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STUDENT ______________________________________ CLASS _______________________ DATE __________
ȱLESSONȱ21—1ȱQUIZȱ
LegalȱConceptsȱ
Directions:ȱFillȱinȱtheȱblank(s)ȱwithȱtheȱmostȱappropriateȱtermȱorȱphraseȱtoȱcompleteȱ
theȱsentence.ȱȱȱȱȱ
ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱAnswersȱ
1.ȱ ȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱauthorityȱisȱdirectlyȱcommunicatedȱbyȱ
theȱprincipalȱtoȱtheȱagent.ȱ
1.ȱ_____________________ȱ
2.ȱ ȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱauthorityȱisȱtheȱpowerȱtoȱdoȱanythingȱ
thatȱisȱreasonablyȱnecessaryȱtoȱcarryȱoutȱtheȱduȬ
tiesȱexpresslyȱauthorized.ȱ
2.ȱ_____________________ȱ
3.ȱTheȱprincipal,ȱwithȱknowledgeȱorȱthroughȱnegliȬ
gence,ȱpermitsȱtheȱagentȱtoȱassumeȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱȱȱ
authority.ȱȱ
3.ȱ_____________________ȱ
4.ȱ ȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱauthorityȱisȱcreatedȱwhenȱaȱprincipalȱ
authorizesȱanȱagentȱtoȱrepresentȱtheȱprincipal.ȱ
4.ȱ_____________________ȱ
5.ȱApparentȱauthorityȱmustȱalwaysȱcomeȱfromȱtheȱ
ȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱ‘sȱwordsȱorȱconduct.ȱ
5.ȱ_____________________ȱ
6.ȱToȱprotectȱtheȱpublic,ȱallȱstatesȱrequireȱthatȱ
agentsȱinȱoccupationsȱsuchȱasȱlaw,ȱrealȱestate,ȱ
andȱinsuranceȱbeȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱ.ȱȱ
6.ȱ_____________________ȱ
7.ȱAnyȱwritingȱthatȱappointsȱsomeoneȱasȱanȱagentȱ
isȱcalledȱa(n)ȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱ.ȱ
7.ȱ_____________________ȱ
8.ȱAnȱagentȱmustȱactȱwithinȱtheȱgrantedȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱȱ
8.ȱ_____________________ȱ
9.ȱTheȱapprovalȱofȱanȱactȱoutsideȱtheȱagent’sȱscopeȱ
ofȱauthorityȱisȱcalledȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱ.ȱ
9.ȱ_____________________ȱ
LegalȱApplicationsȱ
10.ȱTheȱBradysȱplanȱtoȱgoȱonȱanȱextendedȱvacation.ȱTheyȱhaveȱaskedȱtheirȱtrustworȬ
thyȱneighbor,ȱFrankȱBillings,ȱtoȱcareȱforȱtheirȱdogs,ȱcollectȱtheirȱmail,ȱandȱmowȱ
theirȱlawn.ȱTheȱBradysȱhaveȱgivenȱFrankȱoneȱofȱtheirȱcreditȱcardsȱtoȱmakeȱanyȱ
necessaryȱpurchasesȱwhileȱtheyȱareȱgone.ȱTwoȱweeksȱafterȱtheyȱleaveȱhome,ȱaȱ
severeȱthunderstormȱcausesȱaȱlengthyȱpowerȱoutage.ȱFrankȱusesȱtheȱcreditȱcardȱ
toȱbuyȱaȱsmallȱgeneratorȱinȱorderȱtoȱsaveȱtheȱcontentsȱofȱtheȱBrady’sȱwellȬstockedȱ
freezer.ȱWhatȱformȱofȱauthorityȱisȱFrankȱusing?ȱ
11.ȱSupposeȱaȱpavingȱcompanyȱcomesȱalongȱandȱoffersȱaȱbargainȱpriceȱforȱpavingȱ
drivewaysȱinȱFrank’sȱneighborhood.ȱFrankȱhasȱheardȱMr.ȱBradyȱsayȱheȱwouldȱ
likeȱhisȱdrivewayȱpaved.ȱIfȱFrankȱusesȱtheȱcreditȱcardȱtoȱpayȱforȱtheȱpaving,ȱ
wouldȱheȱbeȱactingȱwithinȱtheȱscopeȱofȱhisȱauthority?ȱExplainȱyourȱanswer.ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
12.ȱLindaȱJamesȱworksȱatȱHungryȱJose’sȱMexicanȱrestaurant.ȱSheȱworksȱasȱaȱcashierȱȱ
duringȱbusinessȱhoursȱandȱcleansȱtheȱdiningȱareaȱafterȱbusinessȱhours.ȱIsȱLindaȱ
anȱemployeeȱorȱanȱagentȱwhenȱsheȱisȱcleaningȱtheȱrestaurant?ȱExplainȱyourȱanȬ
ȱ
5-2 Chapter 21 Agency Law
STUDENT ______________________________________ CLASS _______________________ DATE __________
ȱLESSONȱ21—1ȱPRACTICEȱACTIVITYȱ
Readȱtheȱfollowingȱcasesȱandȱanswerȱtheȱquestionsȱaboutȱthem.ȱAttachȱaȱpageȱifȱadditionalȱ
spaceȱisȱneededȱforȱanswers.ȱ
ȱ
1.ȱTheȱMarklandsȱrequestedȱaȱtravelȱagent,ȱTravelȱTravel,ȱtoȱarrangeȱaȱfamilyȱvacaȬ
tionȱforȱthemȱtoȱtheȱVirginȱIslands.ȱTravelȱTravelȱmadeȱarrangementsȱforȱthemȱ
onȱEasternȱAirlinesȱandȱFlyfaireȱVacations,ȱaȱsubsidiaryȱofȱEastern.ȱTheȱMarkȬ
surance.ȱTravelȱTravelȱarguedȱthatȱitȱwasȱnotȱresponsibleȱforȱtheȱMarklands’ȱlossȱ
andȱthatȱtheyȱfoundȱoutȱaboutȱEastern’sȱbankruptcyȱtheȱsameȱtimeȱasȱtheȱMarkȬ
landsȱdid.ȱTravelȱTravelȱalsoȱpointedȱtoȱaȱclauseȱinȱitsȱcontractȱthatȱsaidȱitȱwasȱ
notȱresponsibleȱforȱanyȱbreachȱbyȱtheȱairlines.ȱAsȱanȱagentȱofȱtheȱMarklands,ȱwasȱ
TravelȱTravelȱliableȱforȱtheȱloss?ȱExplain.ȱ[Marklandȱv.ȱTravelȱTravelȱSouthfield,ȱ
ȱ
2.ȱOliverȱWendellȱHolmes,ȱtheȱfamousȱlawyer,ȱdiedȱwhileȱpilotingȱaȱplane.ȱ
Holmes’ȱwife,ȱGladys,ȱsuedȱContinentalȱCasualtyȱCompanyȱwhenȱContinentalȱ
refusedȱtoȱpayȱtheȱproceedsȱofȱanȱallegedȱaccidentȱandȱhealthȱinsuranceȱpolicyȱ
insuringȱherȱhusbandȱwhileȱflyingȱasȱaȱpilot.ȱSheȱclaimedȱthatȱcoverageȱwasȱinȱ
forceȱasȱtheȱresultȱofȱanȱoralȱbinderȱenteredȱintoȱwithȱherȱhusbandȱbyȱtheȱcomȬ
issued,ȱtoȱwhichȱtheȱanswerȱwasȱyes.ȱSecond,ȱtwoȱotherȱpoliciesȱthatȱHolmesȱhadȱ
signedȱaskedȱtheȱsameȱquestionȱandȱreceivedȱtheȱsameȱanswer.ȱWasȱthereȱapȬ
parentȱauthorityȱhereȱforȱtheȱagentȱtoȱbindȱContinental?ȱExplain.ȱ[Continentalȱ
CasualtyȱCompanyȱv.ȱHolmes,ȱ266ȱF.ȱ2dȱ269ȱ(Ala.ȱ1959)]ȱ
ȱ
Chapter 21 Agency Law 5-3
STUDENT ______________________________________ CLASS _______________________ DATE __________
ȱLESSONȱ21—1ȱRETEACHȱ
Directions:ȱWriteȱtheȱanswersȱtoȱQuestionsȱ1–8ȱonȱtheȱblanksȱprovided.ȱTheȱanswerȱ
toȱQuestionȱ9ȱshouldȱappearȱinȱtheȱverticalȱboxes.ȱ
ȱȱ ȱȱ9.ȱ
1.ȱȱ ȱ__ȱ__ȱ__ȱ__ȱ__ȱ
3.ȱȱ __ȱ__ȱȱ__ȱ__ȱ__ȱ__ȱ
5.ȱȱ __ȱ__ȱ__ȱȱ__ȱ__ȱ__ȱ
7.ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ__ȱ__ȱȱ__ȱ__ȱ__ȱ__ȱȱ__ȱ__ȱ
8.ȱȱ __ȱ__ȱ__ȱȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ
ȱ
ȱ
1.ȱAuthorityȱthatȱisȱcreatedȱwhenȱaȱprincipalȱauthorizesȱanȱagentȱtoȱrepresentȱtheȱ
principalȱ
2.ȱWritingȱthatȱappointsȱsomeoneȱasȱanȱagentȱȱ
3.ȱAuthorityȱthatȱisȱtheȱpowerȱtoȱdoȱanythingȱthatȱisȱreasonablyȱnecessaryȱtoȱcarryȱ
outȱtheȱdutiesȱexpresslyȱauthorizedȱ
4.ȱApprovalȱofȱaȱpreviouslyȱunauthorizedȱactȱȱ
5.ȱTypeȱofȱauthorityȱthatȱisȱdirectlyȱcommunicatedȱbyȱtheȱprincipalȱtoȱtheȱagentȱ
6.ȱSituationȱinȱwhichȱimpliedȱauthorityȱmayȱbeȱexpandedȱ
7.ȱApparentȱauthorityȱmustȱalwaysȱcomeȱfromȱaȱprincipal’sȱwordsȱorȱ__________.ȱ
8.ȱTheȱrangeȱofȱactsȱauthorizedȱbyȱtheȱprincipalȱisȱtheȱscopeȱofȱ__________.ȱ
9.ȱAuthorityȱthatȱisȱcreatedȱwhenȱaȱprincipalȱleadsȱtheȱthirdȱpartyȱtoȱreasonablyȱ
believeȱthatȱaȱparticularȱpersonȱhasȱagencyȱauthorityȱ
5-4 Chapter 21 Agency Law
STUDENT ______________________________________ CLASS _______________________ DATE __________
ȱLESSONȱ21—1ȱENRICHMENTȱ
Thisȱlessonȱdiscussedȱtheȱoverviewȱofȱagencyȱandȱtheȱscopeȱofȱagencyȱauthority.ȱAnȱ
agentȱmustȱbeȱableȱtoȱunderstandȱtheȱtransactionȱenteredȱintoȱonȱbehalfȱofȱtheȱprinȬ
cipal.ȱThus,ȱtoȱprotectȱtheȱpublic,ȱallȱstatesȱrequireȱthatȱagentsȱinȱcertainȱoccupationsȱ
beȱlicensed.ȱLicensingȱisȱoftenȱrequiredȱofȱauctioneers,ȱinsuranceȱagents,ȱlawyers,ȱ
stockbrokers,ȱcertifiedȱpublicȱaccountants,ȱandȱrealȱestateȱbrokers.ȱReviewȱtheȱlicensȬ
ingȱrequirementsȱforȱoneȱofȱtheseȱprofessions—orȱanotherȱthatȱrequiresȱlicensing—
andȱanswerȱtheȱquestionsȱbelow.ȱ
ȱ
1.ȱBeforeȱobtainingȱaȱlicense,ȱwhatȱtypeȱofȱeducationȱisȱrequired?ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
2.ȱDoesȱtheȱlicensingȱinvolveȱpassingȱaȱprofessionalȱexaminationȱand/orȱhavingȱaȱ
specificȱamountȱofȱworkȱexperience?ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
3.ȱHowȱmuchȱdoesȱtheȱlicenseȱcostȱandȱhowȱoftenȱmustȱitȱbeȱrenewed?ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
4.ȱIsȱtheȱlicenseȱtransferableȱbetweenȱstates?ȱ
STUDENT ______________________________________ CLASS _______________________ DATE __________
ȱLESSONȱ21—2ȱQUIZȱ
LegalȱConceptsȱ
Directions:ȱFillȱinȱtheȱblank(s)ȱwithȱtheȱmostȱappropriateȱtermȱorȱphraseȱtoȱcompleteȱ
theȱsentence.ȱ
ȱȱ Answersȱ
1.ȱ ȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱȱareȱtheȱlegalȱrequirementsȱforȱcertainȱ
categoriesȱofȱpersons,ȱsuchȱasȱagents,ȱtoȱsubȬ
ordinateȱtheirȱpersonalȱinterestȱinȱorderȱtoȱactȱ
forȱtheȱbenefitȱofȱanotherȱperson.ȱ
1._______________________ȱ
2.ȱAnȱagent’sȱcoreȱdutiesȱareȱthoseȱofȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱ.ȱ2._______________________ȱ
3.ȱTheȱseparateȱaccountsȱforȱtheȱfundsȱofȱprinciȬ
palsȱareȱcalledȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱ.ȱ
3._______________________ȱ
4.ȱTheȱdutyȱofȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱrequiresȱtheȱagentȱtoȱexȬ
erciseȱtheȱdegreeȱofȱskillȱandȱcareȱthatȱaȱreaȬ
sonablyȱprudentȱpersonȱwouldȱuseȱinȱaȱsimilarȱ
situation.ȱ
4._______________________ȱ
5.ȱ ȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱisȱmixingȱtheȱfundsȱorȱpropertyȱofȱtheȱ
5._______________________ȱ
6.ȱTheȱdutyȱofȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱmeansȱthatȱtheȱagentȱ
mayȱnotȱsecretlyȱbenefitȱfromȱtheȱagencyȱ
transaction.ȱ
6._______________________ȱ
7.ȱTheȱdutyȱofȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱrequiresȱtheȱagentȱtoȱ
treatȱinformationȱaboutȱtheȱprincipalȱwithȱ
greatȱcaution.ȱ
7._______________________ȱ
8.ȱAgentsȱmayȱneitherȱbuyȱfromȱnorȱsellȱtoȱtheirȱ
ȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱorȱtheirȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱwithoutȱapprovalȱ
fromȱtheirȱprincipals.ȱ
8._______________________ȱ
9.ȱAnȱagentȱisȱrequiredȱtoȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱtoȱtheȱprinciȬ
palȱanyȱinformationȱthatȱwouldȱaffectȱtheȱprinȬ
cipal’sȱdecisions.ȱ
9._______________________ȱ
10.ȱTheȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱrequiresȱanȱagentȱtoȱaccountȱtoȱ
theȱprincipalȱforȱallȱmoneyȱandȱpropertyȱofȱtheȱ
principalȱthatȱcomesȱintoȱtheȱagent’sȱpossesȬ
sion.ȱ
10._______________________ȱ
LegalȱApplicationȱ
11.ȱLashondaȱSandersȱagreedȱtoȱrepresentȱAllenȱGrimmȱinȱsellingȱhisȱhome.ȱAllenȱ
toldȱLashondaȱthatȱtheȱroofȱofȱhisȱhouseȱleakedȱduringȱhardȱrainstorms.ȱHeȱ
askedȱherȱnotȱtoȱdiscloseȱthisȱinformationȱtoȱpotentialȱbuyers.ȱWhatȱshouldȱȱ
ȱLashondaȱdoȱinȱthisȱcase?ȱExplainȱyourȱanswer.ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
12.ȱȱ PedroȱhiredȱJeffreyȱasȱhisȱagentȱforȱtheȱpurposeȱofȱbuyingȱaȱpieceȱofȱpropertyȱ
thatȱwasȱtoȱbeȱPedro’sȱhomeȱafterȱheȱreturnedȱfromȱhisȱmilitaryȱduty.ȱForȱthisȱ
Pedroȱbackȱtheȱ$25,000ȱbeforeȱPedroȱevenȱknowsȱthatȱJeffreyȱborrowedȱtheȱ
money,ȱhasȱJeffreyȱviolatedȱanyȱdutyȱheȱowedȱtoȱPedro?ȱWhichȱone(s)?ȱExplainȱ
yourȱanswer.ȱ
Chapter 21 Agency Law 5-7
STUDENT ______________________________________ CLASS _______________________ DATE __________
ȱLESSONȱ21—2ȱPRACTICEȱACTIVITYȱ
Readȱtheȱfollowingȱcasesȱandȱanswerȱtheȱquestionsȱaboutȱthem.ȱAttachȱanȱadditionalȱpageȱforȱ
yourȱanswers.ȱ
ȱ
1.ȱCherylȱSwitzerȱandȱGeorgeȱVincentȱenteredȱintoȱanȱagreementȱtoȱletȱEdgarȱ
WimmerȱactȱasȱtheirȱagentȱinȱpurchasingȱcommercialȱlandȱinȱVirginia.ȱAȱsuitableȱ
parcelȱofȱlandȱwasȱfoundȱbyȱWimmer,ȱandȱheȱagreedȱtoȱlookȱupȱtheȱowner’sȱ
nameȱandȱtryȱtoȱsecureȱtheȱpurchase.ȱWimmerȱadvisedȱSwitzerȱandȱVincentȱthatȱ
centȱthenȱsuedȱWimmerȱtoȱobtainȱtheȱpropertyȱfromȱhim,ȱallegingȱthatȱheȱheldȱitȱ
inȱconstructiveȱtrustȱforȱthemȱbecauseȱofȱhisȱfraud.ȱHeȱdefendedȱonȱtheȱgroundȱ
thatȱnoȱagencyȱwasȱformedȱbecauseȱthereȱwasȱnoȱwrittenȱagreement.ȱWillȱthisȱ
defenseȱbeȱeffective?ȱExplain.ȱ[HȬBȱLtd.ȱPartnershipȱv.ȱWimmer,ȱ257ȱS.E.ȱ2dȱ770ȱ
ȱ
2.ȱSevierȱpurchasedȱaȱcarȱandȱwentȱtoȱseeȱHenderson,ȱaȱStateȱFarmȱagentȱinȱArkanȬ
sas,ȱtoȱapplyȱforȱinsurance.ȱTheȱapplicationȱwasȱapproved.ȱSevierȱthenȱmovedȱtoȱ
Oregon,ȱappliedȱforȱinsuranceȱandȱaȱnewȱpolicyȱwasȱissuedȱinȱOregon.ȱAȱfewȱ
monthsȱlater,ȱSevierȱwasȱinvolvedȱinȱanȱaccidentȱinȱwhichȱtwoȱpersonsȱwereȱ
killed.ȱStateȱFarmȱattemptedȱtoȱrescindȱtheȱpolicyȱandȱmailedȱbackȱtheȱpremiumsȱ
drunkȱdrivingȱinȱOregon,ȱwhichȱresultedȱinȱhisȱlicenseȱbeingȱsuspended.ȱHenȬ
dersonȱcontendedȱthatȱheȱdidȱnotȱknowȱofȱtheȱconvictionȱorȱsuspension.ȱWillȱ
StateȱFarmȱbeȱboundȱbyȱwhatȱitsȱagentȱHendersonȱknew?ȱExplain.ȱ[StateȱFarmȱ
5-8 Chapter 21 Agency Law
STUDENT ______________________________________ CLASS _______________________ DATE __________
ȱLESSONȱ21—2ȱRETEACHȱ
Directions:ȱWriteȱtheȱanswersȱtoȱQuestionsȱ1–9ȱonȱtheȱblanksȱprovided.ȱTheȱanswerȱ
toȱQuestionȱ10ȱshouldȱappearȱinȱtheȱverticalȱboxes.ȱ
ȱ
ȱ
ȱȱȱ 10.ȱ
1.ȱȱ ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ
3.ȱȱ __ȱ__ȱ__ȱȱ__ȱ__ȱ__ȱ__ȱ__ȱ
5.ȱȱ ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ
6.ȱȱ __ȱ__ȱ__ȱ__ȱȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ
7.ȱȱ __ȱ__ȱ__ȱ__ȱ__ȱȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ
8.ȱȱ __ȱ__ȱȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ
9.ȱȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱȱ
ȱ
1.ȱIncludedȱinȱtheȱgroupȱofȱpeopleȱtoȱwhomȱagentsȱmustȱnotȱbuyȱfromȱnorȱsellȱ
propertyȱorȱservicesȱwithoutȱdisclosureȱtoȱtheirȱprincipalsȱȱ
2.ȱMixingȱtheȱfundsȱorȱpropertyȱofȱtheȱprincipalȱandȱtheȱagentȱ
3.ȱOneȱofȱanȱagent’sȱcoreȱdutiesȱ
4.ȱDutyȱthatȱrequiresȱanȱagentȱtoȱaccountȱtoȱtheȱprincipalȱforȱallȱmoneyȱandȱpropȬ
ertyȱofȱtheȱprincipalȱthatȱcomesȱintoȱtheȱagent’sȱpossessionȱ
5.ȱAgentsȱmustȱ_____________anyȱinformationȱthatȱwouldȱaffectȱtheȱprincipal’sȱ
decisions.ȱ
6.ȱDutyȱthatȱrequiresȱanȱagentȱtoȱtreatȱinformationȱaboutȱtheȱprincipalȱwithȱgreatȱ
cautionȱ
8.ȱDutyȱthatȱrequiresȱanȱagentȱtoȱexerciseȱtheȱdegreeȱofȱskillȱandȱcareȱthatȱaȱreaȬ
sonablyȱprudentȱpersonȱwouldȱuseȱinȱaȱsimilarȱsituationȱ
9.ȱDutyȱthatȱmeansȱanȱagentȱmayȱnotȱsecretlyȱbenefitȱfromȱtheȱagencyȱtransactionȱ
10.ȱTheȱdutiesȱofȱloyalty,ȱcareȱandȱskill,ȱconfidentiality,ȱandȱaccountingȱareȱcalledȱȱ
ȱȱ
ȱduties.ȱ
Chapter 21 Agency Law 5-9
STUDENT ______________________________________ CLASS _______________________ DATE __________
ȱLESSONȱ21—2ȱENRICHMENTȱ
Thisȱlessonȱexpandedȱonȱtheȱfiduciaryȱdutiesȱofȱagentsȱtoȱtheirȱprincipals.ȱFiduciaryȱ
dutiesȱrequireȱthatȱtheȱagentȱserveȱtheȱbestȱinterestsȱofȱtheȱprincipal—theȱagentȱmustȱ
beȱhonestȱandȱshowȱgoodȱfaith.ȱTheȱlawȱrequiresȱfourȱfiduciaryȱdutiesȱowedȱbyȱ
agentsȱtoȱprincipals:ȱloyaltyȱandȱobedience,ȱreasonableȱcareȱandȱskill,ȱconfidentiality,ȱ
andȱaccounting.ȱInterviewȱsomeoneȱwhoseȱcareerȱinvolvesȱactingȱasȱanȱagentȱforȱanȬ
other—perhapsȱaȱrealȱestateȱagent,ȱaȱpurchasingȱagent,ȱanȱaccountant,ȱorȱaȱstockȬ
broker.ȱAskȱthisȱindividualȱtoȱshareȱwithȱyouȱexamplesȱofȱhowȱheȱorȱsheȱcarriesȱoutȱ
hisȱorȱherȱfiduciaryȱdutiesȱtoȱclients.ȱIndicateȱtheȱexamplesȱinȱeachȱofȱtheȱappropriateȱ
spacesȱbelow.ȱ
ȱ
1.ȱLoyaltyȱandȱobedienceȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
2.ȱReasonableȱcareȱandȱskillȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
3.ȱConfidentialityȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
4.ȱAccountingȱ
5-10 Chapter 21 Agency Law
STUDENT ______________________________________ CLASS _______________________ DATE __________
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TESTȱ
CHAPTERȱ21
SECTION I—IDENTIFY LEGAL TERMS
Directions:ȱPlaceȱaȱTȱforȱTrueȱorȱanȱFȱforȱFalseȱinȱtheȱAnswersȱcolumnȱtoȱshowȱ
whetherȱeachȱofȱtheȱfollowingȱstatementsȱisȱtrueȱorȱfalse.ȱ
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ȱȱ Answersȱ
ȱȱ1.ȱAȱpersonȱwhoȱdoesȱworkȱforȱpayȱunderȱtheȱsupervisionȱandȱ
controlȱofȱanotherȱpersonȱisȱanȱemployee.ȱ
1._______ȱ
ȱȱ2.ȱAllȱemployeesȱareȱalsoȱagents.ȱ2._______ȱ
ȱȱ3.ȱWhenȱaȱsalespersonȱmakesȱsalesȱcontractsȱwithȱcustomersȱforȱaȱ
businessȱowner,ȱanȱagencyȱexists.ȱ
3._______ȱ
ȱȱ4.ȱAgencyȱcanȱonlyȱbeȱusedȱinȱcontracting.ȱ4._______ȱ
ȱȱ5.ȱȱ Ifȱanȱagentȱactsȱoutsideȱtheȱscopeȱofȱauthority,ȱtheȱprincipalȱisȱ
stillȱbound.ȱ
5._______ȱ
ȱȱ6.ȱȱ PrincipalsȱareȱboundȱbyȱagreementsȱwithȱtheȱthirdȱpartiesȱexȬ
ceptȱforȱratifiedȱtransactions.ȱ
6._______ȱ
ȱȱ7.ȱTheȱprincipalȱisȱnotȱliableȱforȱanȱagent’sȱcrimeȱunlessȱitȱhadȱ
beenȱauthorizedȱorȱratified.ȱ
7._______ȱ
ȱȱ8.ȱTheȱagentȱisȱliableȱinȱaȱcontractȱwithȱanȱundisclosedȱprincipal.ȱ8._______ȱ
ȱȱ9.ȱȱ Whenȱtheȱprincipalȱvoluntarilyȱterminatesȱtheȱauthorityȱofȱtheȱ
agent,ȱtheȱprincipalȱshouldȱpromptlyȱnotifyȱthirdȱpersonsȱwhoȱ
haveȱpreviouslyȱdealtȱwithȱtheȱagent.ȱ
9._______ȱ
10.ȱMoneyȱofȱtheȱprincipalȱheldȱbyȱtheȱagentȱisȱusuallyȱdepositedȱinȱ
aȱtrustȱaccount.ȱ
10._______ȱ
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SECTION II—THINK CRITICALLY ABOUT LEGAL CONCEPTS
Directions:ȱInȱtheȱAnswersȱcolumnȱatȱtheȱrightȱofȱeachȱstatement,ȱwriteȱtheȱletterȱthatȱ
representsȱtheȱword,ȱorȱgroupȱofȱwords,ȱthatȱcorrectlyȱcompletesȱtheȱstatement.ȱ
ȱ
ȱȱ Answersȱ
ȱ11.ȱȱ TheȱrelationshipȱofȱagencyȱexistsȱwhenȱoneȱpersonȱhasȱtheȱauȬ
thorityȱtoȱ(a)ȱalterȱlegalȱrelations,ȱ(b)ȱcontrolȱandȱsupervise,ȱȱȱ
(c)ȱbothȱaȱandȱb,ȱ(d)ȱnoneȱofȱtheseȱ
11._______ȱ
ȱ12.ȱȱ Theȱpersonȱwhoȱauthorizesȱanotherȱinȱanȱagencyȱrelationshipȱisȱ
theȱ(a)ȱagent,ȱ(b)ȱemployee,ȱ(c)ȱprincipal,ȱ(d)ȱthirdȱpartyȱ
12._______ȱ
ȱ13.ȱȱ AnyȱagreementȱreachedȱbyȱtheȱrepresentativeȱinȱanȱagencyȱreȬ
lationshipȱbindsȱ(a)ȱtheȱagentȱandȱtheȱprincipal,ȱ(b)ȱtheȱagentȱ
andȱtheȱthirdȱparty,ȱ(c)ȱtheȱprincipalȱandȱtheȱthirdȱparty,ȱ(d)ȱtheȱ
employeeȱandȱtheȱthirdȱpartyȱ
13._______ȱ
14.ȱTheȱrangeȱofȱactsȱauthorizedȱbyȱtheȱprincipalȱisȱ(a)ȱtheȱfiduciaryȱ
duty,ȱ(b)ȱtheȱscopeȱofȱauthority,ȱ(c)ȱtheȱwarrantyȱofȱtheȱprinciȬ
pal’sȱcapacity,ȱ(d)ȱnoneȱofȱtheseȱ
14._______ȱ
15.ȱInjuriesȱfromȱactsȱoutsideȱtheȱscopeȱofȱauthorityȱcanȱbeȱrecovȬ
eredȱbyȱtheȱthirdȱpartyȱfromȱ(a)ȱtheȱagent,ȱ(b)ȱtheȱprincipal,ȱ(c)ȱ
bothȱaȱandȱb,ȱ(d)ȱnoneȱofȱtheseȱ
15._______ȱ
16.ȱTheȱpower,ȱbutȱnotȱtheȱright,ȱtoȱeliminateȱtheȱagencyȱatȱanyȱ
timeȱgoesȱtoȱ(a)ȱtheȱagent,ȱ(b)ȱtheȱprincipal,ȱ(c)ȱbothȱaȱandȱb,ȱ(d)ȱ
noneȱofȱtheseȱ
16._______ȱ
17.ȱAnȱagencyȱmayȱbeȱterminatedȱbyȱ(a)ȱanȱagreement,ȱ(b)ȱbankȬ
ruptcy,ȱ(c)ȱaȱchangeȱofȱlaw,ȱ(d)ȱallȱofȱtheseȱ
17._______ȱ
ȱȱ18.ȱIfȱaȱsalesȱagentȱdefraudsȱaȱcustomerȱinȱorderȱtoȱmakeȱaȱsale,ȱtheȱ
partyȱliableȱforȱtheȱresultingȱdamagesȱwouldȱbeȱ(a)ȱtheȱagent,ȱ
(b)ȱtheȱprincipal,ȱ(c)ȱbothȱaȱandȱb,ȱ(d)ȱnoneȱofȱtheseȱ
18._______ȱ
ȱȱ19.ȱTheȱagentȱbecomesȱpersonallyȱliableȱtoȱtheȱthirdȱpartyȱforȱȱȱ
resultingȱinjuryȱwhenȱ(a)ȱtheȱagentȱactsȱoutsideȱofȱtheirȱscopeȱofȱ
authority,ȱ(b)ȱtheȱprincipalȱratifiesȱtheȱtransaction,ȱ(c)ȱbothȱaȱ
andȱb,ȱ(d)ȱnoneȱofȱtheseȱ
19._______ȱ
20.ȱTheȱprincipalȱhasȱanȱobligationȱtoȱtheȱagentȱtoȱ(a)ȱpayȱwhatȱwasȱ
promised,ȱ(b)ȱreimburseȱexpenses,ȱ(c)ȱrepayȱanyȱlossȱsufferedȱ
dueȱtoȱtheȱprincipal’sȱinstructions,ȱ(d)ȱallȱofȱtheseȱ
20._______ȱ
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SECTION III—APPLY LEGAL PRACTICES
21.ȱWhenȱSethȱneededȱanotherȱcar,ȱheȱaskedȱRalphȱtoȱfindȱoneȱforȱhimȱasȱheȱdidn’tȱ
feelȱqualifiedȱtoȱaskȱtheȱrightȱquestions.ȱRalphȱagreedȱtoȱdoȱitȱbutȱthenȱgotȱbusyȱ
andȱsentȱSteve.ȱIsȱSteveȱnowȱtheȱagentȱforȱSethȱorȱisȱSteveȱtheȱagentȱforȱRalph?ȱ
DoesȱSethȱhaveȱtheȱrightȱtoȱrejectȱwhatȱSteveȱchooses?ȱExplainȱyourȱanswer.ȱ
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22.ȱMarielleȱcalledȱNaomiȱandȱaskedȱherȱtoȱgoȱtoȱtheȱfloristȱandȱpickȱoutȱaȱdishȱgarȬ
denȱandȱchargeȱitȱtoȱMarielle’sȱaccount.ȱNaomiȱwasȱthenȱtoȱtakeȱtheȱdishȱgardenȱ
toȱJosephȱatȱworkȱsoȱheȱcouldȱdropȱitȱoffȱatȱMarielle’sȱhouseȱonȱhisȱwayȱhomeȱ
fromȱwork.ȱWhatȱformsȱofȱagentȱauthorityȱwereȱcreatedȱforȱNaomiȱandȱJoseph?ȱ
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ANSWERS
Lessonȱ21—1ȱ
Quiz
5.ȱprincipalȱ
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11.ȱFrankȱwouldȱnotȱbeȱusingȱhisȱimpliedȱauthorityȱproperly.ȱImpliedȱauthorityȱ
ȱ
Practice Activity
1.ȱNo,ȱasȱanȱagentȱofȱtheȱMarklands,ȱTravelȱTravelȱwasȱnotȱliableȱforȱtheȱdamagesȱ
theȱMarklandsȱsuffered.ȱTheȱcourtȱawardedȱonlyȱtheȱreturnȱofȱtheȱ10%ȱcommisȬ
2.ȱNo,ȱthereȱwasȱnoȱapparentȱauthorityȱhere.ȱTheȱcourtȱsaidȱthatȱtheȱwrittenȱlimitaȬ
tionsȱonȱtheȱagent’sȱabilityȱtoȱbindȱContinental,ȱplusȱtheȱfactȱthatȱContinentalȱ
Reteach
5.ȱexpressȱ
Chapter 21 Agency Law
5-14
Enrichment Activity
Lessonȱ21—2ȱ
Quiz
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11. LashondaȱdoesȱhaveȱaȱresponsibilityȱtoȱobeyȱAllen’sȱinstructions.ȱHowever,ȱsheȱ
12. Yes,ȱJeffreyȱviolatedȱhisȱfiduciaryȱdutyȱtoȱPedro.ȱEvenȱthoughȱheȱpaidȱPedroȱbackȱ
Practice Activity
1.ȱNo,ȱtheȱdefenseȱwillȱnotȱbeȱeffective.ȱTheȱcourtȱsaidȱthatȱwherebyȱWimmer,ȱanȱ
agent,ȱfraudulentlyȱandȱinȱbreachȱofȱfaithȱandȱconfidenceȱhadȱpropertyȱconȬ
veyedȱtoȱhimselfȱandȱmisledȱSwitzerȱandȱVincentȱintoȱbelievingȱtheȱsalesȱpriceȱ
2.ȱYes,ȱStateȱFarmȱisȱboundȱbyȱHenderson’sȱknowledge.ȱTheȱcourtȱfoundȱagainstȱ
Chapter 21 Agency Law 5-15
Reteach
3.ȱobedienceȱ
4.ȱaccountingȱ
7.ȱtrustȱaccountsȱ
8.ȱcareȱandȱskillȱ
Enrichment Activity
ANSWERS TO TEST QUESTIONS
SECTION I
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SECTION II
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SECTION III
21.ȱNoȱagencyȱrelationshipȱexisted,ȱasȱneitherȱRalphȱnorȱSteveȱhadȱcontractualȱauȬ
Chapter 21 Agency Law
5-16
