KELLEY SCHOOL OF BUSINESS - L201 FINAL EXAM (MCCRORY
ANSWERS)
Ima chires cBilly cto cbuy, csell, cand clease creal cestate cfor chim cin cIndiana. cShe ctells cBilly cnot cto cte
cfor cher. cOne cday, cBilly csees ca ccar cthat che cknows cIma cwould clike. cSo, cwithout casking cIma, ch
Which cof cthe cfollowing cis ctrue?
A) cBilly cdoes cnot chave cimplied cauthority
B) cBilly chas cexpress cauthority c
C) cTwo cof cthe cabove
D) cNone cof cthe cabove c
Is cIma ca cdisclosed cprinciple? c- cCORRECT cANS✔✔Billy cBob cdoes cnot chave cimplied cauthority
Ima cIS cNOT ca cdisclosed cprincipal
Which cof cthe cfollowing cis ctrue?
A) cA cgratuitous cagent cis can cagent cwho cacts cbeyond cthe cscope cof chis/her capparent cauthority
B) cOnce can cagent chas cfulfilled cthe crequirements cof chis/her cduty cto cobey, cthe cagent cis callowe
cinformation.
C) cCommingling cand cembezzlement cis ca cviolation cof cthe cagent's cduty cto caccount
D) cA cand cB, cbut cnot cC c
E) cNone cof cthe cabove c- cCORRECT cANS✔✔C
In cthe ccase cof cFrontier cLeasing cCorp cv. cLinks cEngineering, cLLC, cthe ccourt cfound cthat cFlemin
center cinto cthe ccontract cfor cthe cbeverage ccart. c- cCORRECT cANS✔✔False
Mitsubishi cCase c- cCORRECT cANS✔✔Boys cin csuits csell cwoman ccar cat ccar cshow c(not cemploy
-they cdon't chave cauthority cof cany ckind
-the cowner cof cthe ccar cratifies cthe csale cof cthe ccar
-HOW ccould che cratify? c=> cthe cagent cwas cunauthorized, che ccould cnot chave cratified cif cthe cage
-if cthe cowner cwere cto csay c"these cboys cdon't cwork cfor cme" cand cthe ccustomer crescinds, cthe cow
*Set cup ca csituation cfor capparent cauthority:*
-the cowner cstands cbehind cguys cwatching cand cnods chead cthe centire ctime.
Agency c- cCORRECT cANS✔✔a c2-party crelationship cin cwhich cone cparty c(the cagent) chas cthe cp
cunder ccontrol cof, cthe cprincipal.
, => cNo, cthe cprinciple chas cto chave cthe ccapacity c(minors cdon't chave ccapacity), cit cis cvoidable c
Exception: c
-there care csome claws cthat cprotect ccrazy/minors cbecause cthe conly cway cthey ccan center cinto ca
CASE: cMDM cvs. cCX cReinsurance c- cCORRECT cANS✔✔-MDM cis can cinsurance cbroker cwho cde
cinsuring cski cresort cagainst crisk cof c"paid cskier cdays" cwould cfall cbelow ca cstated cminimum.
-CX cagreed cto cunderwrite cpolicies ccovering cthe crisks cfor ca cyear, cand cMDM creceived c12.5% cc
-1999 cwas ca cbad cyear, ccosting cCX c$23M
-MDM csued cCX cfor cliability/breach cof cfiduciary cduty cstating cthey chandled cit cimproperly, ccausin
cand cMDM clost ccommission.
-MDM cwas coriginally cawarded c$6.7M cby cthe ccourts
-CX cappealed cand cjudge creversed, cstating cthat cthe c"obligations ca cprincipal cowes can cagent car
Nondelegable cObligations? c- cCORRECT cANS✔✔duties/actions cthat ccan't cbe cperformed cby can
Ex: clawyers, cdoctors, cathletes, centertainers
Outline cthe c2 ctypes cof cauthority c- cCORRECT cANS✔✔*an cagent ccan cbind cits cprinciple cto ca cc
cwhen cthe cagent chas cthe cauthority cto cdo cso.
2 ctypes- c
1) cActual- cmust cbe ccommunicated cto cthe cagent
ca. cExpress: cthe cprinciple chas cmanifested cthe cagent cusing cSPECIFIC/DETAILED cLANGUAGE
Ex: chomeowner ctells ctree cremoval cexpert cthat cthey caren't callowed cto cremove cash ctrees.
cb. cImplied- cto cact cin ca cway cthe cagent creasonably cbelieves cis cnecessary cto cperform cduties c
Ex: cInterns ctold cto cget cburgers cand chotdogs. cThe c"implied" cpart cwould cbe cpicking cout ca cstore
ctransportation, cthe cbrand, cetc. c
2) cApparent c- cmust cbe ccommunicated cto cthe cthird cparty
*arises cwhen cprinciple's cmanifestations ccause ca cthird cparty cto cbelieve creasonably cthat cthe cage
ccertain cway. c
-depends con cwhat cthe cprinciple ccommunicates cto cthe cthird cparty
3 cRules- c
1) cAgents ccannot cgive cthemselves capparent cauthority c
2) cdoesn't cexist cwhen cagent ccreates cappearance cof cauthority cwithout cprinciple's cconsent
3) cthird cparty cmust creasonably cbelieve cin cagent's cauthority
CASE: cCBS cvs. cFCC c- cCORRECT cANS✔✔-Janet cJackson chas ca cnip cslip
-FCC cgets ccomplaints cfor cviewers cand casks cCBS cfor cbroadcasting cinfo cand cdetermines cCBS c
cpenalty cof c$550,000 cbecause cthey cwere cresponsible cfor cactions cof cJackson cand cTimberlake.
-court clooked cat cReid cfactors c(to cdetermine cif cthey cwere cindependent ccontractors cvs. cemploye
*the cperformers chired cfor ca cbrief, c1-time cevent
*performers chired ctheir cown cdancers, cchoreographers, cetc.
ANSWERS)
Ima chires cBilly cto cbuy, csell, cand clease creal cestate cfor chim cin cIndiana. cShe ctells cBilly cnot cto cte
cfor cher. cOne cday, cBilly csees ca ccar cthat che cknows cIma cwould clike. cSo, cwithout casking cIma, ch
Which cof cthe cfollowing cis ctrue?
A) cBilly cdoes cnot chave cimplied cauthority
B) cBilly chas cexpress cauthority c
C) cTwo cof cthe cabove
D) cNone cof cthe cabove c
Is cIma ca cdisclosed cprinciple? c- cCORRECT cANS✔✔Billy cBob cdoes cnot chave cimplied cauthority
Ima cIS cNOT ca cdisclosed cprincipal
Which cof cthe cfollowing cis ctrue?
A) cA cgratuitous cagent cis can cagent cwho cacts cbeyond cthe cscope cof chis/her capparent cauthority
B) cOnce can cagent chas cfulfilled cthe crequirements cof chis/her cduty cto cobey, cthe cagent cis callowe
cinformation.
C) cCommingling cand cembezzlement cis ca cviolation cof cthe cagent's cduty cto caccount
D) cA cand cB, cbut cnot cC c
E) cNone cof cthe cabove c- cCORRECT cANS✔✔C
In cthe ccase cof cFrontier cLeasing cCorp cv. cLinks cEngineering, cLLC, cthe ccourt cfound cthat cFlemin
center cinto cthe ccontract cfor cthe cbeverage ccart. c- cCORRECT cANS✔✔False
Mitsubishi cCase c- cCORRECT cANS✔✔Boys cin csuits csell cwoman ccar cat ccar cshow c(not cemploy
-they cdon't chave cauthority cof cany ckind
-the cowner cof cthe ccar cratifies cthe csale cof cthe ccar
-HOW ccould che cratify? c=> cthe cagent cwas cunauthorized, che ccould cnot chave cratified cif cthe cage
-if cthe cowner cwere cto csay c"these cboys cdon't cwork cfor cme" cand cthe ccustomer crescinds, cthe cow
*Set cup ca csituation cfor capparent cauthority:*
-the cowner cstands cbehind cguys cwatching cand cnods chead cthe centire ctime.
Agency c- cCORRECT cANS✔✔a c2-party crelationship cin cwhich cone cparty c(the cagent) chas cthe cp
cunder ccontrol cof, cthe cprincipal.
, => cNo, cthe cprinciple chas cto chave cthe ccapacity c(minors cdon't chave ccapacity), cit cis cvoidable c
Exception: c
-there care csome claws cthat cprotect ccrazy/minors cbecause cthe conly cway cthey ccan center cinto ca
CASE: cMDM cvs. cCX cReinsurance c- cCORRECT cANS✔✔-MDM cis can cinsurance cbroker cwho cde
cinsuring cski cresort cagainst crisk cof c"paid cskier cdays" cwould cfall cbelow ca cstated cminimum.
-CX cagreed cto cunderwrite cpolicies ccovering cthe crisks cfor ca cyear, cand cMDM creceived c12.5% cc
-1999 cwas ca cbad cyear, ccosting cCX c$23M
-MDM csued cCX cfor cliability/breach cof cfiduciary cduty cstating cthey chandled cit cimproperly, ccausin
cand cMDM clost ccommission.
-MDM cwas coriginally cawarded c$6.7M cby cthe ccourts
-CX cappealed cand cjudge creversed, cstating cthat cthe c"obligations ca cprincipal cowes can cagent car
Nondelegable cObligations? c- cCORRECT cANS✔✔duties/actions cthat ccan't cbe cperformed cby can
Ex: clawyers, cdoctors, cathletes, centertainers
Outline cthe c2 ctypes cof cauthority c- cCORRECT cANS✔✔*an cagent ccan cbind cits cprinciple cto ca cc
cwhen cthe cagent chas cthe cauthority cto cdo cso.
2 ctypes- c
1) cActual- cmust cbe ccommunicated cto cthe cagent
ca. cExpress: cthe cprinciple chas cmanifested cthe cagent cusing cSPECIFIC/DETAILED cLANGUAGE
Ex: chomeowner ctells ctree cremoval cexpert cthat cthey caren't callowed cto cremove cash ctrees.
cb. cImplied- cto cact cin ca cway cthe cagent creasonably cbelieves cis cnecessary cto cperform cduties c
Ex: cInterns ctold cto cget cburgers cand chotdogs. cThe c"implied" cpart cwould cbe cpicking cout ca cstore
ctransportation, cthe cbrand, cetc. c
2) cApparent c- cmust cbe ccommunicated cto cthe cthird cparty
*arises cwhen cprinciple's cmanifestations ccause ca cthird cparty cto cbelieve creasonably cthat cthe cage
ccertain cway. c
-depends con cwhat cthe cprinciple ccommunicates cto cthe cthird cparty
3 cRules- c
1) cAgents ccannot cgive cthemselves capparent cauthority c
2) cdoesn't cexist cwhen cagent ccreates cappearance cof cauthority cwithout cprinciple's cconsent
3) cthird cparty cmust creasonably cbelieve cin cagent's cauthority
CASE: cCBS cvs. cFCC c- cCORRECT cANS✔✔-Janet cJackson chas ca cnip cslip
-FCC cgets ccomplaints cfor cviewers cand casks cCBS cfor cbroadcasting cinfo cand cdetermines cCBS c
cpenalty cof c$550,000 cbecause cthey cwere cresponsible cfor cactions cof cJackson cand cTimberlake.
-court clooked cat cReid cfactors c(to cdetermine cif cthey cwere cindependent ccontractors cvs. cemploye
*the cperformers chired cfor ca cbrief, c1-time cevent
*performers chired ctheir cown cdancers, cchoreographers, cetc.
