Chapter 20a An employee may not act in the capacity of an agent

1. An employee may not act in the capacity of an agent.

1. Normally, all employees who deal with third parties are deemed to be

agents.

1. Independent contractors have no control over the details of their work

performance.

1. Agency relationships normally are consensual.

1. An agreement to form an agency relationship can be oral.

1. Acts of a purported agent in and of themselves can create an agency

by estoppel.

1. A principal owes his or her agent a duty to act in good faith.

1. When an agent fails to perform his or her duties, liability for breach of

contract may result.

1. A principal owes an agent a duty of estoppel.

1. Remedies of the agent for breach of duty by the principal follow normal

contract and tort remedies.

1. An agent has the implied authority to do what is reasonably necessary

to carry out express authority.

1. Apparent authority arises from what the principal makes clear to the

agent.

1. An agent’s authority to act on behalf of a principal must be actual and

apparent.

1. Ratification occurs when a principal accepts responsibility for an agent’s

unauthorized act.

1. A principal whose identity is known by a third party with whom an

agent contracts on the principal’s behalf is a disclosed principal.

1. A principal who authorizes an agent to commit a tort is not liable to

persons or property injured thereby.

1. Under the doctrine of respondeat superior, an agent is liable for

any harm to his or her principal.

1. A principal may be liable for the tort of an agent committed within the

scope of the agency or employment.

1. An agency coupled with an interest is an agency created for the

agent’s benefit.

1. An agency relationship may be terminated by an act of the parties but

not by operation of law.

1. Ozzy is an officer of Prudent Financial Corporation. Ozzy serves in a

representative capacity for Prudent Financial’s owners. With respect to

binding Prudent Financial to contracts, Ozzy is

a. an agent and has the authority.

b. an agent but does not have the authority.

c. not an agent and does not have the authority.

d. not an agent but does have the authority.

1. Genetic Seed Company hires Howie to work on Genetic’s shipping

dock, accepting deliveries and dealing with other companies’ drivers.

With respect to Genetic, Howie is most likely

a. an agent.

b. an independent contractor.

c. a principal.

d. a work for hire.

1. Diego is a truck driver for Entertainment Supplies Company (ESC).

Diego does exactly what ESC tells him. Diego is

a. an employee.

b. an employer.

c. an independent contractor.

d. a principal.

1. Maya and Noel work at OpenFlo Plumbing Supply. Maya is a

plumbing engineer who works with OpenFlo clients on residential plumbing

and field draining and irrigation projects. OpenFlo closely supervises all of its

engineers, and dictates their work schedules. Noel works part-time in the

evenings cleaning the offices and warehouse.

Refer to Fact Pattern 20-1A. Maya is OpenFlo’s

a. employee, agent, and independent contractor.

b. employee and agent.

c. employee but not agent.

d. independent contractor.

1. Maya and Noel work at OpenFlo Plumbing Supply. Maya is a

plumbing engineer who works with OpenFlo clients on residential plumbing

and field draining and irrigation projects. OpenFlo closely supervises all of its

engineers, and dictates their work schedules. Noel works part-time in the

evenings cleaning the offices and warehouse.

Refer to Fact Pattern 20-1A. Noel is OpenFlo’s

a. agent but not employee.

b. employee and agent.

c. employee or independent contractor, depending on whether

OpenFlo controls the details of his physical performance.

d. independent contractor.

1. Louis, a certified public accountant and an investor, and Maria, an in–

surance salesperson and a realtor, may create an agency relationship

for

a. a business purpose only.

b. a legal purpose only.

c. any purpose.

d. no purpose.

1. Jill introduces Kelly to her friends as “my associate.” Kelly purports to

act as Jill’s agent in several business transactions with those friends. If

Jill is liable for Kelly’s actions, it will be under

a. the doctrine of estoppel.

b. the equal dignity rule.

c. the fiduciary principle.

d. the good faith statute.

1. Home Development Company employs llya to buy property for a future

residential development. Ilya secretly buys some of the property and

sells it to Home Development at a profit. Ilya has breached

a. no duty.

b. the duty of accounting.

c. the duty of loyalty.

d. the duty of notification.

1. Rangler contracts with Siena to buy a certain horse for her. Rangler

makes a deal with Timberline Stables, the owner of the horse, and

makes a down payment. Siena fails to pay the rest of the price.

Timberline sues Rangler for breach of contract. His right to hold Siena

liable for any damages that he has to pay is the right of

a. avoidance.

b. cooperation.

c. indemnification.

d. reimbursement.

1. Glen is an agent for Hi-Flite, Inc. On Hi–Flite’s behalf and at its

request, Glen pays Ian for certain plane maintenance and repair serv–

ices. Glen’s right to obtain the amount of those payments from Hi–Flite

arises under the principal’s duty of

a. avoidance.

b. cooperation.

c. indemnification.

d. reimbursement.

1. Homer is an officer of Integrity Corporation. With respect to binding

Integrity to contracts, Homer’s authority

a. may be actual or apparent.

b. must be actual and apparent.

c. must be actual and not apparent.

d. cannot be actual or apparent.

1. Cory employs Daily Delivery Agency as an agent under a written

agreement that describes the rights and duties of both parties. This is

a. apparent authority.

b. equal authority.

c. express authority.

d. implied authority.

1. Meals n’ More, Inc., a catering company, requires its customers to pay

by check. Lyra, a Meals n’ More driver, tells customers that they can

pay her with cash. When Meals n’ More learns of Lyra’s collections, it

takes no action to stop it. Lyra steals some of the cash. Meals n’ More

may suffer the loss under the doctrine of

a. apparent authority.

b. express authority.

c. implied authority.

d. no authority.

1. Elin, an agent for First Credit Corporation (FC), enters into an unau–

thorized contract with Great Expectations, Inc. (GE), purportedly on FC’s

behalf. This contract will be enforceable if it is ratified by

a. any third party.

b. Elin.

c. FC.

d. GE.

1. Ulani indicates that she is acting as an agent on behalf of an

unnamed client—Thoroughbred Stallions, LLC—when she enters into a contract

with Shana.

Refer to Fact Pattern 20-1A. Thoroughbred Stallions is

a. a disclosed principal.

b. a non-existent principal.

c. an undisclosed principal.

d. an unidentified principal.

1. Ulani indicates that she is acting as an agent on behalf of an

unnamed client—Thoroughbred Stallions, LLC—when she enters into a contract

with Shana.

Refer to Fact Pattern 20-1A. Liability to Shana for nonperformance of the

contract may be imposed on

a. neither Ulani nor Thoroughbred Stallions.

b. Ulani and Thoroughbred Stallions.

c. Ulani only.

d. Thoroughbred Stallions only.

1. BizOnline.com uses an electronic agent, or e-agent, to perform certain

tasks in e-commerce. With respect to the e-agent’s actions,

BizOnline.com is bound by

a. all of the actions.

b. only those actions of which BizOnline.com is aware.

c. only those actions that BizOnline.com does not refute.

d. only those actions that BizOnine.com ratifies.

1. Fabulous Auto Sales, Inc., employs GR8 Collection Company as a

collection agent. While repossessing a car from Hadji, one of

Fabulous’s customers, GR8 causes an accident in which Hadji is

injured. Hadji can recover from

a. Fabulous only.

b. Fabulous or GR8.

c. GR8 only.

d. Hadji’s insurance company only.

1. Emery is an agent for Downtown Market Corporation. Emery makes an

innocent misrepresentation when entering into a contract on behalf of

Downtown Market with Cool Fruits, Inc. Cool Fruits

a. is directly responsible for performing the contract.

b. is estopped from performing the contract.

c. may rescind the contract.

d. must ratify the contract.

1. Omar hires Petra, a real estate broker, to act as his agent to sell his

land for $150,000. Oil is discovered beneath the land, causing its

market value to increase considerably. The agency agreement is likely

a. still in force if Omar gives Petra additional consideration.

b. still in force if Petra does not tell prospective customers.

c. terminated by mutual consent of the parties.

d. terminated by operation of law.

1. Arnold is the chief executive officer of Beta Corporation. Arnold’s re–

sponsibilities include decisions on product development, marketing, and

other significant business directions. Arnold is subject to the approval

and oversight of Beta’s board of directors. Carol is a Beta manager

whose duties include the firm’s day–to-day hiring, firing, purchasing, and

selling. Dave is a Beta salesperson, whose daily activities are con–

trolled by Carol. Erin writes technical manuals for Beta products ac–

cording to Arnold’s instructions and subject to Beta’s control, but has

no dealings with Beta customers or suppliers. Fred edits the manuals

on a contract-per-manual basis and is not otherwise subject to Beta’s

control. Who is a principal? Who is an agent? Who is an employee?

Who is an independent contractor?

1. Tropical Vittles, LLC, hires Sophie to act as its agent to buy a ten-acre

tract of land from Rico for $1,000 per acre. Tropical Vittles does not

want Rico to know that it is the principal or that Sophie is its agent.

Tropical Vittles wants the land for a new fast–food restaurant, and

believes that Rico may not sell the land for that purpose or may

demand a premium price. Sophie makes the purchase, signing only her

name to the contract as the buyer and not disclosing to Rico the

agency relationship. The transfer of the deed is to occur on May 1.

Rico learns of Tropical Vittles’s identity on April 15. Can Rico legally

refuse to deed the property on May 1? Explain.

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