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Business Law Chapter 13 Study Guide
True/False
Indicate whether the statement is true or false.
1. An agent has the authority to act in place of the principal.
2. Some agents are employees.
3. General agents are employed to accomplish a specific purpose or to do a
particular job.
4. A subagent is an agent lawfully appointed by a principal.
5. Actual authority includes all the orders, commands, or directions a
principal directly states to an agent.
6. A proprietor-independent contractor relationship is legally the same as a
principal-agent relationship.
7. Master is a legal term used to describe someone who has the right to
control the conduct of another person.
8. Agency relationships are usually formed when a principal and an agent
agree to the arrangement.
9. Minors cannot be principals.
10. A durable power of attorney gives an agent the authority to deal only with
the tasks named in the agreement.
Multiple Choice
Identify the choice that best completes the statement or answers the question.
11. The person the agent deals with on behalf of the principal is called the
a. coagent.
c. servant.
b. proprietor.
d. third party.
12. An employee who is performing a physical task for a person who has a
high degree of control over the employee’s time, place of work, and tools
used is called a(n)
a. agent's agent.
c. independent contractor.
b. servant.
d. principal.
13. An agency by circumstance, created by law, is called
a. negligent hiring.
c. independent contracting.
b. agency by estoppel.
d. ratification.
14. The manager of a grocery store, who has been given authority to perform
any act within the scope of that store is known as a
a. special agent.
c. statutory agent.
b. general agent.
d. would-be agent.
15. The real power a principal gives to an agent to act on his or her behalf is
called
a. good faith.
c. judgment and skill.
b. apparent authority.
d. actual authority.
16. The agency relationship involves three parties:
a. the principal, the agent, and the third party.
b. the principal, the master, and the servant.
c. the genuine agent, the special agent, and the contractor.
d. the independent contractor, the master, and the servant.
17. When a principal approves an agent’s unauthorized act after the fact, it is
said to be an agency by
a. statute.
c. ratification.
b. operation of law.
d. estoppel.
18. The principal cannot be held liable for anything done by the
a. general agent.
c. subagent.
b. agent’s agent.
d. special agent.
19. Coagents are subject to the authority of the
a. special agent.
c. principal.
b. agent’s agent.
d. third party.
20. Lawyers, stockbrokers, insurance agents, and real estate brokers are all
examples of
a. special agents.
c. general agents.
b. licensed agents.
d. estoppel agents.
Completion
Complete each statement.
21. The principal-agent relationship is a(n) ____________________ agency
relationship.
22. ____________________ authority involves clearly stated terms of
agreement given orally or in writing.
23. General agents are sometimes called ____________________ agents
because they have the right to use their judgment in all matters pertaining
to the agency.
24. The proprietor has no ____________________ over the independent
contractor.
25. Any formal writing used to confer authority on an agent is known as a(n)
____________________.
26. The law allows actual authority to be understood from the expressly stated
terms of the principal. This type of authority is called
____________________.
27. Powers of attorney end when the principal withdraws the authority or
____________________.
28. A(n) ____________________ is appointed by an agent who does not have
the power to make that appointment.
29. When apparent authority is based on previous dealings or transactions, it
is known as ____________________.
Matching
Match each term with its definition.
a. agency
f.
b. agent
g.
c. principal
h.
d. apparent authority
i.
e. servant
j.
independent contractor
general agent
special agent
agency by estoppel
agent’s agent
30. When a principal unintentionally leads a third party to believe that
someone has authority to act as an agent
31. A person who has been given authority to perform any act within the
scope of a business
32. One person who represents another person in a business transaction with a
third party
33. The relationship that involves an agent, a principal, and a third party
34. Authority that a third party believes an agent has while acting on behalf of
the principal
35. An agent who has been given the authority to conduct a particular
transaction or to perform a specified act for his or her principal
36. A person who appoints and directs the activities of an agent
37. A person who contracts to do a piece of work according to his or her own
methods and without being subject to the control of his or her employer
except as to the result of the work
38. A person whose physical conduct in the performance of a task is
controlled by another
39. An agent who is appointed by another agent without the principal’s
permission
Short Answer
40. Define how agency relationships are formed. Describe three types of work
relationships.