Exam 10: Agency and Partnership

It is possible for a principal to be bound by the acts of an independent agent even where no contract of agency exists between them.

Explain what is meant by limited liability.

When an agent acts beyond the specific authority given by the principal, that action will not be binding on the principal.

Which of the following is correct with respect to the law of partnership?

Any restrictions in the employment contract between principal and agent on an agent's authority will be binding on a third party.

Information that comes to the agent because of his position as agent must be passed on to the principal.

Paul and Laurie both worked at the mall. They often discussed how frequently they made decisions for customers when helping them pick out gifts. They concluded that knowing the merchandise in all the stores as well as they did, they could make a lot of money by doing Christmas shopping for customers. They discussed the idea at length. Laurie's mom, a buyer for a department store in the mall, referred some customers to them. With more and more customers, they wanted to quit their jobs and devote more time to this new business. Laurie's mom agreed to give them $2000, but doesn't want her liability to go beyond that. On these facts, which of the following is true?

Explain what is meant by an agent's fiduciary duty to the principal.

When two people enter into a partnership by agreement but neglect to set out the terms of the agreement, or where the parties becomes partners inadvertently, where are the terms and arrangements of that partnership are set out?

Joe R. notified his partners in writing that he would be retiring from the business partnership at the end of 2015. It was acknowledged and agreed upon and, at year end, the remaining partners paid him for his interest in the partnership. In February of 2016, one of the remaining partners misapplied some trust funds that a long-time client had placed in the care of the partnership for the purchase of a hotel. The partnership was sued, but the assets of the partnership were not sufficient to satisfy the judgment. The successful plaintiff went against the personal assets of the partners, including those of Joe R. What is the likely outcome?

When a principal is undisclosed, the third party is restricted to suing the agent.

An agent owes a fiduciary duty to the third party to act in that third party's best interest.

Distinguish between a sole proprietorship and a corporation.

A sole proprietor is not only responsible for his own conduct but also for the wrongful conduct of any employee done in the course of employment.

When the object of the agency relationship becomes illegal, the agency agreement is frustrated and any authority terminated.

Which of the following is the proper definition of a partnership as set out in the Partnership Act?

Partners are vicariously liable for the wrongful acts of employees committed in partnership business.

Apparent authority is the authority the agent has based on what the principal has led the third party to believe.

Societies are separate legal entities, separate and apart from the members who make them up.

A third party is bound to the principal only when he knows that the agent is acting for that principal.