Question 1

Marlene hires Arthur to find a location for her new pizza store. Arthur owns a former gas station that would be just right for a pizza place, and he sells it to Marlene at a fair price, not disclosing his interest. He has breached his fiduciary duty to Marlene.

Accepted Answer

Arthur had a conflict of interest as he had an interest in selling his own property to Marlene without disclosing it. This is a breach of fiduciary duty as he was supposed to act in Marlene's best interest and not his own.

Question 2

The shop rights doctrine allows a company to use an invention developed by an employee on its premises, using company resources, without payment of royalties.

Accepted Answer

The shop rights doctrine allows a company to use an invention developed by an employee on its premises, using company resources, without payment of royalties.

Question 3

An agent's authority can usually be revoked by the principal at any time.

Accepted Answer

An agent's authority is derived from the principal and can be revoked by the principal at any time, unless there is a legally binding agreement or a power of attorney that provides otherwise.

Question 4

Oral agencies are not legally binding unless reduced to writing.

Accepted Answer

Oral agreements/contracts can be legally binding, including oral agency agreements. However, written agreements are always preferred as they provide clearer terms and evidence of the agreement.

Question 5

The principal owes the agent a fiduciary duty.

Accepted Answer

The agent owes the principal a fiduciary duty, not the other way around. The agent is required to act in the best interests of the principal.

Question 6

The principal is allowed to compete with an agent unless the agreement specifically prohibits it.

Accepted Answer

Unless otherwise stated in the agreement, the principal is legally allowed to compete with an agent.

Question 7

An agent may appoint his or her own agents to carry out his/her duties, with or without the authorization of his/her principal.

Accepted Answer

An agent may appoint sub-agents to assist them in carrying out their duties, with or without the permission of their principal. However, the original agent remains responsible for the actions of their sub-agents.

Question 8

A contract is no less binding when negotiated by an agent than by the principal.

Accepted Answer

An agent, acting on behalf of the principal, has the authority to negotiate and enter into contracts on behalf of the principal. Therefore, a contract negotiated and entered into by an agent is just as binding as if it were negotiated and entered into by the principal personally.

Question 9

A person can do via an agent whatever business activity she could do herself.

Accepted Answer

This is known as the principle of agency. An agent can act on behalf of their principal (the person they represent) and carry out any actions or transactions that the principal is capable of doing themselves. This includes entering into contracts, buying and selling property, making decisions, and more.

Question 10

In case where, Michelle, in anticipation of her death, gives Adam, her son, power of attorney, Adam will be acting as a general agent on behalf of Michelle.

Accepted Answer

Giving power of attorney to someone means that they have the authority to act as an agent on behalf of the person granting the power of attorney. In this case, Adam will be acting as a general agent on behalf of Michelle.

Question 11

Most agencies are created by contracts.

Accepted Answer

Yes, most agencies are created by contracts between the principal and agent, outlining their duties, responsibilities, and compensation.

Question 12

The fiduciary responsibility of an agent is imposed by law.

Accepted Answer

The fiduciary responsibility of an agent is indeed imposed by law, specifically by the common law of agency and various state and federal laws that regulate agency relationships.

Question 13

The agent's duty to preserve the confidential information of a principal exists only until the agency relationship lasts.

Accepted Answer

The agent's duty to preserve the principal's confidential information continues even after the agency relationship has ended.

Question 14

Agency law imposes both fiduciary as well as nonfiduciary duties on an agent.

Accepted Answer

Agency law imposes fiduciary duties, such as loyalty, confidentiality, and obedience, on an agent. Additionally, it may impose nonfiduciary duties, such as reasonable care and skill, on the agent.

Question 15

An author's agent would be considered a "special agent."

Accepted Answer

The answer of An author's agent would be considered a...

Question 16

A gratuitous agent owes the principal the same duties as does a compensated agent.

Accepted Answer

A gratuitous agent, or one who works without compensation, still has a fiduciary duty to act in the best interest of the principal and to carry out the duties outlined in their agency agreement. This includes duties of loyalty, obedience, care, and disclosure. Therefore, a gratuitous agent owes the principal the same duties as a compensated agent.

Question 17

The fiduciary relation between an agent and principal is two-way, that is, the agent is the principal's fiduciary and the principal is the agent's fiduciary.

Accepted Answer

The fiduciary relationship is one-way; the agent acts as a fiduciary to the principal, meaning the agent must act in the best interest of the principal, but not vice versa.

Question 18

A contract entered into by an undisclosed agent does not create any liability different from that made by a disclosed agent.

Accepted Answer

An undisclosed agent creates liability for the principal once the third party discovers the principal's identity, whereas a disclosed agent's principal is immediately liable.

Question 19

An independent contractor is, by definition, not an agent.

Accepted Answer

An independent contractor can be an agent if they are authorized to act on behalf of another party in a specific capacity.

Question 20

A general agent has the authority to act in any way required by the principal's business.

Accepted Answer

A general agent has broad authority to act on behalf of the principal in any matter related to the principal's business. This includes entering into contracts, making financial decisions, and engaging in other transactions, all within the scope of the agent's authority. However, the scope of the agent's authority is limited by any specific instructions given by the principal and by the legal limits of agency law.

Quiz 38: Relationships Between Principal and Agent

Marlene hires Arthur to find a location for her new pizza store. Arthur owns a former gas station that would be just right for a pizza place, and he sells it to Marlene at a fair price, not disclosing his interest. He has breached his fiduciary duty to Marlene.

The shop rights doctrine allows a company to use an invention developed by an employee on its premises, using company resources, without payment of royalties.

An agent's authority can usually be revoked by the principal at any time.

Oral agencies are not legally binding unless reduced to writing.

The principal owes the agent a fiduciary duty.

The principal is allowed to compete with an agent unless the agreement specifically prohibits it.

An agent may appoint his or her own agents to carry out his/her duties, with or without the authorization of his/her principal.

A contract is no less binding when negotiated by an agent than by the principal.

A person can do via an agent whatever business activity she could do herself.

In case where, Michelle, in anticipation of her death, gives Adam, her son, power of attorney, Adam will be acting as a general agent on behalf of Michelle.

Most agencies are created by contracts.

The fiduciary responsibility of an agent is imposed by law.

The agent's duty to preserve the confidential information of a principal exists only until the agency relationship lasts.

Agency law imposes both fiduciary as well as nonfiduciary duties on an agent.

An author's agent would be considered a "special agent."

A gratuitous agent owes the principal the same duties as does a compensated agent.

The fiduciary relation between an agent and principal is two-way, that is, the agent is the principal's fiduciary and the principal is the agent's fiduciary.

A contract entered into by an undisclosed agent does not create any liability different from that made by a disclosed agent.

An independent contractor is, by definition, not an agent.

A general agent has the authority to act in any way required by the principal's business.