Business Law Final Exam Review Questions With Accurate
Answers
Explain why the topics of agency and employment are important with respect to
the study of businesslaw. - correct answer -Virtually all businesses conduct their business through agent
and employees.
Distinguish between independent contractors, dependant contractors,
employees, and agents. Explain why that distinction is important. - correct answer -An independent
contractor does specific contracted work, in effect working for
himself. An employee does work as directed by the employer. A dependant contractor is
usually a company providing service primarily to one client or business. In that way a
dependant contractor is more like an employee in relation to that client or business
despite the fact that it is not a person. An agent may be either an independent contractor
or an employee and acts on behalf of a principal in dealings with a third party. The
obligations and liability of the principal/employer is determined to a large extent on the
basis of that relationship. The distinction is important as both the scope of authority and
vicarious liability is generally greater for employees/dependant contractors as they are
involved in a broader scope of the employer's activities.
Distinguish between actual, apparent and implied authority. - correct answer -Actual authority is given
directly to the agent by the principal either
expressly or by implication. Apparent authority usually arises from the circumstances
that the principal creates around the agent or by statements made by the principal that
causes a third party to believe the agent has authority. Implied authority is actual
authority given to the agent implied from expressed terms for the position provided by
the principal to the agent in the agency contract. But you can't imply authority where
it has been specifically denied. Apparent authority is also taken from those
circumstances where the principal has done something to lead the third to believe the
agent has authority and it exists whether specifically denied by the principal or not.
Explain what is meant by ratification, how ratification may arise, and its effect
on the contracting parties - correct answer -Ratification takes place when the agent has acted for the
principal without
authority and after the fact the principal confirms that the action is binding on him
thus granting authority to act retroactively. It makes the contract binding as if the
agent had authority at the time he acted. It can arise by express ratification, by
conduct of the principal or by the principal knowingly taking a benefit under the
agreement.
Explain under what circumstances a principal will be responsible for the
wrongful acts committed by an agent who is an employee, and an agent who is an
independent contractor - correct answer -The employer will be responsible for wrongful acts in tort law
whenever the
agent/employee was acting within the course of the employment when the tort was
, committed. For an independent contractor/agent the liability is much narrower and the
wrongful act must be committed while acting within the actual authority given. This
usually involves the negotiation of or the actual creating of the contract authorized by
the principal. This is almost always fraudulent or negligent misrepresentation with
respect to the transaction.
Explain what is meant by an undisclosed principal. What options are available to a
third party when an agent acts for such an undisclosed principal? - correct answer -In some rare
situations an agent will act for a principal in dealings with a
third party without disclosing that he is acting as an agent or withholding the identity
of the principal. The third party usually thinks they are dealing with the principal
party. If the deal goes sour the third party can sue the agent and upon learning of the
identity of the principal can choose then to sue the principal instead, but once made he
is bound by that choice.
Explain the nature of an agent's obligations to the principal, and what is meant
by fiduciary duty. - correct answer -The agent must act in a competent manner and without negligence
when
carrying out his responsibilities. He also has a duty of good faith and confidentiality
to the principal. This is a fiduciary duty and requires the agent to put the principal's
interests ahead of his own. He must get the best price for the goods, not take kick
backs, not use information gained for his own benefit or intercept opportunities
belonging to the principal, etc.
Define employment and distinguish between the control test and the
organization test. - correct answer -In an employment relationship the employee is working for the
employer
meaning he takes direction from the employer and is in an ongoing service
relationship. The control test looks at the degree of control that the employer exercises
over how the employee carries out her work whereas the organization test asks
whether the employee is an integral part of the employer's organization or business.
Explain under what circumstances an employer will be vicariously liable for the
torts committed by an employee and bound by contracts entered into by an employee. - correct answer
-The employer is responsible for all contracts entered into by the employee
where that employee was acting as an agent and acting within the actual or apparent
authority given by the employer. The employer is vicariously liable for any tort that
was committed by an employee who was acting within the course of his employment
at the time it was committed.
Explain how the employment relationship may be terminated. In the absence of
contractual provisions, how much notice is required? Include a discussion of
constructive dismissal and what effect that will have on the requirement of notice. - correct answer -The
employment may be terminated by mutual agreement between
employer and employee, by termination without notice where there is just cause or by
giving reasonable notice by either party. This usually requires a longer period of
notice on the part of the employer. In the absence of a contractual provision
stipulating how much notice is required, a Court will consider the following factors:
Answers
Explain why the topics of agency and employment are important with respect to
the study of businesslaw. - correct answer -Virtually all businesses conduct their business through agent
and employees.
Distinguish between independent contractors, dependant contractors,
employees, and agents. Explain why that distinction is important. - correct answer -An independent
contractor does specific contracted work, in effect working for
himself. An employee does work as directed by the employer. A dependant contractor is
usually a company providing service primarily to one client or business. In that way a
dependant contractor is more like an employee in relation to that client or business
despite the fact that it is not a person. An agent may be either an independent contractor
or an employee and acts on behalf of a principal in dealings with a third party. The
obligations and liability of the principal/employer is determined to a large extent on the
basis of that relationship. The distinction is important as both the scope of authority and
vicarious liability is generally greater for employees/dependant contractors as they are
involved in a broader scope of the employer's activities.
Distinguish between actual, apparent and implied authority. - correct answer -Actual authority is given
directly to the agent by the principal either
expressly or by implication. Apparent authority usually arises from the circumstances
that the principal creates around the agent or by statements made by the principal that
causes a third party to believe the agent has authority. Implied authority is actual
authority given to the agent implied from expressed terms for the position provided by
the principal to the agent in the agency contract. But you can't imply authority where
it has been specifically denied. Apparent authority is also taken from those
circumstances where the principal has done something to lead the third to believe the
agent has authority and it exists whether specifically denied by the principal or not.
Explain what is meant by ratification, how ratification may arise, and its effect
on the contracting parties - correct answer -Ratification takes place when the agent has acted for the
principal without
authority and after the fact the principal confirms that the action is binding on him
thus granting authority to act retroactively. It makes the contract binding as if the
agent had authority at the time he acted. It can arise by express ratification, by
conduct of the principal or by the principal knowingly taking a benefit under the
agreement.
Explain under what circumstances a principal will be responsible for the
wrongful acts committed by an agent who is an employee, and an agent who is an
independent contractor - correct answer -The employer will be responsible for wrongful acts in tort law
whenever the
agent/employee was acting within the course of the employment when the tort was
, committed. For an independent contractor/agent the liability is much narrower and the
wrongful act must be committed while acting within the actual authority given. This
usually involves the negotiation of or the actual creating of the contract authorized by
the principal. This is almost always fraudulent or negligent misrepresentation with
respect to the transaction.
Explain what is meant by an undisclosed principal. What options are available to a
third party when an agent acts for such an undisclosed principal? - correct answer -In some rare
situations an agent will act for a principal in dealings with a
third party without disclosing that he is acting as an agent or withholding the identity
of the principal. The third party usually thinks they are dealing with the principal
party. If the deal goes sour the third party can sue the agent and upon learning of the
identity of the principal can choose then to sue the principal instead, but once made he
is bound by that choice.
Explain the nature of an agent's obligations to the principal, and what is meant
by fiduciary duty. - correct answer -The agent must act in a competent manner and without negligence
when
carrying out his responsibilities. He also has a duty of good faith and confidentiality
to the principal. This is a fiduciary duty and requires the agent to put the principal's
interests ahead of his own. He must get the best price for the goods, not take kick
backs, not use information gained for his own benefit or intercept opportunities
belonging to the principal, etc.
Define employment and distinguish between the control test and the
organization test. - correct answer -In an employment relationship the employee is working for the
employer
meaning he takes direction from the employer and is in an ongoing service
relationship. The control test looks at the degree of control that the employer exercises
over how the employee carries out her work whereas the organization test asks
whether the employee is an integral part of the employer's organization or business.
Explain under what circumstances an employer will be vicariously liable for the
torts committed by an employee and bound by contracts entered into by an employee. - correct answer
-The employer is responsible for all contracts entered into by the employee
where that employee was acting as an agent and acting within the actual or apparent
authority given by the employer. The employer is vicariously liable for any tort that
was committed by an employee who was acting within the course of his employment
at the time it was committed.
Explain how the employment relationship may be terminated. In the absence of
contractual provisions, how much notice is required? Include a discussion of
constructive dismissal and what effect that will have on the requirement of notice. - correct answer -The
employment may be terminated by mutual agreement between
employer and employee, by termination without notice where there is just cause or by
giving reasonable notice by either party. This usually requires a longer period of
notice on the part of the employer. In the absence of a contractual provision
stipulating how much notice is required, a Court will consider the following factors:
