Multiple Choice Questions
6Q-1 1. Generally, a disclosed principal will be liable to third parties for its agent's unauthorized misrepresentations if the agent is an
Employee Independent Contractor
a. Yes Yes
b. Yes No
c. No Yes
d. No No
2. A principal and agent relationship requires a a. Written agreement.
b. Power of attorney.
c. Meeting of the minds and consent to act.
d. Specified consideration.
3. Which of the following actions requires an agent for a corporation to have a written agency agreement?
a. Purchasing office supplies for the principal's business.
b. Purchasing an interest in undeveloped land for the principal.
c. Hiring an independent general contractor to renovate the principal's office building.
d. Retaining an attorney to collect a business debt owed the principal.
4. Wok Corp. has decided to expand the scope of its business. In this connection, it contemplates engaging several agents. Which of the following agency relationships is within the statute of frauds and thus should be contained in a signed writing?
a. A sales agency where the agent normally will sell goods which have a value in excess of $500.
b. An irrevocable agency.
c. An agency which is of indefinite duration but which is terminable upon one month's notice.
d. An agency for the forthcoming calendar year which is entered into in mid-December of the prior year.
5. Noll gives Carr a written power of attorney. Which of the following statements is correct regarding this power of attorney?
a. It must be signed by both Noll and Carr.
b. It must be for a definite period of time.
c. It may continue in existence after Noll's death.
d. It may limit Carr's authority to specific transactions.
6. Young Corp. hired Wilson as a sales representative for six months at a salary of $5,000 per month plus 6% of sales. Which of the following statements is correct?
a. Young does not have the power to dismiss Wilson during the six-month period without cause.
b. Wilson is obligated to act solely in Young’s interest in matters concerning Young’s business.
c. The agreement between Young and Wilson is not enforceable unless it is in writing and signed by Wilson.
d. The agreement between Young and Wilson formed an agency coupled with an interest.
7. Which of the following statements represent(s) a principal’s duty to an agent who works on a commission basis?
I. The principal is required to maintain pertinent records, account to the agent, and pay the agent according to the terms of the agreement.
II. The principal is required to reimburse the agent for all authorized expenses incurred unless the agreement calls for the agent to pay expenses out of the commission.
a. I only.
b. II only.
c. Both I and II.
d. Neither I nor II.
8. Dent is an agent for Wein pursuant to a written agreement with a three-year term. After two years of the term, Wein decides that he would like to terminate the relationship with Dent. Wein may terminate the relationship
a. Without cause, but may be held liable for breach of contract.
b. Even if Dent is an agent coupled with an interest.
c. Without cause, but may be held liable for the intentional interference with an existing contract.
d. Only if Dent breaches the fiduciary duties owed to Wein.
9. Thorp was a purchasing agent for Ogden, a sole proprietor, and had express authority to place purchase orders with Ogden’s suppliers. Thorp placed an order with Datz, Inc. on Ogden’s behalf after Ogden was declared incompetent in a judicial proceeding. Thorp was aware of Ogden’s incapacity.
Which of the following statements is correct concerning Ogden’s liability to Datz?
6Q-2 a. Ogden will be liable because Datz was not
informed of Ogden’s incapacity.
b. Ogden will be liable because Thorp acted with express authority.
c. Ogden will not be liable because Thorp’s agency ended when Ogden was declared incompetent.
d. Ogden will not be liable because Ogden was a nondisclosed principal.
10. Trent was retained, in writing, to act as Post’s agent for the sale of Post’s memorabilia collection.
Which of the following statements is correct?
I. To be an agent, Trent must be at least 21 years of age.
II. Post would be liable to Trent if the collection was destroyed before Trent found a purchaser.
a. I only b. II only c. Both I and II.
d. Neither I nor II.
11. Pell is the principal and Astor is the agent in an agency coupled with an interest. In the absence of a contractual provision relating to the duration of the agency, who has the right to terminate the agency before the interest has expired?
Pell Astor
a. Yes Yes
b. No Yes
c. No No
d. Yes No
12. Bolt Corp. dismissed Ace as its general sales agent and notified all of Ace's known customers by letter. Young Corp., a retail outlet located outside of Ace's previously assigned sales territory, had never dealt with Ace. Young knew of Ace as a result of various business contacts. After his dismissal, Ace sold Young goods, to be delivered by Bolt, and received from Young a cash deposit for 20% of the purchase price. It was not unusual for an agent in Ace's previous position to receive cash deposits. In an action by Young against Bolt on the sales contract, Young will
a. Lose, because Ace lacked any implied authority to make the contract.
b. Lose, because Ace lacked any express authority to make the contract.
c. Win, because Bolt's notice was inadequate to terminate Ace's apparent authority.
d. Win, because a principal is an insurer of an agent's acts.
13. Generally, an agency relationship is terminated by operation of law in all of the following situations except the
a. Principal's death.
b. Principal's incapacity.
c. Agent's renunciation of the agency.
d. Agent's failure to acquire a necessary business license.
14. Frost's accountant and business manager has the authority to
a. Mortgage Frost's business property.
b. Obtain bank loans for Frost.
c. Insure Frost's property against fire loss.
d. Sell Frost's business.
15. The apparent authority of a partner to bind the partnership in dealing with third parties
a. Will be effectively limited by a formal resolution of the partners of which third parties are aware.
b. Will be effectively limited by a formal resolution of the partners of which third parties are unaware.
c. Would permit a partner to submit a claim against the partnership to arbitration.
d. Must be derived from the express powers and purposes contained in the partnership agreement.
____________
Items 16 and 17 are based on the following information:
Able, on behalf of Pix Corp., entered into a contract with Sky Corp., by which Sky agreed to sell computer equipment to Pix. Able disclosed to Sky that she was acting on behalf of Pix. However, Able had exceeded her actual authority by entering into the contract with Sky.
16. If Pix does not want to honor the contract, it will nonetheless be held liable if Sky can prove that a. Able had apparent authority to bind Pix.
b. Able believed she was acting within the scope of her authority.
c. Able was an employee of Pix and not an independent contractor.
d. The agency relationship between Pix and Able was formalized in a signed writing.
6Q-3 17. If Pix wishes to ratify the contract with Sky,
which of the following statements is correct?
a. Pix must notify Sky that Pix intends to ratify the contract.
b. Able must have acted reasonably and in Pix's best interest.
c. Able must be a general agent of Pix.
d. Pix must have knowledge of all material facts relating to the contract at the time it is ratified.
____________
18. An agent will usually be liable under a contract made with a third party when the agent is acting on behalf of a(an)
Disclosed Undisclosed
principal principal
a. Yes Yes
b. Yes No
c. No Yes
d. No No
19. Sol, an agent for May, made a contract with Simon which exceeded Sol's authority. If May wishes to hold Simon to the contract, May must prove that a. Sol was May's general agent even though Sol
exceeded his authority.
b. Sol believed he was acting within the scope of his authority.
c. Sol was acting in the capacity of an agent for an undisclosed principal.
d. May ratified the contract before withdrawal from the contract by Simon.
20. When an agent acts for an undisclosed principal, the principal will not be liable to third parties if the a. Principal ratifies a contract entered into by the
agent.
b. Agent acts within an implied grant of authority.
c. Agent acts outside the grant of actual authority.
d. Principal seeks to conceal the agency relationship.
21. When a valid contract is entered into by an agent on the principal’s behalf, in a nondisclosed principal situation, which of the following statements concerning the principal’s liability is correct?
The principal The principal may must ratify the
be held liable contract to be once disclosed held liable
a. Yes Yes
b. Yes No
c. No Yes
d. No No
22. Easy Corp. is a real estate developer and regularly engages real estate brokers to act on its behalf in acquiring parcels of land. The brokers are authorized to enter into such contracts, but are instructed to do so in their own names without disclosing Easy's identity or relationship to the transaction. If a broker enters into a contract with a seller on Easy's behalf,
a. The broker will have the same actual authority as if Easy's identity had been disclosed.
b. Easy will be bound by the contract because of the broker's apparent authority.
c. Easy will not be liable for any negligent acts committed by the broker while acting on Easy's behalf.
d. The broker will not be personally bound by the contract because the broker has express authority to act.
23. Parc contracted with Furn Brothers Corp. to buy hotel furniture and fixtures on behalf of Global Motor House, a motel chain. Global instructed Parc to use Parc's own name and not to disclose to Furn that Parc was acting on Global's behalf. Who is liable to Furn on this contract?
Parc Global
a. Yes No b. No Yes c. Yes Yes d. No No 24. Which of the following rights will a third party be entitled to after validly contracting with an agent representing an undisclosed principal?
a. Disclosure of the principal by the agent.
b. Ratification of the contract by the principal.
c. Performance of the contract by the agent.
d. Election to void the contract after disclosure of the principal.
25. If an agent has, within the scope of the agency relationship, committed both negligent and intentional acts resulting in injury to third parties, the principal
a. May be liable even if the agent's acts were unauthorized.
b. May effectively limit its liability to those third parties if the agent has signed a disclaimer absolving the principal from liability.
c. Will be liable under the doctrine of respondeat superior only for the intentional acts.
d. Will never be criminally liable unless it actively participated in the acts.
6Q-4 26. Neal, an employee of Jordan, was delivering merchandise to a customer. On the way, Neal's negligence caused a traffic accident that resulted in damages to a third party's automobile. Who is liable to the third party?
Neal Jordan
a. No No
b. Yes Yes
c. Yes No
d. No Yes
6Q-5