43. The duty of requires the agent to act in the principal’s affairs only as authorized by the principal and to obey all
reasonable instructions and directions given by the principal.
a. accounting
b. obedience
c. fiduciary
d. diligence
44. Contractual duties of a principal to an agent include all but the duty to:
a. pay the agent for losses suffered while acting legally as directed by the principal.
b. account for financial benefits.
c. pay for authorized expenses incurred.
d. compensate the agent as specified in the contract.
45. Which of the following will terminate an agency coupled with an interest?
a. The death of the principal
b. The bankruptcy of the principal
c. The incapacity of the principal
d. None of these will terminate such an agency.
46. Which of the following may terminate an agency agreement by operation of law?
a. Fulfillment of purpose
b. Mutual agreement of the parties
c. Bankruptcy of the principal
d. Renunciation by the agent
47. The Electronic Signatures in Global and National Commerce Act:
a. makes electronic records and signatures valid and enforceable across the United States for many types of
transactions affecting interstate commerce.
b. excludes all transactions covered under the UCC.
c. was enacted by all the states after being promulgated as a uniform act.
d. defines an “electronic agent” as a true agent.
48. Which of the following is NOT a major duty which the agent owes to his principal?
a. Duty to obey instructions.
b. Duty to act in good faith and with loyalty.
c. Duty to indemnify.
d. Duty to exercise care.
49. Which of the following is not an agent of the business?
a. An officer of a corporation
b. A person hired by a sole proprietor to make purchases of business supplies and materials
c. A member of a limited liability company
d. All of these are agents of the businesses.
50. An agent has breached his fiduciary duty to the principal in which of the following situations?
a. Where the agent competes with the principal
b. Where the agent makes a secret profit
c. Where the agent uses confidential information obtained in the course of the agency for his own benefit
d. All of these.
51. Which of the following is correct with regard to the capacity of an agent?
a. The incapacity of the agent disqualifies him from making a contract that is binding on his principal.
b. Business associations do not have the capacity to act as agents.
c. If an incompetent person who is not under guardianship appoints an agent, contracts made by that agent are
voidable.
d. Electronic agents, although not persons, are considered agents.
52. A gratuitous agent:
a. is a paid agent.
b. is subject to the same duty of loyalty as other agents.
c. has no duty of diligence.
d. need not be reimbursed for her expenses.
53. Amber, who is an agent for Peter, breaches her fiduciary duty to Peter. Amber:
a. is liable to Peter for breach of contract.
b. is liable to Peter in tort for any losses caused by the breach.
c. must make restitution for any profits or property received in breach of this duty.
d. All of these are correct.
54. Steven is a manufacturer’s representative for Sellmed Corporation. One day he receives a big-screen television as a
gift from one of the clients he contacts on behalf of Sellmed. In this case:
a. Steven must account to Sellmed for the gift he has received.
b. the big-screen television belongs to Sellmed rather than to Steven.
c. if Steven keeps the TV without telling Sellmed, he will have breached his fiduciary duty to Sellmed.
d. All of these are correct.
55. Jason may validly authorize Nathan to:
a. obtain title to Max’s car by making materially false representations of an existing fact.
b. vote in his place since Jason is not feeling well on election day.
c. negotiate a contract for the sale of Jason’s boat.
d. All of these.
56. According to the Second Restatement, in which of the following situations would an agency be terminated by
operation of law?
a. An outbreak of war places the principal and agent in the position of alien enemies.
b. The death of the individual principal, only upon the agent’s notice of the death.
c. The agent gives notice to the principal that she is renouncing the authority given to her.
d. None of these.
57. Which of the following is not a factor used to determine whether an agent is an employee or an independent
contractor?
a. Whether the employer or the employee/independent contractor designates the person and the tasks to be
accomplished
b. Whether the principal is or is not in business
c. Whether payment is by the job or by the time worked
d. Whether the work is part of the regular business of the principal
58. Which of the following is not a breach of an agent’s duty of obedience?
a. Entering into an unauthorized contract for which his or her principal is liable.
b. Refusing to follow the principal/employer’s instruction to misrepresent the quality of a competitor’s goods to a
potential customer.
c. Improperly delegating her authority.
d. Committing a tort for which the principal is liable.
59. An agent is not required to keep which of the following information confidential?
a. Unique business methods
b. Customer lists
c. Information that his or her principal is engaged in criminal activity
d. Business plans
60. A principal has no duty to compensate his or her agent if:
a. the agent breached the duty of obedience.
b. the agent breached the duty of loyalty.
c. it is a gratuitous agency.
d. All these are correct.
61. In circumstances under which a person is held liable as a principal even though no actual agency has been created,
there is a(n):
a. agency by estoppel.
b. apparent agency.
c. ostensible agency.
d. All of these.
62. An agency:
a. is a consensual relationship that the principal and agent may form by contract or agreement.
b. must be created with consideration.
c. requires a formal writing, called a power of attorney.
d. which is voidable because of the incapacity of an agent results in only voidable contracts with third parties.
63. Milton owns a business delivering coffee and donuts within the downtown area of the city. Smith Co. calls him to
deliver a large quantity of his products to their local office. While taking a coffee urn through the Smith Co.’s office,
Milton drops it on Lester, scalding him. Who is liable?
a. Smith Co. and Milton are liable
b. Milton alone is liable
c. Lester has to absorb the cost himself since he assumed the risk by working at Smith Co
d. Smith Co. alone is liable
64. Mark, who is 16 years old, appoints Joe, age 21, as his agent to purchase a videotape recorder from VideoWorld.
The transaction between Joe and VideoWorld is:
a. void because Mark is a minor.
b. voidable by VideoWorld because Mark is a minor.
c. voidable by Mark because he is a minor.
d. not voidable because Joe is not a minor.
65. Carolyn, a cashier at Tops Supermarkets, may cash checks for up to $20 over a purchase amount. A friend needs
money for a dress, so Carolyn cashes a check for $50 with no purchase. If the check bounces, Carolyn is:
a. liable because she violated her duty of obedience.
b. liable because she breached her duty to inform.
c. not liable since she has apparent authority to take the check.
d. not liable unless she knew her friend did not have the money in the bank.
66. When is an agency relationship irrevocable?
a. It is never irrevocable.
b. When the agency is coupled with an interest of the agent in the subject matter
c. When the principal violates his duties to the agent
d. When the agency is gratuitous
67. All of the following except which one is a duty of an agent?
a. Account for money received on behalf of the principal
b. Inform the principal of any information relevant to the agency
c. Refrain from competing with the principal
d. Refrain from using any information gained while an agent
68. Robert advances money to John so that John can purchase inventory for his business. In return and for security on
the loan, John makes Robert his agent. If John:
a. becomes incapacitated, Robert’s agency is terminated by operation of law.
b. files for bankruptcy, Robert’s agency is terminated by operation of law.
c. dies, Robert’s agency is terminated by operation of law.
d. Robert’s agency is irrevocable.
69. An agency will terminate on the occurrence of all but which one of the following?
a. The goal of the agency is accomplished.
b. The agent decides to quit.
c. The subject matter of the agency is destroyed.
d. The principal leaves the country.
70. Mark hires Joe’s real estate agency to sell his estate, telling Joe he has lost too much money playing the stock market
to afford to keep it up. Then Mark wins the three million-dollar lottery! Joe reads this in the newspaper and that
afternoon makes a contract with Sharon to sell the estate. Is the contract valid?
a. No, the agency terminated because of the change in conditions.
b. No, the agent has no right to sell without consent.
c. Yes, Mark would have to notify Joe if he wanted to stop the sale.
d. Yes, Joe had apparent authority to sell.
71. Carl loans Dan $1,500 for Dan’s honeymoon. Dan gives Carl his ruby ring as security for the loan and after a year,
tells Carl he may as well sell it to recoup the $1,500. When Dan’s wife hears of this, she persuades Dan to call Carl
and get back the ring. Can Carl sell it anyway?
a. No, because Carl’s agency has been revoked
b. No, because an unreasonable amount of time has elapsed
c. Yes, because Carl has apparent authority
d. Yes, because Dan cannot terminate this agency
72. Which of the following would NOT be considered an agent?
a. A salesman who sells his employer‘s goods
b. An independent contractor without authority to act on behalf of the person hiring her
c. A factory worker hired to operate a machine
d. A buyer who regularly buys merchandise for a store
73. Identify the following relationships and parties.
Patricia hires Andrew, an attorney, to negotiate a contract to purchase some property. She
a. agrees to pay him $75 an hour for his services, and he agrees to use his own office and
secretarial staff to negotiate and draft the agreement.
b. Mel owns a retail store. He hires Sarah to work for him as a salesclerk in the home furnishings
department.
c. Carl is the general contractor for the construction of a large office complex. Carl hires Ed’s
Electric Company to do all of the wiring for the building.
d. Invox Corporation hires Gary as an outside salesman and instructs him to call on customers in a
specified territory and to solicit orders for their products.
e. Marlin, who is the owner of Marlin’s Department Store, hires Melissa as the general manager
of his new branch in the Hillridge Mall.
74.
a. What is a fiduciary?
b. What are the implications of an agent’s fiduciary obligation? What is an agent prohibited from
doing as a result of this obligation? Explain.
75. What is an independent contractor? Can an independent contractor also be an agent? Explain.
76.
a. When does an agency relationship come to an end? Explain your answer.
b. Is an agency relationship ever irrevocable? Explain.
77. Identify at least six factors a court will consider in determining whether a person acting for another is an employee
or an independent contractor.