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Flashcards in Agency: The Inside Relationship Deck (40):
1

True/False: Rob agrees to act as an agent for Diane in selling her car. Diane has a duty of loyalty to Rob.

False

2

True/False: Dwayne agrees to serve as Walker’s agent in booking spots for Walker’s portable basketball game. Dwayne asks Walker for pictures and size specifications of the game so he can provide potential customers information they need. If Walker does not provide the pictures and size information, he is breaching a duty to Dwayne.

True

3

True/False: Larry decided to relocate to Germany. Larry hired Happy Homes, Inc. to find a buyer and contract for the sale of his house in the U.S. The agency relationship between Larry and Happy Homes must be evidenced with a written agreement.

True

4

True/False: An agent must obey any and all instructions of the principal.

False

5

True/False: Jolene hired Lacy to find a buyer for her house. Adam was interested in buying the house. If both Jolene and Adam agree, Lacy, a real estate agent, may represent both parties.

True

6

True/False: You cannot be held liable for the actions of your agents if the agents are violating your instructions.

False

7

True/False: The bankruptcy of an agent automatically terminates an agency relationship.

False

8

True/False: Generally, either party to an agency relationship has the power to terminate it at any time.

True

9

True/False: Victoria is the director of marketing for Big Corporation. Victoria needed to negotiate an out-of-town contract on behalf of Big. Big has a legal duty to reimburse Victoria for the hotel expenses she incurs negotiating the contract.

True

10

True/False: John is the trustee of a large testamentary trust. Lori is the sole beneficiary of the trust. Because John is the trustee, he is Lori's agent.

False

11

True/False: Kaiya is a sales representative of TriColor. Kaiya owes a fiduciary duty to TriColor.

True

12

True/False: It does not create an agency relationship between Minott Mills and Douthett Co. for Minott Mills to contract to sell 500 yards of fabric to Douthett Co.

True

13

True/False: A principal must indemnify an agent for any expenses incurred in carrying out agency responsibilities, but the principal will not be responsible for indemnifying an agent for any unauthorized purchases.

False

14

True/False: Esday, Inc. hired Mark to be a financial analyst. Because of the equal dignities rule, the employment contract between Esday and Mark must be in writing.

False

15

True/False: As a good neighbor, Lou gratuitously agreed to try to sell Haley's aquarium while she was on vacation. Since there is no consideration for this agreement, there can be no agency relationship between Lou and Haley.

False

16

An agency relationship can be created:

by the conduct of the parties.

17

Which of the following persons is an agent?

a.) Diane, a shoe salesperson for a retail store.
b.) Tim, a real estate broker for a large real estate company.
c.) Craig, a telephone marketing employee.
d.) All the above.

18

Can a person work as an agent for two different people with conflicting interests?

Yes, provided the agent discloses to both principals that she is representing both persons and the principals agree to the dual relationship.

19

Which of the following is not required of an agency relationship?

Consideration.

20

Nathan agrees to act as an agent for Cheyenne. Which of the following is true?

Cheyenne may compete with Nathan in matters within the scope of the agency business.

21

Wanting to save the money she would have to pay for a commission, Marsha asks her friend Howard to check on the Internet and see if he can find a five-day cruise to the Bahamas for under $400 and if he does, to book it for her. He agrees, but later tells her he doesn’t have time to check for her. Howard:

is not liable to Marsha because he was a gratuitous agent and had both the power and the right to quit any time he wanted.

22

The equal dignities rule relative to agency law applies to an agent:

a.) hired to contract for a booth at a trade show scheduled to occur in two years.
b.) selling real estate for the principal.
c.) authorized to enter into a two-year lease for her principal.
d.) All the above.

23

Janet was employed as a sales representative for Esday, Inc. An appreciative customer gave her a diamond bracelet for all her hard work on a complicated contract. Can Janet keep the bracelet?

Yes, but only if she discloses the gift to Esday and Esday consents to her keeping the bracelet.

24

Mohammad was an employee in the new product development department of Estay Inc. Mohammad was directly involved in the development of a new product that Estay intended to launch in 6 months. Estay took great care to keep information concerning the new product a secret. Ceries, Inc., a competitor of Estay, persuaded Mohammad to leave Estay to direct Ceries' marketing department. Which statement is correct?

Mohammad cannot share with Ceries the confidential information he knows about Estay's new product because he has a duty not to disclose confidential information he acquired during the agency.

25

Ron is the business agent for Kansas Sunshine, a rock band. He is also the agent for another popular Midwestern rock group, City Sand. Ron negotiates a deal with a Kansas City promoter to have City Sand play after a professional football game. The promoter was willing to pay $250,000 for both groups to play after the game; however, Ron talked her into booking just City Sand for $175,000. Given his contract with City Sand, Ron made more money under this arrangement. Has Ron violated his fiduciary duty to Kansas Sunshine?

Yes. It appears that Ron put his own interests ahead of his principal's interests.

26

Nikki was an tax accountant with HBR Accounting. Nikki decided to do some tax consulting in the evenings and on weekends. HBR is unaware of Nikki's consulting work. Which statement is correct?

Nikki has breached a fiduciary duty to HBR since she is competing with HBR.

27

Cameron, editor of the local newspaper, assigned to Jim the writing of a story about pollution of a nearby stream. Although Jim used reasonable care in gathering and checking his information, unknown to Jim, the story contained a defamatory statement about Maureen. Maureen reads the story and sues Jim for libel. Cameron, who read and published the story:

must indemnify Jim for Maureen’s claim.

28

An agent may not engage in inappropriate behavior that reflects badly on the principal. This rule applies to conduct:

during both working hours and off-duty time.

29

Pamela hired Lena to sell her business. Lena:

can buy the business only with Pamela's permission.

30

An agency will be terminated in all but which one of the following situations?

A travel agent files for individual bankruptcy under Chapter 13.

31

Mrs. O'Leary hired Jenna to sell her house in Michigan. She executed a power of attorney in favor of Jenna authorizing her to do "anything and everything associated with the sale of real estate, acting as a prudent person." On May 30, Jenna finalized a deal with Brandon for the purchase of the house. Brandon and Jenna signed the real estate contract that day. Jenna learned the next day that Mrs. O'Leary had died May 29.

The contract is void since the agency terminated May 29.

32

Jim agreed to show Donna's car to a potential buyer. Donna was not able to be home since she had to attend a meeting. After showing the car, Jim left the keys in it and the car was stolen. Which statement is correct?

Since Jim is a gratuitous agent, he will only be liable for the loss of the car if his conduct constitutes gross negligence.

33

Tom, the production manager at Esday, was told by his supervisor to hire Elton, a 15- year-old, to operate an industrial machine. Hiring the 15-year-old violates the child labor laws. Tom:

should not hire Elton. Tom has a duty to obey Esday's instructions only if they are legal and ethical.

34

The death of the agent:

automatically terminates the agency relationship.

35

If the agent is disloyal to the principal:

a.) the agency agreement automatically terminates and the principal may rescind the transaction.
b.) the principal has the right to collect any actual damages sustained as a result of the agent's disloyalty.
c.) the principal has a right to recover any profits earned as a result of his agent's disloyal conduct.
d.) All the above are correct.

36

Linda borrowed $2,500 from Tonya. They agreed that Tonya could take a grouping of Linda's antiques as collateral. If Linda could not pay, then Tonya could sell the antiques to recover her money. When Linda could not pay off the loan, Tonya sold the antiques and paid Linda the proceeds after deducting the balance of the loan. Which of the following statements is correct?

a.) This is an irrevocable agency relationship.
b.) This is a power coupled with an interest.
c.) Linda has neither the power nor the right to terminate the relationship.
d.) All the above are correct.

37

Linda borrowed $2,500 from Tonya. They agreed that Tonya could take a grouping of Linda's antiques as collateral. If Linda could not pay, then Tonya could sell the antiques to recover her money. When Linda could not pay off the loan, Tonya sold the antiques and paid Linda the proceeds after deducting the balance of the loan. Which of the following statements is correct?

Only Tonya can terminate the relationship.

38

John hired Tim to sell his house. Which statement is correct?

John is Tim's principal.

39

In a power coupled with an interest:

the principal has neither the power nor the right to terminate.

40

HBR Accounting hired Denise, a CPA, to prepare tax returns. Which statement is correct?

Denise, as a CPA, is an agent with special skills. She is held to a higher duty than ordinary negligence.