LAW OF AGENCY TEST PAPER QUESTIONS
AND SOLUTIONS FULL REVIEW GUIDE
●● What is agency?
Answer: How contracts are made through other people (one person acts
on behalf of another)
●● What is the main idea of agency?
Answer: When one person acts for another who is legally responsible
●● Who are the 3 players in agency?
Answer: Principal (boss/person being represented), Agent (acts for
them), Third party (outside person they deal with)
●● Give a simple example of agency?
Answer: Employee selling something = agent, Company = principal,
Customer = third party
●● Store example of agency?
Answer: When you buy something from a worker you are actually
making a contract with the company not the employee
●● What is the main rule of agency?
,Answer: If the agent is acting properly within authority the principal is
bound not the agent
●● NATURE OF THE RELATIONSHIP
Answer:
●● What is the agency relationship structure?
Answer: Principal → Agent → Third Party
●● What does the agent do?
Answer: Acts for the principal and connects them to the third party
●● What does the agent create?
Answer: A contract between the principal and the third party
●● Is the agent part of the final contract?
Answer: No they are just the middle person
●● Simple way to remember agency?
Answer: Agent = middle connector, Principal = the one on the hook
●● AUTHORITY & CONTRACT
, Answer:
●● What is authority?
Answer: The power given to an agent to act for the principal
●● What is the rule about authority?
Answer: Agent can only do what they are allowed to do (within scope)
●● What happens if agent stays within authority?
Answer: Principal is bound to the contract
●● What happens if agent goes outside authority?
Answer: Agent may be liable instead
●● What is the agent-principal relationship?
Answer: A contract (like a job contract or commission agreement)
●● EXPRESS AGREEMENT
Answer:
●● What is an express agreement?
Answer: A written agency contract that clearly sets out authority
AND SOLUTIONS FULL REVIEW GUIDE
●● What is agency?
Answer: How contracts are made through other people (one person acts
on behalf of another)
●● What is the main idea of agency?
Answer: When one person acts for another who is legally responsible
●● Who are the 3 players in agency?
Answer: Principal (boss/person being represented), Agent (acts for
them), Third party (outside person they deal with)
●● Give a simple example of agency?
Answer: Employee selling something = agent, Company = principal,
Customer = third party
●● Store example of agency?
Answer: When you buy something from a worker you are actually
making a contract with the company not the employee
●● What is the main rule of agency?
,Answer: If the agent is acting properly within authority the principal is
bound not the agent
●● NATURE OF THE RELATIONSHIP
Answer:
●● What is the agency relationship structure?
Answer: Principal → Agent → Third Party
●● What does the agent do?
Answer: Acts for the principal and connects them to the third party
●● What does the agent create?
Answer: A contract between the principal and the third party
●● Is the agent part of the final contract?
Answer: No they are just the middle person
●● Simple way to remember agency?
Answer: Agent = middle connector, Principal = the one on the hook
●● AUTHORITY & CONTRACT
, Answer:
●● What is authority?
Answer: The power given to an agent to act for the principal
●● What is the rule about authority?
Answer: Agent can only do what they are allowed to do (within scope)
●● What happens if agent stays within authority?
Answer: Principal is bound to the contract
●● What happens if agent goes outside authority?
Answer: Agent may be liable instead
●● What is the agent-principal relationship?
Answer: A contract (like a job contract or commission agreement)
●● EXPRESS AGREEMENT
Answer:
●● What is an express agreement?
Answer: A written agency contract that clearly sets out authority
