The agency relationship is a fiduciary relationship and is based upon trust, and each party owes the other the duty to act with the utmost good faith.
a. True
b. False
answer
a.True
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Which of the following is NOT a duty the agent owes the principal?
a. Performance
b. Superior competence
c. Notification
d. Loyalty
e. Obedience
f. Accounting
answer
b. Superior competence
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The degree of skill or care required of an agent is usually that expected of a(n) __________person under similar circumstances.
answer
The degree of skill or care required of an agent is usually that expected of a(n) reasonable person under similar circumstances.
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A gratuitous agent may be held liable to the principal for breach of the agency contract.
a. True
b. False
answer
b. False
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The agent has the duty to act __________ for the benefit of the principal and not in the interest of the agent or a third party.
answer
The agent has the duty to act SOLELY for the benefit of the principal and not in the interest of the agent or a third party.
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An agent's actions must be strictly for the benefit of the principal and must not result in any ___ profit for the agent.
answer
An agent's actions must be strictly for the benefit of the principal and must not result in any SECRET profit for the agent.
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Which of the following is NOT a duty the principal owes the agent?
a. Compensation
b. Reimbursement and indemnification
c. Substantial ownership in the business
d. Cooperation
e. Safe working conditions
answer
c. Substantial ownership in the business
question
When the principal grants an agent an exclusive territory, we say that the principal has created a(n) ____________ .
a) territorial agency
b) exclusive agency
c) gratuitous agency
d) agency by operation of law
answer
b) exclusive agency
question
. An agent's authority to act for a principal:
a. may be actual or apparent.
b. must always be in writing.
c. can be expressed only.
answer
a. may be actual or apparent.
question
Equal dignity rule:
answer
In most states, a rule stating that express authority given to an agent must be in writing if the contract to be made on behalf of the principal is required to be in writing. Failure to comply can make a contract voidable at the option of the principal.
question
Power of attorney:
answer
A written document, which is usually notarized, authorizing another to act as one's agent; can be special (permitting the agent to do specified acts only) or general (permitting the agent to transact all business for the principal).
question
Notary public:
answer
A public official authorized to attest to the authenticity of signatures.
question
Express authority
answer
power given by one party to another in clear and definite terms to act on that person's behalf
question
The equal dignity rule has several exceptions. For example, an executive officer of a corporation can conduct business transactions without written authority. Likewise, when an agent acts in the of a principal, the rule does not apply. Finally, when the agent's signature is merely a(n) , the agent does not need written authority to sign.
answer
The equal dignity rule has several exceptions. For example, an executive officer of a corporation normally can conduct ordinary business transactions without written authority. Likewise, when an agent acts in the presence of a principal, the rule does not apply. Finally, when the agent's signature is merely a(n) formality , the agent does not need written authority to sign.
question
Ratification
answer
The act of accepting and giving legal force to an obligation that previously was not enforceable
question
Apparent authority
answer
Authority arising from what the principal causes a third party to believe. When the principal, by either word or action, causes a third party to reasonably believe that the agent has authority to act, even though the agent has no express or implied authority
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implied authority
answer
Authority to do what is reasonably necessary to carry out express authority and accomplish the objectives of the agency
question
An agent's implied authority can be inferred by
answer
the position the agent occupies
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. When a third party reasonably believes a person has authority to act on another's behalf, even if that person does not have such authority, the situation is known as .
answer
apparent authority
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An agent will have emergency powers:
a. to protect the principal's property and rights when the agent is unable to communicate with the principal.
b. when the agent is on the phone.
c. when the principal is on the phone
answer
a. to protect the principal's property and rights when the agent is unable to communicate with the principal.
question
Ratification occurs when the principal accepts responsibility for the agent's acts. For ratification to be valid, the agent must have acted on behalf of an principal, that principal must know all of the material , must the agent's act in its entirety, and must have the legal to ratify the transaction both at the time the agent engages in the act and at the time the principal ratifies it. The principal's ratification must occur before the third party from the transaction, and the principal must the same formalities when ratifying the act as would have been required to authorize it initially.
answer
Ratification occurs when the principal accepts responsibility for the agent's unauthorized acts. For ratification to be valid, the agent must have acted on behalf of an identified principal, that principal must know all of the material facts , must affirm the agent's act in its entirety, and must have the legal authority to ratify the transaction both at the time the agent engages in the act and at the time the principal ratifies it. The principal's ratification must occur before the third party withdraws from the transaction, and the principal must observe the same formalities when ratifying the act as would have been required to authorize it initially.
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