Question 1

An agency relationship may not arise in the absence of a contractual agreement.

Accepted Answer

A) True 
 B)False

Question 2

If an agent uses the money of the principal for the agent's purposes, the principal may choose either to sue for the money or to obtain whatever was purchased with it.

Accepted Answer

A) True 
 B)False

Question 3

An agency coupled with an interest is revocable without the consent of the agent.

Accepted Answer

A) True 
 B)False

Question 4

An agency relationship:

Accepted Answer

A)  exists only when it is in the form of a written document signed by both the parties. 
B)  can be either compensated or uncompensated. 
C)  will not exist if the parties have expressly agreed that they do not intend to create one. 
D)  can be formed only by contract. 
A)  exists only when it is in the form of a written document signed by both the parties. 
B)  can be either compensated or uncompensated. 
C)  will not exist if the parties have expressly agreed that they do not intend to create one. 
D)  can be formed only by contract.

Question 5

What does the agent's duty of loyalty mean?

Accepted Answer

The fiduciary duty of an agent is to act

Question 6

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 7

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 8

If no time or event is specified explaining when the agency relationship will end, the agency:

Accepted Answer

A)  will continue indefinitely. 
B)  will continue for the statutory maximum of 10 years. 
C)  automatically ends when the result for which the agency was created has been accomplished. 
D)  automatically ends after a period of 70 days even if the result for which the agency was created has not been accomplished. 
A)  will continue indefinitely. 
B)  will continue for the statutory maximum of 10 years. 
C)  automatically ends when the result for which the agency was created has been accomplished. 
D)  automatically ends after a period of 70 days even if the result for which the agency was created has not been accomplished.

Question 9

The agent has a duty to inform the principal of knowledge the agent gains in the course of his or her responsibilities.

Accepted Answer

A) True 
 B)False

Question 10

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 11

A person may act as a dual agent:

Accepted Answer

A)  on his own accord and can be bound to multiple principals at freewill. 
B)  after partial disclosure of terms to either principal. 
C)  with the consent of any one principal. 
D)  with the consent of both principals on being fully informed about it. 
A)  on his own accord and can be bound to multiple principals at freewill. 
B)  after partial disclosure of terms to either principal. 
C)  with the consent of any one principal. 
D)  with the consent of both principals on being fully informed about it.

Question 12

The proximate cause rule is designed to permit agents to collect commissions on sales completed after termination of the agency relationship if the sale primarily resulted from the agent's efforts.

Accepted Answer

A) True 
 B)False

Question 13

Banks generally continue to have the authority to act as a depositor's agent for check-cashing purposes for a limited period of time after the depositor/agent's death.

Accepted Answer

A) True 
 B)False

Question 14

Generally, a person can do anything through an agent that he or she could legally do personally.

Accepted Answer

A) True 
 B)False

Question 15

Discuss an agent's duty to communicate information to the principal. When is this duty considered to be violated?

Accepted Answer

The agent has a duty to inform the princ

Question 16

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

Accepted Answer

A)  may only bring a lawsuit against the principal for physical injuries suffered and not for compensations because agent has to take the blunt of a principal's breach. 
B)  does not have a lien on anything that belongs to the principal which is in the agent's lawful possession. 
C)  may claim compensation from the principal only after the contract has expired. 
D)  may claim the principal's property that is in his lawful possession for compensation due him for his performance of the agency responsibilities. 
A)  may only bring a lawsuit against the principal for physical injuries suffered and not for compensations because agent has to take the blunt of a principal's breach. 
B)  does not have a lien on anything that belongs to the principal which is in the agent's lawful possession. 
C)  may claim compensation from the principal only after the contract has expired. 
D)  may claim the principal's property that is in his lawful possession for compensation due him for his performance of the agency responsibilities.

Question 17

Agents who are under the control of their employer or principal as to both the objective of their work and the means used to achieve it are _____.

Accepted Answer

A)  distributors 
B)  independent contractors 
C)  employees 
D)  commercial agents 
A)  distributors 
B)  independent contractors 
C)  employees 
D)  commercial agents

Question 18

A gratuitous agent is one who:

Accepted Answer

A)  freely substitutes his or her judgment for that of the principal. 
B)  acts without pay. 
C)  has no prior experience as an agent. 
D)  is employed to find a buyer for one party and a seller for another. 
A)  freely substitutes his or her judgment for that of the principal. 
B)  acts without pay. 
C)  has no prior experience as an agent. 
D)  is employed to find a buyer for one party and a seller for another.

Question 19

A person can have the capacity to act as an agent although he or she does not have the legal capacity to contract.

Accepted Answer

A) True 
 B)False

Question 20

Vlad, as agent, is paid $5,000 owed by a debtor of Lee, Vlad's principal. Instead of giving it immediately to Lee, Vlad invests it in the stock market. Luckily, the market price of that particular stock rises to $10,000 before Lee learns of the wrongdoing. Under these circumstances, _____.

Accepted Answer

A)  Vlad cannot be sued as the money was put to good use 
B)  Lee is entitled only to $5000 
C)  Lee is entitled to all of the stock 
D)  Vlad is not guilty of wrongdoing because he managed to make a profit 
A)  Vlad cannot be sued as the money was put to good use 
B)  Lee is entitled only to $5000 
C)  Lee is entitled to all of the stock 
D)  Vlad is not guilty of wrongdoing because he managed to make a profit

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

An agency relationship may not arise in the absence of a contractual agreement.

If an agent uses the money of the principal for the agent's purposes, the principal may choose either to sue for the money or to obtain whatever was purchased with it.

An agency coupled with an interest is revocable without the consent of the agent.

An agency relationship:

What does the agent's duty of loyalty mean?

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

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

If no time or event is specified explaining when the agency relationship will end, the agency:

The agent has a duty to inform the principal of knowledge the agent gains in the course of his or her responsibilities.

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

A person may act as a dual agent:

The proximate cause rule is designed to permit agents to collect commissions on sales completed after termination of the agency relationship if the sale primarily resulted from the agent's efforts.

Banks generally continue to have the authority to act as a depositor's agent for check-cashing purposes for a limited period of time after the depositor/agent's death.

Generally, a person can do anything through an agent that he or she could legally do personally.

Discuss an agent's duty to communicate information to the principal. When is this duty considered to be violated?

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

Agents who are under the control of their employer or principal as to both the objective of their work and the means used to achieve it are _____.

A gratuitous agent is one who:

A person can have the capacity to act as an agent although he or she does not have the legal capacity to contract.

Vlad, as agent, is paid $5,000 owed by a debtor of Lee, Vlad's principal. Instead of giving it immediately to Lee, Vlad invests it in the stock market. Luckily, the market price of that particular stock rises to $10,000 before Lee learns of the wrongdoing. Under these circumstances, _____.

Law, Legal Reasoning, and the Legal Profession

Dispute Settlement

Business Ethics and Corporate Social Responsibility

Business and the Constitution

Crimes

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Negligence and Strict Liability

Licensing and Intellectual Property

The Nature and Origins of Contracts

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Capacity to Contract

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The Form and Meaning of Contracts

Third Parties Contract Rights

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Warranties and Product Liability

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Remedies for Breach of Sales Contracts

Liability of Principals and Agents to Third Parties

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Introduction to Security

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