Chapter 9 - Agency Limited to Third Parties and Termination

Question 1

agency coupled with an interest

Answer 1

• the agent has some legal right to (an interest in) the property that is subject of the agency
• for instance, a principal might provide inventory for the agent to sell and then to keep the profits
• because the agent has an additional interest in the property beyond the normal commission for selling it, the agent’s position cannot be terminated until the agent’s interest ends

Question 2

apparent authority

Answer 2

• authority that is only apparent, not real
• in agency law, a person may be deemed to have had the power to act as an agent for another party if the other party’s manifestations to a third party led the third party to believe that an agency existed when, in fact, it did not

Question 3

disclosed principal

Answer 3

• a principal whose identity is known to a third party at the time the agent makes a contract with the third party

Question 4

e-agent

Answer 4

• a semiautonomous computer program that is capable of executing specific tasks

Question 5

equal dignity rule

Answer 5

• in most states, a rule stating that express authority given to an agent must be in writing if the contract to be made on behalf of the principal is required to be in writing
• failure to comply can make a contract voidable at the option of the principal
• exceptions :
  1. An executive officer of a corporation normally can conduct ordinary business transactions without obtaining written authority from the corporation
  2. When an agent acts in the presence of the principal, the rule does not apply
  3. When the agent’s act of signing is merely a formality, then the agent does not need written authority to sign

Question 6

express authority

Answer 6

• authority expressly given by one party to another
• in agency law, an agent has express authority to act for a principal if both parties agree, orally or in writing, that an agency relationship exists in which the agent had the power (authority)to act in the place if, and on behalf of, the principal

Question 7

implied authority

Answer 7

• authority that is created not by an explicit oral or written agreement but by implication
• in agency law, implied authority (of the agent) can be conferred by custom, inferred from the position the agent occupies, or implied by virtue of being reasonably necessary to carry out express authority

Question 8

notary public

Answer 8

• a public official authorized to attest to the authenticity of signatures

Question 9

partially disclosed principal

Answer 9

• a principal whose identity is unknown by a third person, but the third person knows that the agent is or may be acting for a principal at the time the agent and the third person form a contract

Question 10

power of attorney

Answer 10

• a written document, which is usually notarized, authorizing another to act as one’s agent; can be special (permitting the agent to do specified acts only) or general (permitting the agent to transact all business for the principal)
• normally terminates in the incapacity or death of the person giving the power

Question 11

ratification

Answer 11

• the act of accepting and giving legal force to an obligation that previously was not enforceable
• requirements can be summarized as follows :
  1. The agent must have acted on behalf of an identified principal who subsequently ratifies the action.
  2. The principal must know all of the material facts involved in the transaction. If a principal ratifies a contract without knowing all of the facts, the principal can rescind (cancel) the contract.
  3. The principal must affirm the agent’s act in its entirety.
  4. The principal must have the legal capacity to authorize the transaction at the time the agent engages in the act and at the time the principal ratifies. The third party must also have the legal capacity to engage in the transaction.
  5. The principal’s affirmation (ratification) must occur before the third party withdraws from the transaction.
  6. The principal must observe the same formalities when retiring the act as would have been required to authorize it initially.

Question 12

respondeat superior

Answer 12

• in Latin, “Let the master respond”
• a doctrine under which a principal or an employer is held liable for the wrongful acts committed by agents or employees while acting within the course and scope of their agency or employment
• key to determining whether a principal may be held liable for the torts of an agent under the doctrine of respondeat superior is whether the torts are committed within the scope of the agency of employment
• courts may consider the following factors in determining whether a particular act occurred within the course and scope of employment :
  1. Whether the employee’s act was authorized by the employee.
  2. The time, place, and purpose of the act.
  3. Whether the act was one commonly performed by employees on behalf of their employers.
  4. The extent to which the employer’s interest was advanced by the act.
  5. The extent to which the private interests of the employee were involved.
  6. Whether the employer furnished the means or instrumentality (for example, a truck or a machine) by which an injury was inflicted.
  7. Whether the employer had reason to know that the employee would perform the act in question and whether the employee had done it before.
  8. Whether the act involved the commission of a serious crime.

Question 13

undisclosed principal

Answer 13

• a principal whose identity is unknown by a third person, and the third person has no knowledge that the agent is acting for the principal at the time the agent and the third person form a contract
• undisclosed principal can require the third party to fulfill the contract, unless one of the following is true :
  1. The undisclosed principal was expressly excluded as a party in the written contract.
  2. The contract is a negotiable instrument signed by the agent with no indication of signing in a representative capacity.
  3. The performance of the agent is personal to the contract, thus allowing the third party to refuse the principal’s performance.

Question 14

vicarious liability

Answer 14

• legal responsibility placed on on person for the acts of another

Question 15

SAMPLE TEST QUESTIONS

1. Nuncio serves in a representative capacity for Obadiah. With respect to binding Obadiah to contracts. Nuncio’s authority :
   a. must be actual or apparent
   b. must be actual and apparent
   c. must be actual and not apparent
   d. cannot be actual or apparent

Answer 15

ANSWER :
(C)
CORRECT :
(A) must be actual or apparent

Question 16

SAMPLE TEST QUESTIONS

2. Mikayla, an agent for Nahir, enters into a contract on Nahir’s behalf with Onora that must be in writing to be enforceable under the Statute of Frauds. Mikayla’s authority to enter into this contract is not in writing. Under the equal dignity rule, this contract is :
   a. enforceable
   b. void
   c. voidable at Nahir’s expense
   d. voidable at Onora’s expense

Answer 16

ANSWER :
(C)
CORRECT :
(C) voidable at Nahir’s expense

Question 17

SAMPLE TEST QUESTIONS

3. Trucking Dispatch Company and Ucello out their agency agreement into a written document that describes the rights and duties of both parties. Ucello, as the agent, has :
   a. apparent authority
   b. none of the choices
   c. express authority
   d. implied authority

Answer 17

ANSWER :
(C)
CORRECT :
(C) express authority

Question 18

SAMPLE TEST QUESTIONS

4. Darwin serves in representative capacity for Ewan. To accomplish the objectives of this relationship, Darwin’s authority can be implied :
   a. by contradiction
   b. by custom
   c. by whim
   d. under no circumstances

Answer 18

ANSWER :
(B)
CORRECT :
(B) by custom

Question 19

SAMPLE TEST QUESTIONS

5. Based on Esteban’s conduct, Floyd reasonably believes that Glynis has the authority to act on Esteban’s behalf even though Glynis does not have the actual authority to do so. Floyd makes a payment to Glynis for Esteban. Glynis keeps the money and disappears. Esteban :
   a. can demand that Floyd make a repayment directly to Esteban
   b. can obtain damages from Floyd for Glynis’s misconduct
   c. may be estopped from denying that Glynis had authority
   d. must repudiate Glynis’s misconduct to avoid liability

Answer 19

ANSWER :
(C)
CORRECT :
(C) may be estopped from denying that Glynis had authority

Question 20

SAMPLE TEST QUESTIONS

6. Without authorization, Lars contracts on behalf of Mina to have Nemo paint the interior and exterior of Mina’s house. If Mina decides to ratify this decision, she must affirm :
   a. all of the contract
   b. any part of the contract, with Lars liable to Nemo for the difference
   c. any part of the contract before performance begins
   d. any part of the contract at any time

Answer 20

ANSWER :
(C)
CORRECT :
(A) all of the contract

Question 21

SAMPLE TEST QUESTIONS

7. Donald approves on behalf of Evelyn -but without authorization- a contract with Farouk to build a new silo. Evelyn does not ratify the contract. The deal with Farouk is :
   a. an enforceable contract with Donald
   b. a voidable contract
   c. an enforceable contract with Evelyn
   d. an unacceptable offer

Answer 21

ANSWER :
(B)
CORRECT :
(D) an unacceptable offer

Question 22

SAMPLE TEST QUESTIONS

8. Linus hires Mieko to act at his agent to purchase Ngoc’s Southeast Asian Buffet. Linus tells Mieko to reveal only that she is buying the restaurant on behalf of a third party, without telling Ngoc’s seller who that third party is. Linus is :
   a. a disclosed principal
   b. not a principal
   c. an undisclosed principal
   d. a partially disclosed principal

Answer 22

ANSWER :
(C)
CORRECT :
(D) a partially disclosed principal

Question 23

SAMPLE TEST QUESTIONS

9. Clark hires Dimitri to act as his agent to purchase Expo Sports Arena, Inc. Clark tells Dimitri to reveal that he is buying the firm and its assets on behalf of a third party and to tell the seller who that third party is. Clark is :
   a. a disclosed principal
   b. an apparent principal
   c. an undisclosed principal
   d. a partially disclosed principal

Answer 23

ANSWER :
(A)
CORRECT :
(A) a disclosed principal

Question 24

SAMPLE TEST QUESTIONS

10. Lena is a salesperson for Musical Instruments, Inc. She tells Nayda, a customer, that an instrument has a certain quality when, as Lena knows, it does not. In reliance, Nayda buys the instrument. Liable for this misrepresentation is :
    a. no one
    b. Lena
    c. Musical Instruments
    d. Nayda

Answer 24

ANSWER :
(C)
CORRECT :
(B) Lena

Question 25

SAMPLE TEST QUESTIONS

11. Mirena serves in a representative capacity for Netanya. Orla is injured through Mirena’s negligence. Netanya may Elaine to Orla if Mirena’s conduct occurred :
    a. due to a propensity Netanya was not and could not have been aware of
    b. during normal working hours
    c. in the course and scope of Mirena’s employment
    d. outside the parties’ employment relationship

Answer 25

ANSWER :
(C)
CORRECT :
(C) in the course and scope of Mirena’s employment

Question 26

SAMPLE TEST QUESTIONS

12. Rodney is an employee of Security Services, Inc. In deciding whether Rodney acted within the scope of his employment when committed a tort against Tracy, a court will not consider whether :
    a. Rodney indicated that he was acting on behalf of Security Services
    b. Security Services authorized the act
    c. Security Services furnished the means by which the injury was inflicted
    d. the act is one commonly performed by employees for their employers

Answer 26

ANSWER :
(A)
CORRECT :
(A) Rodney indicated that he was acting on behalf of Security Services

Question 27

SAMPLE TEST QUESTIONS

13. Garry drives a truck as an employee for Heavy Hauling, Inc. Garry would most likely be considered acting outside the scope of her employment if he :
    a. crashed into a car at the airport while off duty
    b. hit a pedestrian in a parking lot during a “working” lunch
    c. ran over an attendant at a gas station while refueling the truck
    d. smashed into a store-front while intoxicated on-duty

Answer 27

ANSWER :
(A)
CORRECT :
(A) crashed into a car at the airport while off duty

Question 28

FACT PATTERN 9-1B
Barney hires Clean Air, Inc., to install a new air conditioning system in his Dental Clinic, LLP. Barney does not have the right to control the details of Clean Air’s performance.

Question 29

FACT PATTERN 9-1B

14. Refer to Fact Patter 9-1B. The relationship between Barney and Clean Air is :
    a. client and independent contractor
    b. employer and employee
    c. master and servant
    d. principal and agent

Answer 29

ANSWER :
(A)
CORRECT :
(A) client and independent contractor

Question 30

FACT PATTERN 9-1B

15. Refer to Fact Patter 9-1B. While working, Elton, a Clean Air worker, drops a tool on Francine, Barney’s patient, causing an injury. Barney is :
    a. liable to Francine because she was injured on Barney’s property
    b. liable to Francine unless Elton’s act is intentional
    c. not liable because Clean Air is an independent contractor
    d. not liable because Clean Air, and thus Elton, are Barney’s employees

Answer 30

ANSWER :
(C)
CORRECT :
(C) not liable because Clean Air is an independent contractor

Question 31

SAMPLE TEST QUESTIONS

16. Bayou Developmental Corporation hires Coastal Brokerage Associates to sell the condominiums in a building at Bayou Development’s resort. The agency will terminate :
    a. after the condos have been sold
    b. of the prices of the condos must be reduced to sell them
    c. once Bayou Development obtains insurance to cover the property
    d. when Bayou Development pays Coastal Brokerage its first commission

Answer 31

ANSWER :
(A)
CORRECT :
(A) after the condos have been sold

Question 32

SAMPLE TEST QUESTIONS

17. Reliable Insurance Company employs Stuart as an agent. To terminate Stuart’s authority, Reliable Insurance must notify :
    a. only third parties who are aware of the agency relationship
    b. the public generally
    c. Stuart and any third parties who are aware of the agency relationship
    d. Stuart only

Answer 32

ANSWER :
(C)
CORRECT :
(C) Stuart and any third parties who are aware of the agency relationship

Question 33

SAMPLE TEST QUESTIONS

18. On March 1, Eugene retains Farley to act as his authorized agent. On April 1, Eugene dies. On April 2, before Farley knows of Eugene’s death, he enters into a contract on Eugene’s behalf. The contract is :
    a. binding on Eugene’s heirs
    b. binding in Farley
    c. void
    d. voidable

Answer 33

ANSWER :
(C)
CORRECT :
(C) void

Question 34

SAMPLE TEST QUESTIONS

19. Orina hires Padget, a real estate broker, to sell her oceanfront house. The house is destroyed in a hurricane before being sold. Padget is :
    a. Orina’s agent until Orina’s insurer pays Padget’s commission
    b. Orina’s agent until the destroyed home is sold
    c. Orina’s agent until the the destroyed home is rebuilt and sold
    d. no longer Orina’s agent

Answer 34

ANSWER :
(D)
CORRECT :
(D) no longer Orina’s agent

Question 35

SAMPLE TEST QUESTIONS

20. Miklos employee Nathalie to handle a list of financial transactions on Miklos’s behalf. This power will terminate on :
    a. any transaction causing a loss to Miklos
    b. Miklos’s death or incapacity
    c. Miklos’s sixty-faith birthday
    d. Nathalie’s handling of one of each stipulated transaction

Answer 35

ANSWER :
(B)
CORRECT :
(B) Miklos’s death or incapacity

Question 36

Uniform Electronic Transactions Act (UETA)

Answer 36

• sets forth provisions relating to the principal’s liability for the actions of e-agents
• according to Section 15 of the UETA, e-agents can enter into binding agreements on behalf of their principal’s - at least, in those that have adopted the act
• thus, if consumers place an order over the Internet, and the company (principal) takes the order via an e-agent, the company cannot later claim that it did not receive the order
• stipulates that if an e-agent does not provide an opportunity to prevent errors at the time of the transaction, the other party to the transaction can avoid the transaction
• therefore, if an e-agent fails to provide an on-screen confirmation of a purchase or sale, the other party can avoid the effect of any errors