Business Law in Canada, 11e (Yates)
Chapter 10 Agency and Partnership
1) If an agent breaches his duty to his principal, his principal can sue the agent successfully for
A) breach of warranty of authority.
B) breach of the agency agreement.
C) breach of agency act.
D) wrongful representation.
E) the tort of deceit.
Answer: B
Diff: 1 Type: MC Page Ref: 308
Topic: Ch. 10 - The Agency Relationship
Skill: Recall
Objective: Chapter 10: 1. Describe the agency relationship, outlining the rights and
responsibilities of agents and principals.
Bloom's Taxonomy: Knowledge
2) An agency relationship can be created by
A) actual authority.
B) estoppel.
C) ratification.
D) apparent authority.
E) all of the above.
Answer: E
Diff: 1 Type: MC Page Ref: 308
Topic: Ch. 10 - The Agency Relationship
Skill: Recall
Objective: Chapter 10: 1. Describe the agency relationship, outlining the rights and
responsibilities of agents and principals.
Bloom's Taxonomy: Knowledge
1
Copyright © 2017 Pearson Canada, Inc.
,3) Although Jason had participated in the flower auction for the last nine years as an agent for
Thos. Holt's Ltd. (Holt) with the authority to buy whatever he felt the store needed, this day he
was given express instructions to buy only cut flowers. When flats of young camellia bushes
with a rare gold flower were being sold, Jason bought them on behalf of the company. Which of
the following is true?
A) Holt is not bound by the contract because Jason's authority was expressly restricted.
B) Holt is not bound since Holt didn't ratify the contract.
C) Holt is not bound by the contract because Jason is in breach of his agency agreement.
D) Holt is estopped from denying Jason's authority.
E) The key to determining whether or not Holt is bound by the contract is this: in the
circumstances, should the auctioneer have confirmed with Holt the extent of Jason's authority?
Answer: E
Diff: 2 Type: MC Page Ref: 308
Topic: Ch. 10 - The Agency Relationship
Skill: Applied
Objective: Chapter 10: 1. Describe the agency relationship, outlining the rights and
responsibilities of agents and principals.
Bloom's Taxonomy: Knowledge
4) Which of the following is an example of just being an agent as opposed to an employee?
A) Joe worked in the mailroom of Smith Textiles, sorting mail.
B) Joe worked as a mechanic for Smith Used Cars Ltd.
C) Joe worked as a janitor for Smith Textiles.
D) Joe worked as the purchasing agent for Smith Textiles Ltd.
E) Joe worked as a delivery driver for Smith Textiles Ltd.
Answer: D
Diff: 2 Type: MC Page Ref: 308
Topic: Ch. 10 - The Agency Relationship
Skill: Applied
Objective: Chapter 10: 1. Describe the agency relationship, outlining the rights and
responsibilities of agents and principals.
Bloom's Taxonomy: Knowledge
2
Copyright © 2017 Pearson Canada, Inc.
,5) When an agent's authority is terminated by mutual agreement, what is the impact on the
agent's actual and apparent authority?
A) The actual authority continues until the third party is notified of termination, but the apparent
authority ceases.
B) Both the actual authority and the apparent authority continue until the third party is notified of
termination.
C) Both the actual authority and the apparent authority immediately cease.
D) The actual authority ceases, but the apparent authority continues until the third party is
notified of termination.
E) Both the actual authority and the apparent authority continue, because an agent's authority
cannot be terminated by mutual agreement.
Answer: D
Diff: 2 Type: MC Page Ref: 308
Topic: Ch. 10 - The Rights and Responsibilities of the Parties
Skill: Recall
Objective: Chapter 10: 1. Describe the agency relationship, outlining the rights and
responsibilities of agents and principals.
Bloom's Taxonomy: Knowledge
6) Which of the following is an example of an agent's breach of fiduciary duty to his principal?
A) An agent for the vendor collects a commission from the purchaser but told his principal and
obtained his consent.
B) An agent for the vendor makes a profit on the transaction he negotiates for his vendor above
his commission and doesn't tell his principal/vendor.
C) An agent discloses to his principal/vendor that he is giving some of his commission to the
purchaser to induce the purchaser to sign the contract that the principal/vendor wants.
D) An agent negotiates a higher price than the highest sale price reasonably possible at that time.
E) The agent takes presents from the third party and passes them on to the principal.
Answer: B
Diff: 2 Type: MC Page Ref: 308
Topic: Ch. 10 - The Agency Relationship
Skill: Applied
Objective: Chapter 10: 1. Describe the agency relationship, outlining the rights and
responsibilities of agents and principals.
Bloom's Taxonomy: Knowledge
3
Copyright © 2017 Pearson Canada, Inc.
, 7) Which of the following is not acting as an agent in the eyes of the law?
A) The cashier at London Drugs
B) An editor for the Gazette who writes some of the articles and proofreads the final draft of the
paper
C) The paperboy who sells subscriptions for the Globe and Mail
D) A real estate salesman working for A.E. LePage
E) A computer programmer hired by a real estate agency to help computerize the office by
buying appropriate software and hardware for the company and adapting the programs to fit the
agency's needs
Answer: B
Diff: 1 Type: MC Page Ref: 308
Topic: Ch. 10 - The Agency Relationship
Skill: Applied
Objective: Chapter 10: 1. Describe the agency relationship, outlining the rights and
responsibilities of agents and principals.
Bloom's Taxonomy: Knowledge
8) An agent contracted with a third party on behalf of a principal, but went beyond both his
actual and apparent authority. The third party was never paid. Which of the following indicates
the legal position of the third party?
A) He can successfully sue the principal because the principal is always liable for the actions of
his agent.
B) He can successfully sue the agent for breach of warranty of authority if the principal fails to
ratify the contract.
C) Since the agent had no authority, the third party has no remedy against anyone.
D) The third party can ratify the deal and force the principal to go through with it.
E) He can sue the agent for the tort of nuisance.
Answer: B
Diff: 2 Type: MC Page Ref: 308
Topic: Ch. 10 - The Rights and Responsibilities of the Parties
Skill: Applied
Objective: Chapter 10: 1. Describe the agency relationship, outlining the rights and
responsibilities of agents and principals.
Bloom's Taxonomy: Knowledge
4
Copyright © 2017 Pearson Canada, Inc.
Chapter 10 Agency and Partnership
1) If an agent breaches his duty to his principal, his principal can sue the agent successfully for
A) breach of warranty of authority.
B) breach of the agency agreement.
C) breach of agency act.
D) wrongful representation.
E) the tort of deceit.
Answer: B
Diff: 1 Type: MC Page Ref: 308
Topic: Ch. 10 - The Agency Relationship
Skill: Recall
Objective: Chapter 10: 1. Describe the agency relationship, outlining the rights and
responsibilities of agents and principals.
Bloom's Taxonomy: Knowledge
2) An agency relationship can be created by
A) actual authority.
B) estoppel.
C) ratification.
D) apparent authority.
E) all of the above.
Answer: E
Diff: 1 Type: MC Page Ref: 308
Topic: Ch. 10 - The Agency Relationship
Skill: Recall
Objective: Chapter 10: 1. Describe the agency relationship, outlining the rights and
responsibilities of agents and principals.
Bloom's Taxonomy: Knowledge
1
Copyright © 2017 Pearson Canada, Inc.
,3) Although Jason had participated in the flower auction for the last nine years as an agent for
Thos. Holt's Ltd. (Holt) with the authority to buy whatever he felt the store needed, this day he
was given express instructions to buy only cut flowers. When flats of young camellia bushes
with a rare gold flower were being sold, Jason bought them on behalf of the company. Which of
the following is true?
A) Holt is not bound by the contract because Jason's authority was expressly restricted.
B) Holt is not bound since Holt didn't ratify the contract.
C) Holt is not bound by the contract because Jason is in breach of his agency agreement.
D) Holt is estopped from denying Jason's authority.
E) The key to determining whether or not Holt is bound by the contract is this: in the
circumstances, should the auctioneer have confirmed with Holt the extent of Jason's authority?
Answer: E
Diff: 2 Type: MC Page Ref: 308
Topic: Ch. 10 - The Agency Relationship
Skill: Applied
Objective: Chapter 10: 1. Describe the agency relationship, outlining the rights and
responsibilities of agents and principals.
Bloom's Taxonomy: Knowledge
4) Which of the following is an example of just being an agent as opposed to an employee?
A) Joe worked in the mailroom of Smith Textiles, sorting mail.
B) Joe worked as a mechanic for Smith Used Cars Ltd.
C) Joe worked as a janitor for Smith Textiles.
D) Joe worked as the purchasing agent for Smith Textiles Ltd.
E) Joe worked as a delivery driver for Smith Textiles Ltd.
Answer: D
Diff: 2 Type: MC Page Ref: 308
Topic: Ch. 10 - The Agency Relationship
Skill: Applied
Objective: Chapter 10: 1. Describe the agency relationship, outlining the rights and
responsibilities of agents and principals.
Bloom's Taxonomy: Knowledge
2
Copyright © 2017 Pearson Canada, Inc.
,5) When an agent's authority is terminated by mutual agreement, what is the impact on the
agent's actual and apparent authority?
A) The actual authority continues until the third party is notified of termination, but the apparent
authority ceases.
B) Both the actual authority and the apparent authority continue until the third party is notified of
termination.
C) Both the actual authority and the apparent authority immediately cease.
D) The actual authority ceases, but the apparent authority continues until the third party is
notified of termination.
E) Both the actual authority and the apparent authority continue, because an agent's authority
cannot be terminated by mutual agreement.
Answer: D
Diff: 2 Type: MC Page Ref: 308
Topic: Ch. 10 - The Rights and Responsibilities of the Parties
Skill: Recall
Objective: Chapter 10: 1. Describe the agency relationship, outlining the rights and
responsibilities of agents and principals.
Bloom's Taxonomy: Knowledge
6) Which of the following is an example of an agent's breach of fiduciary duty to his principal?
A) An agent for the vendor collects a commission from the purchaser but told his principal and
obtained his consent.
B) An agent for the vendor makes a profit on the transaction he negotiates for his vendor above
his commission and doesn't tell his principal/vendor.
C) An agent discloses to his principal/vendor that he is giving some of his commission to the
purchaser to induce the purchaser to sign the contract that the principal/vendor wants.
D) An agent negotiates a higher price than the highest sale price reasonably possible at that time.
E) The agent takes presents from the third party and passes them on to the principal.
Answer: B
Diff: 2 Type: MC Page Ref: 308
Topic: Ch. 10 - The Agency Relationship
Skill: Applied
Objective: Chapter 10: 1. Describe the agency relationship, outlining the rights and
responsibilities of agents and principals.
Bloom's Taxonomy: Knowledge
3
Copyright © 2017 Pearson Canada, Inc.
, 7) Which of the following is not acting as an agent in the eyes of the law?
A) The cashier at London Drugs
B) An editor for the Gazette who writes some of the articles and proofreads the final draft of the
paper
C) The paperboy who sells subscriptions for the Globe and Mail
D) A real estate salesman working for A.E. LePage
E) A computer programmer hired by a real estate agency to help computerize the office by
buying appropriate software and hardware for the company and adapting the programs to fit the
agency's needs
Answer: B
Diff: 1 Type: MC Page Ref: 308
Topic: Ch. 10 - The Agency Relationship
Skill: Applied
Objective: Chapter 10: 1. Describe the agency relationship, outlining the rights and
responsibilities of agents and principals.
Bloom's Taxonomy: Knowledge
8) An agent contracted with a third party on behalf of a principal, but went beyond both his
actual and apparent authority. The third party was never paid. Which of the following indicates
the legal position of the third party?
A) He can successfully sue the principal because the principal is always liable for the actions of
his agent.
B) He can successfully sue the agent for breach of warranty of authority if the principal fails to
ratify the contract.
C) Since the agent had no authority, the third party has no remedy against anyone.
D) The third party can ratify the deal and force the principal to go through with it.
E) He can sue the agent for the tort of nuisance.
Answer: B
Diff: 2 Type: MC Page Ref: 308
Topic: Ch. 10 - The Rights and Responsibilities of the Parties
Skill: Applied
Objective: Chapter 10: 1. Describe the agency relationship, outlining the rights and
responsibilities of agents and principals.
Bloom's Taxonomy: Knowledge
4
Copyright © 2017 Pearson Canada, Inc.
