CHAPTER 27—OPERATION AND TERMINATION OF AN
AGENCY Key
1. Which of the following is true of the relationship between an agent and a principal?
2. Which of the following is a duty a principal has toward his agent?
3. Jack, acting as an agent for Mike, purchases two tonnes of wheat on credit from Bryan. As per the agency
contract, Jack is entitled to make all purchases under Mike’s name. However, Mike refuses to make payment.
Which of the following is legally permissible in this scenario?
4. Which of the following is true of an agent’s liability toward a third party?
5. Which of the following best describes an agency coupled with an interest?
6. Which of the following best describes durable power of attorney?
7. The termination of corporation’s operation except activities needed for liquidation is known as _____.
8. Jones acted as Blake’s agent for 12 years before this contract of agency was dissolved by Blake. However,
Blake failed to convey this fact to those vendors whom Jones has transacted with in the past. Which of the
following is likely to occur if Jones negotiates future contracts with these vendors on Blake’s behalf?
9. The relationship of principal and agent is fiduciary in nature.
10. An agent does not incur liability for any losses caused by disobeying a principal’s instructions.
11. Agents have a duty to keep principals informed of all facts pertinent to the agency.
12. When an agency agreement does not state the amount of compensation, the agent may obtain reasonable
compensation for the services provided.
13. A contractual payment made by an agent for a principal is an expense for the agent.
14. Agents who contract in their own names become liable to the same extent as though they were the
principals.
15. An agent does not incur personal liability for fraud or any other wrongdoing caused by disobedience.
16. A principal ordinarily does not have liability to third parties for contracts made within the actual or the
apparent scope of an agent’s authority.
17. An agent is not allowed to terminate an agency without the permission of the principal.
18. The principal may terminate the agency by taking actions that are inconsistent with the continuation of the
agency.
19. Destruction of the subject matter to be sold by the agent does not terminate the agency.
20. Explain why a notice of termination must be given to third parties.