Agency and Partnership Questions with
CORRECT Answers
Question:
The basic standard for the existence of an agency relationship is:
Answer:
a manifestation of consent by one person (the principal) that another person (the agent)
act on the principal's behalf, and subject to the principal's control; and the agent's
consent to so act Liability of Principal to 3rd Party in Contract Test A principal will be
liable to a third party on a contract entered into by an agent if the agent had actual or
apparent authority to bind the principal when the agent executed the contract; OR if the
principal ratified or adopted the contract later on.
Question:
Actual Authoriy
Answer:
If agent had authorization from principal to act - then they had actual authority. | Actual
authority involves three requirements: | The authority must be conferred by the
principal on the agent (either expressly or impliedly); | to conduct the specified action
on behalf of the principal, | which the principal would otherwise have had the capacity
to do on his own. | Actual authority may be express or implied.
Question:
Express actual authority
Answer:
A type of actual authority granted by a principal to an agent by written or spoken words
Question:
Implied Actual Authority
Answer:
agent draws a reasonable inference from | principal's conduct that the agent has
authority to act on the principal's behalf, even though the | principal has never told the
agent to act for him in that way. | reasonable person standard-if the principal's | conduct
would lead a reasonable person in the agent's position to believe the agent had
authority to act on the principal's behalf, then the agent had implied actual authority to
do so.
, Question:
Apparent authority
Answer:
The appearance or the assumption of authority based on the actions, words, or deeds of
the | principal or because of circumstances the principal created - even tho the agent
actually has no authority
Question:
Ratification Requirements
Answer:
1.) the ratifying party must have knowledge of all | the material facts. | the ratifying
party must ratify the entire contract. The ratifying party cannot ratify part of a contract
and disaffirm the rest. | because ratification is retroactive to the time of the original
contract, the ratifying party must have contractual capacity not only at the time of |
ratification but also at the time the contract was formed. | Can be express or implied
Question:
Adoption
Answer:
Fall back provision - if authority and ratification fails | - look to authority | Even if an
agent had no authority whatsoever to bind the principal at the time of the contract, and
there was no effective ratification after the fact, a principal may still adopt a contract as
his own. | Like ratification, adoption may be express or implied. | The primary difference
between ratification and adoption is that, unlike ratification, adoption is not retroactive
to the time of the original contract. | The adopting party is liable on the contract only
from the moment of adoption forward.
Question:
Estoppel
Answer:
In applying estoppel, the court recognizes that the purported agent did not have any
actual or apparent authority to engage in the transaction at hand. Due to some fault of
the principal, however, the court will hold that the principal is bound. Most common
estoppel situation is where a principal permits an imposter to be in a position where the
imposter appears to have authority to act on the principal's behalf.
CORRECT Answers
Question:
The basic standard for the existence of an agency relationship is:
Answer:
a manifestation of consent by one person (the principal) that another person (the agent)
act on the principal's behalf, and subject to the principal's control; and the agent's
consent to so act Liability of Principal to 3rd Party in Contract Test A principal will be
liable to a third party on a contract entered into by an agent if the agent had actual or
apparent authority to bind the principal when the agent executed the contract; OR if the
principal ratified or adopted the contract later on.
Question:
Actual Authoriy
Answer:
If agent had authorization from principal to act - then they had actual authority. | Actual
authority involves three requirements: | The authority must be conferred by the
principal on the agent (either expressly or impliedly); | to conduct the specified action
on behalf of the principal, | which the principal would otherwise have had the capacity
to do on his own. | Actual authority may be express or implied.
Question:
Express actual authority
Answer:
A type of actual authority granted by a principal to an agent by written or spoken words
Question:
Implied Actual Authority
Answer:
agent draws a reasonable inference from | principal's conduct that the agent has
authority to act on the principal's behalf, even though the | principal has never told the
agent to act for him in that way. | reasonable person standard-if the principal's | conduct
would lead a reasonable person in the agent's position to believe the agent had
authority to act on the principal's behalf, then the agent had implied actual authority to
do so.
, Question:
Apparent authority
Answer:
The appearance or the assumption of authority based on the actions, words, or deeds of
the | principal or because of circumstances the principal created - even tho the agent
actually has no authority
Question:
Ratification Requirements
Answer:
1.) the ratifying party must have knowledge of all | the material facts. | the ratifying
party must ratify the entire contract. The ratifying party cannot ratify part of a contract
and disaffirm the rest. | because ratification is retroactive to the time of the original
contract, the ratifying party must have contractual capacity not only at the time of |
ratification but also at the time the contract was formed. | Can be express or implied
Question:
Adoption
Answer:
Fall back provision - if authority and ratification fails | - look to authority | Even if an
agent had no authority whatsoever to bind the principal at the time of the contract, and
there was no effective ratification after the fact, a principal may still adopt a contract as
his own. | Like ratification, adoption may be express or implied. | The primary difference
between ratification and adoption is that, unlike ratification, adoption is not retroactive
to the time of the original contract. | The adopting party is liable on the contract only
from the moment of adoption forward.
Question:
Estoppel
Answer:
In applying estoppel, the court recognizes that the purported agent did not have any
actual or apparent authority to engage in the transaction at hand. Due to some fault of
the principal, however, the court will hold that the principal is bound. Most common
estoppel situation is where a principal permits an imposter to be in a position where the
imposter appears to have authority to act on the principal's behalf.
