Chapter 10 Multiple choice questions

. Which one of the following statements is incorrect?

An agency relationship may be created through necessity.

An agency relationship may be created through estoppel.

All agents are entitled to be paid for their services.

An agent creates a legal relationship between a third party and a principal.

. An agency relationship which is made retrospectively is know as an agency by:

Estoppel

Ratification

Necessity

Commerce

. X Ltd has two directors, Joe and Harry. Neither of the directors have authority to individually enter contracts on behalf of the company. In practice, Joe (with Harry's acquiescence) enters into all the contracts on behalf of the company. What type of agency has been created when a third party acting in good faith enters into a contract with Joe who states he is acting on behalf of X Ltd?

An express agency.

An agency by estoppel.

An agency by ratification.

An agency of necessity.

. Con appoints George, to act as his agent for two weeks. George agrees to act without payment. Con instructs George to collect rent each Friday morning from his tenants and pay the rent into the bank next door. In the second week, George collects the rent but fails to bank it. On the way home he leaves it on the bus and it is never recovered. Can Con take action against George for breach of his agency duties?

No, Con has provided no consideration and therefore there is no agency agreement.

No, George is a gratuitous agent and has no duty to follow instructions.

Yes, even though George is a gratuitous agent if he does act he must do so in accordance with instructions set out by the principal.

Yes, but only for 50% of the rent.

. Prab asked her agent, Hari to purchase her 500 shares in X Ltd. Hari owned 600 shares in X Ltd so without informing Prab where the shares come from he sells his shares to Prab at market value. Is Hari in breach of his agency duties?

Yes, because he has a duty to avoid a conflict of interest.

Yes, because he has a duty to account.

No, because he has sold Prab the shares at market value.

No, because he has acted according to Prab's instructions and she has the shares as she requested.

. When does apparent authority of an agent arise?

When the agent acts with the usual authority of his job.

When the principal gives the agent implied authority to act.

When the agent has actual authority to act.

When the principal represents to a third party that an agent has authority to act when in fact he does not.

. Which one of the following is not a duty of an agent?

Duty to exercise care and skill.

Duty to take a commission.

Duty to account.

Duty to avoid a conflict of interest.

. Frank enters into a contract with Sally believing that Sally is acting on her own behalf when in fact she is acting as an agent for Derek on his express instructions. In the event of a breach of contract who can Frank take action against?

No-one, the contract is invalid.

Sally.

Derek.

Derek or Sally.

. What is an undisclosed agency?

Where a third party is not informed of the existence of the principal and believes the agent is acting on his own behalf.

Where the agent indicates through conduct he is acting as an agent.

Where the principal is not in existence.

Where the third party knows there is a principal but does not know his name.

. Which of the following statements is incorrect?

An agency may be terminated by death of either party.

An agency may be terminated by express agreement.

An agency agreement can always be terminated by a principal.

Mental incapacity of an agent will terminate the agency relationship.

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