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Exam 20: Agency and Liability to Third Parties

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Question 1

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Which of the following is false regarding the relationship between a principal and an independent contractor?

A) An independent contractor is not an employee of the principal.
B) The principal does not control the details of the independent contractor's performance.
C) An individual who hires an independent contractor cannot be held liable for the independent contractor's tortious actions under the doctrine of respondeat superior.
D) A principal is not liable for actions engaged in by the independent contractor,even extremely dangerous ones.
E) If an independent contractor commits a crime without the authorization of the principal,the principal is not liable for the agent's crime.

F) B) and D)
G) A) and B)

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Question 2

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High Maintenance.Paul,who runs a retail jewelry store,went with Jane,to whom he was engaged to be married,to a wholesale jewelry store.Paul had no express,written agreement with Jane by which she was his agent.In fact,Paul had told Jane not to buy anything at the store.The wholesale jeweler,Pam,asked Paul if Jane was buying for him.Paul did not want to embarrass Jane so he nodded in agreement.A few minutes later Paul reminded Jane,outside the hearing of the wholesaler,that she should not make any purchases.Paul and Jane had a big disagreement over money that evening,and Jane broke off their engagement.The next day Jane went back to the wholesale jeweler and purchased a string of pearls for $2,000.Jane also purchased a fur jacket for $3,000 from a store owned by Harry that was next door to the jewelry store.She told Harry that Paul wanted a fur jacket for a model in his store and that Paul would be glad to pay Harry for the jacket.What type of agency,if any,did Jane have to act on behalf of Paul as far as Pam is concerned?

A) No type of agency was in effect because no written agreement was in place by which Jane was Paul's agent.
B) No type of agency was in effect because in fact,Jane was not Paul's agent.
C) An expressed agency.
D) An implied agency.
E) An apparent agency.

F) A) and E)
G) A) and B)

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Question 3

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If an agent makes authorized expenditures in the course of working on behalf of the principal,the principal has a duty to reimburse the agent for the amount of money spent.This is known as the duty of subrogation.

In a(n) ________ relationship,the agent is authorized to act for and on behalf of the principal,who hires the agent to represent him or her.

Which of the following is an accurate statement regarding the applicability of various laws to the employer-employee and employer-independent contractor relationships?

An agent's implied authority is derived from the agent's ________ authority.

Lakeside Property.Ronnie agreed to act as Sue's agent in finding a piece of lakeside property for her at a good price and in obtaining a loan for her with which to purchase the property.She agreed to pay him $500 for doing so.To assist Ronnie in his duties,Sue disclosed to Ronnie confidential information about her finances and debts.Ronnie decided that he needed help and paid Rick $300 to look for property for Sue.Bruce told Ronnie about a great deal on a piece of lakeside property that Bruce had for sale.In fact,the deal was so good that Ronnie purchased the property for himself.When Sue found out about the property Ronnie bought for himself,she complained to Ronnie.He defended himself on the basis that he was not actually working for Sue when he found out about the deal.At the time,he was playing golf with Bruce.He also told Sue that he had hired Rick for $300 to assist him and that he could not be held liable because he had turned the job over to Rick.He asked Sue for reimbursement of that amount.Sue fired Ronnie,threatening to sue him.Ronnie told Sue that he would counterclaim for the $300 owed to Rick.Only after he was fired,Ronnie disclosed to a number of parties information regarding Sue's spending habits that he thought were excessive.Which of the following is the most likely result if Sue sues Ronnie for revealing confidential information?

All employees are agents of their employers,and all agents are employees.

The equal dignity rule is based upon the ________.

Which of the following is the most typical way in which to provide constructive notice of agency termination?

In an agency relationship,the party who has the authority to act on behalf of and bind another party is the principal.

Nasty Break-Up.Harold wants to purchase a lot next door to Sarah's home that is owned by Sarah.Harold knows Sarah will not sell the lot to him because they dated in the past and had a nasty break-up.Harold agrees with Alice that Alice will purchase the lot from Sarah for him.Alice and Sarah reach an agreement and enter into a contract whereby Sarah is to sell the lot to Alice for a price within the scope of Alice's authority.Alice tells Sarah nothing about her plan to later transfer the lot to Harold.Before title to the lot is transferred to Alice,Harold tells Alice that he no longer wants the lot.Alice tells Sarah about Harold.Sarah tells Alice that as far as she is concerned,Alice has bought the lot.Sarah says that she plans to move anyway and really does not care whether Alice or Harold ends up with the lot.She just wants her money.Which of the following is true regarding whether Alice is personally bound on the contract with Sarah?

Roofing Issues.Sally agrees to roof a house for Bob.After doing his research,Bob chooses Sally based on her great reputation for being conscientious and doing good work.Bob knows little about roofing and stays away from all the noise involved.Sally provides her own tools for herself and other workers,sets her own schedule,and charges a flat rate of $10,000 to be paid when the job is completed.Sally hires Trudy,Glen,and Fred to help with the roofing.She pays them an hourly rate,supervises their work,provides them with tools and materials,and sets their schedules.Curious about what is going on there,Bob's friend Spencer walks by the house while the roofing is being done.Glen absentmindedly throws some old shingles off the roof and hits Spencer in the head,resulting in him going to the local emergency room and receiving a couple of stitches in his scalp.Spencer decides to sue all the roofers,Bob,and Sally for his hospital expenses and for pain and suffering.Which of the following is the most likely characterization of Trudy,Glen,and Fred in relation to Sally?

In most situations,how many principals may an agent represent in any one agreement?

Which of the following is false regarding termination of agency based on operation of law?

When an agency agreement fails to adhere to the equal dignity rule,the subsequent contracts are typically considered void.

If a manager has business transactions in one of the European Union countries and wants to terminate an agency relationship,he or she would want to have knowledge of which of the following?

An agent's obligation to perform the duties specified in the agency agreement with reasonable skill and care is part of the agent's duty of ________.

If the employer has substantial control over day-to-day operations of the worker,the worker is generally considered an employee.

An agency relationship can be terminated through ________.