Chapter 8: Formation of the Agency Relationships

Question 1

Agency relationships are normally consensual, coming about through voluntary consent and agreement between the parties.

Answer 1

True

Question 2

Generally, agency agreements must be in writing and there must be consideration

Answer 2

False

Question 3

With respect to who can become a principal and who can become an agent,

Answer 3

a person must have contractual capacity to be a principal, but any person can be an agent

Question 4

the two situations in which an agency relationship is unenforceable

Answer 4

1. Ones created for a purpose that is illegal

2. Ones contrary to public policy

Question 5

Which of the following is NOT one of the four ways in which an agency relationship can arise?

Answer 5

Agency by fed law

Question 6

The majority of agency relationships are based on

Answer 6

an expressed or implied agreement

Question 7

An agency agreement must be in writing.

Answer 7

False

Question 8

You walk into a restaurant and check your coat to a person behind a counter. You see a sign that says “I work for tips.” What can you assume the relationship is between the owner of the restaurant and the person who took your coat?

Answer 8

There is an implied agreement that the coat check person is an agent of the restaurant

Question 9

When a person who is not an agent makes a contract on behalf of a principal, the principal cannot benefit from the contract.

Answer 9

False

Question 10

An agency by estoppel arises when the principal’s actions have created the appearance of an agency that does not in fact exist.

Answer 10

True

Question 11

In agency law, ratification occurs when

Answer 11

a principal, by words or by actions, affirms a contract made by a person who in fact is not an agent.

Question 12

It is the deeds or statements of the ——that create an agency by estoppel.

Answer 12

Principal

Question 13

Perry tells Jaime that Selena has agreed to allow him to sell her high-end trial bike. Selena is present at the time, hears the conversation, and says nothing. Jaime wants to buy a bike like Selena’s so he agrees with Perry to buy her bike. Selena then refuses to sell it. She claims she is not bound by the agreement formed by Perry and Jaime because Perry is not her agent. Selena is:

Answer 13

bound by the contract under a theory of agency by estoppel.

Question 14

Clarence buys $221 worth of groceries using his wife’s credit card. Under agency law, his wife will probably be deemed:.

Answer 14

liable for the purchase, based on the creation of an agency by operation of law