Chapter 33 Agency Liability and Termination. All Answers

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N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows. N A question new to this edition of the Test Bank. + A question modified from the previous edition of the Test Ban... k. = A question included in the previous edition of the Test Bank. TRUE/FALSE QUESTIONS A1. Apparent authority is authority declared in clear, direct, definite terms. F PAGE: 639 TYPE: + NAT: AACSB Analytic AICPA Legal A2. An agent’s authority must be express for the agent’s act to bind a principal. F PAGE: 639 TYPE: + NAT: AACSB Analytic AICPA Legal A3. A power of attorney confers express authority. T PAGE: 640 TYPE: N NAT: AACSB Reflective AICPA Critical Thinking A4. A power of attorney can be special or general. T PAGE: 640 TYPE: N NAT: AACSB Analytic AICPA Legal A5. An agent has the implied authority to do what is reasonably necessary to carry out express au¬thor¬ity. T PAGE: 641 TYPE: N NAT: AACSB Analytic AICPA Legal A6. An agent’s authority to act on behalf of a principal must be actual and apparent. F PAGE: 641 TYPE: N NAT: AACSB Analytic AICPA Legal A7. An agent’s implied authority can contradict his or her express authority. F PAGE: 641 TYPE: N NAT: AACSB Analytic AICPA Legal A8. Apparent authority arises from what the principal makes clear to the agent. F PAGE: 641 TYPE: N NAT: AACSB Analytic AICPA Legal A9. Before a principal can ratify a contract, the third party must withdraw from the deal. F PAGE: 644 TYPE: + NAT: AACSB Analytic AICPA Legal A10. Ratification occurs when a principal accepts responsibility for an agent’s unauthorized act. T PAGE: 644 TYPE: N NAT: AACSB Analytic AICPA Legal A11. A principal whose identity is known by a third party with whom an agent contracts on the principal’s behalf is a disclosed principal. T PAGE: 645 TYPE: + NAT: AACSB Analytic AICPA Legal A12. A partially disclosed principal is liable to a third party for a contract made by the agent acting within the scope of his or her authority. T PAGE: 646 TYPE: N NAT: AACSB Analytic AICPA Legal A13. If a principal is undisclosed, the agent may be liable to the principal for a third party’s nonperformance of a contract. F PAGE: 646 TYPE: N NAT: AACSB Analytic AICPA Legal A14. If a principal is disclosed, the agent may be liable to a third party for the principal’s nonperformance of a contract. F PAGE: 646 TYPE: N NAT: AACSB Analytic AICPA Legal A15. A principal who authorizes an agent to commit a tort is not liable to persons or property injured thereby. F PAGE: 647 TYPE: N NAT: AACSB Technology AICPA Leveraging Technology A16. Under the doctrine of respondeat superior, an agent is liable for any harm caused to a principal by a third party. F PAGE: 648 TYPE: + NAT: AACSB Analytic AICPA Legal A17. Vicarious liability is direct liability. F PAGE: 648 TYPE: N NAT: AACSB Analytic AICPA Legal A18. A principal may be liable for the tort of an agent committed within the scope of the agency or employment. T PAGE: 650 TYPE: N NAT: AACSB Analytic AICPA Legal A19. An agency relationship may be terminated by an act of the parties or by operation of law. T PAGE: 651 TYPE: N NAT: AACSB Analytic AICPA Legal A20. An agency coupled with an interest is an agency created for the agent’s benefit. T PAGE: 652 TYPE: N NAT: AACSB Analytic AICPA Legal MULTIPLE CHOICE QUESTIONS A1. Homer is an officer of Integrity Corporation. With respect to binding Integrity to contracts, Homer’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. A PAGE: 639 TYPE: + NAT: AACSB Reflective AICPA Legal A2. Jaclyn, an agent for Kilpatrick, enters into a contract on Kilpatrick’s behalf with Leif that must be in writing to be enforceable under the Statute of Frauds. Under the equal dignity rule, Jaclyn’s authority to enter into this contract a. may be oral or written. b. must be oral and written. c. must be written. d. cannot be oral or written. C PAGE: 639 TYPE: + NAT: AACSB Reflective AICPA Legal A3. Cory employs Daily Delivery Agency as an agent under a writ¬ten agreement that describes the rights and duties of both parties. This is a. apparent authority. b. equal authority. c. express authority. d. implied authority. C PAGE: 639 TYPE: = NAT: AACSB Reflective AICPA Legal A4. Miklos grants an ordinary power of attorney to Nathalie to handle a list of financial transactions on Miklos’s behalf. This power will terminate on a. any transaction causing a loss to Miklos. b. Miklos’s death or incapacity. c. Miklos’s sixty-fifth birthday. d. Nathalie’s handling of one of each stipulated transaction. B PAGE: 640 TYPE: = NAT: AACSB Reflective AICPA Legal A5. Sonia manages a Tasty Pastry store for United Food Company. To manage the business, Sonia’s authority can be implied by a. an inference from the position Sonia occupies. b. any inference a reasonable customer or supplier would make. c. any inference Sonia chooses to make. d. no inference. A PAGE: 641 TYPE: = NAT: AACSB Reflective AICPA Legal A6. Based on Nan’s conduct, Odel reasonably believes that Poppy has the authority to act on Nan’s behalf even though Poppy does not have the actual authority to do so. In this circumstance, Poppy has a. apparent authority. b. express authority. c. implied authority. d. no authority. A PAGE: 641 TYPE: = NAT: AACSB Reflective AICPA Legal A7. Meals n’ More, Inc., a catering company, requires its customers to pay by check. Lyra, a Meals n’ More driver, tells customers that they can pay her with cash. When Meals n’ More learns of Lyra’s collections, it takes no action to stop it. Lyra steals some of the cash. Meals n’ More may suffer the loss under the doc¬trine of a. apparent authority. b. express authority. c. implied authority. d. no authority. A PAGE: 641 TYPE: + NAT: AACSB Reflective AICPA Legal A8. Trey, an agent for Uno Music Corporation, executes an unau¬thor¬ized contract with Variety Recording, Inc., that is highly ad¬vanta¬geous to Uno. Variety withdraws from the deal before Uno ratifies the con¬tract. The contract is a. valid. b. variable. c. void. d. voidable. C PAGE: 644 TYPE: = NAT: AACSB Reflective AICPA Legal A9. Elin, an agent for First Credit Corporation (FC), enters into an unau-thorized contract with Great Expectations, Inc. (GE), purportedly on FC’s behalf. This contract will be enforceable if it is ratified by a. any third party. b. Elin. c. FC. d. GE. C PAGE: 644 TYPE: = NAT: AACSB Reflective AICPA Legal Fact Pattern 33-1A (Questions A10–A11 apply) Ulani indicates that she is acting as an agent on behalf of an unidentified client—Thoroughbred Stallions, LLC—when she enters into a contract with Shana. A10. Refer to Fact Pattern 33-1A. Thoroughbred Stallions is a. a disclosed principal. b. a non-existent principal. c. an undisclosed principal. d. a partially disclosed principal. D PAGE: 645 TYPE: = NAT: AACSB Reflective AICPA Legal A11. Refer to Fact Pattern 33-1A. Liability to Shana for nonper¬formance of the con¬tract may be imposed on a. neither Ulani nor Thoroughbred Stallions. b. Ulani and Thoroughbred Stallions. c. Ulani only. d. Thoroughbred Stallions only. B PAGE: 646 TYPE: = NAT: AACSB Reflective AICPA Legal A12. BizOnline.com uses an electronic agent, or e-agent, to perform certain tasks in e-commerce. With respect to the e-agent’s actions, BizOnline.com is bound by a. all of the actions. b. only those actions of which BizOnline.com is aware. c. only those actions that BizOnline.com does not refute. d. only those actions that BizOnine.com ratifies. A PAGE: 647 TYPE: = NAT: AACSB Technology AICPA Legal A13. Rupert, an agent for Star Productions, Inc., enters into an unauthorized contract with Theatrical Transport Corporation purportedly on behalf of Star, which refuses to perform. Rupert is liable a. for breach of contract to Star and Theatrical Transport. b. for misrepresentation to Star only. c. for misrepresentation to Theatrical Transport only. d. to no one. C PAGE: 647 TYPE: = NAT: AACSB Reflective AICPA Legal A14. Emery is an agent for Downtown Market Corporation. Emery makes an innocent mis¬representation when entering into a contract on be¬half of Downtown Market with Cool Fruits, Inc. Cool Fruits a. is directly responsible for performing the contract. b. is estopped from performing the contract. c. may rescind the contract. d. must ratify the contract. C PAGE: 648 TYPE: + NAT: AACSB Reflective AICPA Legal A15. Fabulous Auto Sales, Inc., employs GR8 Collection Company as a collection agent. While repossessing a car from Hadji, one of Fabulous’s customers, GR8 causes an accident in which Hadji is injured. Hadji can recover from a. Fabulous only. b. Fabulous or GR8. c. GR8 only. d. Hadji’s insurance company only. B PAGE: 648 TYPE: = NAT: AACSB Reflective AICPA Legal A16. Commercial Development Corporation (CDC) hires Delta Construction Company to work at a site as an independent contractor. Whether CDC will be liable for torts committed at the site by Delta depends on a. what Delta bid for the job. b. whether unusually hazardous activities are involved. c. which party obtained insurance to cover tort liability. d. who is paying Delta. B PAGE: 651 TYPE: = NAT: AACSB Reflective AICPA Legal A17. Security Armored Car Corporation employs Theo as an agent. Without Security’s knowledge but otherwise acting within the scope of em¬ployment, Theo commits a crime. The state can successfully prosecute a. neither Security nor Theo. b. Security only. c. Security or Theo. d. Theo only. D PAGE: 651 TYPE: = NAT: AACSB Reflective AICPA Legal A18. Clive is a purchasing agent for Double D Ranch with the authority to buy cat¬tle at a certain auction. After the cattle are bought, the agency rela-tionship terminates a. automatically. b. following notice to all actual cattle sellers. c. following notice to all potential cattle sellers. d. following published notice in a local newspaper. A PAGE: 651 TYPE: = NAT: AACSB Reflective AICPA Legal A19. Frida hires Gert, a real estate broker, to act as her agent to sell her house. The house burns down before being sold. The agency agreement is likely a. still in force if Frida gives Gert additional consideration. b. still in force if Gert does not tell prospective customers. c. terminated by mutual consent of the parties. d. terminated by operation of law. D PAGE: 653 TYPE: = NAT: AACSB Reflective AICPA Legal A20. Omar hires Petra, a real estate broker, to act as his agent to sell his land for $150,000. Oil is discovered beneath the land, causing its market value to in-crease considerably. The agency agreement is likely a. still in force if Omar gives Petra additional consideration. b. still in force if Petra does not tell prospective customers. c. terminated by mutual consent of the parties. d. terminated by operation of law. D PAGE: 653 TYPE: = NAT: AACSB Reflective AICPA Legal ESSAY QUESTIONS A1. Brenda is a purchasing agent for Commodities Exchange Corporation. Dennis, a Commodities corporate officer, gives Brenda written authority to buy for the firm as many computers and peripheral devices as necessary. The next day, Dennis calls Brenda and tells her to buy only fifty note¬book computers and nothing else. Brenda shows the written authority to E-Products, Inc., and enters into a contract with E-Products to buy sixty note-book computers and a selection of printers, scanners, and extra storage media. E-Products ships the order to Commodities. Is Commodities li¬able to E-Products under the contract? Is Brenda liable? In each case, if so, why? If not, why not? A2. Tropical Vittles, LLC, hires Sophie to act as its agent to buy a ten-acre tract of land from Rico for $1,000 per acre. Tropical Vittles does not want Rico to know that it is the principal or that Sophie is its agent. Tropical Vittles wants the land for a new fast-food restaurant, and believes that Rico may not sell the land for that purpose or may demand a premium price. Sophie makes the purchase, signing only her name to the contract as the buyer and not disclosing to Rico the agency relationship. The transfer of the deed is to occur on May 1. Rico learns of Tropical Vittles’s identity on April 15. Can Rico legally refuse to deed the property on May 1? Explain. [Show More]

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