50) Donald authorizes Alice to purchase 200 units of a certain electronic component. Alice
identifies a suitable vendor and places the order. Alice bribes the vendor to have the goods
delivered. Which of the following statements is true of this scenario?
A) If Donald accepts the goods purchased by Alice, agency by ratification occurs.
B) Alice has not fulfilled her duty of accounting to Donald.
C) Duty of reimbursement and indemnification does not require Donald to reimburse the bribe
paid by Alice.
D) Duty of compensation requires Donald to reimburse the bribe paid by Alice.
51) Which of the following statements is true of the duty of cooperation?
A) It requires that a principal do nothing to interfere with an agent’s conduct while the agent is
discharging the duties agreed upon in the contract.
B) It requires that a principal draw up a written agreement designating an individual as the agent
and enumerate the duties that the agent is expected to perform.
C) It mandates that the agent’s fee be agreed upon before the agent starts discharging his or her
duties.
D) It mandates that a principal compensate an agent for all the expenses that arise when the agent
is acting on behalf of the principal.
52) Arthur enters into a written contract with James that requires James to sell Arthur’s farm.
Arthur then hires Katherine to sell his farm without terminating the contract with James. Which
of the following statements is true of this scenario?
A) James can sue Arthur for monetary damages only if their contract was an exclusive agency
contract.
B) James can sue Arthur for breach of contract on the grounds of duty of cooperation and ask for
specific performance.
C) Arthur has the authority to enter into a contract with Katherine without terminating the
contract with James.
D) If James has not completed the duties assigned to him in the contract, Arthur need not
compensate James for his services.
53) Which of the following statements is true of the duty of loyalty?
A) It requires agents to live up to the standards of performance expected of people in their
occupation.
B) It assigns an agent the duty to follow all reasonable and lawful instructions of a principal.
C) It requires agents to keep accurate books that can be viewed by principals.
D) It mandates that an agent act on behalf of one principal only to avoid conflicts of interest.
54) The duty of performance requires agents to ________.
A) keep books accurately
B) exercise reasonable care and skill in performing their work
C) communicate all material information to a principal
D) follow all the instructions of a principal
55) Which of the following statements is true of the duty of obedience?
A) It bars an agent from acting in a manner that is adverse to the principal’s interest.
B) It indicates that it is the duty of an agent to keep accurate books that can be viewed by the
principal.
C) It requires an agent to follow all reasonable and lawful instructions of a principal.
D) It mandates that an agent must use reasonable care and skill in performing his or her work.
56) An indemnity is an obligation on the part of a principal to reimburse the agent against any
losses incurred when the latter is acting on behalf of the former.
57) In terms of the duty of reimbursement and indemnification, an agent is not entitled to
expenses arising out of tortious conduct.
58) In terms of the duty of reimbursement and indemnification, an agent is not entitled to
expenses arising out of unlawful activities.
59) One of the duties of a principal is to provide an agent with safe working conditions.
60) If an agent negligently causes harm while working for a principal, the agent alone must pay
the damages for the harm caused.
61) The principal must do nothing to interfere with the reasonable conduct of an agent as agreed
upon in an express or implied contract.
62) Courts have often indicated that the agent’s most important obligation is fiduciary.
63) Discuss the principal’s duties to the agent.
64) Discuss the agent’s duties to the principal.
65) Which of the following is most important in determining whether a principal is liable to a
third party for an agent’s actions?
A) whether the principal provided safe working conditions
B) whether the principal had a record of indemnifying his or her agents
C) whether the principal was disclosed to the third party
D) whether the agent had abided by the duty of loyalty
66) Which of the following statements is true of e-agents?
A) E-agents can only be used for tasks related to information gathering.
B) Using an e-agent to accept a click-on agreement is considered unlawful.
C) An e-agent’s actions must be approved by a principal for it to bind the principal.
D) The Uniform Electronic Transaction Act (UETA) allows e-agents to bind principals.
67) Jones, a famous tycoon, hires Smith to go to an auction to bid on a castle. Jones does not
wish to be present at the auction as he fears the other bidders will “bid up” the price if they see
that he is bidding. In this case, Jones is a(n) ________.
A) partially disclosed principal
B) independent contractor
C) undisclosed principal
D) employee
68) A principal may be liable for the torts committed by an agent according to the doctrine of
________.
A) non-delegation
B) respondeat superior
C) res ipsa loquitur
D) negligence per se
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69) Which of the following statements is true about the liability of principals for the acts of their
agents?
A) Principals are responsible whenever the agents commit torts or criminal acts.
B) Principals are never responsible for any of the torts committed by their agents.
C) A principal is responsible only for the torts committed within the scope of the agent’s
employment.
D) A principal is liable for torts committed by the agent if the agent was in an unauthorized place
at the time of commission of the tort.
70) Which of the following statements is true of a partially disclosed principal?
A) It refers to a person whose identity is not known to a third party, though the third party does
know that an agent represents a principal.
B) When a principal is partially disclosed, an agent does not have the authority to act.
C) When a principal is partially disclosed, an agent has the authority to act, but the principal is
not liable.
D) It refers to a person whose identity is known only to a third party and an agent at the time of
the agreement.
71) Betty authorizes William to act as her agent. William is required to purchase a vehicle on
Betty’s behalf. Which of the following statements is true of this scenario?
A) If a seller knows that William is acting as an agent, but does not know Betty’s identity,
William is ultimately liable to the seller.
B) If a seller knows that William is acting as an agent, but does not know Betty’s identity, Betty
is said to be an undisclosed principal.
C) If a seller does not know that William is acting as an agent, William is liable to the seller.
D) If a seller knows Betty’s identity and is aware that William is an agent, Betty is said to be a
partially disclosed principal.
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72) Matthew is a truck driver for Argosy, Inc. (Argosy). He transports the supplies from a vendor
to the company and returns the company truck to Argosy. He is not authorized to make any stops
while transporting goods. After collecting the goods from the vendor, Matthew stops at a pub
where he makes defamatory statements about a third party. Which of the following statements is
true of this scenario?
A) Both Matthew and Argosy are liable as Argosy is a disclosed principal.
B) Both Matthew and Argosy are liable as Matthew committed the tort within the scope of his
employment.
C) Argosy is not liable as Matthew was in an unauthorized location according to company rules.
D) If both Argosy and Matthew are found to be jointly and severally liable, Matthew would have
to pay most of the damages based on the “deep pocket” concept.
73) If a school district fails to do background checks before employing teachers or school bus
drivers when the potential employee’s past offensive conduct toward a child could have been
discovered, the school is guilty of ________.
A) trespass to personality
B) negligent supervision
C) negligent hiring
D) trespass to realty
74) A manager is given notice of a male employee’s inappropriate conduct toward a female
employee. If the manager does not take timely action against the male employee, the manager is
guilty of ________.
A) defamation
B) negligent supervision
C) negligent hiring
D) slander
75) The tort of negligent supervision arises when ________.
A) a third party is injured through an employee’s negligent actions
B) a company suffers from losses due to lack of supervision of an employee
C) an employee is left in a position that may be harmful to others after notice is given to an
employer
D) an employee’s past offensive conduct is not uncovered by an employer when the employer
fails to do a background check before hiring the employee
76) Regina works in the procurement department of Magic Kraft, Inc. (Magic Kraft). She is
accused of price fixing, and a lawsuit is filed against her. Which of the following should the
plaintiff establish for Magic Kraft to be liable for the crime?
A) Regina’s superiors in Magic Kraft were aware that she was engaging in price fixing.
B) Regina was in an unauthorized place when she committed the crime.
C) Regina made use of company resources to commit the crime.
D) Regina committed the crime with her personal interests in mind.
77) Under joint and several liability, all the parties responsible for a tort will be liable for
damages as well.
78) If the principal is undisclosed, an agent is likely to be liable to the third party.
79) The tort of negligent supervision comes about when an employee is left in a position that
may be harmful to others after notice is given to an employer.
80) Principals are generally not liable for criminal acts of their agents.
81) When a principal participates directly in an agent’s crime, the agent is not liable for the
criminal act.
82) How do courts decide who is liable for torts committed by an agent?
83) Either the principal or the agent may decide to terminate the principal-agent relationship.
This is known as termination by ________.
A) implication
B) agreement
C) operation of law
D) operation of equity
84) Which of the following is an incorrect statement regarding termination by agreement?
A) The principal may decide to terminate the principal-agent relationship.
B) The agent may decide to terminate the principal-agent relationship.
C) When the principal-agent relationship is terminated by agreement, all third parties who dealt
with the agent should be given actual notice by the principal.
D) When the principal-agent relationship is terminated by agreement, actual notice may be given
to others through advertisements in newspapers published in areas where the agent operated on
behalf of the principal.
85) Suppose Jones agreed with Smith that Smith would serve as his agent for business purposes
until May 20, 2015. On that day, Smith’s actual or apparent authority expired. Jones gave notice
to all relevant parties of the termination. This is known as termination of the principal-agent
relationship by ________.
A) implication
B) equity
C) operation of law
D) lapse of time
86) Which of the following statements is true about termination by agreement?
A) A principal should give constructive notice to all third parties who dealt with an agent.
B) When an agency relationship is terminated by an agent, the agent must give actual notice to
all third parties who dealt with the agent.
C) When an agency relationship is terminated by a lapse of time, there is no requirement to give
notification to third parties.
D) Constructive notice may be given to others through advertisement in newspapers published in
areas where an agent operated on behalf of a principal.
87) Which of the following statements is true of termination by operation of law?
A) If one of the parties dies, that party’s legal heir assumes the role held by that party in a
principal-agent relationship.
B) If an agent is bankrupt, a principal-agent relationship is terminated.
C) If performance is rendered impossible by uncontrollable circumstances, a principal-agent
relationship is terminated.
D) When a principal-agent relationship is terminated by law, the principal must notify the third
parties.
88) Which of the following is not a common method of termination of the principal-agent
relationship by operation of law?
A) death of the principal
B) death of the agent
C) insanity of the principal
D) termination by agreement
89) Which of the following is not a common method of termination of the principal-agent
relationship by operation of law?
A) bankruptcy of the principal
B) impossibility of performance
C) insanity of the agent
D) the principal and the agent decide to terminate their relationship
90) When an agency relationship terminates by a lapse of time, the agent should notify all
relevant third parties.
91) When a principal-agent relationship is terminated by law, the principal should notify all the
relevant third parties.
92) What are the common methods of termination by operation of law?
93) Which of the following is an incorrect statement regarding the principal-agent relationship in
Japan?
A) Agents need not disclose whom they are representing.
B) Third parties often require proof that agents are acting on behalf of a particular principal.
C) The agent must have expressed authority to act.
D) Principals are held liable for acts of agents within their limited range.
94) Which of the following is true about agency relationships in the European Union?
A) Agents must disclose whom they are representing to third parties.
B) Third parties require proof that agents are acting on behalf of a particular principal.
C) Agents must have expressed authority to act.
D) Principals are bound to act in good faith toward their agents.
95) Which of the following is an incorrect statement regarding the Foreign Corrupt Practices Act
(FCPA) and U.S. agents abroad?
A) The FCPA allows remuneration to lower-level foreign agents to expedite the handling of
goods that U.S. businesses are seeking to sell in another country.
B) The FCPA allows remuneration to lower-level foreign officials to expedite the handling of
goods that U.S. businesses are seeking to sell in another country.
C) The FCPA forbids payments to political officials beyond a certain level.
D) Companies are potentially liable for civil, but not criminal, sanctions for violating the FCPA.
96) In Japan, principals are held liable for acts of agents within their limited range.
97) In the European Union, to terminate a relationship of two years, a notice of two months is
required.
98) In the European Union, if there is no written contract, compensation is based on customary
practice in the location where an agent is acting.
99) The Foreign Corrupt Practices Act (FCPA) allows remuneration to lower-level foreign
officials to expedite the handling of goods.
100) Explain how the Foreign Corrupt Practices Act (FCPA) affects the functioning of
businesses in foreign countries.