Question 1

When an agent pays for the right to exercise authority for a business, there is an agency coupled with an interest.

Accepted Answer

A) True 
 B)False

Question 2

To establish an agency relationship:

Accepted Answer

A)  the procedure in state statutes must be followed 
B)  there must be a written contract between the parties 
C)  the principal and agent must agree to form an agency 
D)  all of the other specific choices 
E)  none of the other choices

Question 3

An agency relationship may terminate by lapse of time.

Accepted Answer

A) True 
 B)False

Question 4

Fact Pattern 14-1
Emile owns Emile's Used Car Emporium. Several people work for him at the Emporium. When Emile is gone, he leaves one of his best salespersons, Meg, in charge. Over the years, Emile has given Meg the authority to contract with vendors, negotiate sales, and conclude car sales contracts in his name.
One August, Emile takes a long vacation, leaving Meg in charge. While he is gone a hurricane hits Florida where the Emporium is located, causing severe damage. Because Emile is floating down the Amazon, Meg cannot reach him for instructions. She decides that rather than leave the place in shambles, she will hire people to repair the Emporium.
Meg hires a carpenter to rebuild a wall that was blown down by the storm. Phil, the carpenter, is busy at work on his scaffold when Meg's Scottish terrier Adam, who she keeps with her at work, plows into the scaffolding while chasing a cat. Phil is knocked off the scaffold and falls ten feet to the ground, suffering a broken leg.
-Refer to Fact Pattern 14-1. As Meg's principal, Emile is required to:

Accepted Answer

A)  cooperate with her 
B)  pay her for her services 
C)  indemnify her for any legal liabilities she incurs during the course of her work 
D)  reimburse her for reasonable expenses 
E)  do all of the other choices

Question 5

Someone designated to do all acts that can be legally granted to an agent is called a:

Accepted Answer

A)  special agent 
B)  gratuitous agent 
C)  general agent 
D)  subagent 
E)  none of the other choices are correct

Question 6

In Yin v. J's Fashion Accessories, the court stated that in most cases if an agent makes a contact without identifying his principal, the agent incurs personal liability for the contract.

Accepted Answer

A) True 
 B)False

Question 7

If the subject matter of an agency agreement is destroyed, the agency relationship continues until new subject matter is found.

Accepted Answer

A) True 
 B)False

Question 8

The power of an agent to do whatever is reasonable and customary to carry out the agency purpose is given by:

Accepted Answer

A)  express authority 
B)  implied authority 
C)  quasi authority 
D)  false authority 
E)  verbal authority

Question 9

Apparent authority arises when the principal creates an appearance of authority in an agent that leads a third party to conclude that the agent has authority to act for the principal.

Accepted Answer

A) True 
 B)False

Question 10

In Yim v. J's Fashion Accessories, Inc., where J's Fashion sued Yim for failing to pay for goods he bought under the name Ho Tae and Yim denied liability on the grounds that he had been acting as an agent for Hosung Enterprise, Inc which also did business under the name Ho Tae, the courts held that Yim was liable because:

Accepted Answer

A)  the duty to disclose the principal is on the agent and Yim did not disclose Hosung Enterprise, Inc. as the principal 
B)  the duty to disclose the principal is on the third party and J's Fashion did not disclose Hosung Enterprise, Inc. as the principal 
C)  Hosung Enterprise, Inc. was a limited liability company and so could not be held liable 
D)  Yim made the contract without identifying Hosung Enterprise, Inc. as the agent 
E)  Yim unlawfully disclosed Hosung Enterprise, Inc. as the principal

Question 11

Actual authority give the agent:

Accepted Answer

A)  no real authority 
B)  the power and right to change the principal's legal status 
C)  the power and right to make all decisions for the principal, even on matters where the agent does not have authority 
D)  a 50% ownership share in all the principal's assets 
E)  none of the other choices are correct

Question 12

Fact Pattern 14-1
Emile owns Emile's Used Car Emporium. Several people work for him at the Emporium. When Emile is gone, he leaves one of his best salespersons, Meg, in charge. Over the years, Emile has given Meg the authority to contract with vendors, negotiate sales, and conclude car sales contracts in his name.
One August, Emile takes a long vacation, leaving Meg in charge. While he is gone a hurricane hits Florida where the Emporium is located, causing severe damage. Because Emile is floating down the Amazon, Meg cannot reach him for instructions. She decides that rather than leave the place in shambles, she will hire people to repair the Emporium.
Meg hires a carpenter to rebuild a wall that was blown down by the storm. Phil, the carpenter, is busy at work on his scaffold when Meg's Scottish terrier Adam, who she keeps with her at work, plows into the scaffolding while chasing a cat. Phil is knocked off the scaffold and falls ten feet to the ground, suffering a broken leg.
-Refer to Fact Pattern 14-1. Emile gives Sally authority to execute all normal transactions connected with his business. In this case, Meg is:

Accepted Answer

A)  a special agent 
B)  a gratuitous agent 
C)  a committed agent 
D)  a general agent 
E)  an interested agent

Question 13

Because of the ____ an agent may not represent another party whose interests are in conflict with those of the principal.

Accepted Answer

A)  duty of non-competition 
B)  duty of cooperation 
C)  duty of obedience and performance 
D)  duty to reimburse 
E)  none of the other choices are correct

Question 14

In Guz v. Bechtel National, where Guz was fired after many years of good work at Bechtel, the California supreme court held that his tenure at the company did not affect the right of the company to dismiss him without good cause.

Accepted Answer

A) True 
 B)False

Question 15

Carla agrees to try to sell Frank's prize dog Spike for him. Carla does this as a favor to Frank because she knows many professional dog breeders. Carla may be best described as:

Accepted Answer

A)  a universal agent 
B)  a subagent 
C)  an agent who has an agency coupled with an interest 
D)  a special agent 
E)  none of the other choices

Question 16

An agent's ____ is the power to change the principal's legal obligations.

Accepted Answer

A)  legal right 
B)  official power 
C)  authority 
D)  responsibility 
E)  authorization

Question 17

In Town Center Shopping Center v. Premier Mortgage, a lease for office space, made by a manager of a mortgage company, was negated by the courts because the manager did not have authority to commit her company to that.

Accepted Answer

A) True 
 B)False

Question 18

If an agent competes with his principal without the principal's consent:

Accepted Answer

A)  he is violating his duty of obedience and performance 
B)  he is violating his duty of cooperation 
C)  he is violating his duty to reimburse 
D)  he is violating his duty to play fair 
E)  none of the other choices are correct

Question 19

If an agent is discovered to be representing conflicting interests, she has violated her duty of loyalty.

Accepted Answer

A) True 
 B)False

Question 20

A principal has a ____ the agent for reasonable expenses incurred in carrying out the duties of the agency.

Accepted Answer

A)  duty to cooperate with 
B)  duty of loyalty to 
C)  duty to reimburse 
D)  duty of obedience to 
E)  none of the other choices would apply

Exam 14: Agency and the Employment Relationship

When an agent pays for the right to exercise authority for a business, there is an agency coupled with an interest.

To establish an agency relationship:

An agency relationship may terminate by lapse of time.

Someone designated to do all acts that can be legally granted to an agent is called a:

In Yin v. J's Fashion Accessories, the court stated that in most cases if an agent makes a contact without identifying his principal, the agent incurs personal liability for the contract.

If the subject matter of an agency agreement is destroyed, the agency relationship continues until new subject matter is found.

The power of an agent to do whatever is reasonable and customary to carry out the agency purpose is given by:

Apparent authority arises when the principal creates an appearance of authority in an agent that leads a third party to conclude that the agent has authority to act for the principal.

Actual authority give the agent:

Because of the ____ an agent may not represent another party whose interests are in conflict with those of the principal.

In Guz v. Bechtel National, where Guz was fired after many years of good work at Bechtel, the California supreme court held that his tenure at the company did not affect the right of the company to dismiss him without good cause.

Carla agrees to try to sell Frank's prize dog Spike for him. Carla does this as a favor to Frank because she knows many professional dog breeders. Carla may be best described as:

An agent's ____ is the power to change the principal's legal obligations.

In Town Center Shopping Center v. Premier Mortgage, a lease for office space, made by a manager of a mortgage company, was negated by the courts because the manager did not have authority to commit her company to that.

If an agent competes with his principal without the principal's consent:

If an agent is discovered to be representing conflicting interests, she has violated her duty of loyalty.

A principal has a ____ the agent for reasonable expenses incurred in carrying out the duties of the agency.