AGEN

Question 1

Lund Pizza Company gave specific rules to employees including obeying all traffic laws while delivering pizzas. An employee, while delivering pizzas one day, negligently went through a red light and injured the driver of another car. Which of the following is correct?

a. If the injured driver chooses to hold the employee liable, the employee can require that he first seek recovery from Lund.
b. If a lawsuit is filed against both Lund and the employee, Lund can require that the injured party first exhaust all remedies against the employee before Lund need pay.
c. The injured driver can recover from either Lund or the employee or both.
d. The injured driver can recover from the employee but not Lund because the employee caused the accident while breaking one of Lund’s rules

Answer 1

The injured driver can recover from either Lund or the employee or both.

Question 2

Which of the following acts, if committed by an agent, will cause principal to be liable to third party?

a. A negligent act committed by an employee outside the scope of employment that results in injury to a third party.
b. An employee’s failure to notify the employer of a dangerous condition that results in injury’ to a third party.
c. A negligent act committed by an independent contractor, in performance of the contract, Which results in injury to a third party.
d. An intentional tort committed by an employee outside the scope of employment, which results in injury to third party.

Answer 2

An employee’s failure to notify the employer of a dangerous condition that results in injury’ to a third party.

Question 3

Jim, an undisclosed principal, authorized Rick to act as his agent in securing a contract for the purchase of some plain white paper. Rick, without informing Sam that he was acting on behalf of a principal, entered into a contract with Sam to purchase the paper. If Jim repudiates the contract with Sam, which of the following is correct?

a. Upon learning that Jim is the principal, Sam may elect to hold either Jim or Rick liable on the contract.
b. Rick may not enforce the contract against Sam.
c. Rick will be released from his contractual obligations to Sam if he discloses Jim’s identity.
d. Sam may obtain specific performance, compelling Jim to perform on the contract.

Answer 3

Upon learning that Jim is the principal, Sam may elect to hold either Jim or Rick liable on the contract.

Question 4

Which of the following is not an essential element of an agency relationship?

a. The agent is a fiduciary in respect to the principal.
b. The agent acts on behalf of another and not himself.
c. The agent must be subject to the principal’s control.
d. It must be created by contract.

Answer 4

It must be created by contract.

Question 5

Marcross is an agent for Fashion Frocks, Ltd. As such, Marcross made a contract for and on behalf of Fashion Frocks with Sowinski Fabrics which was not authorized and upon which Fashion has disclaimed liability. Sowinski has sued Fashion on the contract asserting that Marcross had the apparent authority to make it. In considering the factors which will determine the scope of Marcross’ apparent authority, which of the following would not be important?

a. The custom and usages of the business.
b. Previous acquiescence by the principal in similar contracts made by Marcross.
c. The status of Marcross’ position in Fashion Frocks.
d. The express limitations placed upon Marcross’ authority which were not known by Sowinski.

Answer 5

The express limitations placed upon Marcross’ authority which were not known by Sowinski.

Question 6

Wallace, an agent for Lux, made contract with Doolittle which exceeded Wallace’s authority. If Lux wishes to hold Doolittle to the contract, Lux must prove that

Answer 6

Lux ratified the contract before withdrawal from the contract by Doolittle.

Question 7

Agents sometimes have liability to third parties for their actions taken for and on behalf of the principal. An agent will not be personally liable in which of the following circumstances?

a. If he makes contract which he had no authority to make but which the principal ratifies.
b. If he commits a tort While engaged in the principal’s business.
c. If he acts for an undisclosed principal as long as the principal is subsequently disclosed.
d. If he acts for principal which he knows is nonexistent and the third party is unaware of this.

Answer 7

If he makes contract which he had no authority to make but which the principal ratifies.

Question 8

Under the agent’s duty to account, which of the following acts must gratuitous agent perform?

a. Commingle funds and Account for the principle property
b. Commingle funds
c. Account for the principle property
d. Neither

Answer 8

Account for the principle property

Question 9

Brian purchased an automobile from Robinson Auto Sales under a written contract by which Robinson obtained a security interest to secure payment of the purchase price. Robinson reserved the right to repossess the automobile if Brian failed to make any of the required ten payments. Ambrose, an employee of Robinson, was instructed to repossess the automobile on the ground that Brian had defaulted in making the third payment. Ambrose took possession of the automobile and delivered it to Robinson. It was then discovered that Brian was not in default. Which of the following is incorrect?

a. Barian may sue and collect from either Robinson or Ambrose.
b. If Ambrose must pay in damages, he will be entitled to indemnification from Robinson.
c. Ambrose is not liable for the wrongful repossession of the automobile since he was obeying the direct order of Robinson.
d. Brian has the right to regain possession of the automobile and to collect damages.

Answer 9

Ambrose is not liable for the wrongful repossession of the automobile since he was obeying the direct order of Robinson.

Question 10

Harp entered into contract with Rex on behalf of Gold. By doing so, Harp acted outside his authority as Gold’s agent. Gold may be held liable on the contract if

Answer 10

Gold retains the benefits of the contract.

Question 11

Pell is the principal and Astor is the agent in an agency coupled with an interest. In the absence of contractual provision relating to the duration of the agency, who has the right to terminate the agency before the interest has expired?

a. Pell or Astor
b. Astor
c. Neither
d. Pell

Answer 11

Astor

Question 12

Anker wishes to give Mix power of attorney. In general, the power of attorney

Answer 12

May limit Mix’s authority to specific transactions.

Question 13

Maco Corp. develops shopping centers 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 Maco’s identity or Maco’s relationship to the transaction. If a broker enters into a contract with a seller on Maco’s behalf,

Answer 13

The broker will have the same authority as if Maco’s identity had been disclosed.

Question 14

Kent, without actual authority, contracted to buy computer equipment from Fox Corp. Kent told Fox that Kent was acting on Ace’s behalf. For Ace to ratify the contract with Fox,

Answer 14

Ace must know all material facts relating to the contract at the time it is ratified.

Question 15

Borg is the vice president of purchasing for Crater Corp. He has authority to enter into purchase contracts on behalf of Crater, provided that the price under a contract does not exceed $2 million. Dent, who is the president of Crater, is required to approve any contract that exceeds $2 million. Borg entered into a $2.5 million purchase contract with Shady Corp. without Dent’s approval. Shady was unaware that Borg exceeded his authority. Neither party substantially changed its position in reliance on the contract. What is the most likely result of this transaction?

Answer 15

Crater will be bound because of Borg’s apparent authority.

Question 16

Part agreed to act as Young’s agent to sell Young’s land. Part was instructed to disclose that Part was acting as an agent but not to disclose Young’s identity. Part contracted with Rice for Rice to purchase the land. After Rice discovered Young’s identity, Young refused to fulfill the contract. Whom does Rice have a cause of action against?

a. Part and Young
b. Part
c. Young
d. Neither

Answer 16

Part and Young

Question 17

Ace engages Butler to manage Ace’s retail business. Butler has the implied authority to do all of the following except

a. Purchase inventory for Ace’s business.
b. Hire or discharge Ace’s business employees.
c. Sell Ace’s business fixtures.
d. Pay Ace’s business debts.

Answer 17

Sell Ace’s business fixtures.

Question 18

Magnus Real Estate Developers, Inc. wanted to acquire certain tracts of land in Marshall Township in order to build a shopping center complex. To accomplish this goal, Magnus engaged Dexter, a sophisticated real estate dealer, to represent them in the purchase of the necessary land without revealing the existence of the agency. Dexter began to slowly but steadily acquire the requisite land. Which of the following is correct under these circumstances?

a. The use of an agent by Magnus, an undisclosed principal, is manifestly illegal.
b. Either Magnus or Dexter may be held liable on the contracts for the land.
c. An agent for an undisclosed principal assumes no liability as long as he registers his relationship to the principal with the clerk of the paper county having jurisdiction.
d. An undisclosed principal such as Magnus can have no liability under the contract since the third party believed he was dealing with Dexter as principal.

Answer 18

Either Magnus or Dexter may be held liable on the contracts for the land.

Question 19

Which of the following statements concerning agency law is not true?

a. The agent’s duties are by necessity based on contract law.
b. The principal does not his/her agent fiduciary’ duties.
c. The agent does not third parties with which the principal asks the agent to deal fiduciary duties.
d. The agent owes a fiduciary duty to the principal.

Answer 19

The agent’s duties are by necessity based on contract law.

Question 20

An agency coupled with an interest will be created by written agreement which provides that a

Answer 20

Borrower shall pledge securities to a lender which authorizes the lender to sell the securities and apply the proceeds to the loan in the event of default.

Question 21

Forming an agency relationship requires that

Answer 21

Both the principal and agent consent to the agency.

Question 22

Which of the following is prerequisite for the creation of an agency relationship?

a. The principle must have capacity
b. The consideration must be in writing.
c. The agent must have capacity.
d. Consideration must be given.

Answer 22

The principle must have capacity

Question 23

Ozgood is a principal and Flood is his agent. Ozgood is totally dissatisfied with the agency relationship and wishes to terminate it. In which of the following situations does Ozgood not have the power to terminate the relationship?

a. Flood has been appointed as Ozgood’s agent pursuant to power of attorney.
b. Flood is an agent coupled with an interest.
c. The agency agreement is in writing and provides for specific duration which has not elapsed
d. Ozgood and Flood have agreed that their agency is irrevocable.

Answer 23

Flood is an agent coupled with an interest.

Question 24

A principal and agent relationship requires

Answer 24

Meeting of the minds and consent to act.

Question 25

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. An irrevocable agency.
b. A sales agency where the agent normally will sell goods which have value in excess of $500.
c. An agency for the forthcoming calendar year Which is entered into in mid-December of the prior year.
d. An agency which is of indefinite duration but which is terminable upon I month’s notice.

Answer 25

An agency for the forthcoming calendar year Which is entered into in mid-December of the prior year.

Question 26

If an employee commits tort injuring third party while acting within the scope of his employment, which of the following is correct?

a. The employee is liable but not the employer.
b. The employer is liable but not the employee.
c. The third party must elect to hold either the employer or the employee liable but not both.
d. The third party may recover the damages from either the employer or the employee or both.

Answer 26

The third party may recover the damages from either the employer or the employee or both.

Question 27

Sly was a general agent of the Cute Cosmetics Company with authority to sell, make collections, and adjust disputes. Sly was caught padding his monthly expense account by substantial amounts and was dismissed. Cute hired another general agent, Ready, to replace Sly. Ready was slowly but steadily calling upon Sly’s accounts to make sales and was informing them that Sly’s services had been terminated. Cute also published a notice in the appropriate trade journals and the local newspaper announcing the replacement of Sly with Ready. Sly, after he was let go, called on all the customers who had outstanding accounts payable and quickly made whatever collections he could in cash and absconded. Which of the following statements is correct regarding Cute’s legal right against the customers?

a. Cute can regain possession of the goods since title did not pass because Sly’s actions constituted a fraud.
b. Cute will have to absorb the loss unless Cute can prove the customers had actual notice of Sly’s dismissal.
c. Cute can obtain payment from the customers despite Sly’s wrongful acts since it had published a notice of Sly’s dismissal.
d. Cute will have to absorb the loss since Sly had continuing implied authority to make collections.

Answer 27

Cute will have to absorb the loss unless Cute can prove the customers had actual notice of Sly’s dismissal.

Question 28

Jason Manufacturing Company wished to acquire a site for a warehouse. Knowing that if it negotiated directly for the purchase of the property the price would be substantially increased, it employed Kent, an agent, to secure lots without disclosing that he was acting for Jason. Kent’s authority was evidenced by a writing signed by the proper officers of Jason. Kent entered into a contract in his own name to purchase Peter’s lot, giving Peter a negotiable note for $1,000 signed by Kent as first payment. Jason wrote Kent acknowledging the purchase. Jason also disclosed its identity as Kent’s principal to Peter. In respect to the rights and liabilities of the parties, which of the following is a correct statement?

a. Unless Peter formally ratifies the substitution of Jason for Kent, he is not liable.
b. Peter is not bound on the contract since Kent’s failure to disclose he was Jason’s agent was fraudulent.
c. Kent has no liability since he was acting for and on behalf of an existing principal.
d. Jason, Kent, and Peter are potentially liable on the contract.

Answer 28

Jason, Kent, and Peter are potentially liable on the contract.

Question 29

Dixon Sales, Inc. dismissed Crow as its general sales agent. Dixon notified all of Crow’s known customers by letter. Hale Stores, a retail outlet located outside of Crow’s previously assigned sales territory, had never dealt with Crow. However, Hale knew of Crow as a result of various business contacts. After his dismissal, Crow sold Hale goods, to be delivered by Dixon, and received from Hale a cash deposit for of the purchase price. It was not unusual for an agent in Crow’s previous position to receive cash deposits. In an action by Hale against Dixon on the sales contract, Hale will

Answer 29

Win, because Dixon’s notice was inadequate to terminate Crow’s apparent authority.

Question 30

Harris is a purchasing agent for Elkin, a sole proprietor. Harris has the express authority to place purchase orders with Elkin’s suppliers. Harris typically conducts business through the mail and has very little contact with Elkin. Elkin was incapacitated by a stroke and was declared incompetent in a judicial proceeding. Subsequently, Harris placed an order with Ajax, Inc. on behalf of Elkin. Neither Ajax nor Harris were aware of Elkin’s incapacity. With regard to the contract with Ajax, Elkin (or Elkin’s legal representative) will

Answer 30

Not be liable because Harris was without authority to enter into the contract.

Question 31

Cade Corporation hired Brenner to sell computer service contracts to businesses. Brenner goes into Apex Corporation and makes what he thought was a successful presentation. Unknown to Brenner, it was a file clerk who signed the service contract. A few days later, a high-level manager and agent of Apex learns of the facts and tells Cade Corporation that Apex wishes to ratify the service contract for certain beneficial terms but not for other major terms. Cade Corporation maintains it will only sell the service contract in its entirety. Which of the following is correct?

a. Brenner is liable for breach of his fiduciary duty.
b. Apex must accept this contract since it was signed by an agent of Apex.
c. Apex must ratify the contract in its entirety or not at all.
d. Cade is liable on this contract because its authorized agent, arenner, signed it.

Answer 31

Apex must ratify the contract in its entirety or not at all.

Question 32

Ritz hired West for 6 months as an assistant sales manager at $4,000 month plus 3% of sales. Which of the following is correct?

a. The employment agreement must be in writing and signed by the party to be charged.
b. The agreement between Ritz and West formed an agency coupled with an interest.
c. West must disclose any interests he has which are adverse to Ritz in matters concerning Ritz’s business.
d. West can be dismissed by Ritz during the 6 months only for cause.

Answer 32

West must disclose any interests he has which are adverse to Ritz in matters concerning Ritz’s business.

Question 33

Steel has been engaged by Lux to act as the agent for Lux, an undisclosed principal. As result of this relationship

Answer 33

Steel has the same implied powers as an agent engaged by a disclosed principal.

Question 34

Which of the following terms best describes the relationship between corporation and the CPA it hires to audit corporate books?

a. Employer and independent contractor.
b. Master and servant.
c. Employer and principal.
d. Employer and employee.

Answer 34

Employer and independent contractor.

Question 35

Which of the following is(are) available to principal when an agent fraudulently breaches fiduciary duty?

a. Termination of the agency and Constructive trust
b. Termination of the agency
c. Constructive trust
d. Neither

Answer 35

Termination of the agency and Constructive trust

Question 36

Which of the following is not type of authority of an agent that third party can expect to encounter?

a. Apparent.
b. Expert.
c. Implied.
d. Express.

Answer 36

Expert.

Question 37

A principal and agent relationship requires

Answer 37

Meeting of the minds and consent to act.

Question 38

Which of the following principals may normally ratify an unauthorized contract made by an agent?

I. Fully disclosed principal.

Il. Partially disclosed principal.

Ill. undisclosed principal.

Answer 38

I and II only