Chapter 8 Multiple Choice Questions

. In a normal agency relationship where the agent acts within his authority, a binding contract is usually created between which parties?

The principal and agent

The principal and a third party

The agent and a third party

The principal, agent, and third party

. Which one of the following statements concerning commercial agents is NOT true?

Self-employed agents will not be classified as commercial agents.

Agents engaged for a single transaction are unlikely to be classified as commercial agents.

Agents involved in the provision of services will not be classified as commercial agents.

An agent who does not have the power to negotiate on his principal's behalf will not be classified as a commercial agent.

. Regarding the capacity of principal and agent, which one of the following statements is NOT true?

A minor cannot enter into a normal trading contract simply by employing an adult agent.

A mentally disordered person can appoint an agent to purchase necessaries.

An agent who lacks full contractual capacity can only be made personally liable on those contracts that he would have had capacity to make on his own behalf.

A minor cannot act as an agent in a transaction which he would not have capacity to enter into on his own behalf.

. In order for apparent authority to arise, a representation must be made by the principal prior to the contract being entered into. True or False?

True

False

. Which one of the following statements is true?

When determining whether apparent authority exists, the fact that the purported contract is not in the principal's interests is irrelevant.

Apparent authority is based on the doctrine of estoppel.

In order for apparent authority to arise, the principal's representation must be made by words.

Apparent authority may arise even where the third party is not aware of the principal's representation.

. There are numerous limitations and conditions regarding when agency by ratification can arise. Which one of the following is NOT a valid limitation or condition?

Only the principal may ratify the actions of the purported agent.

An act that is void in law cannot be ratified.

Ratification must take place within a reasonable time.

The agent must purport to act as agent for a disclosed principal.

The principal must have a choice whether or not to ratify.

The principal must exist at the time that the agent purported to act as agent.

In order to ratify, the agent must have contractual capacity to enter into the contract on the date which he entered into the contract on the principal's behalf.

Ratification will not take place if it would unfairly prejudice a third party.

. James is appointed by Richard to act as his agent and purchase for him a 1965 Rolls Royce Phantom. Jeremy has such a car. James informs Jeremy that he is an agent, but does not disclose the identity of his principal (Richard). Is Richard a 'disclosed principal?'

Yes

No

. Where a third party deals with an agent, but is not aware that he is dealing with an agent, the principal will not normally be contractually bound to the third party. True or False?

True

False

. An agent is subject to a number of duties. Which one of the following statements regarding the duties of an agent is NOT true?

If an agent appoints a sub-agent, that sub-agent is not normally regarded as an agent of the principal.

An agent cannot accept commission from both parties to a transaction without his principals' consent.

Where an agent's interests conflict with those of his principal, he must disclose the conflict.

The agent is under a duty to keep his own property separate from that of his principal.

A secret profit derived from a third party constitutes a bribe, irrespective of the agent's motives.

An agent who is a professional is required to display such skill as may reasonably be expected from a member of his profession.

An agent can only disobey his principal's instructions if he honestly believes that disobeying those instructions is in his principal's best interests.

A gratuitous agent is not under a duty to act.

. Agents have a number of rights. Which one of the following statements regarding these rights is NOT true?

An agent has a lien over any goods lawfully in his possession if the principal has not paid the agent money due.

Both commercial and non-commercial agents have a right to be paid.

A principal is not obliged to provide non-commercial agents with relevant information.

An agent is not entitled to receive commission if the act for which he was engaged to perform was completed without the agent's involvement.

An agent who has incurred tortious liability whilst carrying out his principal's instructions is entitled to be indemnified by his principal.

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