Question 1

HBR Accounting hired Denise,a CPA,to prepare tax returns.Which statement is correct?

Accepted Answer

A)  Denise is a gratuitous agent and has a duty not to commit gross negligence. 
B)  Denise is an agent and has a duty not to commit ordinary negligence. 
C)  Denise, as a CPA, is an agent with special skills. She is held to a higher duty than ordinary negligence. 
D)  Denise, as a CPA, is an agent with special skills. She is held to a lower standard than ordinary negligence. 
A)  Denise is a gratuitous agent and has a duty not to commit gross negligence. 
B)  Denise is an agent and has a duty not to commit ordinary negligence. 
C)  Denise, as a CPA, is an agent with special skills. She is held to a higher duty than ordinary negligence. 
D)  Denise, as a CPA, is an agent with special skills. She is held to a lower standard than ordinary negligence.

Question 2

As a general rule,an agent is liable on contracts entered into on behalf of a fully disclosed principal.

Accepted Answer

A) True 
 B)False

Question 3

An agency relationship can be created:

Accepted Answer

A)  by the conduct of the parties. 
B)  by an oral agreement in all circumstances. 
C)  only by a written agreement. 
D)  only by the meeting of all the standards of contract law. 
A)  by the conduct of the parties. 
B)  by an oral agreement in all circumstances. 
C)  only by a written agreement. 
D)  only by the meeting of all the standards of contract law.

Question 4

If the agent is disloyal to the principal:

Accepted Answer

A)  the agency agreement automatically terminates and the principal may rescind the transaction. 
B)  the principal has the right to collect any actual damages sustained as a result of the agent's disloyalty. 
C)  the principal has a right to recover any profits earned as a result of his agent's disloyal conduct. 
D)  All the above are correct. 
A)  the agency agreement automatically terminates and the principal may rescind the transaction. 
B)  the principal has the right to collect any actual damages sustained as a result of the agent's disloyalty. 
C)  the principal has a right to recover any profits earned as a result of his agent's disloyal conduct. 
D)  All the above are correct.

Question 5

You cannot be held liable for the actions of your agents if the agents are violating your instructions.

Accepted Answer

A) True 
 B)False

Question 6

The doctrine of estoppel would most often apply in situations of:

Accepted Answer

A)  implied authority. 
B)  apparent authority. 
C)  transaction authority. 
D)  actual authority. 
A)  implied authority. 
B)  apparent authority. 
C)  transaction authority. 
D)  actual authority.

Exam 28: Agency Law

HBR Accounting hired Denise,a CPA,to prepare tax returns.Which statement is correct?

As a general rule,an agent is liable on contracts entered into on behalf of a fully disclosed principal.

An agency relationship can be created:

If the agent is disloyal to the principal:

You cannot be held liable for the actions of your agents if the agents are violating your instructions.

The doctrine of estoppel would most often apply in situations of:

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