Chapter 8 - Agency Formation and Duties Flashcards Preview

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Flashcards in Chapter 8 - Agency Formation and Duties Deck (28):
1

agency

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2

agent

- a person who agrees to represent or act for another, called the principal

3

exclusive agency

- an agency in which a principal grants an agency an exclusive territory and does not allow another agent to compete in that territory

4

fiduciary

- as a noun, a person having a duty created by his or her undertaking to act primarily for another's benefit in matters connects with the undertaking
- as an adjective, a relationship founded on trust and confidence

5

independent contractor

- one who works for, and receives payment from, an employer but whose working conditions and methods are not controlled by the employer
- an independent contractor is not an employee but may be an agent

6

principal

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7

SAMPLE TEST QUESTIONS
1. Jewelry & Coin Company hires Kelly Ann to buy gems and precious metals from various sources on behalf. In this relationship, Jewelry & Coin is :
a. an employee
b. an independent contractor
c. a principal
d. an agent

ANSWER :
(C)
CORRECT :
(C) a principal

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SAMPLE TEST QUESTIONS
2. California Produce Company hires Drew to work on California Produce's shipping dock, checking outgoing loads and dispatching the company's drivers. With respect to California Produce, Drew is most likely :
a. an agent
b. an independent contractor
c. a principal
d. a work for hire

ANSWER :
(B)
CORRECT :
(A) an agent

9

SAMPLE TEST QUESTIONS
3. Elaine owns the Fabric & Yarn store. Goldie is a salesperson in the store. When Goldie makes a sale to Heather, the sale is binding on :
a. Elaine
b. Goldie
c. Fabric & Yarn only - and only if Elaine is present at the sale
d. no one

ANSWER :
(A)
CORRECT :
(A) Elaine

10

FACT PATTERN 8-1B
Margo works as an administrator and receptionist in Neon's Garage Door Store. Neon withholds federal taxes from Margo's pay, and controls the methods and details of the performance of her work. Margo is not authorized to modify the prices or other terms of a sale at the store. Omar installs Neon's Garage Door products at the buyers' locations.

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FACT PATTERN 8-1B
4. Refer to Fact Pattern 8-1B. Neon authorizes Omar to sell garage door upgrades and accessories at the buyers' locations at prices that Omar negotiates with those buyers. With respect to sales at these locations, Omar is :
a. an independent contractor
b. Neon's employee only
c. Neon's employee and agent
d. Neon's principal

ANSWER :
(C)
CORRECT :
(C) Neon's employee and agent

12

FACT PATTERN 8-1B
5. Refer to Fact Pattern 8-1B. At the shop, Margo is :
a. an independent contractor
b. Neon's employee only
c. Neon's employee and agent
d. Neon's principal

ANSWER :
(A)
CORRECT :
(C) Neon's employee and agent

13

FACT PATTERN 8-1B
6. Refer to Fact Pattern 8-1B. Neon hires Professional Janitorial Company to clean the store. Neon gives Professional Janitorial instructions as to what needs to be cleaned and when. Professional Janitorial is :
a. an independent contractor
b. Neon's employee only
c. Neon's employee and agent
d. Neon's principal

ANSWER :
(A)
CORRECT :
(A) an independent contractor

14

SAMPLE TEST QUESTIONS
7. Donato is Equipment Repair Service Company's chief executive officer. On Equipment Repair's behalf, Donato solicits business, hires and fires workers, and handles finances. Equipment Repair pays Donato varying amounts, depending on his "needs." Donato is most likely :
a. a principal
b. an employee
c. an employer
d. an independent contractor

ANSWER :
(B)
CORRECT :
(B) an employee

15

SAMPLE TEST QUESTIONS
8. Sybil agrees with Tyrone and other professional athletes to sign contracts with promoters and others on the athletes' behalf. Sybil is :
a. an agent
b. an employee
c. an employer
d. a principal

ANSWER :
(A)
CORRECT :
(A) an agent

16

SAMPLE TEST QUESTIONS
9. Rosario is a chef and caterer who hires out on a per-project basis to companies with on-location work sites, as well as to hosts of banquets, corporate meetings, concerts, weddings, and other events. In this capacity, Rosario is :
a. an agent
b. an employee
c. an independent contractor
d. a principal

ANSWER :
(A)
CORRECT :
(C) an independent contractor

17

SAMPLE TEST QUESTIONS
10. Ingmar asks Jessie to contract with Jessie's high school classmates to babysit Ingmar's new baby. Jessie orally agrees to do so. This is :
a. an agency by agreement
b. an agency by estoppel
c. an agency by ratification
d. not an agency relationship

ANSWER :
(A)
CORRECT :
(A) an agent by agreement

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SAMPLE TEST QUESTIONS
11. Lucille is married to Marcus. Lucille buys food for their children's lunches and charges the cost to Marcus's account. This is :
a. an agency by operation of law
b. an agency by estoppel
c. an agency by ratification
d. an agency by relationship

ANSWER :
(D)
CORRECT :
(A) an agency by operation of law

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SAMPLE TEST QUESTIONS
12. Global Games Corporation employs Hyacinth as an agent. Global Games gives her an exclusive territory in which to sell its products. Global Games cannot compete with her in that territory under the duty of :
a. compensation
b. cooperation
c. indemnification
d. reinforcement

ANSWER :
(B)
CORRECT :
(B) cooperation

20

SAMPLE TEST QUESTIONS
13. Bernard is an expert on exotic flowers. Custom Floral Arrangements, Inc., hires Bernard to order exotic flowers for its arrangements. Bernard does not examine the quality of the flowers he orders on behalf of Custom Floral. Bernard has :
a. the duty of performance
b. the duty of loyalty
c. no duty
d. the duty of notification

ANSWER :
(A)
CORRECT :
(A) the duty of performance

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SAMPLE TEST QUESTIONS
14. Lorena is appointed as an agent for Milled Grains, Inc. The agency agreement is silent as to the level of sales that Lorena is expected to achieve. She must :
a. achieve nothing because the agreement says nothing on the issue
b. attain the level that Lorena achieved with her previous employer
c. maintain the level Milled Grains attained before Lorena became an agent
d. use reasonable diligence and skill in selling

ANSWER :
(D)
CORRECT :
(D) use reasonable diligence and skill in selling

22

SAMPLE TEST QUESTIONS
15. Home Enterprises employs Itzak to buy property for a possible residential development. Itzak secretly buys some of the property and sells it to Home Enterprises at a profit. Itzak has breached :
a. no duty
b. the duty of accounting
c. the duty of loyalty
d. the duty of notification

ANSWER :
(C)
CORRECT :
(C) the duty of loyalty

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SAMPLE TEST QUESTIONS
16. Investment Holdings Corporation hires Jerilyn, a business appraiser, to locate investment possibilities for Investment Holdings. Jerilyn learns of a salsa and hot sauce manufacturing company available for a reasonable price, but neglects to tell Investment Holdings. Most likely, Jerilyn :
a. breached the agent's fiduciary duties to the principal
b. did nothing wrong
c. failed to take advantage of a business opportunity
d. assumed that the information was confidential

ANSWER :
(A)
CORRECT :
(A) breached the agent's fiduciary duties to the principal

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SAMPLE TEST QUESTIONS
17. Bailey is an agent for Culinary Delites Company. In the course of Bailey's performance for Culinary Delites, she pays Drivers' Repair Service for certain vehicle maintenance and repair work. Bailey's right to obtain the amount of the payments from Culinary Delites arises under the principal's duty of :
a. avoidance
b. cooperation
c. indemnification
d. reimbursement

ANSWER :
(D)
CORRECT :
(D) reimbursement

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SAMPLE TEST QUESTIONS
18. Largo is an agent for MaryElise. MaryElise gives Largo clear instructions to enter contracts on her behalf only on Mondays, Wednesday's, or Friday's. Largo enters into a contract on her behalf on Tuesday. Largo has breached :
a. the duty of performance
b. the duty of loyalty
c. no duty
d. the duty of obedience

ANSWER :
(A)
CORRECT :
(D) the duty of obedience

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SAMPLE TEST QUESTIONS
19. Rondi holds herself out as possessing special accounting skills. As an agent, she must exercise the degree of skill or care expected of :
a. a person having those skills
b. an average, unskilled person
c. a reasonable person
d. the principal

ANSWER :
(C)
CORRECT :
(A) a person having those skills

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SAMPLE TEST QUESTIONS
20. Insurance Sales Corporation hires Jeremy to act as its agent. Insurance Sale's right not to perform a contract entered into by Jeremy, if he breaches their agency agreement, is the right of :
a. avoidance
b. indemnification
c. nullification
d. termination

ANSWER :
(B)
CORRECT :
(A) avoidance

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Section 1(1) of the Restatement (Third) of Agency

- defines agency as "the fiduciary relation [that] results from the manifestation of indent by one person to another that the other shall act in his [or her] behalf and subject to his [or her] control, and consent by the other to act"
- in a principal-agent relationship, the parties have agreed that the agent will act on behalf and instead of the principal in negotiating and transacting business with third parties