BL Study Guide, Chapter 13
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.
b. agent’s agent.
c. principal.
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.
b.
c.
d.
e.
agency
agent
principal
apparent authority
servant
f.
g.
h.
i.
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.
BL Study Guide, Chapter 13
Answer Section
TRUE/FALSE
1. ANS:
NAT:
2. ANS:
NAT:
3. ANS:
NAT:
4. ANS:
NAT:
5. ANS:
NAT:
6. ANS:
NAT:
7. ANS:
NAT:
8. ANS:
NAT:
9. ANS:
NAT:
10. ANS:
NAT:
T
PTS: 1
NBEA IIIA
T
PTS: 1
NBEA IIIA
F
PTS: 1
NBEA III | NBEA IIIA3c
F
PTS: 1
NBEA III | NBEA IIIA3c
F
PTS: 1
NBEA III
F
PTS: 1
NBEA IIIA | NBEA IIIA3a
T
PTS: 1
NBEA IIIA
T
PTS: 1
NBEA IIIA | NBEA IIIA2a
F
PTS: 1
NBEA IIIA
F
PTS: 1
NBEA III | NBEA IIIA3b
DIF: 2
REF: 291
DIF: 1
REF: 291
DIF: 2
REF: 299
DIF: 1
REF: 301
DIF: 2
REF: 297
DIF: 2
REF: 292
DIF: 1
REF: 292
DIF: 1
REF: 293
DIF: 1
REF: 293
DIF: 2
REF: 297
DIF: 2
REF: 291
DIF: 1
REF: 292
DIF: 3
REF: 294
DIF: 2
REF: 299
DIF: 1
REF: 297
DIF: 2
REF: 291
DIF: 2
REF: 295
DIF: 2
REF: 301
DIF: 2
REF: 301
MULTIPLE CHOICE
11. ANS:
NAT:
12. ANS:
NAT:
13. ANS:
NAT:
14. ANS:
NAT:
15. ANS:
NAT:
16. ANS:
NAT:
17. ANS:
NAT:
18. ANS:
NAT:
19. ANS:
NAT:
D
PTS: 1
NBEA III
B
PTS: 1
NBEA IIIA
B
PTS: 1
NBEA IIIA
B
PTS: 1
NBEA III | NBEA IIIA3c
D
PTS: 1
NBEA III
A
PTS: 1
NBEA IIIA | NBEA IIIA2a
C
PTS: 1
NBEA IIIA
B
PTS: 1
NBEA III
C
PTS: 1
NBEA III | NBEA IIIA3c
20. ANS: B
PTS: 1
NAT: NBEA IIIA | NBEA IIIA3a
DIF: 2
REF: 293
DIF: 2
REF: 291
NAT: NBEA IIIA | NBEA IIIA2a
PTS: 1
DIF: 2
23. ANS: discretionary
REF: 297
NAT: NBEA III
PTS: 1
24. ANS: control
DIF: 3
REF: 299
NAT: NBEA III | NBEA IIIA3c
PTS: 1
DIF: 1
25. ANS: power of attorney
REF: 292
NAT: NBEA III | NBEA IIIA3b
PTS: 1
DIF: 2
26. ANS: implied authority
REF: 297
NAT: NBEA III
PTS: 1
27. ANS: dies
DIF: 2
REF: 297
NAT: NBEA III
PTS: 1
DIF: 2
28. ANS: agent's agent
REF: 297
NAT: NBEA III
PTS: 1
DIF: 2
NAT: NBEA III | NBEA IIIA3c
29. ANS: customary authority
REF: 403
TOP: agents
OBJ: Types of Agents
DIF: 3
REF: 298
NAT: NBEA III
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
NAT:
NAT:
NAT:
NAT:
NAT:
NAT:
NAT:
NAT:
NAT:
NAT:
COMPLETION
21. ANS: genuine
PTS: 1
22. ANS: Express
PTS: 1
MATCHING
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
I
G
B
A
D
H
C
F
E
J
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
NBEA IIIA
NBEA III | NBEA IIIA3c
NBEA IIIA | NBEA IIIA3a
NBEA IIIA
NBEA III
NBEA III | NBEA IIIA3c
NBEA IIIA | NBEA IIIA3a
NBEA IIIA | NBEA IIIA3a
NBEA III
NBEA III | NBEA IIIA3c
SHORT ANSWER
40. ANS:
Answers may vary but should include the following:
Agency relationships are formed when one person represents another person in a business transaction with a
third party. To help determine whether or not an agency relationship exists, the functions of the principals,
agents, and third parties are examined.
Any three of the following four work relationships:
1. Principal-agent relationship -- This is a genuine agency relationship. The principal is the party that needs
help and the agent is the party who provides help. Agents can legally conduct business on behalf of the
principal.
2. Proprietor-independent contract relationship -- A proprietor is a person who hires someone to perform a
task. An independent contractor works for a proprietor to perform a task using his or her own tools and
deciding the best way to do the job. Proprietors have no control over independent contractors. The
independent contractor cannot sign contracts or enter into business transactions for the proprietor.
3. Master-servant relationship -- A master is a person who has the right to control the conduct of another
person, the servant.
4. Bailees and trustees -- A bailee is a person who holds the personal property for another person for a certain
reason. A trustee is an individual who manages a trust.
PTS: 1
DIF: 3
REF: 291-292
NAT: NBEA III | NBEA IIIA2a