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True / False
1. Agency relationships used to be common in decades past, but in recent years they have fallen out of favor.
a. True
b. False
2. The agency relationship is a key part to most business operations.
a. True
b. False
3. In an agency relationship, the agent is a neutral party regarding contracts between the principal and third parties.
a. True
b. False
4. A principal's major reason for developing agency relationships is to expand business opportunities.
a. True
b. False
5. An agent may not legally bind a principal to contracts without the principal agreeing to each contract.
a. True
b. False
6. A principal may designate someone to execute all transactions connected with running a business. Such a person is
known as a special agent.
a. True
b. False
7. When an agent pays for the right to exercise authority for a business, there is an agency coupled with an interest.
a. True
b. False
8. A person appointed by an agent to help the agent for certain specific transactions is a special agent.
a. True
b. False
9. A principal may designate someone to do all acts that can be legally delegated to an agent. That agent is called a
universal agent.
a. True
b. False
10. A general power of attorney is usually given to a universal agent.
a. True
b. False
11. A general power of attorney is usually given to a special agent.
a. True
b. False
12. A principal may designate someone to do all acts that can be legally delegated to an agent. That agent is called a
general agent.
a. True
b. False
13. Gratuitous agents are appointed by other agents to undertake some work for the principal.
a. True
b. False
14. If Hilda volunteers to sell Heidi's horse for her, because Hilda knows lots of potential buyers, and Heidi agrees,
Hilda is a gratuitous agent.
a. True
b. False
15. If someone volunteers to act as a gratuitous agent, and performs a task, such as selling a car, for a principal, the
legal consequences are the same as if the agent were paid.
a. True
b. False
16. When an agent is authorized to execute all transactions connected with a business, the person is a general agent.
a. True
b. False
17. When an agent is allowed to delegate duties to other agents, the other agents are subagents who assist the agent.
a. True
b. False
18. A subagent is an agent of an agent, not an agent of the principal, so owes no duty to the principal, only to the agent.
a. True
b. False
19. Agency relationships must be evidenced by a written contract.
a. True
b. False
20. All valid agency relationships are contracts.
a. True
b. False
21. Agency relationships may be based on an oral agreement.
a. True
b. False
22. An agency that is for the sale of land usually must be evidenced by a written contract.
a. True
b. False
23. An agency that is to last more than one year usually must be evidenced by a written contract.
a. True
b. False
24. The legal document intended for the purpose of expressly establishing an agency is the attorney-in-fact.
a. True
b. False
25. Power of attorney is based on a legal document.
a. True
b. False
26. Power of attorney is given to an agent called an attorney-in-fact.
a. True
b. False
27. Power of attorney may only be held by a licensed attorney.
a. True
b. False
28. Ratification is an affirmation by the principal of an unauthorized agreement by a person acting as an agent with a
third party.
a. True
b. False
29. An express ratification takes place when the principal gives a clear signal to be bound by an action that would
otherwise be unauthorized.
a. True
b. False
30. If a principal behaves as if he intended to ratify an unauthorized agreement between his agent and a third party, a
court will find that implied ratification has occurred.
a. True
b. False
31. An implied ratification takes place when the principal behaves as if she has the intention of ratifying an
unauthorized agreement.
a. True
b. False
32. An express ratification takes place when the principal behaves as if she has the intention of ratifying an
unauthorized agreement.
a. True
b. False
33. When a principal's conduct appears consistent with the existence of an agency relationship, an agency by estoppel
may be created.
a. True
b. False
34. In an emergency, when someone acts on behalf of someone else in order to avoid a loss, the law may create an
agency by operation of law.
a. True
b. False
35. If a hurricane is coming and you spend $800 to buy supplies to protect your neighbor's house against storm damage,
when they are gone and cannot be reached, you may have created an agency by operation of law.
a. True
b. False
36. An agent's authority is the power to change the principal's legal obligations.
a. True
b. False
37. Agents rarely can change a principal's legal obligations.
a. True
b. False
38. The two general classifications of authority an agent can possess are general authority and implied authority.
a. True
b. False
39. The two general classifications of authority an agent can possess are actual authority and implied authority.
a. True
b. False
40. Express or actual authority may only be created by written instruction or written contract.
a. True
b. False
41. Actual authority involves powers given by the principal to the agent.
a. True
b. False
42. When an agent has the power to do whatever is reasonable and customary to carry out the agency purpose, the
agent has implied authority.
a. True
b. False
43. Apparent authority arises when the principal creates an appearance of authority in an agent that leads a third party
to conclude that the agent has authority to act for the principal.
a. True
b. False
44. Apparent authority arises when agent concludes that there is an appearance of authority from the principal to act
on behalf of the principal in dealing with third parties.
a. True
b. False
45. Principals may be bound by the unauthorized acts of agents if the agent appears to third parties to have the
authority to act.
a. True
b. False
46. In Town Center Shopping Center v. Premier Mortgage, a manager of a mortgage company was held to have
apparent authority when she entered into a lease for office space, even though she did not have authority to commit
her company to that.
a. True
b. False
47. In Town Center Shopping Center v. Premier Mortgage, a lease for office space, made by a manager of a
mortgage company, was negated by the courts because the manager did not have authority to commit her company
to that.
a. True
b. False
48. In Town Center Shopping Center v. Premier Mortgage, a lease for office space, made by a manager of a
mortgage company, was negated by the courts because the leasing company should have known that a person in
the position of the manager would not have such authority.
a. True
b. False
49. Principals are presumed at common law to have no duties to their agents.
a. True
b. False
50. Legal obligations in an agency run from agent to principal, not principal to agent.
a. True
b. False
51. Principals are presumed to have a duty to cooperate with their agents.
a. True
b. False
52. Principals only duty to agents is to compensate.
a. True
b. False
53. Principals have an obligation to reimburse their agents for their normal business expenses related to the agency,
unless otherwise agreed.
a. True
b. False
54. A major duty of principals to their agents is to indemnify them under most circumstances for liabilities incurred in
completing the purpose of the agency.
a. True
b. False
55. If an agency relationship did not establish a rate of compensation for the duties of the agent, the principal must pay
the "customary" rate for such services.
a. True
b. False
56. Fiduciary duties apply to principals; agents have only non-fiduciary duties.
a. True
b. False
57. Agents have a fiduciary duty to their principals.
a. True
b. False
58. An agent is expected to perform responsibilities with the degree of care that is called ordinary care under the
circumstances.
a. True
b. False
59. In her relations with her principal, an agent must meet the "ordinary standard of conduct" imposed on people
engaged in business dealings.
a. True
b. False
60. If an agent is discovered to be representing conflicting interests, she has violated her duty of loyalty.
a. True
b. False
61. Agents have a duty of obedience to their principals, which means that if the agent ignores the principal's
instructions, she violates her duty.
a. True
b. False
62. Agents have no obligation to engage in activity on behalf of principals that could lead to personal liability.
a. True
b. False
63. If money is commingled (funds of agent mixed with funds of the principal), a violation of duty to account occurs
only if the principal can show actual harm.
a. True
b. False
64. An agent has a duty to notify his principal of all facts relevant to the purpose of the agency.
a. True
b. False
