R5 M4 - Agency

Question 1

When an agent represents an undisclosed principal, and a third party discover who the undisclosed principal is he can go after the agent or the principal.

Question 2

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 evidenced by a signed writing?

A.	An irrevocable agency.
B.	An agency which is of indefinite duration but which is terminable upon one month’s notice.
C.	An agency for the forthcoming calendar year that is entered into in mid-December of the prior year.
D.	A sales agency where the agent normally will sell goods that have a value in excess of $500.

Answer 2

Explanation

Choice “C” is correct. Most agencies do not require a writing. Agencies for the sale of land and agencies impossible to complete in one year do require a writing. An agency agreement entered into in mid-December and to last for the entire next year would require a writing because it would be impossible to complete in one year.

Choice “A” is incorrect. There is no requirement for a writing with irrevocable agencies under the statute of frauds.

Choice “B” is incorrect because an agency that can be terminated upon one month’s notice is not impossible to complete in one year.
Choice “D” is incorrect. Although contracts for the sale of goods of $500 or more would require a writing, the agency agreement would not require a writing.

Question 3

If a principal is undisclosed, which of the following statements is not true?

A.	The principal is personally liable on contracts that the agent enters into with authority.
B.	The agent’s actual authority is the same as if the principal’s identity were disclosed.
C.	The principal may ratify an unauthorized act by the agent.
D.	The agent is personally liable on contracts that he is authorized to enter on the principal’s behalf.

Answer 3

Choice “C” is correct. This statement is not true. If a principal is undisclosed, the principal may not ratify an unauthorized act of his agent. A principal may ratify only if the agent purported to be acting on behalf of the principal, which is impossible if the principal’s identity and existence are undisclosed.

Choices “A” and “D” are incorrect because they are true. If the principal is undisclosed, the third party with whom the agent dealt may hold either the principal or the agent liable on the authorized contracts that the agent enters into.

Choice “B” is incorrect because it is true. An agent’s actual authority depends on the communications between the principal and the agent; whether the principal’s existence and identity are disclosed or undisclosed to third parties is irrelevant to actual authority.

Question 4

What may terminate an Agency and principal relationship?

Answer 4

1. Death of the principal or agent
2. Activity is illegal
3. Bankruptcy filed by the prinicpal