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Exam 27: Agency Relationships in Business

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Question 21

True/False

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When an agent, acting within the scope of his or her authority, contracts with a third party, in no circumstance is the agent liable to the third party.

A) True
B) False

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Question 22

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When an agent's acts create the appearance of an agency that does not in fact exist, the principal is estopped to deny the agency relationship.

A) True
B) False

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Question 23

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A principal has a duty to pay an agent in a timely manner the customary compensation for services rendered.

Roman is the chief executive officer of Salty Snax Corporation. Roman's responsibilities include decisions on product development, marketing, and other significant business directions. Roman is subject to the approval and oversight of Salty Snax's board of directors. Teri is a Salty Snax manager whose duties include the firm's day-to-day hiring, firing, purchasing, and selling. Umberto is a Salty Snax salesperson, whose daily activities are controlled by Teri. Velma writes sales manuals and promotional materials for Salty Snax's products according to Roman's instructions and subject to Salty Snax's control, but has no dealings with the company's customers or suppliers. Warren writes copy on a contract-per-project basis and is not otherwise subject to Salty Snax's control. Who is a principal? Who is an agent? Who is an employee? Who is an independent contractor?

Yoshi contracts with Zach to buy a certain pub, Aficionado's, for Yoshi, who asks Zach not to reveal her identity. Zach makes a deal with Burcet, the owner of the pub, and makes a down payment. Yoshi fails to pay the rest of the price, and does not pay Zach for his services. Does Zach have any recourse against Yoshi? If so, on what basis and to what extent?

The principal is bound by the agent's unauthorized act, unless the principal negates it.

Erin indicates that she is acting as an agent on behalf of an unidentified client-Flight Services Inc.-when she enters into a contract with Go Airlines. Liability to Go for nonperformance of the contract may be imposed on

Without authorization, Lars contracts on behalf of Mina to have Nemo paint Mina's Boutique. If Mina decides to ratify the contract, she must affirm

Vera is a purchasing agent for Wild-Caught Fish Inc., with the authority to buy a sea fisher's catch up to a certain quantity. After the fish is bought, the agency relationship terminates

In an agency relationship, one party called the principal agrees to represent or act for another called the agent.

Orin works at Pumps Inc. He works in the company's engineering department, interacting with third parties only to discuss technical issues. With respect to third parties, Orin is

An independent contractor is, by definition, an employee.

Luis hires Mieko to act as his agent to buy Ngoc's Southeast Asian Café. Luis tells Mieko to reveal only that she is buying the restaurant on behalf of a third party, without telling Ngoc's seller who that third party is. Luis is

Nora works at Oil & Gas Inc. She is a sales representative who works with Oil & Gas customers. The company closely supervises its sales reps, and dictates their schedules. With respect to third parties, Nora is

Energy Company employs Fred to negotiate the purchase of mineral rights for future mining projects. Fred secretly buys some of the property and sells it to Energy at a profit. Fred has breached

Agency relationships come about by voluntary consent and agreement of the parties-consideration is required, and the agreement must be in writing.

Ben manages a warehouse and its inventory for Coffee Roaster Inc. To operate this part of the business, Ben's authority can be inferred

Kit hires Lanie to manage Kit's Cattle Ranch. Lanie agrees to act on Kit's behalf, subject to Kit's control, and Kit trusts Lanie to so act. Their relationship is

Motor Parts Sales Inc. hires Nolly to work on its shipping dock, accepting deliveries, and dispatching trucks, and dealing with customers and drivers. With respect to Motor Parts, Nolly is most likely

Darla serves in a representative capacity for Ellen's Botanicals. To accomplish the objectives of this relationship, Darla's authority can be implied by