Chapter 8 – Agency Formation and Duties
(Link to answers)
1. Jewelry & Coin Company hires Kelly Ann to buy gems and precious metals from various sources on its
behalf. In this relationship, Jewelry & Coin is
a. an employee.
b. an independent contractor.
c. a principal.
d. an agent.
2. California Produce Company hires Drew to work on California Produce’s shipping dock, checking
outgoing loads and dispatching the company’s drivers. With respect to California Produce, Drew is most
likely
a. an agent.
b. an independent contractor.
c. a principal.
d. a work for hire.
3. Elaine owns the Fabric & Yarn store. Goldie is a salesperson in the store. When Goldie makes a sale to
Heather, the sale is binding on
a. Elaine.
b. Goldie.
c. Fabric & Yarn only—and only if Elaine is present at the sale.
d. no one.
Fact Pattern 8-1B (Questions 4-6 apply)
Margo works as an administrator and receptionist in Neon’s Garage Door Store. Neon withholds federal
taxes from Margo’s pay, and controls the methods and details of the performance of her work. Margo is not
au¬thorized to modify the prices or other terms of a sale at the store. Omar installs Neon’s Garage Door
products at the buyers’ locations.
4. Refer to Fact Pattern 8-1B. Neon authorizes Omar to sell garage door upgrades and accessories at the
buyers’ lo¬cations at prices that Omar negotiates with those buyers. With respect to sales at those locations,
Omar is
a. an independent contractor.
b. Neon’s employee only.
c. Neon’s employee and agent.
d. Neon’s principal.
5. Refer to Fact Pattern 8-1B. At the shop, Margo is
a. an independent contractor.
b. Neon’s employee only.
c. Neon’s employee and agent.
d. Neon’s principal.
6. Refer to Fact Pattern 8-1B. Neon hires Professional Janitorial Company to clean the store. Neon gives
Professional Janitorial instructions as to what needs to be cleaned and when. Professional Janitorial is
, a. an independent contractor.
b. Neon’s employee only.
c. Neon’s employee and agent.
d. Neon’s principal.
7. Donato is Equipment Repair Service Company’s chief executive officer. On Equipment Repair’s behalf,
Donato solicits business, hires and fires workers, and handles finances. Equipment Repair pays Donato
varying amounts, depending on his “needs.” Donato is most likely
a. a principal.
b. an employee.
c. an employer.
d. an independent contractor.
8. Sybil agrees with Tyrone and other professional athletes to sign contracts with promoters and others on the
athletes’ behalf. Sybil is
a. an agent.
b. an employee.
c. an employer.
d. a principal.
9. Rosario is a chef and caterer who hires out on a per-project basis to companies with on-location work sites,
as well as to hosts of banquets, corporate meetings, concerts, weddings, and other events. In this capacity,
Rosario is
a. an agent.
b. an employee.
c. an independent contractor.
d. a principal.
10. Ingmar asks Jessie to contract with Jessie’s high school classmates to babysit Ingmar’s new baby. Jessie
orally agrees to do so. This is
a. an agency by agreement.
b. an agency by estoppel.
c. an agency by ratification.
d. not an agency relationship.
11. Lucille is married to Marcus. Lucille buys food for their children’s lunches and charges the cost to Marcus’s
account. This is
a. an agency by operation of law.
b. an agency by estoppel.
c. an agency by ratification.
d. not an agency relationship.
12. Global Games Corporation employs Hyacinth as an agent. Global Games gives her an exclusive territory in
which to sell its products. Global Games cannot compete with her in that territory under the duty of
a. compensation.
b. cooperation.
, c. indemnification.
d. reimbursement.
13. Bernard is an expert on exotic flowers. Custom Floral Arrangements, Inc., hires Bernard to order exotic
flowers for its arrangements. Bernard does not examine the quality of the flowers he orders on behalf of
Custom Floral. Bernard has breached
a. the duty of performance.
b. the duty of loyalty.
c. no duty.
d. the duty of notification.
14. Lorena is appointed as an agent for Milled Grains, Inc. The agency agreement is silent as to the level of
sales that Lorena is expected to achieve. She must
a. achieve nothing because the agreement says nothing on the issue.
b. attain the level that Lorena achieved with her previous employer.
c. maintain the level Milled Grains attained before Lorena became an agent.
d. use reasonable diligence and skill in selling.
15. Home Enterprises employs Itzak to buy property for a possible residential development. Itzak secretly buys
some of the property and sells it to Home Enterprises at a profit. Itzak has breached
a. no duty.
b. the duty of accounting.
c. the duty of loyalty.
d. the duty of notification.
16. Investment Holdings Corporation hires Jerilyn, a business appraiser, to locate investment possibilities for
Investment Holdings. Jerilyn learns of a salsa and hot sauce manufacturing company available for a
reasonable price, but neglects to tell Investment Holdings. Most likely, Jerilyn
a. breached the agent’s fiduciary duties to the principal.
b. did nothing wrong.
c. failed to take advantage of a business opportunity.
d. assumed that the information was confidential.
17. Bailey is an agent for Culinary Delites Company. In the course of Bailey’s performance for Culinary
Delites, she pays Drivers’ Repair Service for certain vehicle maintenance and repair work. Bailey’s right to
obtain the amount of the payments from Culinary Delites arises under the principal’s duty of
a. avoidance.
b. cooperation.
c. indemnification.
d. reimbursement.
18. Largo is an agent for MaryElise. MaryElise gives Largo clear instructions to enter into contracts on her
behalf only on Mondays, Wednesdays, or Fridays. Largo enters into a contract on her behalf on Tuesday.
Largo has breached
a. the duty of performance.
b. the duty of loyalty.
, c. no duty.
d. the duty of obedience.
19. Rondi holds herself out as possessing special accounting skills. As an agent, she must exercise the degree of
skill or care expected of
a. a person having those skills.
b. an average, unskilled person.
c. a reasonable person.
d. the principal.
20. Insurance Sales Corporation hires Jeremy to act as its agent. Insurance Sales’s right not to perform a
contract entered into by Jeremy, if he breaches their agency agreement, is the right of
a. avoidance.
b. indemnification.
c. nullification.
d. termination.
Chapter 9 - Agency Liability to Third Parties and Termination
(Link to answers)
1. Nuncio serves in a representative capacity for Obadiah. With respect to binding Obadiah to contracts,
Nuncio’s authority
a. may be actual or apparent.
b. must be actual and apparent.
c. must be actual and not apparent.
d. cannot be actual or apparent.
2. Mikayla, an agent for Nahir, enters into a contract on Nahir’s behalf with Onora that must be in writing to
be enforceable under the Statute of Frauds. Mikayla’s authority to enter into this contract is not in writing.
Under the equal dignity rule, this contract is
a. enforceable.
b. void.
c. voidable at Nahir’s option.
d. voidable at Onora’s option.
3. Trucking Dispatch Company and Ucello put their agency agreement into a written document that describes
the rights and duties of both parties. Ucello, as the agent, has
a. apparent authority.
b. none of the choices.
c. express authority.
d. implied authority.
4. Darwin serves in a representative capacity for Ewan. To accomplish the objectives of this relationship,
Darwin’s authority can be implied
(Link to answers)
1. Jewelry & Coin Company hires Kelly Ann to buy gems and precious metals from various sources on its
behalf. In this relationship, Jewelry & Coin is
a. an employee.
b. an independent contractor.
c. a principal.
d. an agent.
2. California Produce Company hires Drew to work on California Produce’s shipping dock, checking
outgoing loads and dispatching the company’s drivers. With respect to California Produce, Drew is most
likely
a. an agent.
b. an independent contractor.
c. a principal.
d. a work for hire.
3. Elaine owns the Fabric & Yarn store. Goldie is a salesperson in the store. When Goldie makes a sale to
Heather, the sale is binding on
a. Elaine.
b. Goldie.
c. Fabric & Yarn only—and only if Elaine is present at the sale.
d. no one.
Fact Pattern 8-1B (Questions 4-6 apply)
Margo works as an administrator and receptionist in Neon’s Garage Door Store. Neon withholds federal
taxes from Margo’s pay, and controls the methods and details of the performance of her work. Margo is not
au¬thorized to modify the prices or other terms of a sale at the store. Omar installs Neon’s Garage Door
products at the buyers’ locations.
4. Refer to Fact Pattern 8-1B. Neon authorizes Omar to sell garage door upgrades and accessories at the
buyers’ lo¬cations at prices that Omar negotiates with those buyers. With respect to sales at those locations,
Omar is
a. an independent contractor.
b. Neon’s employee only.
c. Neon’s employee and agent.
d. Neon’s principal.
5. Refer to Fact Pattern 8-1B. At the shop, Margo is
a. an independent contractor.
b. Neon’s employee only.
c. Neon’s employee and agent.
d. Neon’s principal.
6. Refer to Fact Pattern 8-1B. Neon hires Professional Janitorial Company to clean the store. Neon gives
Professional Janitorial instructions as to what needs to be cleaned and when. Professional Janitorial is
, a. an independent contractor.
b. Neon’s employee only.
c. Neon’s employee and agent.
d. Neon’s principal.
7. Donato is Equipment Repair Service Company’s chief executive officer. On Equipment Repair’s behalf,
Donato solicits business, hires and fires workers, and handles finances. Equipment Repair pays Donato
varying amounts, depending on his “needs.” Donato is most likely
a. a principal.
b. an employee.
c. an employer.
d. an independent contractor.
8. Sybil agrees with Tyrone and other professional athletes to sign contracts with promoters and others on the
athletes’ behalf. Sybil is
a. an agent.
b. an employee.
c. an employer.
d. a principal.
9. Rosario is a chef and caterer who hires out on a per-project basis to companies with on-location work sites,
as well as to hosts of banquets, corporate meetings, concerts, weddings, and other events. In this capacity,
Rosario is
a. an agent.
b. an employee.
c. an independent contractor.
d. a principal.
10. Ingmar asks Jessie to contract with Jessie’s high school classmates to babysit Ingmar’s new baby. Jessie
orally agrees to do so. This is
a. an agency by agreement.
b. an agency by estoppel.
c. an agency by ratification.
d. not an agency relationship.
11. Lucille is married to Marcus. Lucille buys food for their children’s lunches and charges the cost to Marcus’s
account. This is
a. an agency by operation of law.
b. an agency by estoppel.
c. an agency by ratification.
d. not an agency relationship.
12. Global Games Corporation employs Hyacinth as an agent. Global Games gives her an exclusive territory in
which to sell its products. Global Games cannot compete with her in that territory under the duty of
a. compensation.
b. cooperation.
, c. indemnification.
d. reimbursement.
13. Bernard is an expert on exotic flowers. Custom Floral Arrangements, Inc., hires Bernard to order exotic
flowers for its arrangements. Bernard does not examine the quality of the flowers he orders on behalf of
Custom Floral. Bernard has breached
a. the duty of performance.
b. the duty of loyalty.
c. no duty.
d. the duty of notification.
14. Lorena is appointed as an agent for Milled Grains, Inc. The agency agreement is silent as to the level of
sales that Lorena is expected to achieve. She must
a. achieve nothing because the agreement says nothing on the issue.
b. attain the level that Lorena achieved with her previous employer.
c. maintain the level Milled Grains attained before Lorena became an agent.
d. use reasonable diligence and skill in selling.
15. Home Enterprises employs Itzak to buy property for a possible residential development. Itzak secretly buys
some of the property and sells it to Home Enterprises at a profit. Itzak has breached
a. no duty.
b. the duty of accounting.
c. the duty of loyalty.
d. the duty of notification.
16. Investment Holdings Corporation hires Jerilyn, a business appraiser, to locate investment possibilities for
Investment Holdings. Jerilyn learns of a salsa and hot sauce manufacturing company available for a
reasonable price, but neglects to tell Investment Holdings. Most likely, Jerilyn
a. breached the agent’s fiduciary duties to the principal.
b. did nothing wrong.
c. failed to take advantage of a business opportunity.
d. assumed that the information was confidential.
17. Bailey is an agent for Culinary Delites Company. In the course of Bailey’s performance for Culinary
Delites, she pays Drivers’ Repair Service for certain vehicle maintenance and repair work. Bailey’s right to
obtain the amount of the payments from Culinary Delites arises under the principal’s duty of
a. avoidance.
b. cooperation.
c. indemnification.
d. reimbursement.
18. Largo is an agent for MaryElise. MaryElise gives Largo clear instructions to enter into contracts on her
behalf only on Mondays, Wednesdays, or Fridays. Largo enters into a contract on her behalf on Tuesday.
Largo has breached
a. the duty of performance.
b. the duty of loyalty.
, c. no duty.
d. the duty of obedience.
19. Rondi holds herself out as possessing special accounting skills. As an agent, she must exercise the degree of
skill or care expected of
a. a person having those skills.
b. an average, unskilled person.
c. a reasonable person.
d. the principal.
20. Insurance Sales Corporation hires Jeremy to act as its agent. Insurance Sales’s right not to perform a
contract entered into by Jeremy, if he breaches their agency agreement, is the right of
a. avoidance.
b. indemnification.
c. nullification.
d. termination.
Chapter 9 - Agency Liability to Third Parties and Termination
(Link to answers)
1. Nuncio serves in a representative capacity for Obadiah. With respect to binding Obadiah to contracts,
Nuncio’s authority
a. may be actual or apparent.
b. must be actual and apparent.
c. must be actual and not apparent.
d. cannot be actual or apparent.
2. Mikayla, an agent for Nahir, enters into a contract on Nahir’s behalf with Onora that must be in writing to
be enforceable under the Statute of Frauds. Mikayla’s authority to enter into this contract is not in writing.
Under the equal dignity rule, this contract is
a. enforceable.
b. void.
c. voidable at Nahir’s option.
d. voidable at Onora’s option.
3. Trucking Dispatch Company and Ucello put their agency agreement into a written document that describes
the rights and duties of both parties. Ucello, as the agent, has
a. apparent authority.
b. none of the choices.
c. express authority.
d. implied authority.
4. Darwin serves in a representative capacity for Ewan. To accomplish the objectives of this relationship,
Darwin’s authority can be implied
