Question 1

A principal cannot be estopped from denying that an agent has authority.​

Accepted Answer

A principal can be estopped from denying that an agent has authority if the principal's actions or representations have led a third party to reasonably believe that the agent has such authority, and the third party has relied on that belief to their detriment.

Question 2

An undisclosed principal is not liable to a third party for a contract made by an agent.​

Accepted Answer

An undisclosed principal can still be held liable for a contract made by an agent if certain conditions are met, such as if the agent had authority to act on behalf of the principal and if the third party reasonably believed they were contracting with the principal.

Question 3

Fact Pattern 17-2
Faye works as an administrator and receptionist for Garage Door Store. The store withholds federal taxes from Faye's pay, and controls the methods and details of the performance of her work. Faye is not authorized to modify the prices or other terms of a sale at the store. Homer installs Garage Door products at the buyers' locations.
-Refer to Fact Pattern 17-2. At the shop, Faye is​

Accepted Answer

Faye is considered an employee because the store withholds federal taxes from her pay and controls the methods and details of her work. Additionally, she acts on behalf of the store in her role as an administrator and receptionist, which also makes her an agent of the store.

Question 4

Fact Pattern 17-1
Nadine and Orin work at Pumps & Pipes Inc. Nadine is a sales representative who works with Pumps's customers, including contractors, government agencies, farmers, and others, as well as individual consumers. Pumps closely supervises all of its sales reps, and dictates their schedules. Orin is an engineer who works in Pumps's design department.
-Refer to Fact Pattern 17-1. With respect to third parties, Orin is Pumps's​

Accepted Answer

Orin, as an engineer working in the design department, is considered an employee due to the nature of his job within the company. However, he is not acting as an agent because his role does not involve making decisions or entering into contracts on behalf of Pumps & Pipes Inc. with third parties, which is a key aspect of agency.

Question 5

A special power of attorney permits an agent to transact all business for a principal.​

Accepted Answer

A special power of attorney grants an agent the authority to act on behalf of the principal in specific matters or events, not all business.

Question 6

High Plains Distribution Inc. hires Inez to work on its shipping dock, accepting deliveries, dispatching trucks, and dealing with customers and other companies' drivers. With respect to High Plains, Inez is most likely​

Accepted Answer

Inez is acting on behalf of High Plains and is performing tasks that are essential to the company's core operations. Therefore, Inez is most likely considered an agent of the company.

Question 7

If an agent has no authority but nevertheless contracts with a third party, the principal cannot normally be held liable on the contract.​

Accepted Answer

The principal cannot normally be held liable for contracts made by an agent without authority, as the principal did not grant the agent the power to act on their behalf in that instance.

Question 8

A disclosed principal is liable to a third party for a contract made by the agent acting within the scope of his or her authority.​

Accepted Answer

This is a basic principle of agency law that a disclosed principal (whose identity is known to the third party) is liable for the acts of its agent performed within the scope of the agent's authority. This means that if an agent enters into a contract on behalf of the principal, the principal is responsible for fulfilling the terms of that contract.

Question 9

A principal is not bound to an unauthorized contract unless the principal ratifies it.​

Accepted Answer

A principal is not legally obligated to honor an unauthorized contract unless he/she ratifies it. Ratification occurs when the principal explicitly or implicitly approves the contract made by an unauthorized agent. If the principal does not ratify the contract, he or she is not bound by its terms.

Question 10

If the principal petitions for bankruptcy, the agency is usually terminated.​

Accepted Answer

When a principal petitions for bankruptcy, the agency is usually terminated, as they are unable to continue fulfilling their obligations and commitments.

Question 11

A partially disclosed principal is only partially liable to a third party for a contract made by an agent.​

Accepted Answer

In a contract involving a partially disclosed principal, the principal is fully liable to the third party for the contract made by the agent, not just partially liable.

Question 12

Vicarious liability is indirect liability.​

Accepted Answer

Vicarious liability refers to a situation where one party is held liable for the actions of another party, such as an employer being held responsible for the actions of their employees while they are on the job. This is a form of indirect liability, as the employer did not directly cause the harm or injury, but is still held responsible for it.

Question 13

An agency relationship terminates only when both parties consent to end it.​

Accepted Answer

An agency relationship can terminate for various reasons beyond mutual consent, including the completion of the agreed task, expiration of the term, death or incapacity of either party, impossibility of performance, or by operation of law.

Question 14

A principal may be liable if he or she authorizes an agent to commit a tort.​

Accepted Answer

A principal is responsible for the actions of their agent if they authorize the agent to act on their behalf. If the agent commits a tort, the principal can be held liable for any resulting damages.

Question 15

Fact Pattern 17-1
Nadine and Orin work at Pumps & Pipes Inc. Nadine is a sales representative who works with Pumps's customers, including contractors, government agencies, farmers, and others, as well as individual consumers. Pumps closely supervises all of its sales reps, and dictates their schedules. Orin is an engineer who works in Pumps's design department.
-​Refer to Fact Pattern 17-1. With respect to third parties, Nadine is Pumps's

Accepted Answer

Nadine is an employee and agent of Pumps because she works closely with the customers and represents Pumps in those interactions. However, she is not an independent contractor because she is closely supervised by Pumps and her schedule is dictated by the company. Orin is an employee of Pumps, but there is no information provided about whether he also serves as an agent for the company.

Question 16

The equal dignity rule requires that if a contract entered into by an agent is or must be in writing, the agent's authority must also be in writing.​

Accepted Answer

The equal dignity rule is a common law requirement stating that if a contract must be in writing, then any authority given by one party to another to enter into that contract must also be in writing. This means that if an agent is acting on behalf of a principal in a contract that must be in writing, the agent's authority to enter into that contract must also be in writing. This rule helps to prevent any misunderstandings or fraud that could arise from unrecorded or oral agreements.

Question 17

A principal is not normally liable for the crime of an agent committed within the scope of the agency or employment.​

Accepted Answer

The answer of A principal is not normally liable for...

Question 18

Fact Pattern 17-2
Faye works as an administrator and receptionist for Garage Door Store. The store withholds federal taxes from Faye's pay, and controls the methods and details of the performance of her work. Faye is not authorized to modify the prices or other terms of a sale at the store. Homer installs Garage Door products at the buyers' locations.
-​Refer to Fact Pattern 17-2. Garage Door authorizes Homer to sell garage door upgrades and accessories at the buyers' locations at prices that Homer negotiates with those buyers. With respect to sales at those locations, Homer is

Accepted Answer

Homer is considered an employee and agent because he is authorized to negotiate and finalize sales on behalf of Garage Door Store, indicating a level of control by the company over his actions, as well as his role in acting on the company's behalf.

Question 19

An agency can terminate once its purpose is achieved.​

Accepted Answer

An agency is established for a specific purpose or objective, and upon achieving the said purpose, the agency can be terminated by either party involved. Therefore, an agency can be terminated once its purpose is achieved.

Question 20

A principal is not normally liable for the tort of an agent committed within the scope of the agency or employment.​

Accepted Answer

A principal is normally liable for the torts of an agent committed within the scope of the agency or employment, under the doctrine of vicarious liability.

Quiz 17: Agency Relationships in Business

A principal cannot be estopped from denying that an agent has authority.​

An undisclosed principal is not liable to a third party for a contract made by an agent.​

A special power of attorney permits an agent to transact all business for a principal.​

High Plains Distribution Inc. hires Inez to work on its shipping dock, accepting deliveries, dispatching trucks, and dealing with customers and other companies' drivers. With respect to High Plains, Inez is most likely​

If an agent has no authority but nevertheless contracts with a third party, the principal cannot normally be held liable on the contract.​

A disclosed principal is liable to a third party for a contract made by the agent acting within the scope of his or her authority.​

A principal is not bound to an unauthorized contract unless the principal ratifies it.​

If the principal petitions for bankruptcy, the agency is usually terminated.​

A partially disclosed principal is only partially liable to a third party for a contract made by an agent.​

Vicarious liability is indirect liability.​

An agency relationship terminates only when both parties consent to end it.​

A principal may be liable if he or she authorizes an agent to commit a tort.​

The equal dignity rule requires that if a contract entered into by an agent is or must be in writing, the agent's authority must also be in writing.​

A principal is not normally liable for the crime of an agent committed within the scope of the agency or employment.​

An agency can terminate once its purpose is achieved.​

A principal is not normally liable for the tort of an agent committed within the scope of the agency or employment.​

A principal cannot be estopped from denying that an agent has authority.

An undisclosed principal is not liable to a third party for a contract made by an agent.

A special power of attorney permits an agent to transact all business for a principal.

High Plains Distribution Inc. hires Inez to work on its shipping dock, accepting deliveries, dispatching trucks, and dealing with customers and other companies' drivers. With respect to High Plains, Inez is most likely

If an agent has no authority but nevertheless contracts with a third party, the principal cannot normally be held liable on the contract.

A disclosed principal is liable to a third party for a contract made by the agent acting within the scope of his or her authority.

A principal is not bound to an unauthorized contract unless the principal ratifies it.

If the principal petitions for bankruptcy, the agency is usually terminated.

A partially disclosed principal is only partially liable to a third party for a contract made by an agent.

Vicarious liability is indirect liability.

An agency relationship terminates only when both parties consent to end it.

A principal may be liable if he or she authorizes an agent to commit a tort.

The equal dignity rule requires that if a contract entered into by an agent is or must be in writing, the agent's authority must also be in writing.

A principal is not normally liable for the crime of an agent committed within the scope of the agency or employment.

An agency can terminate once its purpose is achieved.

A principal is not normally liable for the tort of an agent committed within the scope of the agency or employment.