Business Law Exam 4 Questions and
All Actual Answers.
One person (the principal) consents to the other person (the agent) acting in his or her behalf -
Answer Fiduciary Relationship
A person who undertakes to act on behalf of-and primarily for the benefit of-another - Answer
Fiduciary
Employer and employee, principal and independent contractor, and principal and agents are
examples of what kind of relationships - Answer agency relationships
Formed through express consent (oral or written) or implied by conduct - Answer Agency by
Agreement
Principal either by act or by agreement ratifies conduct of a person who is not in fact an agent -
Answer Agency by Ratification
Created by the principals conduct - Answer Agency by Estoppel
Agency based on social policy or legal duty, or formed in certain situations when the agent is
unable to contact the principal - Answer Agency by Operation of Law
Authority declared in clear, direct, and definite terms- orally or in writing - Answer Actual
Authority- express
Authority is inferred or conferred by custom or agents position - Answer Actual Authority-
implied
Authority when principal causes third party to reasonably believe that agent has authority to act
for principal - Answer Apparent Authority
Arises when an agent must protect or preserve the property and rights of the principal and the
agent is unable to communicate with the principal - Answer Emergency Powers
Occurs when principal accepts responsibility for an agents unauthorized act. when it occurs, the
principal is bound by the agents act. - Answer Ratification
,Employee fired in violation of a contract - Answer Exceptions based on contract theory
Abusive discharge procedures may result in a lawsuit for intentional infliction of emotional
distress or defamation - Answer Exceptions based on tort theory
Employers reason for firing the employee violates a fundamental public policy of the jurisdiction
- Answer Exceptions based on public policy
When an employer discharges an employee in violation of an employment contract or a
statutory law protecting employees, the employee may bring an action - Answer wrongful
discharge
Napoleon owns Napoleon's Construction and agrees to renovate Mrs. Cernan's bathroom. She
will provide him with the plans, and then he will do the work in the manner that he determines
is most cost effective and appropriate. Napoleon is likely to be classified as:
a. an independent contractor.
b. a partially disclosed principal.
c. a disclosed principal.
d. an employee. - Answer a. an independent contractor.
Whitney works at home making unique children's clothes. Liam buys Whitney's clothes to sell in
his store. With respect to Whitney's legal relationship to Liam, she is probably:
a. a principal.
b. an independent contractor.
c. an agent by operation of law.
d. an employee. - Answer b. an independent contractor.
Sam goes out shopping and, using his wife Juanita's credit card, buys $221 worth of groceries.
Under agency law, Juanita will probably be deemed:
a. liable for the purchase, based on the creation of an agency by operation of law.
b. not liable for the purchase, based on Sam's duty of performance.
c. not liable for the purchase, based on Sam's lack of a power of attorney.
d. liable for the purchase because Sam is her employee. - Answer a. liable for the purchase,
based on the creation of an agency by operation of law.
Charlie tells Jamal that Marisol has agreed to allow him to sell her racing bicycle. Marisol is
present at the time, hears the conversation and says nothing. Jamal agrees with Charlie to buy
Marisol's bike. Marisol then refuses to sell the bicycle. Marisol claims that she is not bound by
the agreement formed by Charlie and Jamal because Charlie is not her agent. Marisol likely is:
, a. bound by the contract under a theory of agency by operation of law.
b. bound by the contract under a theory of agency by estoppel.
c. not bound by the contract because she did not have an agency agreement with Charlie.
d. not bound by the contract because of a rescission. - Answer b. bound by the contract under
a theory of agency by estoppel.
Robert attempts to avoid paying Andrew a commission on the sale of his house to a buyer
procured by Andrew. He does so by waiting until after the listing agreement has expired.
Andrew finds out about this after Robert sells his house. Andrew can:
a. sue Robert for indemnification.
b. sue Robert for avoidance.
c. sue Robert for breach of contract.
d. sue Robert for a constructive trust. - Answer c. sue Robert for breach of contract.
Eli and Marilyn ask Gracie to be the administrator of their will and the guardian of their children
if they pass away before their children reach the age of majority. Gracie agrees. Fiduciary
relationships such as this one:
a. are legal only between family members.
b. typically exist only between employees in government agencies.
c. involve a high degree of trust and confidence.
d. allow the parties to legally avoid their obligations to one another. - Answer c. involve a high
degree of trust and confidence.
Sarah has to move from the East Coast to the West Coast for her job. Elmo agrees to act as
Sarah's agent to sell her New York condo. As her agent, Elmo owes Sarah all of the following
duties except:
a. performance.
b. notification.
c. payment.
d. loyalty. - Answer c. payment.
Dara gives her agent, Marla, money to purchase a new commercial oven. Marla takes the
money and deposits it into her personal checking account. Marla then accidentally spends some
of Dara's money. Marla has violated her duty of:
a. loyalty.
b. accounting.
c. cooperation.
d. payment. - Answer b. accounting.
All Actual Answers.
One person (the principal) consents to the other person (the agent) acting in his or her behalf -
Answer Fiduciary Relationship
A person who undertakes to act on behalf of-and primarily for the benefit of-another - Answer
Fiduciary
Employer and employee, principal and independent contractor, and principal and agents are
examples of what kind of relationships - Answer agency relationships
Formed through express consent (oral or written) or implied by conduct - Answer Agency by
Agreement
Principal either by act or by agreement ratifies conduct of a person who is not in fact an agent -
Answer Agency by Ratification
Created by the principals conduct - Answer Agency by Estoppel
Agency based on social policy or legal duty, or formed in certain situations when the agent is
unable to contact the principal - Answer Agency by Operation of Law
Authority declared in clear, direct, and definite terms- orally or in writing - Answer Actual
Authority- express
Authority is inferred or conferred by custom or agents position - Answer Actual Authority-
implied
Authority when principal causes third party to reasonably believe that agent has authority to act
for principal - Answer Apparent Authority
Arises when an agent must protect or preserve the property and rights of the principal and the
agent is unable to communicate with the principal - Answer Emergency Powers
Occurs when principal accepts responsibility for an agents unauthorized act. when it occurs, the
principal is bound by the agents act. - Answer Ratification
,Employee fired in violation of a contract - Answer Exceptions based on contract theory
Abusive discharge procedures may result in a lawsuit for intentional infliction of emotional
distress or defamation - Answer Exceptions based on tort theory
Employers reason for firing the employee violates a fundamental public policy of the jurisdiction
- Answer Exceptions based on public policy
When an employer discharges an employee in violation of an employment contract or a
statutory law protecting employees, the employee may bring an action - Answer wrongful
discharge
Napoleon owns Napoleon's Construction and agrees to renovate Mrs. Cernan's bathroom. She
will provide him with the plans, and then he will do the work in the manner that he determines
is most cost effective and appropriate. Napoleon is likely to be classified as:
a. an independent contractor.
b. a partially disclosed principal.
c. a disclosed principal.
d. an employee. - Answer a. an independent contractor.
Whitney works at home making unique children's clothes. Liam buys Whitney's clothes to sell in
his store. With respect to Whitney's legal relationship to Liam, she is probably:
a. a principal.
b. an independent contractor.
c. an agent by operation of law.
d. an employee. - Answer b. an independent contractor.
Sam goes out shopping and, using his wife Juanita's credit card, buys $221 worth of groceries.
Under agency law, Juanita will probably be deemed:
a. liable for the purchase, based on the creation of an agency by operation of law.
b. not liable for the purchase, based on Sam's duty of performance.
c. not liable for the purchase, based on Sam's lack of a power of attorney.
d. liable for the purchase because Sam is her employee. - Answer a. liable for the purchase,
based on the creation of an agency by operation of law.
Charlie tells Jamal that Marisol has agreed to allow him to sell her racing bicycle. Marisol is
present at the time, hears the conversation and says nothing. Jamal agrees with Charlie to buy
Marisol's bike. Marisol then refuses to sell the bicycle. Marisol claims that she is not bound by
the agreement formed by Charlie and Jamal because Charlie is not her agent. Marisol likely is:
, a. bound by the contract under a theory of agency by operation of law.
b. bound by the contract under a theory of agency by estoppel.
c. not bound by the contract because she did not have an agency agreement with Charlie.
d. not bound by the contract because of a rescission. - Answer b. bound by the contract under
a theory of agency by estoppel.
Robert attempts to avoid paying Andrew a commission on the sale of his house to a buyer
procured by Andrew. He does so by waiting until after the listing agreement has expired.
Andrew finds out about this after Robert sells his house. Andrew can:
a. sue Robert for indemnification.
b. sue Robert for avoidance.
c. sue Robert for breach of contract.
d. sue Robert for a constructive trust. - Answer c. sue Robert for breach of contract.
Eli and Marilyn ask Gracie to be the administrator of their will and the guardian of their children
if they pass away before their children reach the age of majority. Gracie agrees. Fiduciary
relationships such as this one:
a. are legal only between family members.
b. typically exist only between employees in government agencies.
c. involve a high degree of trust and confidence.
d. allow the parties to legally avoid their obligations to one another. - Answer c. involve a high
degree of trust and confidence.
Sarah has to move from the East Coast to the West Coast for her job. Elmo agrees to act as
Sarah's agent to sell her New York condo. As her agent, Elmo owes Sarah all of the following
duties except:
a. performance.
b. notification.
c. payment.
d. loyalty. - Answer c. payment.
Dara gives her agent, Marla, money to purchase a new commercial oven. Marla takes the
money and deposits it into her personal checking account. Marla then accidentally spends some
of Dara's money. Marla has violated her duty of:
a. loyalty.
b. accounting.
c. cooperation.
d. payment. - Answer b. accounting.
