Law of Agency Quiz

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Questions and Answers

What is the primary role of an agent in an agency relationship?

To act on behalf of the principal in dealings with third parties (correct)

To ensure all parties sign the contract

To make decisions independently of the principal

To represent both parties in the transaction

Which of the following best describes a general agent?

An agent with authority limited to their personal capacity

An agent acting within their ordinary course of business (correct)

An agent appointed for a specific transaction

An agent who acts outside of their ordinary course of business

In the context of agency, what distinguishes a special agent from a general agent?

A special agent is appointed for a specific transaction (correct)

A special agent always has broader authority

A special agent can never act on behalf of a principal

A special agent must operate as a middleman in transactions

What is one key factor that determines whether an agent can act in their own name?

The business or entity they represent Signup and view all the answers

What happens in a typical agency transaction between an agent and a third party?

The contract is legally between the principal and the third party Signup and view all the answers

What characterizes a disclosed agency?

The agent transacts with the third party openly as the agent of the principal. Signup and view all the answers

In an undisclosed agency, which statement is true?

The agent is treated as the principal in all dealings. Signup and view all the answers

What can happen if a principal in an undisclosed agency is discovered by the third party?

The third party can hold the principal liable under the contract. Signup and view all the answers

Which of the following statements about agents in a disclosed agency is correct?

Agents cannot be held liable under the contract. Signup and view all the answers

What is a key difference between disclosed and undisclosed agency regarding agent's liability?

In disclosed agency, agents are never liable under the contract. Signup and view all the answers

Which of the following is true regarding the agent's role in an undisclosed agency?

The agent is treated as the principal in most situations. Signup and view all the answers

What happens if the agent in an undisclosed agency concludes a contract?

The contract is binding between the third party and agent. Signup and view all the answers

In which legal systems is the concept of undisclosed agency generally not recognized?

Civil Law systems. Signup and view all the answers

What happens if an agent withholds information that prevents a principal from giving fully informed consent?

The consent is not effective. Signup and view all the answers

Under the Unfair Contract Terms Act 1977, which of the following duties can a principal not exclude?

Liability for fraud. Signup and view all the answers

What is the common law requirement for a principal concerning an agent's indemnification?

The principal must indemnify the agent for expenses incurred during duty. Signup and view all the answers

Which of the following best describes an agent's right of lien?

The agent can retain possession of the principal's goods until debts are paid. Signup and view all the answers

In the absence of a stated contract, how is an agent's remuneration determined?

A reasonable amount for the work performed is implied by the court. Signup and view all the answers

What newly imposed duty does the Commercial Agents Regulation place on principals in relation to their agents?

A duty of good faith Signup and view all the answers

What must a principal provide to an agent according to the Commercial Agents Regulation?

Means or tools to earn commission Signup and view all the answers

Upon termination of an agency, what kind of compensation is an agent entitled to under the regulation?

Compensation for damage or loss of agency value Signup and view all the answers

How does indemnification under the Commercial Agents Regulation differ from common law indemnification?

It accounts for benefits gained for the principal after agency ended Signup and view all the answers

Which of the following is true about the scope of the Commercial Agents Regulation?

It applies exclusively to commercial agents Signup and view all the answers

What characterizes a disclosed agency in the context of third party relations?

The principal's identity is known to the third party. Signup and view all the answers

Under what circumstances can an agent exclude the principal from a contract despite a disclosed principal?

When the contract explicitly states that the principal is not a party. Signup and view all the answers

What was the ruling in The Swan case regarding the responsibility of an agent who signs in their own name?

The agent is liable unless it is clear they signed in an agent capacity. Signup and view all the answers

In the Filatona Trading Ltd v Navigator Equities Ltd case, what was the main issue regarding the identity of the principal?

The principal was known but not mentioned in the document. Signup and view all the answers

What assumption is commonly made when an owner of a ship contracts for repairs?

The owner is assumed to be the principal in the contract. Signup and view all the answers

What must a third party demonstrate regarding apparent authority?

The principal made a representation that the agent had authority. Signup and view all the answers

In Freeman v Lockyer, what was necessary for the company to be bound by the actions of the agent?

There must be reliance on the representation made by someone with authority. Signup and view all the answers

What does not support a claim of apparent authority?

Knowledge that the agent might lack authority. Signup and view all the answers

In the case of Criterion Properties plc v Stratford UK Properties LLC, what was a key ruling regarding apparent authority?

The third party relied on the agent's apparent authority despite red flags. Signup and view all the answers

Which scenario illustrates a case where apparent authority could not be established?

A director informs their team they will buy a new property without board approval. Signup and view all the answers

What did the court conclude in Bedford Insurance Co Ltd v Institutio de Resseguros do Brasil regarding apparent authority?

The presence of apparent authority did not change the legality of the insurance contract. Signup and view all the answers

In East Asia Co Ltd v PT Satria Tirtatama Energindo, what factor led to a determination against apparent authority?

Lack of board resolution for significant transactions. Signup and view all the answers

What is required from the principal for the agent to have apparent authority?

The principal's actions must create a reasonable belief of authority in the third party. Signup and view all the answers

What is a consequence if a third party discovers an agent lacks authority?

The principal cannot be held liable if the third party had constructive knowledge. Signup and view all the answers

Study Notes

Law of Agency

Agency is when one party (Agent) acts on behalf of another party (Principal) to affect their legal relationship with a third party.
Common examples include directors representing companies, employees representing employers, and solicitors representing clients.
In a typical agency scenario, the agent interacts with a third party, then the principal and third party have their agreement.
The agent facilitates the contract, acting as the middleman.

Types of Agents

General Agent: Acts as an agent in the usual course of their business, such as brokers.
Special Agent: Acts as an agent for a specific transaction outside their normal business practices.

Types of Agency

Disclosed Agency: The third party knows the agent is acting on behalf of a principal.
Undisclosed Agency: The third party is unaware the agent is acting on behalf of a principal. This is unique to English law.

Authority of Agents

Actual Authority: The principal explicitly or implicitly authorizes the agent's actions.
Apparent Authority: The principal's words or actions lead a third party to believe the agent has authority, even if they don't.
Usual Authority: Typical actions by agents in that position. The agent can bind the principal in situations not expressly discussed, as in the Watteau v Fenwick case.
Undisclosed Principals: Undisclosed principals can be bound by their agents.

Power of Agents

Agents have power to bind the principal to contractual arrangements and legal standing changes.
Agents who act within their actual authority can bind the principal.
If agents act outside their actual authority, and the third party is unaware, the principal may be bound if their action is ratified later.

Duties of Agents to Principals

Internal: Agent-principal contractual obligations and fiduciary duties (avoiding conflicts of interest).
External: Agent's interactions with third parties concerning the Principal.

Duties of Principals to Agents

Remuneration: Principals are obligated to pay agents reasonable compensation.
Indemnification: Principals must protect agents from liabilities that arise in the course of executing their duties.

Termination of Agency

Mutual Agreement: Both parties agree to end the agency relationship.
Expiration of Term: The agency relationship ends due to a specified time frame.
Unilateral Revocation: The principal cancels the agent's authority. If a principal does not allow the agent to fulfill duties, the agent is entitled to compensation.
Agent's Wrongdoing: Principals can terminate the relationship due to agent misconduct.
Insolvency of Agent: If the agent becomes insolvent, their authority to act on behalf of the principal is revoked.
Agency coupled with an interest: Only terminable upon the fulfilment of the interest of the agent.

Positions of Third-Parties

Agents can be held liable in agency cases, if the actions of the agent and principal are not clear in the contract.
Disclosed Agency: Contract is between the principal and the third party, even when the agent is involved.
Undisclosed Agency: Third party can sue either the agent or the principal.
Ratification: The actions of the agent are accepted by the principal after the fact.

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Description

Test your understanding of the law of agency, including the roles of agents and principals, types of agents, and their authority. This quiz covers essential concepts such as disclosed and undisclosed agencies, helping you to grasp the legal relationships involved in agency scenarios.