Chapter 14

Question 1

How many parties are involved in an Agency Relationship?

Answer 1

3 - Agent, Principal, 3rd Person

Question 2

Authorized to negotiate contracts on behalf of a Principal with a 3rd person.

Answer 2

Agent

Question 3

Gives authority to Agent to make contracts on its behalf with a 3rd Person. One of the parties to a contracts.

Answer 3

Principal

Question 4

Negotiates a contract with the agent. One of the parties to the contract.

Answer 4

3rd Person

Question 5

Classifications of Agents:

Answer 5

(1) Universal Agent
(2) General Agent
(3) Special Agent

Question 6

Performs all acts authorized by the Principal. (Ex: Durable Power of Attorney).

Answer 6

Universal Agent

Question 7

Authorized to perform all transactions connected with a certain business (Ex: Hotel Manager).

Answer 7

General Agent

Question 8

Authorized to perform only specified acts by a Principal (Ex: Realtor selling a house).

Answer 8

Special Agent

Question 9

No formal procedure is necessary to establish an agency relationship. However, authorization is always required from a Principal to the Agent to get the relationship launched.

Answer 9

Acts for the Principal

Question 10

Types of Actual Authority:

Answer 10

(1) Express Authority

(2) Implied Authority

Question 11

Principal authorizes Agent to perform a certain act. (Ex: “List my house on the market and sell it”).

Answer 11

Express Authority

Question 12

Often, when an Agent receives express authority, he is also given implied authority to do what is reasonable to carry on the agency purpose (Ex: What might be implied actions of authority when selling a house?)

Answer 12

Implied Authority

Question 13

Principal “cloaks” agent with the appearance of having authority. Leads a 3rd Person to reasonably believe that the agent has authority to act on behalf of Principal. If proven, Principal will be bound by contracts negotiated between the Agent and 3rd person.
Note: 3rd Person has a duty to reasonably inquire about the status of an Agent’s authority.

Answer 13

Apparent Authority

Question 14

3 Models of Disclosure of a Principal

Answer 14

Liability for Contracts

Question 15

3 Models of Disclosure of a Principal:

Answer 15

(1) Disclosed Principal
(2) Partially Disclosed Principal
(3) Undisclosed Principal

Question 16

3rd party knows who the Principal is.

Answer 16

Disclosed Principal

Question 17

Agent lets 3rd party know they are working for a Principal, but doesn’t disclose Principal’s actual identity.

Answer 17

Partially Disclosed Principal

Question 18

Agent does not disclose the existence of Principal to the 3rd party.

Answer 18

Undisclosed Principal

Question 19

True or False: For Partially and Undisclosed Principals, they are liable to the extent their identity is discovered by the 3rd person. You can’t sue a “John Doe”.

Answer 19

True

Question 20

Authorized to negotiate contracts on behalf of the Principal (who may or may not be their employer).

Answer 20

Agent

Question 21

Not all employees have the power to negotiate contracts for the employers. An agent may be an employee, but not all employees are agents.

Answer 21

Employee

Question 22

Bounded by a contract to produce certain results, but the actual work is controlled by the independent contractor. In contrast, an agent is controlled by the principal in the negotiation of their contracts. The more control the “employer” has, the less likely a worker can be characterized as an independent contractor.

Answer 22

Independent Contractor