiduciary? 
b. What...

Question 17

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) Yes, because Carl has apparent authority.
B) Yes, because Carl has an express agency.
C) No, Carl's authority has been revoked.
D) Yes, because Dan cannot terminate this agency except by discharging the obligation.

Accepted Answer

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

Question 18

Mark hires Joe's real estate agency to sell his property, 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 property. 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 agency terminated because of the change in conditions. Mark's winning the lottery significantly changed the conditions and reasons for wanting to sell the property, so Joe no longer had the authority to sell without Mark's consent.

Question 19

A principal has no duty to compensate his or her agent if:
A) the agent breached the duty of obedience.
B) the agent breached the duty of loyalty.
C) it is a gratuitous agency.
D) All these are correct.

Accepted Answer

According to the general rule, a principal has no duty to compensate an agent who breaches the duty of obedience or loyalty. Additionally, if the agency is gratuitous, meaning the agent is not being paid, the principal has no duty to compensate the agent. Therefore, all three options are correct.

Question 20

A gratuitous agent:
A) is a paid agent.
B) is subject to the same duty of loyalty as other agents.
C) has no duty of diligence.
D) need not be reimbursed for her expenses.

Accepted Answer

A gratuitous agent, despite not being paid, is still subject to the same duty of loyalty as other agents, meaning they must act in the best interest of the principal.

Quiz 28: Relationship of Principal and Agent

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

An agent is not required to keep which of the following information confidential?

Steven is a manufacturer's representative for Incell Corporation. One day he receives a big-screen television as a gift from one of the clients he contacts on behalf of Incell.

Bob 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, Bob drops it on Lester, scalding him. Who is liable?

Mark (age 16) appoints Joe (age 21) as his agent to purchase a digital camcorder from Electronic World. The transaction is:

When is an agency relationship irrevocable?

Which of the following is not a breach of an agent's duty of obedience?

Which of the following agents would not have authority to contract with third parties on behalf of the principal?

An agent may lose the right to compensation:

A durable power of attorney differs from a power of attorney in that the durable power of attorney:

The contractual duties owed by a principal to an agent are the duties of:

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. The check bounces. Carolyn is:

Carson, who is an agent for Peter, breaches his fiduciary duty to Peter. Carson:

Lewis employs Donna under a one-year contract to sell Lewis's line of leather wallets and checkbook covers. If without Donna's knowledge, Lewis dies:

The concept of conflict of interest as it relates to the law of agency includes which of the following?

a. What is a fiduciary? b. What are the implications of an agent's fiduciary obligation? What is an agent prohibited from doing as a result of this obligation? Explain.

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 principal has no duty to compensate his or her agent if:

A gratuitous agent: