68. If the act of an agent is ratified:
a. there is retroactive authority for the act.
b. the principal has agreed to allow the agent to be liable.
c. the agent then has express authority for that act in the future.
d. none of the above
69. In a master-servant relationship, the principal most likely will need to do which of the following?
a. Withhold income taxes for the agent
b. Pay FICA for the agent
c. Pay FUTA for the agent
d. All of these
70. Principals are liable for the acts of independent contractors if:
a. the acts are inherently dangerous activities.
b. the independent contractor was negligently hired.
c. both a and b
d. none of the above
71. A fiduciary is required to:
a. act in the best interests of the principal.
b. eliminate all risk for the principal.
c. hire a trustee to supervise the funds involved that belong to the principal.
d. none of the above
72. The purpose of anti-retaliation statutes is to protect:
a. employers from whistle-blowing employees.
b. government agencies from suit in the event a private employer is investigated because of an employee’s
claim.
c. whistle-blowing employees.
d. none of the above
73. In which of the following situations is an agent liable to third parties?
a. in a situation where there is a fully disclosed principal but only apparent authority
b. in a situation where there is a fully disclosed principal but only implied authority
c. in a situation where the principal is an unincorporated association
d. all of the above
74. Jane and Joseph Sechrist signed a contract to have a swimming pool built in their backyard for $10,000. The
salesman for the pool company signed the contract as well on a space marked “Salesperson.” Two days after the
contract was signed, the salesman called the Sechrists back and asked them to come in and sign a new contract for
$11,000 because the vice president had not approved the original price. Jane has checked the contract and
discovered that there is no language that requires the approval of anyone other than the salesperson. Jane and
Joseph can have their pool built for $10,000 because:
a. the pool company was bound once Jane and Joe signed the contract.
b. the pool company has ratified the contract.
c. of misrepresentation.
d. the salesman had at least apparent authority to bind the pool company.
75. Gilda Steinforth is a partner in the law firm of Jones, Deloitte & Ernst. A wealthy couple has met with her and
asked her to draw up a trust for a portion of their property. They gave Steinforth a check for $10,000 as a retainer
fee and a check for $500,000 to begin the trust. Within two days after her meeting with the couple, Gilda and the
checks are gone. The couple wishes to recover from Jones, Deloitte & Ernst. Which of the following statements is
true?
a. The couple may not recover since Jones, Deloitte & Ernst is not responsible for the intentional torts of its
employees.
b. The couple may not recover since Steinforth, as a lawyer, was an independent contractor and not a servant
of the firm.
c. The couple may not recover since Steinforth had no express or implied authority to receive the checks.
d. none of the above
76. Haskins is an officer of a real estate development firm. Haskins purchased a piece of property in a rural area of
Arizona with the idea of building resort homes there. The firm has always had board resolutions for purchases of
property (as is common practice) but there was no resolution for this property purchase. The other officers in the
firm have learned of the value of the property and are concerned that the firm may not own the property. Which of
the following statements is true?
a. The firm can ratify Haskin’s actions and take over the contract.
b. The firm cannot ratify the contract unless Haskins had express authority to buy land.
c. If the firm ratifies the contract, the effect is that Haskins is released from liability on it.
d. none of the above
77. In which of the following situations does the agent have no liability to third parties?
a. contract entered into with express authority and a fully disclosed principal
b. contract entered into with no authority but later ratified in full by the principal
c. contract entered into for a corporation before the corporation was formed but with full knowledge and
support of the incorporators
d. The agent has no liability in any of the above.
78. Russ Belmont is a staff accountant at a bank in the downtown Phoenix area. Belmont commutes to the bank each
day from his suburban home in Mesa – a distance of 19 miles each way. Belmont’s working hours are 8:00 AM to
5:00 PM and he commutes from 7:15 AM until he reaches the bank‘s parking garage between 7:45 and 8:00
(depending upon the traffic). If Russ is in an accident while on the freeway at 7:30 AM:
a. the bank will be liable for any injuries to third parties.
b. the bank will not be liable for any injuries to third parties.
c. Belmont is an independent contractor and the bank will have no liability for injuries or damages in the
accident.
d. none of the above
79. Russ Belmont is a staff accountant at a bank in the downtown Phoenix area. Belmont is sent to various branches
throughout the state to do audits and has an accident while en route to one of the audits. Which of the following
statements is true?
a. The bank will be liable for any injuries to third parties.
b. The bank will not be liable for any injuries to third parties.
c. Belmont is a professional and an independent contractor and the bank will not be liable.
d. none of the above
80. Which of the following is necessary to create an agency relationship?
a. consideration
b. an agent with contractual capacity
c. a ratification by the principal
d. none of the above
81. Firing an agent terminates:
a. express authority.
b. implied authority.
c. apparent authority.
d. a and b only
e. a, b, and c
82. Lingering apparent authority results from:
a. the failure to give notice of termination.
b. ratification.
c. the lack of capacity on the part of the principal.
d. none of the above
83. Joe Helquist and Samantha Gillis were partners in the operation of an office supply business for 32 years. Joe had
always handled suppliers and Samantha was responsible for running the store and managing employees. Joe
decided to retire and Samantha gave him a fine retirement dinner. Joe had some financial setbacks shortly after
retirement when his wife became ill and two of his children decided to go on for their masters’ degrees. Joe began
ordering supplies from the usual suppliers since they were not aware of his retirement. Joe would intercept the
supplies at the loading dock and then sell them on his own. Samantha soon caught the discrepancy in the bills and
her inventory and refused to pay the suppliers when she learned of Joe’s scheme. Which of the following
statements is correct?
a. Samantha is not liable to the suppliers since Joe’s authority terminated.
b. Samantha is not liable to the suppliers because Joe’s acts constituted fraud.
c. Samantha is liable to the suppliers.
d. none of the above
84. An agent for which of these would have authority to act?
a. An unincorporated company
b. A minor
c. An incompetent person
d. None of these
85. Which of these ends apparent authority?
a. Departure of the agent
b. Retirement of the agent
c. Termination of the agent
d. None of these
86. The breach of the fiduciary duty by an agent:
a. results in termination of the agent.
b. terminates the agent’s apparent authority.
c. does not terminate an agent‘s implied authority.
d. none of the above
87. Alan Freeman and Bill Freeman, brothers, operated a residential construction firm. There were three divisions of the
firm: single-family homes, townhomes, and custom homes. Alan did not enjoy the demands of custom home buyers
and Bill did not enjoy the cookie-cutter work of the other divisions. The brothers agreed to split the business with
Bill assuming the responsibilities and contracts of the custom home division and Alan handling the remaining
divisions. Alan told Bill he could continue to use the company offices until he was able to find offices of his own.
Bill met his clients at the company offices, used the plans of the company and even continued to use the company
stationery. Three months later Bill left town, leaving custom homes unfinished and taking the deposits of three
customers with him. The customers have sued Alan. Which of the following statements is true?
a. Alan is not liable since the relationship had been terminated.
b. Alan is liable because of apparent authority.
c. Bill is not liable because he was Alan’s agent.
d. none of the above
88. In an undisclosed principal situation in which the agent does not have the authority to enter into a contract for real
property and does so:
a. only the principal is liable on the contract.
b. the third party can elect to hold the principal or agent liable.
c. only the agent is liable on the contract.
d. none of the above
89. To bind the third party, restrictions on an agent’s authority must be:
a. known to the third party.
b. in contract form between the agent and principal.
c. in writing.
d. none of the above
90. A pizza deliverer who is in an accident while en route to deliver a pizza for a restaurant has:
a. no liability for the accident.
b. the only liability for the accident if he was driving his own car.
c. liability along with the restaurant for the accident.
d. none of the above
91. Which of the following functions would be implied authority for an apartment manager?
a. selling the apartment complex
b. selling the apartments’ appliances
c. collecting rent from the tenants
d. All of the above would be included in implied authority.
92. Which of the following is not a factor in determining whether an agent is a servant or independent contractor?
a. level of supervision
b. whether the agent has his or her own office
c. whether the agent has a college degree
d. whether the agent has more than one client
e. All of the above are not factors.
93. What is the general rule with regard to employer liability for employee accidents occurring while the employee is on
the way to work?
a. The employer is generally not liable.
b. The employer is liable unless it furnishes transportation for employees.
c. The employer is liable if the employee is reporting to work early.
d. both b and c
e. none of the above