Question 1

One can never serve as the principal for both parties to a transaction.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is true of an agent's duty to obey a principal's instructions?

Accepted Answer

A)  An agent may always substitute his or her personal judgment for that of the principal. 
B)  An agent has no power to exercise his or her best judgment to further the interests of the principal, if no instruction is given. 
C)  An agent will be liable for any loss to the principal caused by failure to follow instructions. 
D)  An agent has a duty to ignore the principal's instructions if they seem unwise. 
A)  An agent may always substitute his or her personal judgment for that of the principal. 
B)  An agent has no power to exercise his or her best judgment to further the interests of the principal, if no instruction is given. 
C)  An agent will be liable for any loss to the principal caused by failure to follow instructions. 
D)  An agent has a duty to ignore the principal's instructions if they seem unwise.

Question 3

When an agent breaches a duty owed to the principal,the agent may:

Accepted Answer

A)  not be discharged until the contract has expired. 
B)  be discharged without liability in spite of an unexpired contract. 
C)  be discharged only if the principal can show actual damage. 
D)  not be discharged until contractual damages are paid. 
A)  not be discharged until the contract has expired. 
B)  be discharged without liability in spite of an unexpired contract. 
C)  be discharged only if the principal can show actual damage. 
D)  not be discharged until contractual damages are paid.

Question 4

Agents breach their duty of loyalty by buying for the principal from themselves even if they charge a fair price.Which of the following common law duties of an agent does this violate?

Accepted Answer

A)  Duty of indemnification 
B)  Duty to obey instructions 
C)  Duty of loyalty 
D)  Duty to account for funds and property 
A)  Duty of indemnification 
B)  Duty to obey instructions 
C)  Duty of loyalty 
D)  Duty to account for funds and property

Question 5

To avoid being bound by the acts of the agent after the agency has ended,the principal:

Accepted Answer

A)  should give actual notice to those who have dealt with the former agent. 
B)  need not give notice as he has no liability. 
C)  should give verbal notice if the termination is due to loss of legal capacity by the principal. 
D)  should get the agent to give notice. 
A)  should give actual notice to those who have dealt with the former agent. 
B)  need not give notice as he has no liability. 
C)  should give verbal notice if the termination is due to loss of legal capacity by the principal. 
D)  should get the agent to give notice.

Question 6

A feature which distinguishes commercial agents from distributors and nonagents is that commercial agents:

Accepted Answer

A)  generally maintain their own inventory of goods unlike distributors. 
B)  are usually compensated through a straight salary when a sale is completed. 
C)  always bear the financial risk of nonpayment by the purchaser. 
D)  often possess the authority to contract on behalf of their principals. 
A)  generally maintain their own inventory of goods unlike distributors. 
B)  are usually compensated through a straight salary when a sale is completed. 
C)  always bear the financial risk of nonpayment by the purchaser. 
D)  often possess the authority to contract on behalf of their principals.

Question 7

Independent contractors:

Accepted Answer

A)  are under the control of their employer or principal as to both the objective of their work and the means used to achieve it. 
B)  are under the control of their principals as to the result that is to be achieved, but not as to the means used to accomplish that result. 
C)  do not maintain their own inventory of goods; instead, they take orders on behalf of their principal. 
D)  bring the parties together rather than actually negotiating a contract of sale. 
A)  are under the control of their employer or principal as to both the objective of their work and the means used to achieve it. 
B)  are under the control of their principals as to the result that is to be achieved, but not as to the means used to accomplish that result. 
C)  do not maintain their own inventory of goods; instead, they take orders on behalf of their principal. 
D)  bring the parties together rather than actually negotiating a contract of sale.

Question 8

Distributors generally are not agents and,as a result,manufacturers are legally responsible for their contracts,torts,or crimes.

Accepted Answer

A) True 
 B)False

Question 9

When an agent's breach of duty causes harm to the principal,the principal:

Accepted Answer

A)  may deduct the loss from the amount due the agent. 
B)  can bring an action in court even if compensation is due the agent. 
C)  is liable to compensate the agent, even if the breach is serious. 
D)  is liable to show actual damages to avoid having to compensate. 
A)  may deduct the loss from the amount due the agent. 
B)  can bring an action in court even if compensation is due the agent. 
C)  is liable to compensate the agent, even if the breach is serious. 
D)  is liable to show actual damages to avoid having to compensate.

Question 10

An agency can never be oral.

Accepted Answer

A) True 
 B)False

Question 11

According to the doctrine of agency at will,_____.

Accepted Answer

A)  each party has the power to terminate the agency even if there is no contractual right to do so 
B)  only the principal has the right to terminate the agency at his will 
C)  either party can terminate the agency anytime, if there is a contractual right to do so 
D)  only the agent can terminate the agency 
A)  each party has the power to terminate the agency even if there is no contractual right to do so 
B)  only the principal has the right to terminate the agency at his will 
C)  either party can terminate the agency anytime, if there is a contractual right to do so 
D)  only the agent can terminate the agency

Question 12

If an agent indulges in commingling,he _____.

Accepted Answer

A)  probably will not be liable for loss to the principal 
B)  bears the risk of any loss to the principal 
C)  will not be liable for any loss to the principal if the property is not wrongfully used 
D)  is breaching the duty to communicate information 
A)  probably will not be liable for loss to the principal 
B)  bears the risk of any loss to the principal 
C)  will not be liable for any loss to the principal if the property is not wrongfully used 
D)  is breaching the duty to communicate information

Question 13

When agents make advances from their own funds in conducting the principal's business,the principal has:

Accepted Answer

A)  no duty to reimburse the agent because the agent has assumed the burden. 
B)  a duty to reimburse the agent for expenses incurred for the principal. 
C)  a duty to reimburse the agent even if the agent is not acting within the scope of his/her authority. 
D)  no duty to reimburse the agent because the agent commingled fungible goods. 
A)  no duty to reimburse the agent because the agent has assumed the burden. 
B)  a duty to reimburse the agent for expenses incurred for the principal. 
C)  a duty to reimburse the agent even if the agent is not acting within the scope of his/her authority. 
D)  no duty to reimburse the agent because the agent commingled fungible goods.

Question 14

What does the agent's duty of loyalty mean?

Accepted Answer

The fiduciary duty of an agent is to act

Question 15

Termination of an agency based on race,religion,national origin,and age is generally prohibited by state and federal legislation.

Accepted Answer

A) True 
 B)False

Question 16

The principal has a duty to keep records from which the compensation due the agent can be determined.

Accepted Answer

A) True 
 B)False

Question 17

When an agreed-on result is obtained by the agent and the principal does not benefit,the agent:

Accepted Answer

A)  will not be paid. 
B)  is entitled to be paid. 
C)  must return any pay to the principal. 
D)  may only recover the expenses incurred, not the actual compensation. 
A)  will not be paid. 
B)  is entitled to be paid. 
C)  must return any pay to the principal. 
D)  may only recover the expenses incurred, not the actual compensation.

Question 18

In an agency at will,when one party exercises the power to terminate in violation of the right to terminate,the other party:

Accepted Answer

A)  is left without a remedy. 
B)  may recover monetary damages in a breach of contract suit. 
C)  may recover specific performance only terminating the contract. 
D)  can recover only if the relationship was not based on mutual consent. 
A)  is left without a remedy. 
B)  may recover monetary damages in a breach of contract suit. 
C)  may recover specific performance only terminating the contract. 
D)  can recover only if the relationship was not based on mutual consent.

Question 19

When an agent's duties conflict with the principal's own interests,_____.

Accepted Answer

A)  the agent has breached the duty of loyalty 
B)  the agent must disclose these facts to the principal 
C)  if the agency is gratuitous, there is no duty of disclosure 
D)  the agent must resign immediately 
A)  the agent has breached the duty of loyalty 
B)  the agent must disclose these facts to the principal 
C)  if the agency is gratuitous, there is no duty of disclosure 
D)  the agent must resign immediately

Question 20

An agency relationship arises when the agent acts for his own benefit under the direction of the principal.

Accepted Answer

A) True 
 B)False

Exam 23: The Agency Relationship-Creation, duties, and Termination

One can never serve as the principal for both parties to a transaction.

Which of the following is true of an agent's duty to obey a principal's instructions?

When an agent breaches a duty owed to the principal,the agent may:

Agents breach their duty of loyalty by buying for the principal from themselves even if they charge a fair price.Which of the following common law duties of an agent does this violate?

To avoid being bound by the acts of the agent after the agency has ended,the principal:

A feature which distinguishes commercial agents from distributors and nonagents is that commercial agents:

Independent contractors:

Distributors generally are not agents and,as a result,manufacturers are legally responsible for their contracts,torts,or crimes.

When an agent's breach of duty causes harm to the principal,the principal:

An agency can never be oral.

According to the doctrine of agency at will,_____.

If an agent indulges in commingling,he _____.

When agents make advances from their own funds in conducting the principal's business,the principal has:

What does the agent's duty of loyalty mean?

Termination of an agency based on race,religion,national origin,and age is generally prohibited by state and federal legislation.

The principal has a duty to keep records from which the compensation due the agent can be determined.

When an agreed-on result is obtained by the agent and the principal does not benefit,the agent:

In an agency at will,when one party exercises the power to terminate in violation of the right to terminate,the other party:

When an agent's duties conflict with the principal's own interests,_____.

An agency relationship arises when the agent acts for his own benefit under the direction of the principal.

Law, Legal Reasoning, and the Legal Profession

Dispute Settlement

Business Ethics and Corporate Social Responsibility

Business and the Constitution

Crimes

Intentional Torts

Negligence and Strict Liability

Licensing and Intellectual Propertypart Two Contracts

The Nature and Origins of Contracts

Creating a Contract: Offers

Creating a Contract: Acceptances

Consideration

Capacity to Contract

Voluntary Consent

Illegality

The Form and Meaning of Contracts

Third Parties Contract Rights

Performance and Remediespart Three Sales

Formation and Terms of Sales Contracts

Warranties and Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contractspart Four Agency and Employment

Liability of Principals and Agents to Third Parties

Employment Laws-Part Five Business Organizations

Which Form of Business Organization

Partnerships

Formation and Termination of Corporations

Management of the Corporate Business

Financing the Corporation and the Role of the Shareholders

Securities Regulation

Legal Liability of Accountantspart Six Property

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance-Part Seven Commercial Paper

Negotiable Instruments

Negotiation and Holder in Due Course

Liability of Parties

Checks and Electronic Fund Transfers-Part Eight Credit Transactions

Introduction to Security

Security Interests in Personal Property

Bankruptcy-Part Nine Government Regulation

The Antitrust Laws

Consumer Protection Laws

Environmental Regulation

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