BUL 5810 Part III – Agency Exam Questions
With Correct Answers
A power of attorney is a formal manifestation that states an agent's authority. The agent is known
as the: - answer✔✔attorney at fact
A(n) __________ is a written instrument that expresses the principal's intention that the agent's
authority will not be affected by the principal's subsequent incapacity or that the agent's authority
will become effective upon the principal's subsequent authority. - answer✔✔Durable power of
attorney
Agency is a consensual relationship that the principal and agent may form by: -
answer✔✔contract or relationship
Is the agent subject to liability to her principal for breach of the duty of obedience if she sells the
principal's product on credit in violation of explicit instructions? - answer✔✔Yes, and she is
liable to the principal for any amounts that the purchaser doesn't pay
Which of the following will terminate a valid durable power of attorney after the principal is
incapacitated? - answer✔✔The death of the principal
Which of the following is a major duty, which the agent owes to the principal? - answer✔✔Duty
to act in good faith and with loyalty
If the agent is authorized to sell certain property of her principal for $1,000 and sells it for
$1,500. Which of the following is the best description of her violation if she keeps the money? -
answer✔✔An agent has a duty not to acquire any financial or material benefits in connection
with transactions conducted on behalf of the principal .
A principal has a duty to compensate his or her agent if: - answer✔✔the agent rendered
authorized services
All of the following are contractual duties owed by a principal to an agent, except:
An agent's authority can terminate by: - answer✔✔Both acts of the parties and by operation of
law.
Assume that Dr. Early is a sales representative for Pharzime, as well as for other pharmaceutical
companies. What would be the main factor in determining whether he was an employee or an
independent contractor for Pharzime? - answer✔✔The degree to which Pharzime controls the
details of Dr. Early's work.
Assume that Dr. Early is an independent contractor for Pharzime and was calling on a doctor at
the hospital. The hospital wanted to order some Gensol. Dr. Early sells some pills to the hospital
that he was given as samples and keeps the money for himself. What duty has Dr. Early
violated? - answer✔✔The duty of loyalty
Assume Dr. Early is an independent contractor for Pharzime and that Pharzime allows Dr. Early
to spend money to take doctors who may be interested in buying Gensol to lunch and other
events to entertain them. Pharzime sends a notice to Dr. Early that it wants to know how much
money has been spent in the past two months on such activities. Dr. Early must give Pharzime
this information based on his: - answer✔✔Duty of accounting
Assume that Dr. Early is an independent contractor for Pharzime. Dr. Early sells the hospital
1,000 Gensol tablets. Pharzime does not deliver on time. The hospital sues Dr. Early for the
breach of contract. Dr. Early is found liable for $10,000 worth of damages. Dr. Early will
probably be able to recover the $10,000 from Pharzime, because of the concept of: -
answer✔✔Indemnification
The owner of a business with a buyer terminates an agency without giving notice of the
termination to vendors who have dealt with the agent. Is it reasonable for the vendors to expect
that the agent still has the authority to make contracts that will bind the business? -
answer✔✔The vendors are reasonable in doing business with the agent until they are notified of
the termination of the agency
Baxter agrees with Morry to enter into the management of a new apartment building. Morry
appoints Baxter as his manager for one year. During the course of the construction, Baxter
decides to use funds specified for the construction of a garage that Baxter alone has been
interested in completing. Morry is very angry on learning of Baxters' actions and terminates the
agency. Baxter insists that the agency cannot be terminated in this manner. Is Baxter correct? -
answer✔✔Morry has the power to terminate agency
Belle was seriously ill and feared that she might lapse into a coma or somehow become unable to
speak or act for herself in her medical emergency. She is aware that agents ordinarily lose their
authority to act for principals who become mentally disabled. She nevertheless desires to have
her husband Alan make medical decisions and speak on her behalf. She is particularly concerned
about existing on life support in a persistent and incurable vegetative state. Is there any action
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