Q&A Hero

Q: When the agent colludes with a third party to withhold knowledge or money from the principal, the principal will be liable.

Q: A sales manager for a corporation would probably have authority to hire sales agents for the corporation and such agents can also act as subagents.

Q: Between the agent and the principal, it is the principal who is ultimately liable for the acts of the subagent.

Q: Agents may not delegate to employees acts that involve no judgment or discretion.

Q: Ratification must be expressed and may not be implied from the actions of the agent.

Q: Ratification does not give the principal full benefit of the contract.

Q: Generally, notice to the agent is notice to the principal if it relates to the business of the agency.

Q: Many courts allow a third party to rescind a contract when the person has relied on a misrepresentation by the agent even though the contract contains an exculpatory clause.

Q: A person may have apparent authority even though she has never been appointed an agent by the principal.

Q: Seth runs David's Connecticut farm while David works as a stockbroker in New York City. Twice a year, David asks Seth for an accounting. Explain Seth's duty to provide an accounting.

Q: Discuss the purpose of insurance commissions paid to the agents.

Q: An agent does not possess the implied authority to do whatever is reasonably necessary to accomplish the objectives of the agency.

Q: An agent's exercise of apparent authority, in the absence of actual authority, is in violation of the agent's duty to the principal.

Q: Consumers Assurance was Lin's insurance agent on a truck that was insured with Casualty Company. Lin later purchased a car from Ted's Toyota Dealership, but, before he was allowed to remove it from the dealership, the dealer's credit manager called Consumers to verify that the new car would be insured. A Consumers' employee indicted that the car was insured by Casualty. Based on these assurances, Lin took delivery of the new car, started driving it, and paid the insurance premiums when they became due. Several months later, Lin wrecked the car and filed an insurance claim. Casualty denied coverage on the grounds that it had never agreed to insure the car. Lin sued Casualty, alleging that the agency relationship between Casualty and Consumers bound the insurer to the assurances made by its agent. Casualty denied that an agency relationship existed. Discuss.

Q: What does the agent's duty of loyalty mean?

Q: Discuss an agent's duty to communicate information to the principal and when is this duty considered to be violated?

Q: To avoid being bound by the acts of the agent after the agency has ended, the principal: A. should give actual notice to those who have dealt with the former agent. B. should give constructive notice to those who have dealt with the former agent. C. should give verbal notice if the termination is due to loss of legal capacity by the principal. D. should give actual notice if the termination is due to impossibility of performance.

Q: To avoid being bound by the acts of the agent after the agency has ended, the principal should give constructive notice: A. to those who have dealt with the former agent. B. to those who knew of the agency but had never dealt with it before termination. C. to those who never knew of existence of the agency. D. to everyone who the principal was in contract with before the termination.

Q: An "agency at will" means that: A. each party has the power to terminate the agency even if there is no contractual right to do so. B. only the principal has the right to terminate the agency at his will. C. both parties may mutually agree to modify their agency contract at will. D. only the agent can terminate the agency.

Q: When one party exercises the power to terminate in violation of the right to terminate, the other party: A. is left without a remedy. B. may recover monetary damages in a breach of contract suit. C. may recover specific performance. D. may recover punitive damages in a breach of fiduciary duty.

Q: An agency coupled with an interest means: A. either party may terminate the agency at any time. B. the agency may not be able to recover the debt in the event of the principal's death. C. the agency is irrevocable without the consent of the agent. D. each party has the power to terminate without breach of contract if done so within 18 months.

Q: Lydia borrows $500 for textbooks from Gerry. She gives Gerry the authority to sell her DVD player to satisfy his claim if she does not pay the loan back as promised. She does not pay the loan back as promised. Under these circumstances: A. a dual agency exists. B. Lydia can revoke Gerry's power if the books are damaged. C. if Lydia dies, there is termination of the agency even if the debt remains unpaid. D. Lydia cannot revoke Gerry's power to sell the DVD player.

Q: A real estate broker was hired as a rental agent for a house. The house burnt down due to accidental causes. In this circumstance: A. the agency automatically ends as the subject matter of the agency is destroyed. B. the agency is automatically transferred to other properties of the principal. C. the agent is liable to be compensated even if the aim to the agency has not been accomplished. D. the agency may be terminated only by mutual consent.

Q: If no time or event is specified explaining when the agency relationship will end, the agency: A. will continue indefinitely. B. will continue for the statutory maximum of 10 years. C. automatically ends when the result for which the agency was created has been accomplished. D. automatically ends after a period of 70 days even if the result for which the agency was created has not been accomplished.

Q: When a principal breaches a duty owed to the agent, the agent: A. may only bring a lawsuit against the principal for physical injuries suffered. B. does not have a lien on anything that belongs to the principal which is in the agent's lawful possession. C. may not terminate the agency until the contract has expired. D. may claim the principal's property that is in his lawful possession for compensation due him for his performance of the agency responsibilities.

Q: When agents make advances from their own funds in conducting the principal's business, the principal: A. has no duty to reimburse the agent because the agent has assumed the burden. B. has a duty to reimburse the agent for expenses incurred for the principal. C. has a duty to reimburse the agent even if the agent is not acting within the scope of his/her authority. D. has no duty to reimburse the agent because the agent commingled fungible goods.

Q: Which of the following is true of real estate commissions? A. If the seller has not given the broker a specific closing date, the broker can assume a reasonable closing date and can also claim a commission for an incomplete sale. B. If the seller has not given the broker specific terms on price, the broker can sell the property on his own terms and claim for the commission. C. If the seller has not given the broker a specific closing date, the law assumes the contract to end 30 days after the creation of the contract, but the broker will not be entitled for a commission. D. If the seller has not given the broker specific terms of price or closing date then the commission is not earned until the contract of purchase has been made.

Q: (p. 425; 426) When an agent breaches a duty owed to the principal, the agent: A. may not be discharged until the contract has expired. B. may be discharged without liability in spite of an unexpired contract. C. may be discharged only if the principal can show actual damage. D. may not be discharged until contractual damages are paid.

Q: (p. 425; 426) When an agent's breach of duty causes harm to the principal: A. the principal may deduct the loss from the amount due the agent. B. the principal can bring an action in court even if compensation is due. C. the principal is not liable to compensate the agent, even if the breach is serious enough. D. the principal is liable to show actual damages to avoid having to compensate.

Q: One of the duties generally imposed on the principal by the common law is: A. the duty to share profits and losses. B. the duty to reimburse and indemnify. C. the duty to account for funds and property. D. the duty to consult.

Q: (p. 423; 424) Under the "procuring cause" rule, when the agent is the primary factor in a purchase: A. the agent may be entitled to a commission regardless of who eventually completes the sale. B. the agent is not entitled to compensation after termination of the agency relationship. C. the agent is not entitled to compensation because the agent did not actually "seal the deal." D. the agent is entitled to compensation only if he completes the sale even after termination of the agency relationship.

Q: When the parties do not agree on the duration of the agency and the agent has incurred substantial expenses in completing the agency, a court will likely hold that: A. the agency relationship must be terminated immediately to avoid unjust enrichment. B. the principal cannot terminate the agency until after the agent has had a reasonable time to try to earn the expected commission. C. only the principal can terminate the agency and the courts cannot hold him liable for any expenses incurred by the agent during the agency period. D. the principal will be required to indemnify the agent if some fault of the agent causes a loss.

Q: If an agent indulges in commingling: A. he probably will not be liable for loss to the principal. B. he bears the risk of any loss to the principal. C. he will not be liable for any loss to the principal if the property is not wrongfully used. D. he is breaching the duty to communicate information.

Q: When an agreed-on result is obtained by the agent and the principal does not benefit: A. the agent will not be paid. B. the agent is entitled to be paid. C. the agent must return any pay to the principal. D. the agent may only recover the expenses incurred, not the actual compensation.

Q: Whenever the agent's duties to the principal conflict with the agent's own interests: A. the agent automatically is regarded as having breached the duty of loyalty. B. the agent must disclose such facts to the principal, or be in violation of the duty of loyalty. C. there is no duty of disclosure if the agency is gratuitous. D. the agent must resign immediately.

Q: A person may act as a dual agent: A. on his own accord. B. after partial disclosure of terms to either principal. C. with the consent of any one principal. D. with the consent of both principals on being fully informed about it.

Q: Which of the following is true of an agent's duty to obey a principal's instructions? A. An agent may always substitute his/her personal judgment for that of the principal. B. An agent has no power to exercise his/her best judgment to further the interests of the principal, if no instruction is given. C. An agent will be liable for any loss to the principal caused by failure to follow instructions. D. An agent may ignore the principal's instructions if they seem unwise or not truly in his/her best interests.

Q: A gratuitous agent is one who: A. freely substitutes his/her judgment for that of the principal. B. acts without pay. C. requires a generous tip. D. is employed to find a buyer for one party and a seller for another.

Q: Jeff, as agent, is paid $5,000 owed by a debtor of Lee, Jeff's principal. Instead of giving it immediately to Lee, Jeff invests it in the stock market. Luckily, the market price of that particular stock rises to $10,000 before Lee learns of the wrongdoing. Under these circumstances: A. Jeff cannot be sued as the money was put to good use. B. Lee is entitled only to $5000. C. Lee is entitled to all of the stock. D. Jeff can be sued for an indefinite amount on account of his misconduct.

Q: When an agent buys for the principal from himself, even if he charges a fair market price, the agent is violating which of the following common law duties? A. Duty to communicate information B. Duty to account for funds and property C. Duty of loyalty D. Duty to obey instructions

Q: A feature which distinguishes commercial agents from distributors and nonagents is that: A. commercial agents generally maintain their own inventory of goods unlike distributors. B. commercial agents are usually compensated through a straight salary when a sale is completed. C. commercial agents always bear the financial risk of nonpayment by the purchaser. D. commercial agents often possess the authority to contract on behalf of their principals.

Q: Agents who are under the control of their employer/principal as to both the objective of their work and the means used to achieve it are: A. distributors. B. independent contractors. C. employees. D. commercial agents.

Q: Independent contractors: A. are under the control of their employer/principal as to both the objective of their work and the means used to achieve it. B. are under the control of their principals as to the result that is to be achieved, but not as to the means used to accomplish that result. C. do not maintain their own inventory of goods; instead, they take orders on behalf of their principal. D. just bring the parties together rather than actually negotiating a contract of sale.

Q: (p. 415, 416) A duty imposed on the agent by the common law generally includes the: A. duty to compensate. B. duty of loyalty. C. duty to reimburse. D. duty of indemnification.

Q: A substantial change in market values or business conditions that affects the subject of the agency ends it if a reasonable agent would believe that termination is desired by the principal.

Q: An agent may be able to bind the principal on contracts with third persons after termination of the agency if the third person is unaware that the agency has ended.

Q: An agency relationship: A. exists only when it is in the form of a written document signed by both the parties. B. can be either compensated or uncompensated. C. will not exist if the parties have expressly agreed that they do not intend to create one. D. can be formed only by contract.

Q: Most agency rules spring from: A. customary law. B. common law. C. statutory law. D. regulatory law.

Q: Agents may use the formulas, processes, and mechanisms they have acquired while employed by their principal to benefit themselves.

Q: The agent does not have to inform the principal of knowledge the agent gains in the course of her responsibilities.

Q: An agent may deposit funds of the principal in her personal account.

Q: Unless the circumstances of the relationship suggest that the agent intended to act for free, a duty to pay the agent is implied.

Q: The duty of the principal to keep records from which the compensation due to the agent can be determined is reinforced by tax laws that require such recordkeeping.

Q: Termination of an agency based on race, religion, national origin, and age is generally prohibited by state and federal legislation.

Q: Distributors are usually compensated through the payment of a commission when a sale is completed and have to bear the financial risk of nonpayment by the purchaser.

Q: Usually one cannot serve as the principal for both parties to a transaction; however, agents may consent to such a dual role if the parties are both fully informed.

Q: An agency relationship results from any indication of consent by the principal that the agent may act on the principal's behalf and under her control.

Q: The legal effect of the agent's action on behalf of the principal is usually the same as if the principal had done the act.

Q: A person has the capacity to act as an agent only if he/she has the legal capacity to contract.

Q: Bev ordered an alabaster-colored mink coat from Poe's Furs. The coat had been specially made because she required an unusually large size and had requested a particular styling. The coat cost $5,500, of which Bev paid $250. Several months later, she decided that she did not want the coat and canceled the order, even though Poe's had completed the coat. Poe's then filed suit for the balance of the purchase price. What can Bev argue in defense?

Q: Under the UCC, list five remedies available to a buyer when the seller has breached a contract.

Q: On May 1, Fred Farmer agreed to sell 1,000 bushels of wheat to a bread maker for $7 per bushel. Delivery was to be on August 1. After the market price of wheat rose to $8 per bushel, Fred breached the contract. If the bread maker can get substitute wheat at the current market price, can he get specific performance? If not, what two options are available to him if he seeks damages for breach of contract from Fred? What will he recover under each option?

Q: An agency relationship arises when the agent acts for his own benefit under the direction of the principal.

Q: An agency can never be oral.

Q: Oleta makes a contract with Jim to sell her a 1965 lava lamp once owned by a famous artist. Jim later decides that he does not want to sell the lamp. Oleta: A. can do nothing; she has no remedy. B. cannot compel specific performance. C. can make Jim deliver the lamp because it is one of a kind. D. can sue Jim and make him pay a fine for misconduct.

Q: Name the most common ways a buyer may breach a contract.

Q: Under the UCC, list three remedies available to a seller when a buyer breaches a contract.

Q: Tom Tune purchased a new radio that was warranted to be free from manufacturing defects or defects in workmanship for a period of six years. Five years after Tom purchased the radio, he was burned when the radio spontaneously caught fire as a result of a manufacturing defect. Under these circumstances, which of the following statements is most correct? A. Tom is entitled to recover the difference between the price of the defective radio and its value as warranted, but Tom cannot recover damages for personal injuries unless the contract expressly provided for such recovery. B. Tom is entitled to recover damages for personal injury as consequential damages but he cannot recover damages for the loss in value of the radio. C. Tom can recover damages for loss in value of the radio and can recover damages for personal injury as consequential damages for breach of warranty. D. Tom cannot recover damages from the manufacturer under these facts because his action is barred by the U.C.C. statute of limitations.

Q: If the seller refuses to deliver the goods called for by the contract, the buyer can: A. get the difference between the contract price of the goods and their market price at the time the buyer learns of the seller's breach. B. sue for only consequential damages. C. deprive the seller of credit for any expenses saved. D. seek for specific performance even if the goods ordered are not unique in nature.

Q: If a buyer accepts defective goods and wants to hold the seller liable, the buyer must give the seller notice of the defect: A. within four weeks. B. within a reasonable time. C. within a year. D. within a period of three months.

Q: When goods are defective and the buyer provides the seller with notice, which of the following remedies is applicable? A. The buyer is entitled to only consequential damages. B. The buyer can claim only incidental damages. C. The buyer can recover the difference between the value of the goods received and the value the goods would have had if they had been as warranted. D. The buyer can obtain specific performance when the goods are generic and can be easily found elsewhere.

Q: The buyer is entitled to ____ of the contract if the goods are unique. A. liquidated damages B. specific performance C. incidental damages D. consequential damages

Q: An injured buyer can recover consequential damages if: A. expenses incurred during storage of goods do not conform to those called for in the contract. B. he covers. C. the goods are not consumer products. D. he can show that he could not have prevented the damage by obtaining substitute goods.

Q: A buyer is _____ if he cannot pay his bills when they become due. A. unconscionable B. liquidated C. repudiated D. insolvent

Q: (p. 399, 400) Under the UCC, which of the following remedies is available to both a buyer and a seller? A. Cover and damages for the total value of goods in the contract. B. Contract rescission. C. Damages in the amount of the difference between the contract price and the market price of goods. D. Specific performance.

Q: In which of the following ways can a seller breach a contract? A. By entrusting goods are in buyer's possession. B. By delivering goods that do not conform to the contract. C. By repudiating a contract. D. By indicating an intention to fulfill the obligations under the contract.

Q: When a seller breaches a contract, the buyer may: A. buy other goods and recover damages from the seller based on any additional expense incurred in obtaining the goods. B. obtain specific performance when the goods are generic and can be obtained elsewhere. C. never recover consequential damages. D. be legally sued into performing as well as made to compensate for loss of time.

Q: When a buyer covers, he/she can recover from the seller: A. the difference between the contract price and the market price. B. the difference between the contract price and the cost of the substitute goods. C. the goods the seller has failed to deliver. D. the reasonable value of the goods.

Q: Based on the difference between the contract price and the market price, a seller may recover damages from a breach of contract when the goods are: A. in the buyer's possession. B. in the seller's possession. C. in transit via airplane. D. in transit via sea.

Q: If the seller has justifiably withheld delivery of the goods because of the buyer's breach, the buyer is entitled to: A. recover any money or goods he has delivered to the seller over and above the agreed amount of liquidated damages. B. an amount in excess of $500 or 20% of the value of total performance. C. recover any money or goods he has delivered to the seller only to the agreed amount of liquidated damages. D. an amount in excess of $1,000 or 20% of the value of total performance or whichever amount is higher.