Agency Law Principles Quiz

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Questions and Answers

What is implied authority based on?

Future business projections

Explicit written contracts only

Circumstances and conduct of the parties (correct)

Verbal agreements without evidence

Which condition is NOT necessary to establish agency by estoppel?

The third person believed the representation

The agent was assumed to have authority

The agent must have acted without the principal's awareness (correct)

The principal must have made a representation

In agency by necessity, what triggers the agent's extraordinary authority?

A formal letter of authority from the principal

The agent's prior experience in similar situations

An emergency situation arising during authorized acts (correct)

The principal's absence due to travel

What must occur for a representation to create agency by estoppel?

The principal allows the third party to believe the agent has authority Signup and view all the answers

What happens during an emergency when the agent acts without explicit authorization?

The agent may gain extraordinary authority to act Signup and view all the answers

Which of the following best describes agency by estoppel?

It occurs when the principal unintentionally misleads the third party Signup and view all the answers

When Harshad Sir acts as an agent for Anand Sir during the fire, what type of agency is created?

Agency by Necessity Signup and view all the answers

In what scenario would implied authority NOT apply?

When there are explicit written agreements conflicting with the conduct Signup and view all the answers

What is the primary role of a substituted agent?

To act for the principal with their knowledge and consent Signup and view all the answers

What distinguishes a substituted agent from a sub-agent?

A substituted agent is an agent of the principal for specific parts of the agency Signup and view all the answers

What duty does an agent have when selecting a substituted agent?

To exercise a level of discretion equivalent to an ordinary person's prudence Signup and view all the answers

What happens if an agent fails to follow the principal's instructions?

The principal may incur losses which the agent must indemnify Signup and view all the answers

Under what condition can an agent be absolved from responsibility for a substituted agent's actions?

When the agent exercises due diligence in selecting the substituted agent Signup and view all the answers

What should an agent do in the absence of specific directions from the principal?

Follow the customs that prevail in conducting similar business Signup and view all the answers

What is required from an agent when they earn a profit due to not following the principal's instructions?

They must account for the profit to the principal Signup and view all the answers

In the context of agency, what does 'indemnify' mean?

To compensate the principal for losses incurred Signup and view all the answers

What is the primary responsibility of an agent regarding duty of care?

To act with reasonable diligence and skill. Signup and view all the answers

What should an agent do if they wish to deal on their own account?

Obtain consent from the principal. Signup and view all the answers

Which of the following is NOT a duty of an agent?

To make secret profits during transactions. Signup and view all the answers

In what instance can an agent make compensation to the principal?

For direct consequences of their own neglect or misconduct. Signup and view all the answers

When must an agent pay the sums received on behalf of the principal?

Only when specifically demanded by the principal. Signup and view all the answers

What is expected of an agent in terms of delegating tasks?

Agents cannot delegate tasks they are required to perform personally. Signup and view all the answers

What is one of the communication obligations of an agent towards the principal?

To seek instructions vigorously in times of difficulty. Signup and view all the answers

What happens if an agent does not obtain the principal’s consent before making a transaction for themselves?

The transaction may be repudiated by the principal. Signup and view all the answers

What is the liability of an employer when an agent commits a criminal act?

The employer cannot be held liable for the agent's criminal acts. Signup and view all the answers

In which scenario must a principal compensate an agent?

When the agent suffers injury due to the principal's neglect. Signup and view all the answers

What happens if an agent exceeds their authority but part of the actions are within their authority?

Only the actions within the authority are binding upon the principal. Signup and view all the answers

How does notice given to an agent affect the principal?

It has the same legal consequence as if given directly to the principal. Signup and view all the answers

Under what condition is a principal liable for their agent's actions?

When the acts are within the scope of the agent's authority. Signup and view all the answers

What is true regarding employer liability for criminal acts of an agent?

Employers are entirely free from liability for any agent's actions. Signup and view all the answers

What must a principal do if an agent suffers injury due to the principal's lack of skill?

The principal must compensate the agent for the injury. Signup and view all the answers

What is an agent accountable for when their actions exceed their given authority?

The agent is accountable only for actions that couldn’t be separated from their authority. Signup and view all the answers

What is an agent's right to retain moneys received for?

Advances made on behalf of the principal Signup and view all the answers

Under what circumstance can an agent claim indemnification from the principal?

For lawful acts done within their authority Signup and view all the answers

What must an agent provide in order to retain the principal's property?

Proof of commission due Signup and view all the answers

Which right is NOT explicitly mentioned as belonging to the agent?

Right to termination of agency Signup and view all the answers

What is the agent entitled to that may be payable for their services?

Remuneration as per the contract Signup and view all the answers

In which scenario would an agent NOT be indemnified by the principal?

For any actions taken without prior permission Signup and view all the answers

What is the extent of the right of lien an agent has over the principal's property?

Both movable and immovable property until payment is made Signup and view all the answers

What happens if the agent incurs expenses while conducting business for the principal?

They can claim reimbursement from the principal Signup and view all the answers

Study Notes

Agent's Duties

Duty not to use confidential information received during agency against the principal.

Agent's Rights

Right to retain sums received on the principal's account for:
- Moneys due for advances made.
- Expenses properly incurred while conducting business.
- Payable remuneration.
Right to remuneration as per contract.
Agent's lien on principal's property until amounts due (commissions etc.) are paid.
Right to indemnity for lawful acts done in the exercise of authority.
Right to indemnification for acts done in good faith on the principal's instructions.

Implied Authority

Inferred from circumstances, conduct, and communications.
Includes:
- Agency by estoppel (principal's representation leads third party to believe agent has authority).
- Agency by necessity (agent acts in emergency to prevent principal's loss). Example: A caretaker putting out a fire on a farm while the owner is away. The owner is liable for expenses incurred.

Substituted Agent

Appointed by the agent with the principal's knowledge and consent.
Acts as the principal's agent, not a sub-agent.
Agent must exercise the same prudence in selecting a substituted agent as they would for their own affairs.

Agent's Duties and Obligations

Duty to follow instructions or customary practices. Failure to do so may require indemnification of losses to the principal, and an accounting of profits.
Duty of reasonable care and skill; compensation is due to the principal for direct consequences of neglect, lack of skill, or misconduct (not indirect or remote consequences).
Duty to render proper accounts to the principal upon demand.
Duty to communicate with the principal in cases of difficulty.
Duty not to deal on their own account without the principal's consent (principal can repudiate transactions and claim benefits).
Duty not to make secret profits.
Duty not to delegate tasks requiring personal performance.
Duty to pay all sums received on the principal's account.

Non-Liability of Employer

An employer is not liable to an agent for consequences of doing a criminal act (even if instructed).

Agent's Right to Compensation

Principal must compensate an agent for injury caused by the principal's neglect or want of skill.

Principal's Liability to Third Parties

Principal is liable for the acts of agents within the scope of their authority.
If an agent exceeds authority, only the actions within the authorized scope are binding.
Notice given to an agent in the course of business has the same legal consequence as notice to the principal.

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Description

Test your knowledge on the key principles of agency law, including agents' duties, rights, and concepts of implied authority. This quiz covers essential terms and scenarios that define the relationship between agents and principals. Perfect for law students or anyone interested in legal principles.